[Senate Hearing 118-398]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 118-398

                     NOMINATION OF DANIEL I. WERFEL

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







                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                                 on the

                             NOMINATION OF

                 DANIEL I. WERFEL, TO BE COMMISSIONER, 
          INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
                               __________

                           FEBRUARY 15, 2023
                               __________

                                     





                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                                      







            Printed for the use of the Committee on Finance
                                 ______

                   U.S. GOVERNMENT PUBLISHING OFFICE 

56-519--PDF                WASHINGTON : 2024 















                          COMMITTEE ON FINANCE

                      RON WYDEN, Oregon, Chairman

DEBBIE STABENOW, Michigan            MIKE CRAPO, Idaho
MARIA CANTWELL, Washington           CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey          JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland         TIM SCOTT, South Carolina
SHERROD BROWN, Ohio                  BILL CASSIDY, Louisiana
MICHAEL F. BENNET, Colorado          JAMES LANKFORD, Oklahoma
ROBERT P. CASEY, Jr., Pennsylvania   STEVE DAINES, Montana
MARK R. WARNER, Virginia             TODD YOUNG, Indiana
SHELDON WHITEHOUSE, Rhode Island     JOHN BARRASSO, Wyoming
MAGGIE HASSAN, New Hampshire         RON JOHNSON, Wisconsin
CATHERINE CORTEZ MASTO, Nevada       THOM TILLIS, North Carolina
ELIZABETH WARREN, Massachusetts      MARSHA BLACKBURN, Tennessee

                    Joshua Sheinkman, Staff Director

                Gregg Richard, Republican Staff Director

                                  (II)
















                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee 
  on Finance.....................................................     1
Crapo, Hon. Mike, a U.S. Senator from Idaho......................     3
Carper, Hon. Thomas R., a U.S. Senator from Delaware.............     5

                         ADMINISTRATION NOMINEE

Werfel, Hon. Daniel I., nominated to be Commissioner, Internal 
  Revenue Service, Department of the Treasury, Washington, DC....     7

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Carper, Hon. Thomas R.:
    Opening statement............................................     5
Cassidy, Hon. Bill:
    ``40 Years of Failure: IRS Unable to Fix Computer System,'' 
      by Michael Mirsky, Americans for Tax Reform, March 5, 2022.    51
Crapo, Hon. Mike:
    Opening statement............................................     3
    Prepared statement...........................................    61
Werfel, Hon. Daniel I.:
    Testimony....................................................     7
    Prepared statement...........................................    62
    Biographical information.....................................    63
    Responses to questions from committee members................    80
Wyden, Hon. Ron:
    Opening statement............................................     1
    Prepared statement...........................................   120

                             Communication

National Association of Tax Professionals........................   123

                                 (III)

 
                    NOMINATION OF DANIEL I. WERFEL,
                          TO BE COMMISSIONER,
                       INTERNAL REVENUE SERVICE,
                      DEPARTMENT OF THE TREASURY

                              ----------                              

                      WEDNESDAY, FEBRUARY 15, 2023

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:30 
a.m., in Room SD-215, Dirksen Senate Office Building, Hon. Ron 
Wyden (chairman of the committee) presiding.
    Present: Senators Cantwell, Menendez, Carper, Cardin, 
Brown, Bennet, Warner, Whitehouse, Hassan, Cortez Masto, 
Warren, Crapo, Grassley, Cornyn, Thune, Cassidy, Lankford, 
Daines, Young, Barrasso, Johnson, Tillis, and Blackburn.
    Also present: Democratic staff: Robert Andres, Chief Tax 
Counsel; Eric LoPresti, Detailee; Ian Nicholson, Investigator 
and Nominations Advisor; Joshua Sheinkman, Staff Director; and 
Tiffany Smith, Deputy Staff Director and Chief Counsel. 
Republican staff: Michael Gould, Detailee; Mike Quickel, Policy 
Director; Gregg Richard, Staff Director; and Don Snyder, Tax 
Counsel.

   OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR 
       FROM OREGON, CHAIRMAN, COMMITTEE ON FINANCE 

    The Chairman. With permission from the ranking minority 
member, Senator Crapo, we're going to get started. And also, 
before I begin my remarks, I want to welcome formally our new 
members, Senator Johnson, Senator Tillis, Senator Blackburn. We 
said ``hello'' when you came to the organizational meeting. 
It's your first hearing, and I think a very appropriate one.
    The committee meets to discuss Danny Werfel's nomination 
for IRS Commissioner. We want to welcome him back to the 
Finance Committee. We know him well. I expect that a 
significant portion of the hearing will focus on IRS funding 
that was included in the Inflation Reduction Act. That's where 
I'll begin.
    And, colleagues, I'm going to focus on three points. First, 
for some time I've talked about the two tax systems that exist 
in America. One is for firefighters and nurses and teachers, 
and their taxes come straight out of every paycheck. And then 
there's another tax system for the billionaires and the high-
flyers who, to a great extent, can pay what they want when they 
want to.
    So today, we're going to focus on ending the two-tiered 
system of enforcing America's tax laws. That's what is needed. 
It's a big part of what Democrats sought to address in the 
Inflation Reduction Act, because audit rates today are far 
higher for those of modest means than the very wealthy.
    Second point: the Inflation Reduction Act makes sure that 
the IRS gets the resources to go after tax cheating by the big 
guys: the ultra-wealthy, the multinational corporations.
    Now, there are members who oppose that effort, and I get 
that they want to deflect and distract. That's why people have 
heard these fantasies about 87,000 agents armed with rifles 
busting down people's doors. If you don't want to engage on the 
real issue, which is tax cheating by the ultra-wealthy and 
multinational corporations, you change the channel. You try to 
talk about something else.
    Third, contrary to a lot of baseless attacks you hear 
today, improving technology and staffing up customer service is 
a big win for law-abiding families and small businesses. In my 
view, they're going to be less likely to face an audit thanks 
to the Inflation Reduction Act.
    I want to briefly touch on each of these three points. 
Working people and the middle class today have a 99-percent 
rate of compliance with the tax code, yet working families who 
claim the Earned Income Tax Credit get audited far more than do 
the wealthy folks. Things didn't get that way by accident. A 
decade of Republican budget cuts gutted the IRS's ability to do 
the kind of in-depth enforcement work that's needed to make 
sure that the multinational corporations and the very wealthy 
pay what they owe.
    From 2012 to 2020, our economy got a whole lot bigger, yet 
the total dollar amount of unreported taxes uncovered by 
corporate audits fell by nearly 60 percent. Over the last 
decade, audit rates of wealthy taxpayers making more than $5 
million a year fell by 90 percent. On the other hand, the audit 
rate for working people didn't budge, even though the IRS was 
working with fewer resources. That means working Americans bore 
a much heavier burden.
    That's where my second point comes in. When Democrats wrote 
the Inflation Reduction Act, we decided it was long past time 
to say to the multinational corporations and the tax cheats at 
the top, ``Nobody is above the law, and that includes you.'' 
That's why the bill included new resources for enforcement. 
Democrats have made clear that the funding is not going to go 
to auditing Americans who earn less than $400,000.
    In fact, during the debate on the legislation, Republicans 
actually struck legislative language from the bill that would 
have constructed even stronger guard rails on this issue. For 
Democrats, this is about going after cheating at the top and 
doing a better job of collecting what the very wealthy and the 
big corporations already owe.
    The official tax gap says that $540 billion in taxes go 
unpaid each year. We asked the IRS Commissioner, Charles 
Rettig, about this, because we thought it was higher. He said 
it could be as high as a trillion dollars. So, the Inflation 
Reduction Act funding is going to help us get at that issue.
    Finally, better technology and better customer service 
personnel are going to allow us to go a long way toward 
relieving headaches for typical taxpayers and small businesses. 
More customer service personnel are going to make a big 
difference because, in the past, it's been a struggle to get 
anybody on the phone when you call the IRS with a question.
    In the spring of 2021, to show some progress, 11 percent of 
the phone calls got through. Pretty darn low. Last year, it was 
13 percent. In the early stages of this filing season, 
colleagues, it's up to 90 percent, a huge improvement. These 
tech upgrades and more personnel ought to reduce the odds that 
a law-abiding family or a small business faces an audit.
    These days taxpayer information goes into a lot of outdated 
systems that struggle to communicate with each other. Fixing 
that is going to help the IRS better use the information it 
already has. If the IRS can answer its own questions and 
resolve issues proactively, it's less likely that a busy parent 
or let's say, colleagues, the owner of a small local restaurant 
opens the mailbox one day to find a scary letter from the tax 
man.
    With that, we want to thank Mr. Werfel for his willingness 
to return to public service and the IRS. We had a good 
conversation when he came by. I believe the President made an 
excellent choice with his nomination. There's a lot of history 
of working with the Finance Committee, and it's been positive. 
I know the late Senator Hatch was very fond of Mr. Werfel, and 
we look forward to our discussion.
    Senator Crapo?
    [The prepared statement of Chairman Wyden appears in the 
appendix.]

             OPENING STATEMENT OF HON. MIKE CRAPO, 
                   A U.S. SENATOR FROM IDAHO

    Senator Crapo. Thank you very much, Mr. Chairman. And, Mr. 
Werfel, thank you for your willingness to serve and to answer 
our questions today.
    The IRS exists solely to serve taxpayers and fairly 
administer tax law. The Internal Revenue Code requires the IRS 
Commissioner and all IRS employees to act in accord with 
codified taxpayer rights, including the right to be informed, 
the right to quality service, the right to challenge the 
position of the IRS and to be heard, the right to privacy, and 
the right to confidentiality.
    Over the last several years, Americans have time and again 
seen the IRS fail to meet these obligations, and they are 
rightly concerned about the vitality of their taxpayer rights. 
The statute requires the IRS Commissioner to ensure the IRS 
respects these rights, and the next Commissioner needs to show 
that he will faithfully stand up for the American taxpayer. The 
next IRS Commissioner must also demonstrate that he can be 
fair, consistent, and impartial as an umpire for taxpayers 
rather than reflexively pro-IRS.
    While I did not always agree with former Commissioner 
Rettig, he was consistent and called the balls and strikes the 
same for everyone. Recently, the IRS simply overlooked 
statutory deadlines for implementing new laws, including third-
party network reporting and EV tax credits. These delays seemed 
conspicuous, given that other recent and complex tax changes, 
including the amortization of R&D expenses, corporate book 
minimum tax, and stock buyback excise taxes all took effect 
without necessary guidance.
    The need for an objective, consistent, and level-headed IRS 
Commissioner who is laser-focused on taxpayer rights is even 
more imperative, given the staggering $80 billion in additional 
funding that the misnamed Inflation Reduction Act just gave the 
agency. For reference, $80 billion is more than 6\1/2\ times 
the IRS's typical annual budget.
    These additional funds come despite the fact that, over the 
past 2 decades, Congress has appropriated the IRS hundreds of 
billions of dollars in annual funding and tens of billions of 
dollars in more supplemental funding with little improvement to 
show for it. The IRS continues to utilize outdated methods and 
processes that even the Taxpayer Advocate called ``crazy.''
    A recent report by the Treasury Inspector General for Tax 
Administration shows that these antiquated processes cost 
hundreds of times more than an updated approach that would 
better serve taxpayers and the IRS. This is just one example of 
how funding has become a scapegoat for mismanagement.
    It is no surprise to hardworking Americans that the IRS 
currently ranks dead last in a recent gallop poll rating 
Federal agencies. Sending the IRS on an unchecked spending 
binge has no intrinsic value. Unless there are outsized results 
to match the gargantuan investment, the IRS's supplemental 
billions will simply become another example of government 
waste. Because the funding lacks any accountability measures or 
guard rails, the next IRS Commissioner shoulders the primary 
responsibility for outcomes, as well as planning, tracking 
spending, and transparently monitoring outcomes.
    Americans and their elected representatives are watching. 
Will the IRS be honest and fully and deeply transparent? Will 
the IRS use best practices, rely on unbiased data, and set 
common-sense goals? Given how the funding was conceived, 
designed, and adopted, I'm skeptical, but I will look to you, 
Mr. Werfel, to fill the gap, if you are confirmed.
    The fact that nearly 60 percent of the funding will go 
toward hiring enforcement personnel, more than 14 times the 
funding set aside for serving taxpayers, is a particular 
concern. Unease about supersized IRS enforcement hiring has 
nothing to do with supporting evasion by wealthy tax cheats but 
comes from a fear that the IRS will waste untold taxpayer 
dollars chasing speculative or marginal revenue recoveries, 
while hardworking Americans and small businesses end up in a 
dragnet.
    When I offered my amendment to statutorily protect 
taxpayers making less than $400,000 from increased audits, all 
of my Republican colleagues stepped up and voted ``yes.'' No 
one on the other side voted ``yes.'' And now we have a 
statement from the Secretary of the Treasury that, in fact, we 
won't see this 60-plus percent of the $80 billion spent on 
auditing those making less than $400,000.
    My colleague, the chairman, has indicated that that is the 
intent of this money, but it is not what the law says, because 
my amendment was not allowed to be adopted. Unenforceable 
edicts are so easily broken.
    In sum, the new IRS Commissioner will shoulder immense 
responsibility. If confirmed, Mr. Werfel, you must be the 
change agent we have long been promised.
    Thank you. And I look forward to your testimony and your 
detailed responses to our questions.
    [The prepared statement of Senator Crapo appears in the 
appendix.]
    The Chairman. I thank my colleague. We're going to get 
going.
    The important point is, Democrats have made it very clear 
that we have an ironclad commitment to protect people who are 
making under $400,000. And regrettably, the Republican approach 
would have been to give a free pass to billionaires, for 
example, who have figured out a way, as we've noted, to pay 
little or no taxes for years on end because they go to their 
accountants and they say, ``Make sure I'm not getting any 
income.'' So, we're going to talk through those issues right 
now.
    Senator Carper is going to introduce our guest.

          OPENING STATEMENT OF HON. THOMAS R. CARPER, 
                  A U.S. SENATOR FROM DELAWARE

    Senator Carper. Before I do that, Mr. Chairman, thanks so 
much for giving me this opportunity. Let me just follow up on 
your comments. I've been a member of this committee for about 
15 years. For as long as I can remember, we've had IRS 
Commissioners, Democrat, Republican, come before us and plead 
for the resources they need--human, technology, and so forth--
to be able to do their job. Every new Congress, the head of GAO 
comes in and says to us, ``Here's a high-risk list of ways 
we're wasting money, and one of the ways we're wasting money is 
not collecting the taxes that are owed.'' The high-risk list 
every year says, ``For God's sake, fund the IRS,'' and we've 
done that.
    Today the question is, what kind of leadership are we going 
to provide for the IRS? And leadership is the most important 
element in the ingredients of any organization that I've ever 
been a part of. And I want to, again, thank our chairman and 
ranking member for giving me the privilege of introducing Danny 
Werfel at this confirmation hearing to serve as the next IRS 
Commissioner.
    History repeats itself today. Some 13 years ago, I had the 
privilege to offer similar remarks before the Senate Homeland 
Security and Governmental Affairs Committee when I introduced 
Danny as a nominee for Comptroller at the Office of Management 
and Budget, OMB.
    At that hearing, Danny was joined by his wife Beth, by 
their daughter Molly, and a son, Sean, who were just young kids 
at the time. I see they're not young kids anymore. Today, Molly 
and Sean both join us as college students, with Molly following 
in her mother's footsteps by studying psychology and Sean 
following in his dad's footsteps by studying public finance.
    Also in attendance again are Danny's parents, Barbara and 
Fred. Nice to see both of you; happy to see all of you again. 
And I want to thank you for sharing your husband, your father, 
and your son with the people of this country. I especially want 
to thank Beth for sharing her husband with all of us.
    I'd be hard-pressed to think of anyone more qualified than 
Danny Werfel to lead the IRS during this critical time of 
rebuilding. Throughout his distinguished career in public 
service, under both Democratic and Republican administrations, 
we have seen Danny work tirelessly to make sure that taxpayer 
dollars are spent wisely.
    He's been a lifelong champion for good government and has 
become known as the expert that people turn to for help in 
navigating the many challenges we face in government and in 
this country of ours. And that's why both President George W. 
Bush and President Barack Obama chose Danny Werfel to lead 
their Chief Financial Officers Council. That's a group of CFOs, 
Chief Financial Officers, for the largest Federal agencies, who 
work to improve financial management in our Federal Government.
    That's why President Obama chose Danny to serve as OMB 
Comptroller, where he oversaw Federal spending and tirelessly 
worked to reduce waste, fraud, and abuse in our government. And 
that's why, in 2013, President Obama appointed Danny to be the 
Acting IRS Commissioner--a job Danny performed so well that he 
earned bipartisan praise from both Senate Finance Committee 
Chair Max Baucus and the ranking member at the time, Orrin 
Hatch, for his many contributions and performance.
    The American people deserve an IRS that meets their 
expectations. That includes getting their phone calls answered, 
their problems solved online, and their refunds delivered in a 
timely way. And after decades of underfunding, thanks to the 
Inflation Reduction Act, this agency finally has the necessary 
resources to make significant improvements in the service that 
we provide to everyday taxpayers.
    We need a leader at the IRS who's been confirmed by the 
U.S. Senate. A Senate-confirmed Commissioner is critical to 
achieving the policy objectives of the Inflation Reduction Act, 
including providing best-in-class customer service to the 
American taxpayers, delivering on historic clean energy tax 
credits to meet our climate objectives, and ensuring that the 
wealthy individuals and corporations in our country pay their 
fair share of taxes too.
    In closing, Danny Werfel has proved time and again that he 
has the management expertise and experience, and the background 
necessary to tackle this very difficult and challenging mission 
head-on and to succeed. In fact, he's done this job before, so 
he can hit the ground running on Day One.
    In closing, I would urge our colleagues to confirm Danny 
and do so soon, very soon. And once again, I thank our chair 
and ranking member for the privilege--really--of introducing 
him to all of us. Thank you so much.
    The Chairman. Thank you, Senator Carper.
    Mr. Werfel, you are lucky to have Senator Carper in your 
corner.
    Normally, what we do is, we go to your opening statement, 
but would you like to introduce your family? I understand 
they're here.
    Mr. Werfel. Yes, absolutely. And actually, my statement 
goes through and introduces them, so I'll start that, and then 
we'll introduce the family as part of my statement, if that's 
okay, Mr. Chairman.
    The Chairman. That'll be fine. Why don't you go into your 
opening statement?
    Senator Carper. Mr. Chairman, could I just say one last 
thing? I'm chairing a hearing in the Environment and Public 
Works Committee at the same time that this is going on. I'm 
leaving, but I'll be back, okay? Thanks so much.
    The Chairman. Let the record show, okay?

      STATEMENT OF HON. DANIEL I. WERFEL, NOMINATED TO BE 
        COMMISSIONER,  INTERNAL REVENUE SERVICE,  DEPART-
        MENT OF THE TREASURY, WASHINGTON, DC

    Mr. Werfel. Chairman Wyden, Ranking Member Crapo, and 
members of the committee, I'm honored and humbled to come 
before you today as President Biden's nominee for Commissioner 
of the Internal Revenue Service. I want to thank Senator Carper 
for his generous introduction, and I want to express my 
gratitude to the committee for considering my nomination. I 
also want to thank President Biden and his administration for 
placing their confidence in me.
    I'm grateful to have my family with me today, this morning, 
supporting me today as they have through every step my life: my 
wife Beth, my children Sean and Molly, and my parents Fred and 
Barbara.
    From a young age, I saw the honor in serving others. I saw 
that honor in my grandfather--a World War II veteran and postal 
worker--and mother, a social worker who helped place people 
with disabilities into gainful employment. I see that honor in 
my amazing wife, who has spent more than 25 years working as a 
psychologist in the public school system. Their examples 
inspired me to pursue a career in public service.
    I felt a great sense of pride when I showed up at the 
Office of Management and Budget for my first day of work as a 
GS-9 in the late 1990s--and even more pride 13 years later when 
I last sat in a Senate confirmation hearing as the nominee for 
the OMB Comptroller.
    While at OMB, I served under nine different Directors of 
both political parties. This experience reinforced the 
importance of having a true north for how to best serve the 
American people. At OMB, I learned that the essential 
foundation of government is public trust. Public trust requires 
transparency, collaboration with oversight entities such as 
Congress, adherence to the rule of law, responsible stewardship 
for taxpayer dollars, equity, and fairness.
    In 2013, with these lessons now a part of my professional 
DNA, I was selected to serve as Acting Commissioner of the IRS. 
While serving, I witnessed the dedication and talent of the IRS 
civil servants. Since leaving the IRS, I watched from afar how 
these employees provided economic lifelines to hundreds of 
millions of families and small businesses during the COVID-19 
pandemic. Their true north is their deep belief that the 
American people need an IRS that provides all taxpayers with 
world-class customer service and implements the tax code in a 
way that is just, fair, and equitable.
    I share in this belief. As an IRS alum, but more 
importantly as a taxpayer, I've been concerned about gaps in 
capacity that have impeded the IRS's ability to meet its 
critical mission. The result is that hardworking, honest 
taxpayers who need assistance in meeting their tax obligations 
are not getting the services they need.
    The IRS has also been ill-equipped to unpack complex and 
intricate returns of high-income taxpayers. Following the 
passage of the Inflation Reduction Act, Americans rightly 
expect a more modern and high-performing IRS. Last year, 
Secretary Yellen issued a directive that the IRS will not 
increase audit rates for small businesses and households making 
under $400,000, which I am committed to meeting.
    Therefore, if I'm fortunate enough to be confirmed, the 
audit and compliance priorities will be focused on enhancing 
IRS's capabilities to ensure that America's highest earners 
comply with applicable tax laws. Also, front and center will be 
efforts to modernize and dramatically improve taxpayer 
services. If confirmed, I will lead these efforts in close 
collaboration with this committee and will be unyielding in 
following my true north to increase public trust.
    While unheralded, effective implementation of our tax 
system is necessary to fund critical government services. For 8 
months in 2013, I had the privilege to walk into the IRS and 
draw inspiration from the workforce and the solemn duty of this 
mission.
    As I reflect on the public service legacy of my family, I 
think about the example I will set for my children by 
rededicating myself to a career in public service. To be given 
this opportunity again would be the greatest honor of my life.
    Thank you for considering my nomination. I look forward to 
answering your questions.
    [The prepared statement of Mr. Werfel appears in the 
appendix.]
    The Chairman. Thank you very much, Mr. Werfel.
    Before we begin, there are some obligatory questions that 
we have to pose to you. First, is there anything that you're 
aware of in your background that might present a conflict of 
interest to the duties of the office to which you've been 
nominated?
    Mr. Werfel. No.
    The Chairman. Second, do you know of any reason, personal 
or otherwise, that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office to 
which you've been nominated?
    Mr. Werfel. No.
    The Chairman. Third, do you agree without reservation to 
respond to any reasonable summons to appear and testify before 
any duly constituted committee of the Congress if you are 
confirmed?
    Mr. Werfel. Yes.
    The Chairman. Finally, do you commit to provide a prompt 
response in writing to any questions addressed to you by any 
Senator of the committee?
    Mr. Werfel. Yes.
    The Chairman. All right. I'll start with questions, then 
we'll go with Senator Crapo.
    The first is, I want to address this fact that the wealthy 
get audited far less than do working families. And we've 
obtained information that low-income taxpayers who claimed the 
Earned Income Tax Credit were over eight times more likely to 
be audited than large partnerships. If confirmed, what would 
you do, specifically, to make sure the IRS ends what I call 
this two-tiered enforcement system and starts auditing 
partnerships, for example, favored by billionaires at a higher 
rate than low-income taxpayers who claim the Earned Income Tax 
Credit?
    Mr. Werfel. Senator, I thank you for the question, and I 
think it's a very important one. I start with thinking through 
what are the ingredients of effective tax implementation, and 
certainly equity is one of them. And to achieve equity, I think 
we should be able to look at the audit footprint and see 
balance. I don't think, based on what I know now, that there is 
balance today.
    I'm not at the IRS, but if there is an imbalance, that is 
concerning, especially if there's a disparate impact on poor 
people. If poor people are more likely to be audited than the 
wealthy, that is something that I think potentially degrades 
public trust and needs to be addressed within the tax system.
    I head into this job with a directive from Secretary 
Yellen, and that is to balance this audit footprint. And I'm 
excited and eager to work with the IRS on a strategy--that I'll 
make very transparent--on how to do that.
    The Chairman. All right.
    There have been troubling recent reports that Black 
Americans are at least three times as likely to be audited as 
other taxpayers, even though the IRS doesn't collect 
information on race. This raises serious questions about 
discrimination with respect to audit selection. This is 
something the IRS has to address. If you're confirmed, what 
will you do to uncover the reasons for the racial disparity in 
audit selection, and what will you do to correct it?
    Mr. Werfel. I agree, Senator. This is very concerning. I go 
back to the point in the first question: fairness is an 
essential element of tax administration, and we have to have an 
understanding of whether our approaches, our activities, are 
having disparate impacts on any population. It's particularly 
alarming if it's having a disparate impact on racial 
minorities. Right now, not being at the IRS, I don't yet have a 
good sense of what the issue is.
    The Chairman. Let's do this. Will you commit, within 60 
days of being confirmed, that you will get back to us and give 
us the underlying reasons, in your view, why there is this 
discrimination and what you'll do to correct it within 60 days?
    Mr. Werfel. I will absolutely, as soon as I get to the IRS, 
talk to those individuals who are working this issue and report 
back to you on what we're finding.
    The Chairman. Sixty days.
    Mr. Werfel. Understood, Senator.
    The Chairman. All right.
    With respect to the tax gap, which is attributable to the 
wealthy, the Treasury Department estimated last year that the 
tax gap was about $600 billion, with the top 1 percent counting 
for the largest share. But the IRS's latest tax gap projections 
don't even show how much high-income taxpayers cheat. They 
completely omit noncompliance from multinational corporations, 
flow-through entities, foreign activity, and digital assets.
    Commissioner Rettig said, when the committee asked, the tax 
gap could be as high as a trillion dollars, if you included 
those areas I mentioned that have been omitted. If you're 
confirmed, what would you do to ensure that the IRS measures 
the tax gap in these areas, and that you actually have a 
strategy for reducing it?
    Mr. Werfel. Absolutely, Mr. Chairman. When I think about 
the objective to improve the capacity the IRS has to unpack 
complex and intricate returns, I think we have to do a number 
of things. I'm not sure that training the current workforce 
will be sufficient. I think we want to hire and bring in 
experts, maybe some of the same individuals who, earlier in 
their careers, prepared these very intricate returns and are 
ready to come back and potentially serve their country and, 
maybe years later, help us unpack them. And when they're doing 
that, I think, Mr. Chairman, we will be able to not only unpack 
and help collect more revenue from high-income taxpayers and 
large corporations, but also understand how to better measure 
that so that, going forward, the tax gap assessment has a more 
clear picture of what this gap is.
    The Chairman. I'm going to wrap this way. I know Senator 
Carper has got a hectic morning, and I know a lot of my 
colleagues do. I'd like you to tell us what you're going to do, 
if confirmed, to reduce the audits of family-owned small 
businesses that follow the rules.
    You heard me in my opening statement say it seems to me, 
with better technology and highly trained staff, you're going 
to be in a position to focus on these big players, these 
multinational corporations, the ultra-wealthy, you haven't been 
able to focus on in the past, because those have been more 
expensive cases. And this can redound to the advantage of small 
businesses who are complying with the law and complying with 
the rules.
    So tell us, as I wrap up my time, because this is something 
that we all feel strongly about--and you've seen the back and 
forth with respect to small businesses. What specifically are 
you willing to do to reduce the audits of family-owned small 
businesses that follow the rules?
    Mr. Werfel. I think, first of all, with the directive from 
Secretary Yellen to focus IRS resources on high-income 
taxpayers, certainly there'll be a rebalancing of the audit 
footprint. I want to take a look with the IRS team at other 
audits and figure out if there's a way to determine where, 
essentially, we'd be wasting our time to go and audit, because 
there's such a high percentage and a high probability that the 
balance is already being paid. And by doing that, we can go 
after more issues where there might be something underlying 
that's nefarious, something that relates to advertent cheating 
or evasion.
    I think there are opportunities, and I will come back to 
you, Mr. Chairman, with a more specific set of plans on how to 
rebalance the audit footprint in a way that's fair, equitable, 
and is as transparent as the law will allow me to be.
    The Chairman. Okay. Thank you.
    Senator Crapo?
    Senator Crapo. Thank you, Mr. Chairman.
    My first question, Mr. Werfel, is on this plan that Senator 
Wyden has been talking to you about getting some details on. 
There's growing uncertainty about when or even if the IRS plan 
for spending the $80 billion will be publicly released. I 
understand that you have not been involved in that because you 
are not the IRS Commissioner yet, but you probably will be if 
your nomination proceeds, as it looks like it will. It's a 
widely shared view that the IRS must release this plan in real 
time and allow stakeholders to provide feedback.
    If you are confirmed as the IRS Commissioner, would you 
agree that the plan to spend the $80 billion will be publicly 
released and that you will allow public feedback from 
stakeholders and others on it?
    Mr. Werfel. Senator, I appreciate the question. I agree 
that the plan that is put together should allow both you, this 
committee, and the public to connect the dollars from the 
Inflation Reduction Act to the various activities and 
investments. And I really want to earn this committee's trust. 
I think as a former budgeter, I will earn your trust by putting 
together a very clear plan that articulates where the money is 
going. And as a former OMB Comptroller, I hope to earn your 
trust in terms of making sure that those funds are spent 
wisely.
    So, I think you and I are sharing the same values, Senator. 
Let's be public about the plans, and let's make sure that we're 
building trust in the way forward.
    Senator Crapo. Well, thank you. And I'll take that as a 
commitment that you will publicly release the plan.
    As you know and has already been discussed here at the 
hearing, I'm very concerned about the use of the funds for the 
enforcement part of the plan. We have never had an argument in 
this committee about whether we need to give the IRS the 
necessary resources to bring itself technologically into the 
21st century and to get the adequate response to the taxpayers 
that they now don't get so that the IRS can even answer the 
telephones, so to speak, when taxpayers are trying to 
communicate with them.
    The battle has been over this completely uncontrolled and 
undefined commitment of 60 percent of the $80 billion to 
enforcement. And there's been a lot of talk about, well, we 
want to enforce this against those who are rich, super-rich tax 
cheats. But yet, when I brought that amendment I referenced 
earlier, no one would support it and put that right into the 
law.
    So, I want to get into that. From the IRS's own data, the 
two largest single components of the tax gap--that's the 
difference between taxes owed and paid--are small businesses, 
small business income, and individual non-business income. In 
response to my questions, the nonpartisan Joint Committee on 
Taxation told us that these shortfalls are overwhelming. They 
are upwards of 90 percent, and these shortfalls fall on 
hardworking Americans with modest income far under $400,000.
    Now, Secretary Yellen reportedly has said she's directed 
the IRS not to use this--somewhere in the neighborhood of $50 
billion--to enforce against people with incomes less than 
$400,000. My colleague, the chair, has said that is not to be 
done. What I want to know is, how strong will you make that 
commitment? The language we've gotten from the Secretary was in 
this term of, well, we want to get balance. I want to know 
whether you are going to commit today that the plan will not 
allow this super-sized enforcement money to be utilized against 
people who make less than $400,000 per year. Will you make that 
commitment?
    Mr. Werfel. Senator, yes, and I made my commitment in my 
official statement. For the record, I am committed to Secretary 
Yellen's directive on how the audits should move forward under 
the Inflation Reduction Act, and I look forward to working with 
you and you holding me accountable for that.
    Senator Crapo. Well, thank you. Secretary Yellen's 
statement leaves a lot of wiggle room. I want to be sure you 
know that I don't expect to see wiggle room in this commitment.
    Last question: there's been a lot of debate in the last 
Congress that was stopped finally--but some of us are concerned 
that it's not--about whether the IRS should have the authority 
to get into people's bank accounts if they make over $600 a 
year or spend over $600 a year. And then some said, ``Well, 
we'll make that $10,000 a year as the target point, or $10,000 
a year spending or depositing.''
    There's a lot of concern about the intent at the IRS to 
move forward with some plan. We've stopped it here 
legislatively in the battles in Congress last year. I want to 
know whether there are any intentions at the IRS or any 
intention on your part to regulatorily seek to expand the 
ability of the IRS to literally invade and look into the bank 
accounts of Americans simply because they have deposited more 
than $600--or $10,000, or whatever number--into their account?
    Mr. Werfel. Senator, I'll go back to my background. I'm a 
rule follower, and I would only take actions that are 
consistent with what the IRS authorities are under the law. But 
I'll also say this: I think about effective tax administration 
as requiring a bunch of different factors, reducing paperwork 
burden on the public, but also avoiding unnecessary intrusion.
    So, if we're going to take a step, I'm going to want to 
make sure this committee is comfortable that: (a) we've taken 
that step consistent with what our parameters are in the law; 
and (b) that we've made the right decision that this is the 
right step to do in the interest of the taxpayer and balances 
the importance of not invoking unnecessary intrusion. And my 
commitment is to hold to these factors and work with you 
collaboratively to make sure we balance them effectively.
    Senator Crapo. Well, I would hope that you wouldn't seek 
any plan like I just described, which I think is a violation of 
the privacy of our American citizens, unless Congress directed 
it.
    The Chairman. I'll just say to my colleague I think I'm 
about as big a privacy hawk as there is around here. I'm 
certainly going to make sure people's privacy is protected as 
well.
    Okay; our next two Senators will be Senator Cardin and 
Senator Grassley.
    Senator Cardin. Thank you, Mr. Chairman.
    Mr. Werfel, first of all, thank you. Thank you for your 
willingness to serve our country in this critically important 
position. There's an easier way to make a living, so thank you 
for being willing to take on this challenge.
    I also want to acknowledge that I believe your strongest 
assets in the IRS are your workforce. I know many of the 
individuals who are very talented. They've gone through 
struggles with lack of resources, and I just urge you to invest 
in good people, continue to invest in good people, and do 
everything you can to increase the morale within the workforce. 
The work that they're doing is critically important to our 
country.
    I agree with you on your commitment to be a rule follower. 
We're the ones who pass the laws. Then they're interpreted. And 
yes, there's confusion in the way that people comply with our 
tax code. And historically, we've had high compliance because 
it's been voluntary compliance. Everyone should believe they're 
being treated fairly under our system, but that's no longer the 
case.
    And yes, when you look at following the rules, if you're a 
higher-income taxpayer or more complicated taxpayer, you have a 
lot of professional help for you to interpret the rules as 
favorably as they can be to your advantage. And when you don't 
have audits and you don't have an aggressive way to have a 
uniform interpretation of those rules, you run into the tax gap 
that we have today.
    And so, I agree with my colleagues that we want everyone to 
comply with the rules. There's not an income limit here on 
complying with the rules. We know that those of higher incomes 
have found ways to bend those rules, and that has to end. And 
that's one of the reasons why, in passing the Inflation 
Reduction Act, the resources were made available so we could 
close that gap and have a better confidence among the American 
taxpayers that they're being treated fairly. I just wanted to 
underscore that point.
    I know I had a chance to talk to you about that, and I'm 
convinced you understand that. Everyone needs to comply with 
the rules, but we have to make sure that everyone understands 
the rules through the audit process. So, I just encourage you 
to do that.
    I want to raise an issue that's been raised by several of 
my colleagues, and that's small businesses. I chaired the Small 
Business Committee. It's one of the major areas of concern that 
is raised by small businesses around this country: the 
challenges within our tax system. I think we, in Congress, have 
to take responsibility for that, because we're the ones who 
developed the rules. But we need your help in how we can 
develop the rules and apply the rules to help small business 
owners who don't have the same capacity to deal with the tax 
code that larger companies have.
    So, I'd just like to know your vision on how we can work 
together to make the tax code more understandable and fairer 
for small businesses, which are the growth engines of our 
economy.
    Mr. Werfel. Absolutely, Senator Cardin. And it was 
interesting--in Senator Crapo's opening remarks, he made 
reference to the Taxpayer Bill of Rights. And I got some very 
good advice prepping for this process to go and print out and 
read the Taxpayer Bill of Rights, and I've made a habit now of 
reading it every day. And if confirmed, I will read it every 
day.
    And one of the ones that jumps out at me is the right to 
understand, have clarity on what is expected of them. And I 
think there's more that the IRS can be doing to reach out, 
especially to taxpayers who don't have the means to hire 
accountants or law firms to navigate their taxes. I mean, it's 
a very complicated code. It can be daunting. And so, I think 
there has to be an objective to meet taxpayers where they are. 
If they can't afford the resources to help them navigate, how 
can the IRS do more to answer their questions--whether it's 
people in taxpayer assistance centers, whether it's better 
solutions online, whether it's working with intermediaries, tax 
preparer associations, local chambers of commerce, whatever it 
is--to hold sessions that might be helpful? I'm ready to roll 
up sleeves and do what we can to help working families, small 
businesses, meet their tax obligations in a much easier way 
than it has been to date.
    Senator Cardin. And I would point out that the Taxpayer 
First Act and the Bill of Rights have all been areas that we've 
weighed in on to do exactly that: to be a consumer-friendly 
agency. Phones have to be answered, advice has to be given 
that's accurate, so people can respond in a timely way. And 
your response to my first question gives me great confidence 
that we can work together to achieve those objectives.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Cardin.
    Senator Grassley?
    Senator Grassley. Congratulations on your appointment, and 
I'm sure your family and everybody who knows you is proud of 
the responsibilities you assume.
    I'm going to follow up on the first question that Senator 
Carper asked you. It's about spending the $80 billion, and it 
deals with a bill that Senator Thune and I introduced, the IRS 
Funding Accountability Act. And you said that you would make 
public the report that you're going to put out when you get 
done with it.
    So, this bill emphasizes doing that annually so we can 
compare one year with the previous year. So, if confirmed, 
would you direct IRS to update the spending plan annually for 
Congress to review, regardless of whether this bill passes or 
not?
    Mr. Werfel. Senator, thank you for the questions. And I've 
worked a long time in government and seen a lot of the 
initiatives that you've undertaken to increase transparency and 
increase the integrity of the Federal process. It's so 
essential that we build trust, and I think that by sharing 
whatever we can share within the law with the public about our 
go-forward plan is going to help build the trust.
    I will work with this committee to figure out what is the 
best manner in which to make this public and the frequency of 
it. And so, anyway, I'm very much looking forward to working 
with you on that.
    Senator Grassley. I want to go to the ProPublica release 
that they put out. It's clear that IRS needs to do a better job 
safeguarding taxpayer information. Government Accountability 
Office and Treasury Inspector General for Tax Administration 
reports identify many vulnerabilities in the IRS information 
system, particularly as it relates to use of cloud systems.
    Just last month, GAO released another report on IRS's 
implementation of cloud computing that made an additional nine 
recommendations. So, if confirmed, will you work to protect 
taxpayers' information by addressing the serious 
vulnerabilities identified by TIGTA and GAO?
    Mr. Werfel. Senator, I'm glad you asked that question. When 
I sat down to think through what the most important factors of 
effective tax implementation are, the very first thing I wrote 
down was data security and making sure that we protect taxpayer 
information from unauthorized disclosures.
    And then your point about the Taxpayer Inspector General 
and the Government Accountability Office--these are incredibly 
important voices that frequently provide recommendations to 
organizations like the IRS. I will absolutely take all of those 
recommendations seriously. I always have, and I will work with 
them to make sure that we're implementing those recommendations 
in a way that advances more data security so taxpayers can 
build confidence that we're holding their data sacred.
    Senator Grassley. According to the National Taxpayer 
Advocate, in 2021 that agency saw IRS telephone assistance 
reach an all-time low, with only minimal improvement in 2022. 
Moreover, IRS still has nearly 2 million unprocessed paper tax 
returns from last filing season.
    Addressing poor taxpayer service needs to be a high 
priority for you. However, of the nearly $80 billion in 
additional funding IRS has received, only $3 billion is 
dedicated to taxpayer service. Prior to supersizing 
enforcement, IRS should focus on using the $3 billion for 
improved customer service.
    If confirmed, will you prioritize deploying $3 billion more 
than that before expanding audits and other enforcement?
    Mr. Werfel. Senator, I appreciate the question. I think if 
anything is going to keep me up at night--if I'm fortunate 
enough to be confirmed--it's going to be what are the right 
efforts we can undertake to increase taxpayer service. Phone 
calls should be answered, questions should be resolved, and I 
think what's really important is that the IRS Commissioner 
implements the law that's been passed to the maximum impact 
that serves taxpayers' interests. So, if there's $3 billion in 
increased funding for taxpayer service, and that's what 
Congress in its wisdom enacted, we will make sure, and I will 
work to make sure that those $3 billion are spent wisely and 
with maximum impact in improving the taxpayer experience.
    Senator Grassley. And my last question deals with a bill 
that passed in 2005, the IRS whistleblower program. So far, 
it's an underutilized IRS enforcement tool, encouraging those 
with knowledge of tax fraud to step forward. It helps IRS 
direct its limited resources, and since 2006, this legislation 
has brought in $6.4 billion that would have otherwise been 
uncollected.
    In recent years, awards to whistleblowers have fallen, 
while processing times have increased. The average time for 
processing whistleblower's claims is now 11 years, and I think 
that's unacceptable. If confirmed, what steps would you take to 
ensure well-functioning whistleblower programs so we can bring 
in a lot more than $6.4 billion?
    Mr. Werfel. Senator, I appreciate the question. And as I 
mentioned earlier, I know this is an issue that you spent your 
career working towards. I think there are certain levers that 
are in place at government organizations--and I'll speak to the 
IRS specifically--that help make sure that it is following the 
right set of rules and procedures and conducting itself in a 
way that builds trust.
    I think the Inspector General, I think GAO, and I think 
effective whistleblower functions are critical to that. I want 
to learn from the IRS. You mentioned some statistics that are 
concerning about the potential functionality of that process. I 
will look into it and figure out what corrective actions may be 
necessary to strengthen it.
    The Chairman. Senator Grassley's time is up, but I just 
want, for the record, for people to know how important this 
work is that you're talking about. And you and I have been 
working on these whistleblower issues for a long time together, 
and that will continue here. Thank you for bringing it up.
    Senator Bennet?
    Senator Bennet. Thank you, Mr. Chairman. I appreciate it. 
Mr. Werfel, thank you for your willingness to serve and your 
family's willingness to let you serve. Very much appreciated.
    Two weeks ago, the IRS notified taxpayers in Colorado in 
the middle of filing season that they could face a tax on their 
tax refund, which in my State we call TABOR refunds, Taxpayer 
Bill of Rights refunds. Coloradans receive TABOR refunds when 
the State collects more in taxes than we allow in State law. 
It's a tax refund, not income. And in 30 years, the IRS has 
never taxed these refunds for the vast majority of Coloradans. 
And Congress hasn't passed any laws to change that.
    So the IRS's announcement threw our entire filing season 
into chaos. It would've hit my State with about $400 million in 
additional taxes at a time when working families are already 
struggling with rising prices in this economy, and that's why I 
called the Treasury Department and the IRS and demanded that 
they fix this. And over the weekend, the IRS clarified that it 
won't tax last year's TABOR refunds, but I should never have 
had to make that case, and people in Colorado should not have 
had to make that case, especially when they're in the middle of 
filing their taxes.
    Mr. Werfel, I know you weren't involved in this; otherwise, 
I would've called you. But I want to put the issue on your 
list, because I am intensely interested in making sure we don't 
repeat this again next year. So my question for you is, first, 
will you commit to working with my office and the State of 
Colorado ahead of the next filing season, so we aren't 
inflicting needless chaos and confusion on my State?
    Mr. Werfel. Yes, I will, Senator. Absolutely. I think it 
goes back to the Taxpayer Bill of Rights--clarity on what is 
expected. I think clearly, it's better to have that clarity in 
advance of the filing season with reasonable notice.
    Senator Bennet. Even if you thought it was a good idea, 
which, for the record, I don't think it's a good idea, and 30 
years of experience with the IRS tells us it's not a good idea. 
But even if you did, the last time you should do it is when 
people are already filing. In fact, the guidance that we got, 
incredibly, from the IRS was ``don't file your tax returns 
until we sort this out.'' And again, I share Ben Cardin's view 
that there are many hardworking public servants there, but 
that's an example of the kind of self-inflicted wound that I 
think is just--well, it makes people believe there's just a 
fundamental nonsense of government. So, I look forward to 
working with you on that.
    Mr. Werfel, as you know, I've been in the Senate now for 
more than a decade, and the most significant issue that I've 
worked on is the expansion of the Child Tax Credit in 2021, 
along with my colleagues on this committee, Chairman Wyden and 
Senator Brown. That one policy cut childhood poverty in half in 
America. It cut family hunger by a quarter in this country, a 
country that has the highest childhood poverty rate in the 
industrialized world, notwithstanding the fact that we're a 
wealthy country.
    The Child Tax Credit benefited over 90 percent of the kids 
in my State and all across the United States. At the time, many 
people doubted that the IRS could deliver the CTC on a monthly 
basis, but to its credit, it did. It wasn't perfect, but about 
90 percent of eligible children received the payments.
    My biggest disappointment is, obviously, that Congress let 
the expanded CTC expire. And I still believe that we will 
eventually pass an expanded CTC. I'm glad there are members of 
the Republican caucus who have their own proposals. If you 
become Commissioner, you will play a vital role in making this 
a success. What lessons did you learn from the roll-out of the 
expanded CTC and the American Rescue Plan that we could carry 
forward, and what steps would you take to make sure that we 
deliver the CTC to every eligible family?
    Mr. Werfel. Senator, I understand how hard you've worked on 
this issue, and it's such an important one. And as I mentioned 
in my opening statement, I wasn't at the IRS, but I admired 
from my status as a civilian and a citizen the way in which, 
during a pandemic, the IRS was able to implement both the Child 
Tax Credit and several rounds of Economic Impact Payments.
    I think the lesson I take from that is, it can be done, and 
I'm hopeful that if there is a law that comes out that requires 
that solution to be redeployed, the fact that it's been done 
once will enable it to be done again. But again, I would love 
to get to the IRS, if I'm fortunate to be confirmed, and learn 
more about what that took, what that process took and how 
repeatable it is, and then position the IRS even more 
effectively through the right investments in technology, 
process improvement, and the necessary human capacity, so that 
when these things come up, we can hit them out of the park.
    Senator Bennet. Thank you. Mr. Werfel.
    I'm out of time, Mr. Chairman, I realize that. Had I a 
moment to ask another question, it would be about how to get 
more families signed up on EITC, so I'll send that for the 
record.
    Thank you, Mr. Chairman.
    The Chairman. Thank you for making sure we get that 
information.
    The next two, unless Senator Thune comes in, will be 
Senator Warner and Senator Lankford.
    Senator Warner. Thank you, Mr. Chairman. Mr. Werfel, great 
to see you again. And again, we had the chance to meet 
individually. I appreciate your willingness to take on what's 
got to be one of the more thankless tasks in the government, 
but obviously something that's extraordinarily important.
    I may differ from some of my Republican friends on this 
because, frankly, I think the reinvestment in the IRS is 
extraordinarily important. I want to touch on a couple of 
issues. I know people have already raised concerns about just 
plain responding to constituents on call-in numbers. We did not 
do a very good job during COVID. We picked up a little bit 
recently. We've got the corresponding challenge around tax 
returns that still have not been finished.
    How are you going to balance that, even with the infusion 
of additional capital into that customer service component of 
responding to inquiries, but at the same time make sure you 
don't get further backlogged as we approach the tax season?
    Mr. Werfel. Senator, I appreciate the question. I think 
often, from my experience and my brief tenure at the IRS, you 
are juggling a lot of different priorities. The way I think 
about your question is really to understand better what the 
portfolio is of what's incoming. Certain things that are 
incoming may be able to be handled quicker, may be able to be 
handled in an automated way. I think one of the big 
opportunities that exists is putting more technology into the 
customer service solution, whether that's tech solutions in the 
call center, whether that's improved digital solutions on the 
web, or applications on smartphones.
    Understanding and mapping, essentially--and this is 
something that I think I learned in the private sector over the 
last 9 years--understanding how the best private-sector 
entities in the world manage their incoming and prioritize it 
in a way that's more efficient; I'd love to benchmark that and 
then see if the IRS can beat those benchmarks. And we have, I 
think, a once-in-a-generation opportunity to put in some of 
these solutions that will benefit all taxpayers.
    Senator Warner. We want to look at how you're going to be 
able to balance those two and get it right.
    I want to raise one of the things that, again, I hope even 
critics of the IRS would acknowledge is one of the areas where 
we desperately need to make more investment, and that is tech 
modernization. It feels like every time we try to upgrade the 
IT systems at the IRS, it has been a failed effort. The close 
to $5 billion that have been allocated is terribly important.
    My friend, Senator Tillis, and I are cochairs of the 
Cybersecurity Caucus, and one of the things is--and I see this 
a lot from my position as chair on Intel. We get better at 
cybersecurity, but the bad guys get better at an equal rate, 
and too often cybersecurity ends up being bolted onto legacy 
systems rather than built in from the inception.
    And my hope with this kind of close to $5 billion 
capitalization is, we can really think about potentially 
getting rid of some of the legacy systems and almost starting 
over. Talk about that, and talk about how, again, you're going 
to make sure that cyber-protections--because we're talking 
about the most critical personal and financial information of 
Americans and businesses--are going to be built into that 
strategy?
    Mr. Werfel. Senator, earlier I made the comment that when I 
sat down to think about what are the most important elements of 
tax administration that I could think of, data security was the 
first thing I wrote down. It'll be one of the first questions I 
ask, if I'm fortunate enough to be confirmed. What is our 
baseline right now in terms of our cyber-resiliency and our 
cyber-performance? Where are the risks? As we update the 
technology, the technology backbone, what changes do we need to 
make? As you say, not so that it's bolted on and therefore 
potentially less robust, but deep in the roots of the systems 
itself, so from A to Z we feel extremely confident that there 
is no material cyber-risk that we face. I don't have a good 
feel right now for what the risk profile is, but it is a top 
priority to understand it, because it's mission-critical.
    Senator Warner. I know Senator Tillis and I want to follow 
up on that. And again, I hope we can, when we think about IT, 
not simply add on to legacy, but in some cases build on it.
    I'm going to follow Senator Bennet and not ask for a 
response on this, but I would love--Senator Cardin has already 
raised the challenges of small business. I think some of the 
problem has been lack of coordination, for example between the 
SBA and the IRS. So this coordination of IRS with other Federal 
agencies, I think, will lead to a better customer experience 
and a better overall experience. And again, I hope you'll be 
able to get back to me with that.
    Thank you for extra 17 seconds.
    The Chairman. No, thank you, Senator Warner.
    And Mr. Werfel, you should know that a number of the 
members of this committee are also on the Intelligence 
Committee chaired by Senator Warner, so you're going to find an 
intersection there on cybersecurity and other issues.
    Next in line is Senator Lankford.
    Senator Lankford. Mr. Chairman, thank you. Mr. Werfel, good 
to see you again. We got to meet each other when you first dove 
into the IRS, deep into the pool, right after the whole Lois 
Lerner experience that happened, where the IRS was using the 
power of the IRS to be able to slow down or silence 
conservative voices.
    Obviously, there was a transition of leadership at that 
time, and you walked into the middle of all that to be able to 
clean that up. So, you're walking into another set of 
challenges as well. Obviously, the IRS has a record amount of 
dollars that are being thrown at it at a very rapid time 
period. We're waiting to get a plan where not only we can see 
how it's going to be done, but the American people can also see 
how that money is going to be spent.
    There were some very specific statements that were made 
earlier on, on how the money would be spent, that it wouldn't 
affect anyone with $400,000 or less, but that actually wasn't 
put in the statutes to require that. And so there will be a lot 
of questions on how that money will actually be spent and what 
that looks like.
    ProPublica, a year and a half ago, released taxpayer 
returns, put them out publicly, which, by the way, is a 
violation of Federal law--to publish someone's tax returns. 
Apparently, no one has been prosecuted for printing them and 
releasing them, and no one has been prosecuted for actually 
leaking them, and we haven't been able to get information on 
how they actually got leaked, so that's out there.
    And then there's also you've got a record number of people 
eligible for retirement. So, you thought you were in the fire 
the last time you walked into the IRS. You've got a lot that's 
on your plate this time. The 1099 that Ranking Member Crapo has 
already brought up as well, this particular one is interesting 
to me.
    Let me ask you a couple quick questions. Part of the 
American Rescue Plan and part of ``rescuing America''--
apparently to my Democratic colleagues--was getting information 
about my Venmo transactions with my daughter to the IRS. So my 
daughter--she's a great lady. Occasionally, she'll run to the 
store and will buy something and will bring it home, and I will 
tell her, ``Will you grab that at the store, and I will Venmo 
you to pay for that.''
    I'm quite confident that will exceed $600 over the course 
of a year of random things like that with our family. Those 
records are now going to go to the IRS because of the American 
Rescue Plan; part of rescuing America is getting that. The IRS 
was supposed to start collecting those last year and requiring 
third-party organizations to do it. They delayed it out and 
said now it'll be this year. What's your best guess on how the 
IRS is going to have to manage what is actually taxable in that 
and what is just tracking the information of me paying my 
daughter back for groceries in our household?
    Mr. Werfel. Thank you for the question. I'm familiar with 
the issue in terms of how it's been reported publicly. I think, 
when I reflect on these issues that emerged during the filing 
season and the IRS then pulls back and says, ``We have to study 
this,'' I would imagine it's because they're getting a lot of 
feedback, that whatever is going on right now is unsustainable, 
so we need to take a moment and reset.
    As I mentioned earlier, one of my objectives would be to 
prevent that from ever happening so that we're prepared going 
into each filing season and we mitigate the risk of that 
happening. But you raise a really important question about how 
does the IRS balance all these factors? Is it the right 
approach to be asking for information? I go back to the 
Taxpayer Bill of Rights, paperwork burden, intrusion, what is 
the right balance?
    And I'll start with the law. What does the law expect us to 
do? And then, to the extent there's discretion in the law to 
make sure that we're taking all the right reasonable steps, I 
want to move there. And then I want to be transparent with the 
committee: ``This is what we think, this is the tension that 
we're seeing, and we want that feedback.''
    And if it comes to be that we see that there's 
opportunities for certain personal transactions to not be 
included, let's talk about doing that as well. So I'm open to a 
lot of different options. The bottom line is, as always, what 
will build trust with the taxpayers?
    Senator Lankford. Well, I think a lot of taxpayers are 
going to be shocked that part of the American Rescue Plan was, 
over the course of a year if you do $600 in Venmo transactions, 
you're now going to have to report that to the IRS. I think 
that's going to be pretty shocking to a lot of folks in the 
days ahead, and there'll be a lot of technicalities and issues.
    This customer service issue has also come up. I've seen 
some recent press releases and, quite frankly, some crowing 
from the IRS about how our customer service percentage numbers 
are so much better on answered calls and such, and so I 
actually went and pulled the facts on the percentage of calls 
answered, and I have to tell you, I was a little surprised on 
it, because the way the percentage works on it is, last year 
there were 9.2 million people who attempted to call, and only 
3.7 million actually got an answer.
    So, then the crowing was about how the percentage is so 
much better this year. There were 5.6 million attempts to call 
and 3.5 million calls answered. We actually answered fewer 
calls last year than the year before; we just had fewer people 
try to call. So the announcement was about, gosh, we're doing 
so much better, the percentage is better. It's just because 
people didn't call any more; you were actually returning fewer 
calls.
    So this issue, we're going to have a lot of dialogue about, 
about how to improve customer service and what that's going to 
look like. You don't have time to be able to go into all the 
details now, but just know we're going to have a lot of 
dialogue about this in the days ahead. So, thank you, Mr. 
Werfel.
    The Chairman. Senator Barrasso?
    Senator Barrasso. Thank you, Mr. Chairman.
    Congratulations. Thanks for coming to visit with me and 
having a chance to talk about a number of the things, including 
the things that Senator Lankford was just talking about.
    This is a critically important position in the government. 
Very few agencies in Washington are as present in the lives of 
working families as the IRS, for better or for worse. Many 
people feel like it's for worse, and that's what I hear in 
Wyoming. They're afraid of the IRS. They are honest people who 
want to pay their taxes, want to pay what is owed, don't want 
to have someone come after them if they think they've done 
right, if they think they have called and they have called and 
finally get an answer, may have been told something after 
waiting hours and hours to try to comply--and we talked about 
this.
    Restoring the credibility of the agency, I think, is going 
to be a steep mountain to climb, and it's something that when 
we visited, I said, ``This is critical.'' This is part of your 
job. The policies that have been enacted by President Biden's 
reckless tax and spending bill really are not going to be 
helpful in trying to regain the credibility of the American 
people for the agency.
    The American people have seen examples of political 
targeting at the IRS, weaponization of the tax code. People 
feel we have an administration that is woke and weaponized 
against them. We know about the poor customer service. Less 
than 10 percent of the taxpayer calls are getting answered. In 
the private sector, that level of performance would put someone 
out of business, but in the Federal Government, you get more 
money. The answer is, pay more money, increase the spending. 
Massive backlogs have left desperate families and small 
businesses waiting on much-needed returns. They fight 
skyrocketing inflation. Some of these returns that I hear 
about--we get calls in the State of Wyoming from people waiting 
for over a year for returns, for their money.
    The IRS has been plagued by leaks of highly confidential 
taxpayer information to news outlets, like the one that Senator 
Lankford just referred to. These are just a number of examples. 
I think from our discussion you know that there is plenty of 
cleaning up to do, and the focus needs to be on improving 
customer service for hardworking taxpayers. Regrettably, that 
wasn't the mandate of this ill-conceived tax and spending 
package--$80 billion in additional funds for the IRS--and as I 
read it, only $3 billion went to improve taxpayer services.
    More than $45 billion went to support an army of IRS 
agents. We saw the ads of what people are looking for in terms 
of ability to carry weapons. This is a shakedown of small 
business operators and middle-class families to pay for 
expensive, partisan policies, and it just gets very, very 
bothersome. When you read this new report out, the IRS has 
proposed a revenue procedure this week to crack down on the 
service industries reporting of tips. People are going to have 
until May to provide feedback.
    So we're looking at 87,000 new IRS agents. The promise was 
that they're not going to come after anybody who makes less 
$400,000, but what's just come out is a new program aimed at 
how to better report tips. So we're not doing what the chairman 
had said, talking about, well, this is going after millionaires 
and billionaires. This is going after waiters and waitresses. 
That's how I read this. So I mean, this is the big difference 
from what I hear from the chairman of the committee and what I 
see happening and hearing from people in Wyoming.
    So, Ranking Member Crapo has introduced legislation to 
protect taxpayers making less than $400,000 from increased 
audits. The Department has said it. You are on record today 
saying you would not increase audits on Americans making less 
than $400,000. So, would you be supportive of legislation 
codifying your promise, just adding additional guard rails for 
taxpayers?
    Mr. Werfel. Senator, I appreciate the question. I will 
share with you that I believe that the role of the IRS 
Commissioner is not to opine on whether to support a piece of 
legislation, only to tell you whether we think, at the IRS, 
it's administrable or not. And so, my partnership with this 
committee will not be oriented around what the tax code looks 
like--more like, how do we get the tools we need to do whatever 
you in your wisdom and this committee in its wisdom enact? How 
do we implement it effectively?
    Senator Barrasso. When we visited and I mentioned the 
difference of how much money is spent for others, and you said, 
``in the wisdom of Congress,'' I said, ``Well, it wasn't really 
the wisdom of all of Congress.'' It was a bill that was passed 
on party-line vote, without a single Republican in the House or 
Senate voting for it, to do the sort of service-type things 
that you and I agree need to be done for the American people 
and American taxpayers.
    Is the $3 billion enough? Is this a misappropriation in 
terms of how the money is divided, in terms of what you might 
need if you came to us and said, to really hit the taxpayers' 
needs so people can answer the phones and give people correct 
information--has the money been allocated in a way that you 
would've done it if you could say, ``Let me divide the money 
differently''?
    Mr. Werfel. Yes. I want to be able to come back to you, 
Senator. As I said earlier, we've been given a mandate by 
Congress with several billions of dollars to improve taxpayer 
service. My commitment is to make sure that that money is spent 
wisely, that we get the most out of that money so that it 
benefits taxpayers, all taxpayers. And I will commit my time to 
making sure that there's transparency, as I mentioned, into 
what we can and can't do with the funds that are provided.
    Senator Barrasso. Thank you, Mr. Chairman. My time has 
expired.
    The Chairman. Senator Johnson?
    Senator Johnson. Thank you, Mr. Chairman.
    Mr. Werfel, thank you for spending time with me yesterday 
and for your willingness to take on this task. I think, based 
on the discussion today, you have a pretty good sense of what 
you're getting yourself into. From my standpoint, I think the 
job of the IRS should be pretty straightforward. It's to 
administer the tax laws and collect the revenue the government 
requires.
    Unfortunately, Congress, in creating these tax laws, 
created this complex mess which is almost impossible to comply 
with. You've seen the studies where you have 10 different tax 
CPAs that complete a return, and none of them get the same 
answer. That's a very sad reality.
    I want to focus my question, though, on what I think is 
going to be part of the public debate here, which is going to 
be that tax gap. Because as Commissioner, it will be up to you 
to really determine how you're going to employ the resources to 
try and close that tax gap. And again, we all want to see 
people comply with the tax code. We don't want to see people be 
tax cheats, but I'm hearing all kinds of different things.
    I mean, I have a report here where the Joint Committee on 
Taxation said that 78 to 90 percent of that tax gap really is 
with taxpayers under $200,000, lost reported revenue. The 
chairman was talking about how it's all with the top 1 percent, 
although the top 1 percent pay more than 40 percent of the 
income tax. So I want to get your sense. Where is that tax gap 
really occurring? I mean, what types of taxpayers? How much is 
due to just the complexity of the tax code?
    Mr. Werfel. Well, Senator, I appreciate the question. I 
think you can start with some basic facts, and I think about 
the fact that most Americans, working families, pay their taxes 
through their payroll, and therefore the IRS has 99 percent of 
the information it needs to assess a balance due. And then, 
just based on research and studies and what's been publicly 
reported, very intricate, complex returns or filings from high-
income taxpayers, that's very different; that is not paid 
through the payroll.
    There's a whole host of different issues that come up, and 
I've seen estimates that say as much as 20 percent of that 
income is opaque and shielded from IRS view.
    Senator Johnson. Let me just quickly interrupt.
    Mr. Werfel. Please.
    Senator Johnson. There's always a big deal made of these 
big companies that pay nothing. Big companies oftentimes have 
IRS agents in their offices, right? Correct?
    Mr. Werfel. I'm not sure I follow, Senator.
    Senator Johnson. Well, I mean large companies have massive 
tax departments. Oftentimes IRS agents are basically embedded 
to make sure that they comply. The big companies that pay zero 
are just complying with a very complex tax code, correct? And 
yet, you generally have IRS agents there making sure that 
they're complying as best they can with the complex tax code, 
correct?
    Mr. Werfel. Senator, I'm not sure, just because I'm not as 
familiar with--what I understand right now, and I need to learn 
more if I'm fortunate enough to be confirmed, is that IRS 
agents or revenue agents, they don't feel they have the 
capacity or the understanding to unpack the complexity of some 
of these activities.
    Senator Johnson. So, if up to 90 percent of the tax gap is 
in misreported income of people making less than $200,000, I 
mean--are we just going to misspend all kinds of money trying 
to go after the wrong group of people, particularly, if we're 
saying we're not going to touch anybody making under $400,000? 
How much of the tax gap is with illegal activity, things like 
drug trafficking? I'm trying to get a sense of where you really 
do think the dollars are. And if the dollars aren't--again, 
there certainly are dollars at the top, but if there's not 
enough, I mean, are we going to spend more money trying to get 
money out of taxpayers who don't represent the huge amount of 
the tax gap?
    Mr. Werfel. Senator, I think I always start with this 
guiding principle: how do we build trust? So, to answer your 
questions, I would say for high-income taxpayers, I think we 
can build trust across all taxpayers by saying we're going to 
do a better job understanding their balance due than we do 
today. Because, if you're an honest, hardworking American and 
just doing your taxes effectively, you should expect large 
corporations and high-income taxpayers to do the same.
    For the rest of the tax gap that you're describing, my 
going-in hypothesis is, the way to build trust is to understand 
what are the highest-priority areas to go after. Are there 
unscrupulous tax preparers that we need to assess? Are there 
individuals or organizations that are looking to evade taxes, 
and is there a way we can focus on that versus others that are 
honest taxpayers? So, I don't know yet, because I'm not there. 
But the commitment here is to better unpack the tax gap for you 
and for the American people so there's clarity on exactly how 
this all shapes up on a go-forward basis.
    Senator Johnson. Okay. We need to look at the actual data 
and go based on the reality of the situation rather than just 
rhetoric.
    Mr. Werfel. I agree. Evidence-based is critical.
    The Chairman. Thank you, Senator Johnson.
    Senator Blackburn is next, her first questions on the 
committee.
    Senator Blackburn. Thank you. Thank you, Mr. Chairman. Yes, 
indeed it is.
    Mr. Werfel, welcome. We're delighted you're here, and I'm 
so pleased your country music-loving wife is with you today. 
Being a Tennessean, we discussed this yesterday, and I have to 
get you to Nashville.
    I want to go back to the question that Senator Barrasso was 
asking you about on the service industry tax compliance, and 
I've heard a lot about this in Tennessee. People in the service 
industry--hairdressers, wait staff, delivery personnel, gig-
economy workers--they are incensed by this. Many of them are 
women, and they're sole providers for their family. And you 
have said to Chairman Wyden and to Senator Crapo that you're 
not going after people under $400,000. So let me ask you this 
and put it to you this way. How many waiters, waitresses, 
hairdressers, barbers, gig-economy workers do you know who are 
making more than $400,000 a year, and why would they be 
targeted by this administration?
    Mr. Werfel. Senator, thank you for the question. I think if 
the IRS is successful going forward----
    Senator Blackburn. How many do you know?
    Mr. Werfel. Well, if the IRS is successful going forward, 
then the individuals in the occupations that you mentioned will 
see only impacts in service improvements--and particularly with 
the Inflation Reduction Act funds--versus an increase in any 
audit rates. That's the goal.
    Senator Blackburn. See, this is the contradiction. You can 
say you're not going to go after anybody who is making less 
than $400,000. I don't know anyone in this category that would 
be affected by the service industry tip compliance program who 
is making more than $400,000 per year. So what you have done is 
to segment them out and say. ``We're carving you out so we can 
tax you more,'' and this is why there is such a contradiction 
in what this administration says and what it actually does.
    Let me return to a couple of questions that we discussed 
yesterday. Commissioner Rettig said--this was at a Finance 
Committee hearing last year--53 percent of the IRS employees 
are in a full-time telework capacity. But as we discussed 
yesterday, this is concerning, considering that the IRS only 
picks up the phone about 20 percent of the time. And getting 
people back to work is going to be an imperative, getting them 
back to full-time work. So, do you commit to exhausting funding 
for customer service staff before hiring new agents to go out 
and pick on people in the service industry?
    Mr. Werfel. Senator, I appreciate the question. I can't 
commit until I'm at the IRS and understand exactly where they 
are with their plans.
    Senator Blackburn. That's fair.
    Okay. Let's talk about protecting data, because this is 
something where the IRS has had kind of a checkered past, when 
it comes to protecting consumer data. In 2015, over 700,000 
Social Security numbers may have been stolen. In 2017, the IRS 
notified Congress of over 100,000 Federal student loan accounts 
that were accessed in a data breach (ProPublica). In 2023, I 
think it's safe to say that there is a data security issue at 
the IRS. And so, what I would like for you to do, if you are 
confirmed, is give us a plan, and a timeline for implementing 
that plan, for keeping citizens' data, taxpayer data safe. 
Would you do that for us?
    Mr. Werfel. Yes, Senator. In fact, when I think about the 
data security issue and I think about the discussion that we're 
having on the Inflation Reduction Act today--the increased 
resources that the IRS is receiving under the Inflation 
Reduction Act--there's part of those funds that can be used to 
shore up data security, whether that's through technology, 
training, et cetera.
    So, when the plans come together for the Inflation 
Reduction Act, they should reflect the very question you're 
asking, which is: what are the steps we're taking to be on a 
continuous improvement journey to improve data security?
    Senator Blackburn. That is helpful. And we would hope that 
part of that plan is more customer service agents and less 
field agents who are going to go audit people who do make under 
$400,000 a year.
    Thank you, Mr. Chairman.
    The Chairman. I thank my colleague. And let me just say to 
her, I know that this is an important issue. My understanding 
is--and we will be talking to the agency and both the Secretary 
and Mr. Werfel, when confirmed, and I believe he will be--this 
is a voluntary program. Let me emphasize that--a voluntary 
program, no mandates. So my understanding is, if a restaurant 
believes that this voluntary program will make it possible for 
them to more easily comply with existing tax law, they would 
have a chance to do it.
    But I want my colleague to know that I'll look forward to 
staying in touch with her and working on this.
    Senator Blackburn. Thank you, Mr. Chairman. Because 
voluntary programs end up becoming mandates----
    The Chairman. No----
    Senator Blackburn [continuing]. And people in the service 
industry are so concerned about this tip compliance.
    The Chairman. On my watch, I assure my colleague this is 
not going to be a mandatory program. We are being told the 
concept is voluntary. If a restaurant chooses to do it--so 
there is no requirement, whatever--and they decide that for 
them, it would make it easier to comply with existing tax law, 
they could do it. So, my colleague asked a question about 
mandates. Not on my watch for these restaurants. I thank my 
colleague.
    Our next Senator will be Senator Cassidy.
    Senator Cassidy. Mr. Werfel, congratulations for being 
nominated. Thank you for accepting, and I thank even more your 
wife for allowing. So, I thank you for all that.
    I'd like to continue the conversation that Senator 
Blackburn initiated, but it would be a continuation of the 
conversation we had yesterday. And for context, I'll submit for 
the record a publication by ATR, speaking about the problems 
that the IRS has had for the last 40 years to upgrade its 
information system.
    [The publication appears in the appendix beginning on pg. 
51.]
    Senator Cassidy. For 40 years there are headlines such as 
``1.5 Million Tax Returns Delayed in Processing'' from 1985. In 
1982, ``grossly short of the capacity in modern, state-of-the-
art efficiency essential for an effective IRS system'' by the 
then-Director. In 1986, ``IRS Ends Computer Contract.'' The 
list of uglies just continues all the way up until now.
    My staff has looked to see that we're currently spending 
about--or the IRS is--$200 million a year for information 
services, which we presume is to upgrade your systems and to 
have them go. And the IRA gave the agency another $4.75 billion 
over 10 years. Frankly, this looks like good money after bad. 
You had mentioned yesterday the antiquated systems you have, 
and one of these things I have says that something that was 
supposed to be completed in 2014, the GAO says will not be 
completed until 2030.
    So what I'm asking now is not to revisit all that--not your 
fault--but it's just a mess, and we've just wasted dollars for 
the last 40 years on stuff we never accomplished. What are your 
thoughts about doing what the Department of Defense has done, 
which is to move this into the cloud to allow a cloud-based 
service which, as in its work for DoD, has established that it 
can do things for the Federal Government with greater security, 
not the data leaks that were previously referenced, and the 
ability to handle highly classified material as opposed to, 
again, one more time thinking that we're going to redo 
something when we never do? Thoughts?
    Mr. Werfel. Thank you, Senator. I think that this question 
about information technology and how to make sure that, going 
forward, IRS investments are performing better for taxpayers is 
front and center in my priorities, if I'm confirmed.
    To your question, I just want to make a quick point. I 
spent a large part of my time at OMB, starting in the Bush 
administration, extending into the Obama administration, 
assessing the progress of information technology investments 
across government, and I learned a lot about why these projects 
tend to fail.
    One of the reasons, I think, is that we don't always have 
the right set of alternatives----
    Senator Cassidy. Let me stop you, though.
    Mr. Werfel. Yes.
    Senator Cassidy. Because what you're really talking about 
is the current systems we have and why they are never upgraded. 
It looks like DoD just said, ``No, we're going to a different 
paradigm.'' And because, if history is prologue, these systems 
are not going to get fixed. We're going to be talking about a 
system running on Fortran and COBOL in 10 years. So I'm asking 
about an openness to moving it to the cloud, allowing an 
entity, such as it does for DoD, to manage these systems.
    Mr. Werfel. And the point I was going to make, Senator, is 
that that should absolutely be one of the alternatives that is 
investigated. I think there's been a theme during this 
discussion of ``will you make decisions with an evidence 
base?'' And I will, if confirmed. And I can only make a 
decision on IT if it is evidence-based; if I look at that type 
of alternative and understand if that is the best----
    Senator Cassidy. So, let me stop you. I only have 5 minutes 
that's why, not being rude. I apologize.
    Mr. Werfel. Yes, sir.
    Senator Cassidy. But you were at OMB. The thing that so 
impressed me, under a Republican and a Democratic 
administration, you were like up to here at looking at 
information systems. You may have even weighed in on the 
deliberation for DoD to move over into the cloud. So, knowing 
that this isn't something that you'll have to learn from 
scratch, but rather bring a great deal of experience to, as you 
weigh it, knowing that you may find something different, how 
does it weigh now?
    Mr. Werfel. Yes, I would give this serious consideration. I 
think we want to move systems into the 21st century. And it 
goes without saying that technology that's enabled in a cloud, 
as you point out, can be secure. It can be more efficient. It 
often can be more cost-efficient, and so, absolutely, it has to 
be an alternative.
    It's premature for me to give you a firm answer. I want to 
do the right thing and understand the process and go through 
the process, understand the right analytics, but absolutely it 
should be up for consideration.
    Senator Cassidy. Thank you very much. And again, thank you 
for considering this job.
    The Chairman. Thank you, Senator Cassidy.
    Our next three will be Senator Brown, Senator Tillis, and 
Senator Cornyn.
    Senator Brown?
    Senator Brown. Thank you, Mr. Chairman. Mr. Werfel, thank 
you for your willingness to serve and willingness to do today 
what you're doing.
    My colleagues on the other side today have raised concerns 
about error rates with the Child Tax Credit and the Earned 
Income Tax Credit, two tax cuts for working families that are 
so, so, so important for so many.
    I want to get your thoughts on two bipartisan proposals to 
get the error rates down. Presidents of both parties, your 
predecessor appointed by President Trump--and I would add your 
predecessor did a good job beginning the Child Tax Credit. I 
wish that he could've kept going with it. They've asked 
Congress to give IRS the authority to establish minimum 
competency standards for paid tax preparers. I recognize you're 
not in this job yet, but give us your best estimate. If paid 
tax preparers had to demonstrate a bare minimum expertise in 
tax preparation, do you think we would see fewer errors in the 
EITC and the CTC?
    Mr. Werfel. Yes, I think that's intuitive, Senator. I would 
absolutely think that strengthening the overall performance and 
skills of tax preparers would go a long way.
    Senator Brown. And I assume you're saying Congress should 
give IRS this authority. Yes?
    Mr. Werfel. Well, I don't want to opine on something that's 
more the domain of the Office of Tax Policy. I've mentioned 
earlier, Senator, that I think the role of the Commissioner is 
to answer whether it would be administrable, so I'll answer it 
in this way. Problems with tax preparers degrade the integrity 
of the tax system. So, should we look for solutions to improve 
it? Yes.
    Senator Brown. Okay.
    Mr. Werfel, the Volunteer Income Tax Assistance, the VITA 
program, which the IRS supports, has a 94-percent accuracy 
rate. I worked with Senator Heller when he was here from Nevada 
some years ago to authorize the VITA grant program, recognizing 
this was a way to ensure accurate EITC and CTC returns. If 
you're confirmed, will you work with me and help colleagues on 
the committee to strengthen the VITA program?
    Mr. Werfel. Yes, I would.
    Senator Brown. Thank you.
    Turning to an issue I know Senator Crapo and Senator 
Lankford asked about--the 1099-K reporting threshold--I want 
the IRS to do a better job holding corporations accountable 
when they cheat on their taxes, but I don't think what the IRS 
should be spending its limited resources doing is burdening 
Ohioans making simple transactions on third-party platforms. I 
was pleased the IRS delayed the new $600 1099-K threshold. 
That's simply too low. It ought to be higher, and I think 
there's general agreement on this committee about that.
    I know you're not on the job yet; for that reason, you 
don't have firsthand familiarity with their operations. But 
does it stand to reason that if 1099-K thresholds were higher, 
the IRS would have fewer forms to process and, for that reason, 
would be able to focus its resources more efficiently?
    Mr. Werfel. Senator, if I understand your question, yes, a 
simpler framework would be easier to implement. That's the type 
of feedback that I think an IRS Commissioner can provide to 
this committee.
    Senator Brown. Okay. And we will make those requests once 
you're confirmed.
    In the last 3 seconds I want to join Chairman Wyden and my 
other colleagues in raising our concern that Black tax filers 
are three times more likely to be audited than White tax 
filers. I know this is of great concern to my colleague on this 
committee and ranking member of the Banking Committee, which 
Senator Tillis and I serve on. This is of great concern to 
Senator Scott. I know you committed to Senator Wyden to report 
back within 60 days of starting the job, and we look forward to 
working with you on that, so thank you.
    Mr. Werfel. Thank you.
    Senator Brown. Thank you, Chairman Wyden.
    The Chairman. Thank you, Senator Brown. We'll work very 
closely with you on those issues.
    All right. Let's see. Next is Senator Tillis and then 
Senator Cornyn.
    Senator Tillis. Thank you, Mr. Chairman. And thank you, Mr. 
Werfel, for being here. I appreciated the time that you and Ron 
spent in my office yesterday covering a lot of questions. And I 
also want to welcome Beth, Molly, and Sean. I heard what 
Senator Blackburn said about coming to visit in Tennessee. 
Great State, lived there, but I know where your roots are 
planted. And thank you for being willing to take on this role.
    I don't think there is anybody who is in this position who 
doesn't know that the IRS needs to modernize, change, be more 
customer-focused, and I've gathered some of that from your 
discussion. You were at BCG as a managing partner, director 
for, what was it, about 8 years, 7 or 8 years?
    Mr. Werfel. About 9, coming up on 9 years. Yes, sir.
    Senator Tillis. And what was the nature of the practice 
there? Did you work on enterprise transformation? And that was 
in the public sector, right?
    Mr. Werfel. Yes. So, I worked with Federal agencies, mostly 
with the Defense Department, but also with the Commerce 
Department and other agencies. And the mission or the objective 
was, how do we bring private-sector solutions successfully to 
government?
    Senator Tillis. And how did you do on any particular 
project?
    Mr. Werfel. We were very successful. I mean, an example 
that I would provide--and I'll try to be brief--is we worked 
closely with the commissary system at the Defense Department. I 
brought experts from BCG in managing supermarkets to help 
there. We introduced a private-label brand for the first time, 
and we saved hundreds of millions of dollars on how they 
acquire goods.
    Senator Tillis. I think that it's important to know that 
somebody with some enterprise transformation experience, 
particularly in the public sector, is desperately needed at the 
IRS. And speaking of an enterprise transformation, I see that 
as what I hoped the Inflation Reduction Act, particularly in 
the IRS base, would've achieved.
    I'm curious--this would be after you're confirmed--but I 
don't see the distribution of money. I see less than half of it 
going to anything that's more customer-focused. The other one 
half, rightfully through a cynical eye, looks like it's more on 
enforcement and audits. So it's going to be very helpful. Will 
you commit to me, when you're confirmed, that we can get a 
report back from the IRS on how these buckets fit into 
improving the customer experience versus becoming an additional 
burden and threat to the taxpayer?
    Mr. Werfel. Senator, yes. I mentioned to Senator Crapo 
earlier that as a former budgeteer, I think I'll be able to 
earn your trust with a very clearly articulated spend plan for 
how the money is----
    Senator Tillis. Good. I'll tell you that my predisposition 
is really just looking at the buckets--taxpayer services, 
enforcement operations support, business systems, 
modernization. And a cynic could say that two-thirds of the 
bill has less to do with improving the customer service, the 
customer experience, and enterprise transformation, and more to 
do with actually making you less liked by the taxpayers. So I'd 
really be interested in seeing the flexibilities in the IRA 
that are going to let you put money to the best and highest 
use, and a lot of that has to be--you're never going to be one 
of the top 10 most-admired Federal agencies because you take 
money from people, and that's your job. But improving the 
experience, I think, is going to be very important.
    When we were doing the bipartisan infrastructure deal, I 
was supporting good governance policies at the IRS, improving a 
consolidated audit trail, and enacting higher penalties for IRS 
agents or IRS employees who leak taxpayer information. Do you 
agree or disagree that we have to work on something like a 
consolidated audit trail for the IRS?
    Mr. Werfel. Senator, I want to look at all the different 
levers that can be taken to improve data security. I want to 
sit down with the team at the IRS, with our staff, and others 
and look at these various levers and say, ``What can we 
strengthen, what can we change, what can we shift, all with the 
benefit of improving data security?'' So, I'm certainly open to 
exploring these suggestions that you have.
    Senator Tillis. Just a final comment. You don't have to 
respond. I intend to support your confirmation, incidentally. 
The $400,000 cap isn't very consoling to me, and we mentioned 
this in the office. On the one hand, in combined income, my 
wife and I fall below the cap. So, as an individual, I should 
probably feel better about it. But the small businessman that I 
spoke to just a couple weeks ago has a business with three 
service trucks, a wife who's the CEO, the CFO, and basically 
mandates the schedule of the husband--that's it. That's all 
they've got, and they have a million dollars in income that 
they are going to have to report. So I think it's a cop-out to 
say that the $400,000 limit means that the little guy shouldn't 
mind.
    You and I talked about, instead of a simplistic number cut-
off--there could be a lot of people under $400,000 who 
potentially are evading taxes. But there are a lot of people, 
based on the activities of the business--it just doesn't look 
like it'd be the best and highest use of our resources to go 
into that small businessman's presence without any strong, 
indicative information and subject them to an audit.
    So I hope, as we go further into the discussion, we can 
figure out how we can get people who are paying what the law 
requires--stipulating to Senator Johnson, some of it shouldn't 
even be on the books, in my opinion, and it should be 
simplified. But I think that's the way I want the IRS to look 
at it. Thank you very much.
    Mr. Werfel. Thank you, Senator.
    The Chairman. My colleague, Senator Cornyn.
    Senator Cornyn. Mr. Werfel, when the misnamed Inflation 
Reduction Act appropriated roughly $80 billion for the IRS 
through 2031, were you aware of any plan that was in place that 
instructed that appropriation, or was this money appropriated 
to the IRS in this multiyear fashion without any concrete plan 
in place on how it would be spent?
    Mr. Werfel. I'm not aware of a plan that's been published. 
I am aware that Secretary Yellen has asked my potential 
predecessor, if I'm confirmed, for such a plan that you 
described.
    Senator Cornyn. Yes; well, that bothers me a lot. This is 
sort of typical of Washington, DC. We appropriate the money and 
ask for the plan later, rather than ask for the plan and say, 
``How much money do you need to actually implement the plan?'' 
I too am a little troubled by some of the political rhetoric 
around the IRS, given particularly the checkered history of the 
IRS in targeting certain taxpayers that you're all too familiar 
with, as a result of your coming in after the Lois Lerner 
affair and the targeting of certain taxpayers.
    But the President said we're not going to collect taxes 
from people making under $400,000 a year. Actually, he didn't 
say that exactly. He said we're not going to have increased 
audits of people making less than $400,000 a year. Will you 
commit to collecting all lawful taxes that taxpayers owe, 
regardless of whether they are the top 1 percent or whether 
they earn less than $400,000 a year?
    Mr. Werfel. Yes, Senator. And I think it's an important 
clarification that the directive from Secretary Yellen was to 
make sure that Inflation Reduction Act funds do not increase 
audit rates for those earning less than $400,000, but those 
individuals still have a responsibility and a balance due. But 
as described earlier in this hearing, I think a vast majority 
of them are honest taxpayers who are ready and willing to do 
their civic duty and meet their obligations. And for them, my 
focus should be, I think, on improving service.
    Senator Cornyn. Well, let me ask you about the Treasury 
Inspector General on Tax Administration's report for Fiscal 
Year 2021, because I think the record of the IRS with regard to 
implementing some of the tax credit provisions, which I assume 
have come up here before today, leave a lot to be concerned 
about.
    For example, 28 percent of total Earned Income Tax Credits 
were improperly made--28 percent; 13 percent of additional 
Child Tax Credits were improperly paid. And 26 percent of 
American Opportunity Tax Credits were improperly paid. This has 
been a longstanding issue for the IRS. Please tell me that 
you're going to look into that and try to make sure that people 
who are receiving money from the Federal Government, other 
taxpayers in effect, through improper payments--tell me that 
you're going to look into that and try to reduce those numbers 
dramatically.
    Mr. Werfel. Senator, absolutely. I mean, I know I've talked 
about my background a lot today. For a while in government, 
actually for many years, I was known around town as the 
improper payments guy. That was my job for both President Bush 
and President Obama. I thought a lot about this issue and 
certainly will focus on it when I'm there, if I get confirmed.
    Senator Cornyn. Well, I'm a little concerned when I hear 
one of my colleagues suggest this is a problem with unlicensed 
tax preparers only. It strikes me that no matter who is 
preparing the tax return, that it's the responsibility of the 
U.S. Government, and the IRS in particular, to make sure that 
improper payments are not being made. Would you agree that both 
of those are important?
    Mr. Werfel. Yes, both. I mean, look, we should--it's all 
about building trust and improving program integrity--and we 
should be addressing improper payments for sure.
    Senator Cornyn. Well, ultimately, I think there are three 
simple questions that we need to ask about whether the IRS is 
meeting its stated mission. One, do taxpayers find filing their 
tax return easier in the current year than they did in the 
previous years? Secondly, were taxpayers' questions and 
problems handled as smoothly as account inquiries for their 
bank, credit card company, or utility? And third, did IRS 
personnel treat taxpayers respectfully and professionally? 
Obviously, we know the IRS has had a long history of struggling 
to meet those goals, but I hope it's your commitment to us here 
today that that would be your intention.
    Mr. Werfel. Yes, sir.
    Senator Cornyn. Thank you.
    The Chairman. Thank you, Senator Cornyn.
    I think Senator Whitehouse is next.
    Senator Whitehouse. Thanks very much, Mr. Chairman. Good to 
be with you.
    Mr. Werfel, best wishes to you in your pursuit of one of 
the more challenging and least popular jobs in town.
    A couple of things. First, some of us here, particularly 
Senator Crapo, but many of us have worked together on trying to 
make the United States a less-attractive haven for foreign 
criminals and kleptocrats to hide their ill-gotten gains. One 
of the means for doing that is something called reciprocal 
FATCA so that we trade information with other countries. Are 
you familiar with that?
    Mr. Werfel. I am, Senator.
    Senator Whitehouse. Are you generally in favor of that?
    Mr. Werfel. Yes. FATCA was on the books during my brief 
stint at the IRS in 2013. I gained an understanding of the 
importance of working internationally to eliminate safe havens. 
I think the idea of a Swiss bank account is more and more in 
the rearview mirror because of FATCA, and I think, obviously, 
more work could be done.
    Senator Whitehouse. The code of trust is more impenetrable. 
So, if you don't mind, when, as, and if you're confirmed, I'm 
going to ask for your advice, because we are drafting a 
reciprocal FATCA statute. We want to make sure we can get the 
details right with you. Are you okay with that?
    Mr. Werfel. Yes.
    Senator Whitehouse. Second, the plan for IRS reform. I'd 
love for you to share it with us as soon as you can so we have 
an idea of whether you're complying with what I think our three 
goals are, which are better customer service, more rapid 
refunds, and real diligence in going after the returns of 
complex, high-income filers who appear to have been getting 
away with a lot of mischief at the high end of the income 
spectrum.
    So, if those are your three goals, I'm for it. I hope your 
plan will bear that out.
    Mr. Werfel. Yes, I'm aligned with those goals and values.
    Senator Whitehouse. And last is the problem of 501(c)s, 
particularly 501(c)(4)s, but the problem is spreading a little 
bit. The first thing is that we've seen political money flow 
through 501(c)(4)s in explosive, unexpected numbers. Nobody 
ever thought it was going to be like this years ago, but here 
we are, with literally billions of dollars pouring through, 
hiding who's spending the billions.
    I'm interested in finding out what the IRS is doing just to 
track those numbers, how much is flowing through? Now, that's 
problem one: the scale. Problem two is what happens when 
501(c)(4)s glom together into a pod and the donation goes into 
one, 50 percent on politics, the other 50 percent to another; 
50 percent on politics, now it's 75. Fifty percent, the 
remainder to another; 50 percent on politics. Now you're up to 
87. And if you have four or five of these things that are just 
donation cycling like that, you can blow through the nominal 
IRS 50-percent limit with very little schemery, and we should 
try to penetrate that schemery and figure out if that's 
happening.
    It seems to me that that was not the intention of the 50-
percent rule: that you could pod together a bunch of 501(c)(4)s 
and end up having essentially all the money go into politics in 
a coordinated effort. So that's the second thing.
    And the third is, the standard political operation right 
now is a 501(c)(3) and a 501(c)(4) that are essentially twins. 
They have the same staff. They have the same location. They 
have the same donors. They probably have the same email systems 
and everything else.
    That boundary between a 501(c)(3) and a 501(c)(4) is 
something that I think is worth protecting, because there are 
differences between the two, and I don't believe the IRS has 
ever looked at whether the corporate veil between a 501(c)(3) 
and a 501(c)(4) is real or whether you could penetrate that 
corporate veil with a banana, for Pete's sake.
    So, those are things that I'm going to ask you to look at, 
and I hope that you will keep an open mind with respect to 
that. There's enormous pressure and noise on this issue, but I 
think doing the right thing will see you through. Any comment?
    Mr. Werfel. I appreciate your leadership on this issue. You 
know and have articulated that it's a complicated area, but 
yes, I am open to working with you and the others on this 
committee to see where the IRS is today and where it needs to 
go going forward, absolutely.
    Senator Whitehouse. Thanks.
    Thanks, Mr. Chairman.
    The Chairman. I thank my colleague.
    I've got several additional questions, Mr. Werfel. I want 
to let my colleagues--we always try to have parity here--ask a 
couple of questions. But if there is any colleague who hasn't 
had a chance to ask questions, whether they be a Democrat or 
Republican, we'll break from what we're talking about for them. 
Okay?
    Mr. Werfel. Understood.
    The Chairman. My first question deals with the backlog of 
2.6 million original returns awaiting processing. These are 
essentially these individual paper returns that are 
constituting the backlog. Now, I think it's important that 
progress has been made, but that's still a very substantial 
backlog of original returns that await processing.
    And one of the things that troubles me greatly is that the 
IRS is still transcribing so many returns manually instead of 
following common-sense recommendations to scan them like most 
of the States. Secretary Yellen has said that the IRS would 
scan millions, including this filing season. But as far as I 
can tell--maybe you can give us an update--the IRS is still 
testing this technology. What's going to be done to ensure that 
the IRS really has a serious program with respect to scanning 
like basically almost everybody else has?
    Mr. Werfel. Senator, thank you for the question. I think 
one of the things that motivates me about wanting to be the IRS 
Commissioner is a picture that I think was in The Washington 
Post months ago. I think it was a cafeteria in Austin with a 
table full of paper returns. And I thought of myself when I saw 
that picture. There are technologies emerging that can 
potentially rapidly scan them and do so in a way that converts 
them into machine-readable context that would allow that 
backlog to be reduced quicker.
    Since I'm not there, Mr. Chairman, I'm not sure where the 
IRS is on that, but I think it's a huge priority to enhance 
scanning so that we can move out of paper.
    The Chairman. I just hope that you all will move more 
quickly on this, because I've been hearing the scanning is 
coming, and it always sounds like the marquee at the old movie 
house where people say, ``Oh, it's coming soon.'' The picture 
is coming, but it doesn't get there, and I think we've got to 
get going.
    So, we're going to let Senator Carper and Senator Young ask 
the next questions. And at that point, depending on whether 
additional colleagues will come, then it would be Senator 
Johnson's turn since I asked an additional question.
    Senator Carper?
    Senator Carper. Senator Wyden, thanks so much for this 
opportunity. Senator Johnson, nice to be with you. 
Congratulations on being named ranking member also. [Laughter.]
    Mr. Werfel, how is it going so far?
    Mr. Werfel. I think it's going well, Senator.
    Senator Carper. Good. Thank you. I look to his family 
behind him, and thumbs up. What do you guys think? You look 
mighty proud, and you should.
    One of my proudest responsibilities as a U.S. Senator 
serving the people of Delaware is supporting my constituents. 
We have exactly a million people living in Delaware now who 
come to Chris Koons and Lisa Blunt Rochester and myself who 
want help with various Federal agencies. But one of the 
agencies that leads the hit parade in terms of, we need to 
provide more help, better help, is the IRS.
    I receive regular reports from my constituent services team 
in our State, and the IRS frequently ranks at or near the top 
of issues that we're hearing the most about from Delawareans, 
and it's not always complimentary. I was very heartened to see 
that, since the Inflation Reduction Act was enacted last fall, 
the IRS has already begun putting the funds that Congress 
provided to good use.
    Some of my colleagues have already mentioned this, but I 
think it bears repeating. Since hiring 5,000 workers to staff 
the phones using Inflation Reduction Act funding, the IRS is 
now answering 90 percent of taxpayer phone calls this 2023 tax 
season. That's up from--get this--13 percent of calls answered 
during last year's tax season. So, from a lowly 13 percent to 
90 percent as a result of the ability to hire that additional 
5,000 workers says volumes.
    I just want to say, when I was privileged to be Governor of 
Delaware, we had something called J.D. Power quality awards, 
and they would go to a company in our State or a nonprofit in 
our State. The last year I was Governor, it went to the 
Division of Revenue, which is like the State version of the 
IRS. They won the quality award for service that they provided 
to the people of Delaware, and I want to see the IRS get that 
kind of recognition for quality.
    But what additional measures would you take as Commissioner 
to ensure that the IRS is responsive to taxpayers who need 
assistance, and how will you improve transparency in 
communications between the IRS and taxpayers across the board?
    Mr. Werfel. Senator, thank you for the question. And I too 
am learning of this information of improvements, significant 
improvements it sounds like, in terms of call rates answered. 
But beyond that, I think we also want to put people in Taxpayer 
Assistance Centers. I had also heard reports that Taxpayer 
Assistance Centers aren't staffed the way they need to be, so 
there are long lines there or people can't get in. I think 
there's an opportunity beyond just putting people in the call 
centers, which is critical--digital solutions, enhancing the 
functionality of applications on iPhone, on the website, so 
that people find their experience in an electronic format to be 
extraordinarily helpful.
    One of the things, Senator, that I think could be very 
important to do is to benchmark what are other world-class 
customer service organizations doing that the IRS is not? How 
are they measuring their customer experience in a way that the 
IRS is not? My objective would be--because of how important I 
think it is to Americans--that we should not only be 
benchmarking what these organizations are doing, we should be 
able to beat them. We should be better, and that would be my 
objective.
    Senator Carper. That reminds me of finding what works, and 
doing more of that. Find out what doesn't work, do less of 
that.
    How have your experiences in both the public and private 
sectors prepared you for this role to lead the IRS workforce? 
How would you, as Commissioner, work to fill the gaps in the 
workforce, improve training practices, and otherwise uplift the 
agency's almost 80,000 full-time employees to make sure that 
they can perform to the best of their ability for American 
taxpayers?
    Mr. Werfel. Well, I would go back to the--I think about my 
bio and the fact that I joined as a GS-9 and early in my career 
really developed an understanding of what the perspective is of 
the civil servants; developed expertise in subject matter on 
really the nuts and bolts of government. I'm kind of a 
government geek, Senator Carper. I tell people, if you want to 
get a cup of coffee and talk about the latest changes to OMB 
Circular A-11, I'm your guy. And I think I bring that 
foundation, but on top of that I've had, and been blessed to 
have, these experiences of leading in both crisis--whether it 
was the work I did with the CFO Council after the Deepwater 
Horizon oil spill to organize our approach in how Federal funds 
would flow to deal with that crisis, to helping implement the 
Recovery Act in 2009--and then obviously my time at the IRS in 
2013.
    And then there were 9 years in the private sector where I 
really kind of got my eyes opened in terms of what are some of 
the innovative and cutting-edge solutions that are out there 
that I really think the government could benefit from. So all 
these layers, Senator--if I can effectively bring those layers 
to the IRS, empower and position the workforce to be 
successful, I think we can achieve a lot of these objectives 
and answer a lot of the questions that have been presented 
today.
    Senator Carper. Thanks for that response. Thanks for your 
willingness to do this.
    Mr. Chairman, I'm going to ask for a unanimous consent 
request to ask a question with respect to the Free File 
program.
    The Chairman. I was going to ask about that, and I'm glad 
you are.
    Senator Carper. Good. Thank you.
    The Chairman. Thank you.
    All right. We're going to have to backtrack a little bit. 
We've got Senator Thune, and then it would be Senator Young and 
Senator Cortez Masto.
    Senator Thune?
    Senator Thune. Thank you, Mr. Chair.
    I know this ground has been covered a little bit already 
with Senator Grassley, but I am very interested in the IRS's 
plan, annual plan, on how they're going to deploy the $80 
billion in mandatory funding that you all received. He and I 
have a bill we've introduced, the IRS Funding Accountability 
Act. Among other things, it would require the IRS to submit to 
Congress a detailed spending plan annually. And it seems to me 
at least, keeping Congress informed of IRS progress, any 
changes in that plan, makes sense regardless of the status of 
our bill.
    I know you've been asked this, but I would like to press on 
it a little bit, if I might. And that is, if confirmed, will 
you direct the IRS to update its spending plan annually for 
Congress to review? Eighty billion dollars is six times your 
annual budget. We're talking about 87,000 new employees. So 
would you commit to--will you direct the IRS to update a 
spending plan annually?
    Mr. Werfel. Senator, I would say it's so important that the 
plan we have is transparent, it's updated, it's clear to you 
and the American people. Just sitting here, I think an annual 
update is reasonable. I do want to talk with the IRS employees 
and the Treasury Department once I become a Federal employee, 
if I'm fortunate enough to be confirmed, to confirm my 
understanding. But the general principle of updated plans 
annually resonates with me.
    Senator Thune. So, thank you, and I hope that you will be 
able to make a more definitive commitment after consultation.
    So, in this new funding, $46 billion of it goes toward 
enforcement, and only 4 percent toward helping with the filing 
claims of ordinary tax filers. And to me it seems with the 
record, at least the current record, recent record of the IRS, 
which includes 10 million unprocessed tax returns and a 13-
percent phone call pickup rate in 2022, that improving 
taxpayer's services ought to be the number one priority.
    Now obviously, the allocation of funding doesn't suggest 
that, when you have 46 percent allocated to enforcement and 
audits and going after people and only 4 percent or $3.2 
billion for taxpayer services. So again, in terms of 
priorities, as you look at this issue, what will be the higher 
priority for you when it comes to administering the IRS funding 
allocation, better customer service to taxpayers or increasing 
the number of audits on Americans?
    Mr. Werfel. It'll be a dual priority Senator, equally 
focused on improving taxpayer service, in particular for 
working families and small businesses, and side-by-side with 
that will be a commitment to improve the IRS's capacity to 
unpack complex returns, which is something I understand today, 
they lack the capacity to do.
    Senator Thune. Well, I hope that you will--that the agency 
will double down when it comes to just dealing with 
prioritizing taxpayer services. I mean that data, those numbers 
are just indefensible, inexcusable, and it needs to be fixed.
    Let me just ask--and maybe this has been asked already as 
well--but the data breach going back to 2021, the ProPublica 
data breach; there still hasn't been any accountability on the 
leak or the breach of private taxpayer information. And I know 
you're going to punt that to the Justice Department, but do you 
think it's acceptable that, here we are 2 years later, and 
there still isn't any information about what happened there, 
who the leaker was? And if confirmed, would you take steps to 
ensure that that kind of confidential taxpayer information (1) 
that the breaches, there's accountability there, and (2) that 
it doesn't happen again?
    Mr. Werfel. Senator, as I think about the nuts and bolts of 
tax administration, data security is a top priority. I don't 
know how to build trust with the public when there's a sense 
that there's material risk of unauthorized disclosures. What 
gives me some degree of comfort--you mentioned the Justice 
Department--but what gives me some degree of comfort is the 
Treasury Inspector General plays an extraordinarily important 
role whenever there's a potential breach to understand the root 
cause.
    So one of the things that I will absolutely do is work with 
the Inspector General to understand what they see as the risks 
and, for any specific action or activity that's taken place, 
have they investigated it; what are the root causes; are there 
corrective actions, because if there are, we will take them.
    Senator Thune. Okay. And I, just again, would reiterate 
that it would help enormously if there would be accountability 
for those that have already happened. We don't have that yet 
for the one that happened in 2021.
    Thank you, Mr. Chairman.
    Senator Carper [presiding]. Good.
    Senator Young, you're up next, followed by Senator Cortez 
Masto.
    Senator Young. Thank you, Mr. Chairman.
    Welcome, Mr. Werfel. Good to have you before the committee, 
and congratulations on your nomination.
    I've been overseeing the IRS for a number of years, and 
it's really unfortunate--between targeting particular taxpayers 
for their political beliefs and the backlog in returns--that 
there's been a significant downward trend in terms of public 
trust for the IRS institutionally. And I think also, in terms 
of service delivery, I've been seeing all kinds of problems.
    So, I'm hoping you're the guy who can help turn all of this 
around. The IRS is receiving a substantial amount of money, $80 
billion, and that's on top of their $12 billion a year typical 
budget, so we need to make sure that is used effectively and 
efficiently.
    So, as it relates to funding, the IRS has had serious 
transparency issues over the years, and the ``garbage in, 
garbage out'' principal has applied to their dashboard of 
statistics at times.
    Some recent headlines trumpet the vast improvements of the 
IRS's phone service, based upon the IRS's so-called level of 
service statistic. The National Taxpayer Advocate has indicated 
that this level of service statistic really cooks the books. 
It's not an accurate reflection of the genuine level of 
service. It omits the fact that the IRS call volumes are 
actually down significantly to date as compared to last year, 
nearly 41 percent overall. And all else being equal, if you 
have a lower number of phone calls, that will increase the 
level of service statistic. But what we've actually seen is, 
the IRS has actually answered 200,000 fewer calls to date this 
year as compared to last year. So I'm hopeful that you can take 
a look at that statistic in isolation, but also attend to the 
other metrics to review performance.
    Mr. Werfel, I know measuring performance is important to 
you, because we have discussed this. Do you agree that the IRS 
or any other Federal agency should not be relying on this sort 
of flawed data to make decisions?
    Mr. Werfel. Senator, yes. I don't know that this data is 
flawed. I do know that it's really important that decisions 
that are made in tax administration or any government agency 
should be analytically robust, that there's an evidence base 
that guides it, that there's integrity in the information 
that's being reported publicly or being used behind closed 
doors to drive decision-making. So, if there are questions 
about the integrity of a particular metric, I will roll up 
sleeves and get to the bottom of it.
    Senator Young. Great. Just make sure that you're embracing 
what I would regard as the right principle of administration. 
You don't have to speak to any particular statistic, but do you 
commit to me here that you will make sure that the IRS is only 
providing, disseminating, using unbiased and informative data, 
yes or no?
    Mr. Werfel. Yes, absolutely. We have to be unbiased in what 
we do.
    Senator Young. Okay. Thank you.
    TIGTA--you mentioned how important this Inspector General 
is to provision of services. They recently reported that, in 
Fiscal Year 2016, the IRS's digital interactions with 
taxpayers, on average, cost only 20 cents per interaction, 
whereas other types of interactions cost the IRS hundreds of 
times more: $42 per interaction through phones, $57 per 
interaction through correspondence, and $68 per interaction at 
a Taxpayer Assistance Center. I think that's somewhat 
intuitive, right?
    Not all interactions the IRS has with taxpayers can or even 
should be digitally based. I certainly acknowledge that, but 
there's a massive backlog of processing of returns that needs 
to occur, and that, to me, sort of showcases in very stark 
terms that the current systems aren't sufficient to process 
those returns.
    Of additional concern is that this labor-intensive process 
that I think is disproportionately relied upon is 285 times 
more expensive than a digital one, according to TIGTA. So this 
is a double loss, where taxpayers are paying a lot more for 
services that aren't meeting their needs. I'm going to ask 
you--because my time is coming to an end--if confirmed, will 
you commit to promptly providing me an answer, which I don't 
expect you to have right now, to the following question? 
Assuming the IRS had a working, fully digital platform for 
taxpayer inquiries and correspondence, how much less would the 
IRS have spent in Fiscal Year 2020, Fiscal Year 2021, or Fiscal 
Year 2022 to perform that function?
    Mr. Werfel. I will work with the team to figure what the 
best potential way is to answer that question and come up with 
the most robust estimate.
    Senator Young. Okay. Thank you, sir.
    Senator Carper. All done? All right. Thanks.
    Next, Catherine Cortez Masto, and then she'll be followed 
by Senator Warren. I believe you're next. Yes. Saving the best 
until last.
    Senator Cortez Masto. Thank you, Mr. Chair. Mr. Werfel, 
it's good to see you again.
    Let me start with a question that I had for you when you 
were gracious to meet with me and to talk with me in my office. 
The IRS has programs that streamline tax compliance for tipped 
workers, like the tens of thousands that we have in Nevada who 
work in our hospitality industry.
    These programs use an average negotiated tip rate for 
employees of certain industries. In 2020, the IRS applied a 
series of rate reductions to employees participating in these 
programs because of the pandemic. Absolutely reasonable. Now, 
the IRS has raised those rates up, and I am hearing in many 
cases our workers in Nevada are seeing rates higher than in 
2019--that's pre-pandemic.
    So my question to you, and we've had this conversation, is 
simply this. Will you commit to working with our workers and 
employers in Nevada to ensure that there is a fair resolution 
to this issue? And at a minimum, we would like to see at least 
a phase-in approach, a phase-in that reflects the reality of 
the pandemic impact in Las Vegas, which was so hard hit during 
the pandemic.
    Mr. Werfel. Yes, Senator, I will absolutely work with you 
on this issue. You did raise this issue when we met. I've been 
thinking about the importance to this community of having 
clarity on what is expected of them, understanding the 
timelines, having an opportunity to respond to what the plan 
is. Those are all, I think, the right principles of tax 
administration, and I will work with you on that.
    Senator Cortez Masto. Thank you. I appreciate that.
    Second question--and it's come up quite often in the 
conversations, and rightly so--is customer service. The number 
one issue I hear in my State are the concerns over customer 
service. The National Taxpayer Advocate provides an annual 
report to Congress, and in the 2022 report, there's a 
discussion around the problems encountered by taxpayers, 
including processing delays, complexity of the tax code, IRS 
hiring and training, telephone and in-person service, and 
online access for taxpayers and tax professionals.
    In the report, however, the Taxpayer Advocate says that for 
the first time since the start of the pandemic, the IRS will 
begin 2023 in a better position than prior years to improve its 
performance for three reasons: (1) the IRS has largely worked 
through its backlog of unprocessed returns; (2) Congress has 
provided the IRS with significant additional funding to 
increase its customer service staffing; and (3) with the 
benefit of direct hire authority, the IRS recently hired 4,000 
new customer service representatives. It's seeking to hire 700 
additional more.
    Could you please talk about the customer service component, 
which is key to all of this? And if you would, there's been a 
lot of talk about, of course, the additional funding that we 
provided that was essential for the IRS, to include not just an 
enforcement piece of it, but also the customer service piece 
around technology, around phone use, around all of the above. 
How do you envision improving that customer service?
    Mr. Werfel. Thank you for the question. I think there are 
so many different levers that can be pulled to improve the 
experience that taxpayers have when they interact with the IRS. 
We've talked about, obviously, that adding more people to the 
call center so that more calls get answered is important, but 
there are others.
    There are technologies that can be leveraged to make the 
call center more efficient. There are technologies that can be 
embedded in the IRS website or applications for smartphones. I 
think one of the things that is important is that the IRS 
determine more information from the taxpayers on what they want 
and what they expect when they come--so, whether it's focus 
groups or surveys to understand that journey that the taxpayer 
is on when they interact with the IRS, where are they 
frustrated versus where are they pleased. I mean, no one's ever 
pleased to pay their taxes, but they're pleased at least to get 
a clear answer in a timely way so that we can start investing 
in solutions that are responsive to what we're hearing from 
taxpayers.
    Senator Cortez Masto. I only have so much time, but can you 
address this issue? Is the technology that the IRS uses now 
outdated?
    Mr. Werfel. Yes.
    Senator Cortez Masto. That's what I wanted to hear, because 
it is. That's part of the problem here, and that's why we put 
this funding in there to help.
    Now, one other final thing that I constantly hear is this 
idea that there's going to be 87,000 agents that are hired to 
audit, and sometimes I hear that they would be armed. Can you 
address that? Are you intending to hire 87,000 agents to audit 
Americans based on this funding?
    Mr. Werfel. I am not. I think it's patently incorrect. In 
fact, I enter the job with a directive from Secretary Yellen to 
not use IRA funds to increase audits on anyone earning less 
than $400,000, whether that be a small business or a working 
family. Instead, my understanding is the focus is to hire 
people with understanding and capacity and talent to unpack 
very complicated, intricate returns, which is a capacity gap 
that exists today.
    So I think the notion of armed agents is incorrect. I 
certainly would have no intention of making that part of any 
plan going forward.
    Senator Cortez Masto. Thank you.
    The Chairman. I thank my colleague. Very important 
questions.
    Senator Warren?
    Senator Warren. Thank you, Mr. Chairman. Mr. Werfel, 
welcome.
    So, for decades Republicans in Washington have pursued a 
three-step plan to rig our tax system and run up the deficit. 
Number 1, shovel tax cuts to the wealthy and the giant 
corporations whenever they are in charge. Number 2, slash 
funding at the IRS so that they can't take on rich tax cheats. 
And number 3, pretend to care about fiscal responsibility when 
there's a Democrat in the White House so that the Republicans 
can hold our economy hostage.
    And let's face it, this scam has worked. The audit rate for 
millionaires has plummeted, and for years corporations have 
contributed a declining share to national revenue to make this 
country run. And that's why the Inflation Reduction Act that 
Democrats passed last year imposes a new 15-percent minimum tax 
on billionaire corporations and provides the IRS with new 
funding to track down wealthy tax cheats.
    But the very first thing that the House Republicans did 
when they took power this year was to repeal the new IRS 
funding. So, Mr. Werfel, let me just ask. If that funding went 
away, would it make it harder or easier for billionaires to get 
away with cheating on their taxes?
    Mr. Werfel. Senator, I think it would make it easier. The 
goal is to increase the IRS capacity today to unpack these very 
returns you're referring to. So, if the funding is repealed, we 
wouldn't have that lever to increase our ability to unpack 
those returns.
    Senator Warren. Okay. So, in other words, if Republicans 
succeeded in repealing IRS funding, we would have more 
billionaire tax cheats, and that sounds like it's going to cost 
us money. So, let me ask the rest of that question.
    Mr. Werfel, would the Republican bill to defund the IRS 
increase or decrease the deficit?
    Mr. Werfel. It would increase the deficit. I typically look 
to CBO in terms of how they score legislation. They scored the 
Inflation Reduction Act as a saver, so repealing it----
    Senator Warren. Meaning reducing the deficit.
    Mr. Werfel. Reducing the deficit. So, if they repealed it, 
it would increase the deficit. I don't know the exact figure, 
but if I recall, they said it would increase the deficit by 
more than $100 billion.
    Senator Warren. Yes. And actually, the Treasury has 
estimated it will cost even more if we don't do this, about 
$400 billion. And then there's the latest Republican scam, this 
so-called fair tax. House Republicans plan to vote on this to 
slap a 30-percent national sales tax on everything that 
Americans buy, from gas to groceries to housing to health care. 
And at the same time, it would scrap all the taxes designed 
around people paying according to how much money they have.
    So, Mr. Werfel, how do sales taxes generally impact lower-
income folks versus how they impact the wealthy?
    Mr. Werfel. Sales taxes are regressive----
    Senator Warren. Meaning?
    Mr. Werfel. Meaning that they impact the low-income in a 
more substantial way. They pay more--it's kind of a share of 
wallet. It's kind of, the more tax you have on a common good or 
service, a low-income person is going to feel that in their 
wallet more than a high-income taxpayer.
    Senator Warren. In fact, one analysis of the Republican tax 
plan found that the average tax bill for the bottom 80 percent 
of Americans under this Republican plan would increase by 50 
percent, while the top 1 percent would save hundreds of 
thousands of dollars on their taxes.
    And then just a last little piece, the cherry on top, the 
Republican tax plan would completely abolish the IRS, make the 
States do the dirty work of increasing the price of everything 
by 30 percent.
    But I want to go back to the question about billionaires 
cheating. So, if this Republican plan were in place and 
billionaires buy and sell their mega-mansions, their mega-
yachts, their private art collections, Mr. Werfel, would they 
have more opportunities to cheat on their taxes if the IRS were 
abolished and we had nothing but the Republican so-called Fair 
Tax Law?
    Mr. Werfel. Senator, I think you're raising a good point. 
In this world that this act envisions, where it's all sales tax 
rather than income tax, yes, you would have very large, 
complicated transactions, whether it's a boat or a business. 
And if there's no IRS to make sure that we're assessing what 
the right sales tax is to pay, you would have significant risk 
of evasion, I think.
    Senator Warren. Okay. So, a tax plan that basically will 
cut taxes for billionaires and for billionaire cheats--I don't 
think there's anything ``fair'' about that. So I get it; the 
Republicans are going to make a lot of noise about the debt 
ceiling, but this is theater. The debt ceiling crisis is 
entirely made up. If the Republicans hadn't pushed through the 
massive Trump tax cuts and slashed the audit rate for 
billionaires, our country wouldn't even hit the debt ceiling in 
the first Biden term.
    Americans should not buy the Republican debt ceiling scam, 
and responsible lawmakers should flat-out refuse to cut a 
single dollar of support for hardworking Americans while House 
Republicans refuse to help unrig the tax system. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Warren.
    Senator Cantwell then Senator Menendez.
    Senator Cantwell. Thank you, Mr. Chairman. Thank you for 
this hearing. Mr. Werfel, congratulations on your nomination.
    Several of my colleagues have asked about the backlog, and 
I too want to ask about that. The National Taxpayer Advocate 
agrees this is one of the biggest problems the IRS faces, and 
I've been able to ask previous acting administrators to focus 
on online tools, not the one-way communication where, if you 
are calling them to make sure that tax was collected, you 
communicate, but then when they have questions, you don't 
communicate. So, I want to figure out what are the ways that 
you believe that we can reduce the backlog, and what can you do 
on online communications to improve the system?
    Mr. Werfel. Thank you for the question, Senator. 
Absolutely, backlogs create a lot of challenges with respect to 
tax administration. I think, first of all, my understanding is 
that a lot of the backlogs are paper, and so there's an 
opportunity to move more of those into an electronic format. By 
doing that, they'll be more searchable. You'll be able to 
segment them into activities which can be done relatively 
quickly and get taxpayers an answer in a timely way, versus 
segmenting those that might take more time.
    When you know that they take more time, then you can start 
shifting people and resources to them, rather than have them 
sitting there without the right staffing. So, there's an 
analytics component to this once we have a better understanding 
of what the backlog is, and I would be very eager to understand 
what the IRS is doing today around these types of strategies 
versus how they can improve them over time.
    Senator Cantwell. Do you commit to transparency on this 
issue: here are the numbers on the backlog; here's what we 
think we can do with them--that kind of information?
    Mr. Werfel. I do.
    Senator Cantwell. Okay.
    Only 12 percent of those who called the IRS during the 2022 
filing season were able to reach a customer service 
representative. This means that taxpayers were left in the 
dark. Now, I'm kind of pushing on the airlines that it's 
unacceptable to have 4 days go by in a major outage with the 
Southwest system and not be able to communicate with people. 
So, what are you going to do to promise that there will be an 
improved communication? Two hundred thirty constituents of mine 
reached out to my office for assistance with the IRS, and so I 
want to make sure that we are continuing to push for tools that 
will go a long way in answering these questions and helping to 
get information into taxpayer's hands.
    Mr. Werfel. Yes. I think, Senator, a kind of a next-
generation IRS should be able to communicate much more timely 
and effectively with taxpayers to understand what they're 
looking for and expecting, in terms of how they interact with 
the IRS: what do they want the digital solutions to look like; 
how to make them easy. I think a lot of private-sector 
companies do this type of outreach.
    Also, to your point, what do you do when you have a 
challenge, and you can't get through? What would you do if you 
can't get through to the Taxpayer Advocate, you can't get 
through to anyone in the government to help solve your problem, 
and you can't afford an accountant? These are the types of 
questions that I think we need to move forward on aggressively 
to understand how to open up those lines of communications. I 
think we can work with people in communities to figure out 
solutions to understand how to prioritize which taxpayers have 
urgent needs. It's kind of like your airline example. I'm about 
to miss my flight versus, I have 3 hours, right? Can we figure 
out----
    Senator Cantwell. Well, in this case it was like, we're not 
flying for 4 days, and you can't get a flight, and I'm going to 
be stuck, or am I going to be stuck? So I think your ranking of 
the issues is a good idea. Like you were trying to say, we're 
going to get this information from people who still have 
lingering problems. You're not suggesting that you have to have 
an accountant to get that information, right?
    Mr. Werfel. Not at all.
    Senator Cantwell. But you're pledging to me that you're 
going to look at some innovative ways to try to get two-way 
communications into regular taxpayer discussions who really 
have complicated cases that really do need an answer?
    Mr. Werfel. Yes. And I think partnering with the Taxpayer 
Advocate is critical to that effort, and I'm committed to doing 
that.
    Senator Cantwell. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Senator Menendez?
    Senator Menendez. Thank you, Mr. Chairman.
    Mr. Werfel, over the past year I've written over eight 
letters, many of them with a fair number of my colleagues, to 
the IRS about a range of customer service issues impacting 
taxpayers. I'm pleased that the IRS has implemented some of the 
measures that I've called for, like the expansion of overtime 
opportunities for IRS employees in creating surge teams, which 
have been critical in reducing pandemic-related tax return and 
correspondence backlogs. But as the new filing season begins, 
the IRS simply needs to do better.
    In 2022, a taxpayer who called the IRS had a one-in-10 
chance of speaking to a representative. Tax professionals have 
said that reaching the practitioner priority service is 
``virtually impossible.'' So, what do you consider an 
acceptable level of telephone service?
    Mr. Werfel. That's a great question. First of all, I'm 
going to lose sleep if I hear about one taxpayer who called the 
IRS and didn't get through. So in some way, Senator, I feel--
and maybe this is unrealistic--but in my heart, I want it to be 
100 percent. But I mentioned earlier--I think in response to a 
question from Senator Carper--the strategy, I think, should be 
to benchmark. What is the best-in-class, world-class customer 
service agency achieving in terms of call rates? I want to 
understand how they measure it, and I want to beat those 
metrics, if I'm confirmed.
    Senator Menendez. Well, the National Taxpayer Advocate 
recommends an 85-percent level of telephone services as a 
minimum. Right now, as of February 10th, the IRS is answering 
90 percent of calls. That's good.
    Mr. Werfel. That is.
    Senator Menendez. But I want us to see a maintenance of 
that and, hopefully, a progression; is that something you're 
committed to?
    Mr. Werfel. Yes.
    Senator Menendez. And how do you intend to go about 
ensuring that the IRS is able to consistently provide this 
level of service?
    Mr. Werfel. Well, I look at the Inflation Reduction Act 
certainly as an opportunity to strengthen the overall resources 
that we have, increase customer service with technology that is 
strategically placed within the customer service solutions, 
that is efficient, that certain questions that taxpayers have 
can be answered by technology, and we should be putting those 
in place and testing those. So I think sustaining it is coming 
up with a strategy and implementing that strategy for a higher-
performing service apparatus, which involves improved process, 
hiring more people, training those people, and improving 
technology. I think all of these things will be part of a plan 
that I hope to work on with this committee for improving 
service, and as you raised, sustain it.
    Senator Menendez. Well, this is one of the efforts I've led 
here to try to have the resources--the chairman as well--for 
the IRS to do its job because, in my view, the IRS is in the 
customer service business, and it needs to get back to basics. 
That means answering the phones, processing tax returns, 
processing timely refunds, which is almost along the lines of 
what people would expect of their elected representative: 
answer the phone, give me a responsive answer to mail that I 
send you, and do it in a timely fashion.
    I want to echo--understand that I was chairing a Foreign 
Relations hearing--but I want to echo the question of the topic 
of equity in tax administration. I think others may have 
referred to it, but that joint report from Stanford and the 
Department of the Treasury found that Black taxpayers are at 
least three times as likely to be audited by the IRS.
    Now, the agency doesn't collect data on race or ethnicity, 
but the disparity is attributed to the IRS computer algorithms 
that select the returns for audit. So at the same time, the IRS 
is known for low audit rates of high-income taxpayers and large 
businesses, which has led to an estimated gap in tax 
collections of nearly $500 billion. So, do you plan on 
addressing these disparities at the IRS, if confirmed?
    Mr. Werfel. Absolutely. I mentioned earlier, Senator, these 
are very concerning. Equity is a critical part of effective tax 
administration. We should be constantly understanding where 
activities are having a disparate impact on any particular 
group, particularly concerning if it's having a disparate 
impact on racial minorities. I will, if confirmed, work with 
the IRS to understand why this is happening, get to the root 
cause, and figure out solutions so that it doesn't happen in 
the future.
    Senator Menendez. Good.
    Finally, taxpayers have a right to receive prompt refunds, 
regardless of whether they file online or by paper. It's 
unacceptable that 13 million taxpayers who filed via paper 
waited an average of 6 months or longer to receive their 
refunds. As you can imagine, these delays caused taxpayers to 
feel confusion, frustration, and experience financial hardship, 
all of which are preventable.
    In March, the National Taxpayer Advocate issued a directive 
requesting that the IRS implement scanning technology to ensure 
that taxpayers receive timely refunds, while also saving the 
agency time, money, and resources. Scanning has been used by 17 
State tax agencies for over 20 years. The benefits are clear. 
I'm pleased that Secretary Yellen has promised to move forward 
with plans to automate the scanning of individual paper 
returns. Do you commit the IRS to implement scanning technology 
for all individual paper returns by the 2024 tax filing season?
    Mr. Werfel. Senator, moving from paper to digital 
environments is an absolute priority. I know that they have 
started scanning and looked at scanning solutions. I want to, 
if confirmed, understand exactly where they are, but the 
commitment that I would have is that we should absolutely be 
pushing more paper to electronics, and I think scanning is the 
way to go.
    Senator Menendez. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Menendez.
    Senator Johnson, I think, is going to make a couple of 
points. He has one question, and I have one question, and I'm 
going to wrap up with a short statement. So, Mr. Werfel, you 
are about to be liberated. I know it's hard to imagine, because 
you probably thought you were going to be here eating your 
cornflakes. And I am stunned, as the father of five children, 
that your kids have been so patient through this whole thing. 
They have been trying not to smile, which I'm sure would not be 
the case with respect to my children.
    So, Senator Johnson.
    Senator Johnson. That's called good parenting.
    The Chairman. I guess. Yes.
    Senator Johnson. Let me start, Mr. Chairman. I want to 
thank you for how welcoming you've been to this committee. This 
is my first hearing as a member of the Finance Committee. I 
gave up a position and all my seniority on the Senate Foreign 
Relations Committee and on the Commerce Committee to be here 
for this issue. It's an incredibly important issue: how do you 
raise the revenue the Federal Government needs to govern this 
country? And it needs to be done in a very fair manner. I was 
fortunate that Senator Crapo asked me to sit in for him as 
ranking member. I was happy to do it because I wanted to sit 
through this full hearing. I wanted to hear what the committee 
was like. I wanted to hear the points made by the members.
    And what I did hear was an awful lot of areas of agreement. 
Now, there's no doubt about it, there are differences here, 
okay, but coming from the private sector, I found out that the 
only way you really accomplish things in the private sector--
and Mr. Werfel, you probably discovered this too--is you search 
for and exploit areas of agreement. There are plenty of things 
that divide us, but concentrate on the areas of agreement.
    So again, I want to work with you, Mr. Chairman, to try and 
find those areas of agreement and do the work of the American 
public. I think when it comes to tax policy, I've never really 
liked the term ``tax reform.'' I would much rather concentrate 
on tax simplification and tax rationalization. I think if we 
would do that, I think it would remove an awful lot of the 
headaches that you're going to be experiencing as Commissioner.
    I know you did, in answer to--I think it was Senator 
Cornyn's question, maybe somebody else. You said your position 
or job as Commissioner is not to be proposing or even really 
commenting on legislation or taking a position on it. But I do 
hope as Commissioner, you inform this committee what laws, what 
legislation are giving you headaches, are making it very 
difficult to administer the tax law in a fair and impartial and 
efficient manner. I mean, it's extremely important.
    So my question for you, and sorry if you did cover this, 
but I did go for votes a couple times. One of your challenges 
is going to be replacement of the baby boomers, as well as 
whatever hires now Congress has enabled you to do with their 
funding. In Wisconsin, probably the biggest challenge for any 
employer is finding people to hire. So my question is, have you 
considered that? Do you have a strategy for dealing with the 
replacement of many people in the current workforce and then 
hiring qualified and hopefully impartial staff for the IRS to 
administer our tax code?
    Mr. Werfel. Thank you for the question, Senator. 
Absolutely! The statistics that you raise on the retirement of 
the baby boom generation--I think that's going to hit a lot of 
industries and a lot of government agencies. Looking at the 
statistics that I've seen, it's going to hit the IRS very hard, 
with tens of thousands of employees set to retire over the next 
5 to 6 years.
    How do we backfill those? I start first with partnering 
with the Office of Personnel Management in terms of the broader 
government recruiting that they do. I also believe that there 
could be outreach to communities, to retirees who may want to 
come back and work and serve their country in this way, if they 
have expertise. I think about veterans. I think about schools 
and graduate programs. Maybe not everybody, but there are 
individuals who I think would be excited about the opportunity 
to serve their country in this particular way because they're 
interested in tax administration. They're fascinated by the 
world in which we operate. As Oliver Wendell Holmes said, taxes 
are essential to a civilized society, and I think some people 
get the itch to want to be involved in that.
    So I'm excited in particular about how to get people 
outside the IRS today, who we are going to need in the future, 
excited about the mission, and on board. And if we do it right, 
they'll come onboard with all the right mindsets of fairness, 
equity, impartiality so that we can, with every step we do, 
build trust.
    Senator Johnson. Again, I appreciate that. I appreciate 
your willingness to take on this task. It's an enormous task.
    And my final point, Mr. Chairman, is there is a difference 
between tax avoidance and tax evasion. I don't think there's 
anybody on this side of the aisle who is going to support tax 
evasion. We all want to clamp down on tax cheats. There's no 
doubt about that.
    I would like to simplify the tax system and rationalize it 
so that tax avoidance, which is a legal thing--but if we 
simplify our tax code, that won't be as big an issue either. So 
again, thank you, Mr. Werfel.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Johnson.
    And, Mr. Werfel, we send you off, and I'm going to pick up 
on a point that Senator Johnson made. And you probably know 
this because of your involvement with Chairman Hatch. It wasn't 
exactly an atomic secret, you know--he treated me like a son. 
We did big things in this room. We did child welfare and health 
care, a host of issues, and we did it--and I think this really 
touches on where we are, and I don't want to put words in his 
mouth, but where I think Senator Johnson wanted to go. We have 
a big difference of opinion in this room, no question about 
that. But we also have a history in the Senate Finance 
Committee of being able to find common ground.
    I will tell you, I am particularly proud of the fact that 
this committee helped to break the gridlock on the gun safety 
legislation in the last Congress, because there were people who 
said, ``Oh, it's mental health with people instead of guns.'' 
I'm of the view that there are issues on both sides. We ought 
to keep guns out of the hands of people who shouldn't have 
them, but mental health is a big challenge, and this committee 
came to play right away, and we put into black letter law the 
text that Senator Murphy and Senator Cornyn were able to use on 
the mental health provisions. I can tick them off for you: help 
through Medicaid in schools, suicide hotlines, we made it 
possible to get additional help, preventions, Senator 
Stabenow's historic help with respect to behavioral health.
    So you'll find here that if you get us the facts about 
where the Department wants to go--you've said to several 
Senators that you expect us to hold you accountable. I'll start 
by saying 60 days on the racial discrimination issue. I think 
you heard from colleagues--we started off probably 3 hours 
ago--members of this committee think this is very, very 
serious, this kind of discrimination, in effect where nobody's 
even looking for it. God only knows what you would find if you 
were looking for it.
    This is serious business, so I'm expecting that. I want to 
know what you think the reasons are for it and what we're going 
to do to correct it. So I'm just going to ask one additional 
question and then we will call it a day, and you won't have to 
stay here until breakfast time tomorrow.
    You could hear members talking about their interests, to 
the greatest extent possible, in voluntary programs. Senator 
Blackburn and I were talking about some of the issues with 
restaurants and the hairdressers and the like. I said there's 
not going to be any mandates here. The fact is, for most 
Americans the government has the relevant information that they 
need to complete a tax return.
    These are the firefighters and the nurses and the teachers, 
and my wife always says, ``I hear this so many times. I wake up 
in the middle of the night, and my husband's talking about 
firefighters, teachers, and nurses and two tax codes.'' The 
government has the information, and what's wrong with the idea 
if someone in Oregon or any of our States says I would like the 
government--and this would be purely voluntary. Let me 
underline it--purely voluntary.
    And if all the big tax prep firms try to say it would be a 
mandate, I want them to hear ``purely voluntary.'' But if a 
person says, ``I'd like the government to take the information 
it has and give me a draft return; I'll make any changes and 
send it back,'' what is wrong with having a voluntary approach 
like that? Your thoughts?
    Mr. Werfel. I would go back to the question of what are the 
authorities the IRS has; is this something that would have to 
be implemented in law or can it be administered without a law? 
If it needs to be implemented by law, then my opinion on this 
as a potential Commissioner, Mr. Chairman, would be, can we do 
it? What are the gaps that we have with our technology?
    The Chairman. What do you make of the fact that so much of 
the rest of the world does it? We're all wandering around, ``Oh 
my goodness, it's so complicated.'' Much of the rest of the 
world looks at us and says, ``Hey folks, how can it be that you 
can't figure this out?'' And I'm not talking about the 
administration of it. You're making very valid points, but 
having heard how Senators feel about the nature of a voluntary 
program, I assume you don't have problems with a voluntary 
program in this area?
    Mr. Werfel. I don't. First of all, you mentioned--whether 
it's States or nations, I'm a big fan of benchmarking. I want 
to understand what other tax administrators are doing, where 
they're having success with customer service and their 
experiences, and I think that's going to be part of a go-
forward plan. Your point around, is this a solution that could 
really unlock a lot of benefits for taxpayer service, we should 
be looking at it.
    I just put it to tax policy and this committee to decide 
the wisdom of that, and whether it requires a legal change. And 
my seat at the table----
    The Chairman. As you know, we already put language into the 
legislation I and several colleagues have been interested in, 
so you're going to do it. I just want somebody to have their 
heart in it.
    Mr. Werfel. Yes.
    The Chairman. That's why I'm asking you.
    Mr. Werfel. Yes. I'm very interested in it. Yes.
    The Chairman. I'm constantly stunned when I have town 
meetings. I made this commitment to have town meetings, every 
county every year, 1,030. When I bring this up, people look at 
me and say, ``Yes, what's holding it up?'' And it's hard to 
explain it. So you have a lot on your plate, but right at the 
core of the mission is, we want everybody in America to have a 
chance to get ahead. I want people to be successful.
    You know I've authored the first billionaire income tax, 
and I made it clear I want people to be successful, but I think 
we all ought to be paying our fair share, and that's right at 
the heart of this. And what Senators were telling you is that, 
when you have audit rates that are so much higher for the 
person of modest means than they are for wealthy, that does not 
pass the smell test in terms of fairness.
    You've got a big job to do. And I was for you before you 
showed up today, and I think you have today accounted for 
yourself very well on these key kinds of questions with respect 
to fairness and professionalism. I look forward to supporting 
you. I hope we will be able to move your nomination soon, and I 
hope we will be able to get support from both sides of the 
aisle.
    With that, Mr. Werfel, the Finance Committee is adjorned.
    Mr. Werfel. Thank you, Mr. Chairman.
    The Chairman. Colleagues, one more little bit of business. 
I jumped the gun. We thank you, Mr. Werfel, for your testimony. 
Members of the committee will have until the close of business 
on Friday, February 17th to submit questions for the record.
    The Finance Committee is adjourned.
    [Whereupon, at 1:14 p.m., the hearing was concluded.]












                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


                    Submitted by Hon. Bill Cassidy, 
                     A U.S. Senator From Louisiana
From Americans for Tax Reform

         40 Years of Failure: IRS Unable to Fix Computer System

By Michael Mirsky

March 5, 2022

For 40 years the IRS has tried and failed to update its main computer 
system. Regardless of funding level and regardless of who controls the 
White House and Congress, the bureaucracy is simply unable to pull it 
off. The IRS and progressive Democrats continue to plead poverty and 
pretend the failure is due to insufficient funding rather than 
incompetence.

Below is a compilation of key news articles documenting the IRS 
failure, starting in 1982:

April 4, 1982: Lament of the Reagan I.R.S.; by David Shribman, The New 
York Times, https://www.nytimes.com/1982/04/04/business/lament-of-the-
reagan-irs.
html.

``Meanwhile, the I.R.S. is struggling with a data processing system 
that is, by its own admission, grossly short of the capacity and modern 
state-of-the-art efficiency that is essential for an effective tax 
system in the 1980s.''

Its computer data facilities, parts of which are as many as 17 years 
old, must be replaced. The agency plans to put into effect a 
modernization program by 1985, replacing computers in its local service 
centers, buying a computerized microfilm research system and replacing 
outmoded hardware at the service's National Computer Center.

``Without this,'' Mr. Egger said, ``we face the prospect of breakdowns 
which will make the service unresponsive to taxpayers and our own 
internal needs.''
                                 ______
                                 
April 22, 1985: Taxes: Moving in Slo-Mo at the IRS; Time Magazine, 
http://content.time.com/time/subscriber/article/0,33009,966856,00.html.

``IRS Commissioner Roscoe Egger acknowledged last week that his agency 
is taking as long as 12 weeks to send out refunds, 2 weeks longer than 
last year. The sluggishness of the IRS, said Egger, is the result of 
glitches in setting up a new $103 million Sperry Univac 1100/84 
computer system.''
                                 ______
                                 
Some anonymous IRS employees told journalists that the tax backlog had 
got so bad that agency workers had deliberately shredded thousands of 
returns.

April 29, 1985: IRS Problems Worse Than Previously Thought; by Anne 
Swardson, The Washington Post, https://www.washingtonpost.com/archive/
politics/1985/04/29/irs-problems-worse-than-previously-thought/
70aa69a9-af25-4600-8c43-6582f2abd6cc/.

``Internal Revenue Service computer and operational problems are more 
widespread than previously thought, and more than 150,000 taxpayers may 
have received erroneous dunning notices from the troubled Philadelphia 
Service Center alone, according to two new government reports.

``Some area taxpayers who filed early in the tax season are 
experiencing unusually long delays in getting their refunds and, in a 
twist, taxpayers who waited longer to file are likely to get their 
refunds first.

``The delays were caused by the failure of the $103 million computer 
system to record many returns the first time they were put through the 
system.''
                                 ______
                                 
``Rep. Doug Barnard Jr. (D-GA) has accused the IRS of `grossly 
inadequate planning' for installation of its new computer, including 
underestimating the time it would take to train employees to use the 
system and choosing a computer language inappropriate to the type of 
computer.''

May 25, 1985: 1.5 Million Tax Returns Delayed in Processing; by David 
E. Sanger, The New York Times, https://www.nytimes.com/1985/05/25/
business/1.5-million-tax-returns-delayed-in-
processing.html?searchResultPosition=35.

``The Internal Revenue Service, still suffering the effects of computer 
problems that plagued it earlier this year, said today that some 
taxpayers might have to file duplicate returns to get their refunds.

``The I.R.S. said the processing of 1.5 million individual returns had 
been delayed because of problems registering them with its master 
computer file in Martinsburg, WV.

``As a result, a large number of taxpayers--possibly several hundred 
thousand--may not receive their refunds until after the June 1st 
deadline that the Government is racing to meet. From that date, 
taxpayers who filed their returns on time are entitled to 13 percent 
annual interest on their refunds, at a potential cost to the Government 
of millions of dollars.

``I.R.S. officials denied reports that large numbers of returns had 
been lost. But where the computer-encoded copy of a return has been 
accidentally erased, officials said, the revenue service may ask 
taxpayers to submit duplicates of their tax forms to get a refund. A 
revenue service spokesman said taxpayers whose refunds were long 
overdue should not send in duplicate returns until they had asked an 
I.R.S. employee to check their account.''
                                 ______
                                 
``The record backlog of troublesome returns comes just as the I.R.S. 
was emerging from the most turbulent tax-processing season in its 
history. The problems arose from the installation of a new $100 million 
Sperry Corporation computer system that was plagued with both 
programming errors and faulty tape drives, which record individual tax 
data on magnetic tape.''

January 28, 1986: I.R.S. Ends Computer Contract; by David E. Sanger, 
The New York Times, https://www.nytimes.com/1986/01/28/business/irs-
ends-computer-contract.html?searchResultPosition=27.

``The Internal Revenue Service today canceled a multimillion-dollar 
contract to install the second phase of its troubled new computer 
system, in a move that seemed likely to delay further any reduction of 
the growing backlog of tax disputes.

``The cancellation came just days after a panel of three administrative 
law judges ruled that software used in the system selected by the 
agency last year did not meet the Government's performance standards. 
In an opinion that was sharply critical of both I.R.S. management and 
several of the companies that bid on the system, the panel ordered the 
service to end the contract it awarded to Computer Systems and 
Resources Inc.

``An I.R.S. spokesman, Roderick P. Young, said that the agency, which 
is still reeling from computer problems that snarled and delayed the 
processing of millions of tax returns last year, is now `examining our 
options.' While the new equipment canceled today was not scheduled for 
installation until after the current tax season is over, it now appears 
unlikely that it will be in place by the 1987 tax season.''

February 10, 1986: Taxes: Downtime at the IRS; Time Magazine, http://
content.time.com/time/subscriber/article/0,33009,960594,00.html.

``On the front of this year's federal income tax forms, the Internal 
Revenue Service printed a letter to taxpayers apologizing for foul-ups 
that delayed millions of refunds in 1985. About 16,000 taxpayers still 
have not received their checks.

``The IRS is trying to fix the problem by upgrading its computer 
system, but that effort suffered a setback last week. IRS officials 
canceled a contract for $73 million worth of new computers and software 
to be supplied by Virginia-based Computer Systems and Resources, after 
a Government review panel found that the equipment had serious 
deficiencies. For one thing, the system's mastery of COBOL, a computer 
language widely used in the Government, did not meet federal standards. 
The panel also concluded that the system would probably cost $101 
million, instead of the $73 million estimated by the Virginia company.

``IRS officials say that their current computers are adequate for the 
time being and that the processing of returns will be faster this year 
than in 1985. Many critics are skeptical. Says one professional tax 
preparer: ``My advice to anybody expecting a refund is to get your 
return in early.''

April 8, 1990: The I.R.S.'s Bumbling Efforts to Update Its Computers; 
by David Burnham, The New York Times, https://www.nytimes.com/1990/04/
08/business/the-irss-bumbling-efforts-to-update-its-
computers.html?searchResultPosition
=9.

``With the nation's taxpayers struggling to complete their income-tax 
returns by next week's deadline, the Internal Revenue Service is 
approaching the crossroads of an extraordinarily challenging effort to 
design and acquire a new network of computer equipment and software to 
process returns during the next decade.

``But according to investigations by the I.R.S. itself, the $10.7 
billion program is being undermined by a lack of technical expertise, 
an inability to keep track of project costs and a failure to develop a 
unified plan describing how the agency's thousands of computers--
mainframe, desktop and portable--would work together under the new 
structure. Planning for the Tax System Modernization Project began in 
1987; the program is supposed to be fully in place by 1998.

``The management problems are so severe, the investigators said, that 
the I.R.S. should consider cutting back on the acquisition of some new 
computer systems until the master operating plan is formulated.''

January 31, 1997: IRS admits its $4 billion modernizing is a failure; 
official says computers don't work; agency wants to contract out tax 
returns; The Baltimore Sun, https://www.baltimoresun.com/news/bs-xpm-
1997-01-31-1997031030-story.html.

``The Internal Revenue Service conceded today that it had spent $4 
billion developing modern computer systems that a top official said `do 
not work in the real world' and proposed contracting out the processing 
of paper tax returns filed by individuals. That would allow non-
Government workers to see confidential information about the incomes of 
individual Americans.

``Arthur Gross, an assistant commissioner of internal revenue who was 
appointed 10 months ago to rescue the agency's efforts, said customer 
service representatives must use as many as nine different computer 
terminals, each of which connects to several different data bases, to 
resolve problems.

`` `Dysfunctional as some of these systems may be today,' Mr. Gross 
said, the I.R.S. `is wholly dependent on them' to bring in the $1.4 
trillion in taxes that finance the Government. He expressed doubt that 
the agency was capable of developing modern computer systems, saying it 
lacked the ``intellectual capital' for the job.''
                                 ______
                                 
``The failure of the modernization effort will mean years of 
frustration for taxpayers who get into a dispute with the I.R.S., 
especially one that involves records kept on two or more of its 
computer systems.

``Mr. Gross said that for the foreseeable future the I.R.S. must 
continue to work with dozens of antiquated computer systems--some 
dating to the 1960's--that cannot trade information with one another.''

September 23, 1997: No Call to Bash the IRS; by Mortimer M. Caplin, The 
Washington Post, https://www.washingtonpost.com/archive/opinions/1997/
09/23/no-call-to-bash-the-irs/71b97943-fc69-430e-b268-6e26dcc96034/.

``Like many other government agencies, it has had its share of 
management errors and poor judgment. And major changes are long 
overdue: improving education and services for taxpayers, better 
training for IRS employees, modernizing computers and greater efforts 
to simplify and streamline the entire tax process.''

November 4, 1997: Man in the News: Charles Ossola Rossotti; Hope for 
I.R.S. in 2000; by David Stout, The New York Times, https://
www.nytimes.com/1997/11/04/us/man-in-the-news-charles-ossola-rossotti-
hope-for-irs-in-2000.html.

``When President Clinton nominated Charles O. Rossotti to head the 
Internal Revenue Service, the candidate's expertise in computers seemed 
ideal for an agency whose technology was outmoded and overwhelmed. When 
Mr. Rossotti was confirmed by the Senate today, he took on an even 
bigger mission: regaining the trust of the American people.

``The I.R.S.'s computer problems, including machines that do not talk 
to each other very well and poor planning to accommodate the computer-
baffling date change to the year 2000, were known when the President 
chose him on July 31st.''

April 12, 1998: Moving a Mountain of Paper Taxes the IRS; by Albert B. 
Crenshaw, The Washington Post, https://www.washingtonpost.com/wp-srv/
business/longterm/tax/irs12.htm.

``The agency had hoped by now to be operating entirely with the latest 
in computer technology. But repeated efforts to design and install it 
have failed, enraging Congress.

``The failures finally prompted the Clinton administration, with 
Congress's enthusiastic backing, to appoint an IRS chief who is not a 
tax expert but knows computers. He is Charles O. Rossotti, the founder 
of American Management Systems Inc., a Northern Virginia technology 
company. Rossotti has said he is appalled by the state of the agency's 
systems and is working to modernize them, but that has been delayed by 
the need to fix software bugs in the old computer systems so they can 
recognize dates after 1999.''
                                 ______
                                 
``The agency tried to automate this process with electronic equipment a 
few years ago. But the equipment didn't work well in some ways and was 
removed, so back came the rubber stamps, presumably to stay until a 
more successful technology is installed in the pending computer 
overhaul for the IRS as a whole.''

March 2, 1999: Sloppy Books Cost IRS Millions; by Deborah Orin, The New 
York Post, https://nypost.com/1999/03/02/sloppy-books-cost-irs-
millions/.

``And it says IRS computer security is so weak that unauthorized people 
could get hold of sensitive taxpayer information such as financial data 
that `may be used to commit identity fraud.' ''

March 1, 2000: IRS's Woes Costing Billions, GAO Says; Watchdog Agency 
Urges More Changes; by Albert B. Crenshaw, The Washington Post, http://
www.washingtonpost.com/.

``Poor internal management at the Internal Revenue Service is costing 
the federal government billions of dollars in uncollected taxes and 
improperly paid refunds, at the same time that the agency places 
unnecessary burdens on some honest taxpayers, the General Accounting 
Office said yesterday.

``The analysis, detailed in the congressional watchdog's annual audit 
of the IRS's books and accompanying testimony before a House 
subcommittee, concluded that while the agency has been improving in the 
wake of new laws and new management, it still needs to make major 
changes.''

October 16, 2000: The Fix Isn't In: IRS is still struggling to 
modernize its ancient software; by Jim McTague, Barron's, https://
www.barrons.com/articles/SB971480724627850076.

``The rosiest budget forecasts, as well as the most pessimistic, take a 
fully-
functioning tax-collection system for granted. Imagine, then, the 
fiscal chaos (and perhaps bliss for individuals) that might ensue if 
the Internal Revenue Service's 35-year-old computer software suddenly 
crashed. Tax collectors, who take in almost $2 trillion a year, might 
lose track of returns and be unable to determine for months, if not 
years, exactly who had paid their taxes. Hundreds of billions in 
revenues might remain uncollected, even after the IRS was up and 
running again. The government might have to borrow to make good on the 
spending promises being made by presidential contenders Gore and Bush.

``This scenario isn't a mere stretch of the imagination. Although the 
tax agency is modernizing its core software, the changeover is 
occurring at a bureaucratic jog, not a free-market sprint. New software 
won't be delivered until next year, and programmers won't begin 
installation until 2002. The core computer system of the IRS, which 
contains all taxpayer records, is so fragile, the old software will 
have to be replaced in stages over several years. It's akin to 
replacing the foundation of a building, brick by brick.

``In the meantime, the IRS will have to rely heavily on the old 
programming language, which over four decades has become so complex, 
disjointed and jury-rigged that large parts of it could crash at any 
moment.''
                                 ______
                                 
``Like old plumbing, the current software is prone to leaks. In July, 
the IRS discovered that a computer glitch had caused it to short-change 
taxpayers of $25 million in refunds over several years. Some leaks are 
very costly to repair, especially when you consider that the IRS plans 
to trash the old system by the end of the decade. Ridding the existing 
core software of the Y2K bug alone cost $1.4 billion.''

August 23, 2001: Technology; PeopleSoft Gets Contract With I.R.S. for 
Software; by Chris Gaither, The New York Times, https://
www.nytimes.com/2001/08/23/business/technology-peoplesoft-gets-
contract-with-irs-for-software.html.

``The I.R.S. has found that task impossible, with a 35-year-old 
computer system and 125 million individual tax returns filed each year. 
The agency's current central database, which is being replaced by next 
year, offers no way for I.R.S. service representatives to note their 
interactions.''

December 11, 2003: At I.R.S., a Systems Update Gone Awry; by David Cay 
Johnston, The New York Times, https://www.nytimes.com/2003/12/11/
business/at-irs-a-systems-update-gone-awry.html?searchResultPosition=7.

``After 5 years, a project to replace the Internal Revenue Service's 
aging file-keeping computer system with modern technology is so far 
behind schedule that the I.R.S. has told the prime contractor that 
unless it improves its performance by the end of the month, the 
government may have no choice but to fire it.

``The project, which was expected to cost $8 billion when completed, 
has spent less than $1 billion so far, but it is already 40 percent 
over budget for what it has done, according to the I.R.S. Oversight 
Board, an independent watchdog body that Congress created in 1998.

``Most taxpayers are younger than the computer system that the I.R.S. 
relies on to maintain its master files on individuals and businesses--
all the records of who they are, where they are, their income, taxes 
paid, and the amounts they still owe or are owed as refunds.''

February 13, 2004: IRS commissioner bars CSC from upcoming projects; by 
Juan Carlos Perez, IDG News Service, https://www.computerworld.com/
article/2575133/irs-commissioner-bars-csc-from-upcoming-projects.html.

``In December, the IRS Oversight Board blasted both the IRS and CSC for 
problems with the IT modernization effort, including poor planning, 
poor execution and blown deadlines (see story). CSC is the primary 
contractor for the Business Systems Modernization (BSM) project, a 
multiyear and wide-ranging effort to significantly revamp the tax 
agency's infrastructure and allow the IRS to operate more efficiently 
and provide better service.''

April 1, 2004: No Easy IT Fix for the IRS; by Elana Varon, CIO.com, 
http://web.archive.org/web/20200614101929/https:/www.cio.com/article/
2439729/no-easy-it-fix-for-the-irs.html.

``The internal revenue service's Master File is an accident waiting to 
happen. A legacy of the Kennedy administration, this database stores 
the taxpaying histories of 227 million individuals and corporations, 
including every transaction between taxpayers and the IRS for the past 
40 years. The Master File is used to determine if you've paid what you 
owe, and without it the government would have no way to flag returns 
for audits, pursue tax evaders or even know how much money is or should 
be flowing into its coffers.

``Yet the system still runs code from 1962, written in an archaic 
programming language almost no one alive understands. Every year, 
programmers, some who have worked at the IRS for decades, add new code 
to the Master File to reflect new rules passed by Congress. As a 
result, the system has become a high-tech Rube Goldberg machine. Those 
familiar with the Master File say it is poised for a fatal crash that 
would shut the government down.

``Congress and the IRS had hoped that by this tax season, this fragile 
system would be partially replaced by a centralized database that could 
provide both IRS agents and individual taxpayers with daily updates of 
taxpayer accounts, just as credit card companies and banks do, enabling 
speedier refunds and more timely customer service. This new Customer 
Account Data Engine, or CADE, is part of a massive $8 billion 
modernization program launched by the IRS in 1999 to upgrade its IT 
infrastructure and more than 100 business applications.


``But the program, called Business Systems Modernization, has stumbled 
badly, running into serious delays and substantial cost overruns. The 
first of multiple software releases planned for the new database (which 
would enable faster processing of returns and faster refunds for 6 
million out of the 21.5 million people who file the 1040EZ form) is 
nearly three years late and $36.8 million over budget. Eight other 
major projects have missed deployment deadlines by at least three 
months, and costs have ballooned by more than $200 million, according 
to the U.S. General Accounting Office and the congressionally chartered 
IRS Oversight Board, an independent panel of tax industry and 
technology experts who advise the IRS and Congress.

``Those familiar with the program say the fault lies largely with the 
IRS's entrenched bureaucracy. The agency did not follow its own 
procedures for developing the new systems and failed to give consistent 
direction and oversight to Computer Sciences Corp. (CSC), the vendor it 
hired to do the work. Longtime managers resistant to change undercut 
CSC and the private-sector IT executives who were hired to oversee the 
program, according to Mark Forman, who, as associate director for IT 
and e-government at the Office of Management and Budget, oversaw the 
government's major IT initiatives from June 2001 until last summer. 
Three CIOs have come and gone in the seven years since planning began 
for Business Systems Modernization.''

May 5, 2008: IRS trudges on with aging computers; by Anne Broache, 
CNET, https://www.cnet.com/news/irs-trudges-on-with-aging-computers/.

``The Internal Revenue Service has been trying for years to upgrade its 
antiquated mainframe computers, which process Americans' tax returns by 
churning through millions of lines of assembly code written by hand in 
the early 1960s.

``But after more than 20 years and over $5 billion, there's still no 
end in sight. Not all computer systems can talk to each other, 
information isn't available in real time, and tax returns filed on 
paper are often manually entered by typists.''
                                 ______
                                 
``The IRS's long-term goal is to run its operations with the efficiency 
Americans expect of banks and credit card companies, but it has 
consistently fallen short. Right now, for instance, a taxpayer who 
submits a tax return on a Monday will likely find that it will not be 
processed until at least the following weekend, thanks to limitations 
in the antiquated core of the agency's tax-processing apparatus. Over 
$3 billion was wasted in an earlier upgrade attempt in the 1990s. Last 
year, computer problems caused the IRS to erroneously hand out an 
estimated $318 million in fraudulent refunds.

``Government audits show that the many years of planned upgrades have 
been dogged by the same missteps that plague so many massive government 
computer upgrades: inadequate management, ill-defined goals, repeated 
cost overruns, and failure to meet deadlines and expectations.''

September 4, 2008: IRS finds unauthorized Web servers connected to its 
networks; by Jill Aitoro, Nextgov, https://www.nextgov.com/technology-
news/2008/09/irs-finds-unauthorized-web-servers-connected-to-its-
networks/42369/.

The Internal Revenue Service found more than 1,000 unauthorized Web 
servers connected to its networks, leaving the agency's systems open to 
hackers, according to a report released on Thursday by the IRS 
inspector general.

In September 2007, the IRS Computer Security Incident Response Center 
scanned the agency's Web servers and identified 2,093 that had at least 
one security vulnerability. When the center matched those servers to 
the IRS database of registered Web sites and servers, an inventory of 
systems that the agency uses to perform security maintenance and apply 
patches, it found 1,811, or 87 percent, were not listed in the 
database.

Of the unregistered servers, the IRS identified 661 that were used for 
legitimate agency business, leaving 1,150 servers being used for 
potentially unauthorized activity, according to the report.

``Unauthorized servers pose a greater risk [than authorized servers] 
because the IRS has no way to ensure that they will be continually 
configured in accordance with security standards and patched when new 
vulnerabilities are identified,'' the IG wrote in the audit report. 
``Malicious hackers or employees could exploit the vulnerabilities on 
these Web servers to manipulate data or to use the servers as launch 
points to attack other computers connected to the network.''

November 20, 2009: IT turkeys: 7 government projects worthy of a roast; 
by Kevin McCaney, FederalComputerWeek, http://web.archive.org/web/
20091123
155701/https:/fcw.com/articles/2009/11/20/it-turkeys-7-government-
projects-gone-wrong.aspx/.

IRS Modernization

More than 20 years ago, the IRS launched its Business System 
Modernization program to replace its Master File system, parts of which 
dated to the Kennedy administration. By 1995, after 8 years and $2 
billion, the agency told Congress it had made only marginal 
improvements. In 1999, an IRS assistant commissioner speaking at the 
FOSE trade show called the modernization program a $3.3 billion 
failure, and said most of its technology did not work. At that point, 
the agency was already starting over with a $5 billion contract to CSC, 
awarded the previous December. The project has continued with a mix of 
progress and setbacks. The Customer Account Data Engine, for example--
described by an official as ``the centerpiece of our modernization 
efforts''--began processing more than 25 percent of taxpayer returns in 
2008. But by June 2009, IRS had halted CADE's development. The saga 
continues.

November 25, 2013: Why Your Tax Returns Aren't Safe With the IRS; by 
Brianna Ehley, The Fiscal Times, https://www.thefiscaltimes.com/
Articles/2013/11/25/Why-Your-Tax-Returns-Arent-Safe-IRS.

Serious security weaknesses in the Internal Revenue Service's data 
system have left millions of taxpayers' sensitive financial information 
vulnerable to hackers.

The agency claims it has fixed the problem, but its auditors beg to 
differ.

A new report released by the Treasury Inspector General for Tax 
Administration (TIGTA) found that although the IRS claimed it had 
implemented 19 fixes to secure the system recommended by the auditor in 
previous years, at least eight (or 42 percent) of them ``had not been 
fully implemented,'' and should not have been checked off as completed.

The auditors said the IRS never tracked its progress on the repairs, 
and in many cases, it closed cases without submitting documentation to 
prove the fix was complete. The auditors blamed it on ``weakened 
management controls.''

The report also found that the agency didn't properly scan servers--
which contain taxpayer information--for ``major vulnerabilities,'' or 
properly lock user accounts, and it did not update software on 
databases.

``When the right degree of security diligence is not applied to 
systems, disgruntled insiders or malicious outsiders can exploit 
security weaknesses and may gain unauthorized access,'' Treasury 
Inspector General J. Russell George said.

June 2, 2015: Investigator says IRS failed to upgrade security ahead of 
cyberattack; by Stephen Ohlemacher, Lubbock Avalanche-Journal, https://
www.lubbockonline.com/story/news/nation-world/2015/06/03/investigator-
says-irs-failed-upgrade-security-ahead-cyberattack/14974000007/.

George suggested that the IRS should strengthen its management 
controls, as well as provide additional training to employees involving 
uploading data to implement fixes.

The IRS responded to the auditor, saying it has already issued a new 
manual to staff to help improve monitoring practices.

The auditor's warning comes 4\1/2\ months after the IRS inadvertently 
posted thousands of Social Security numbers on a government website. 
Additionally, a security breach in November 2012 revealed that 74.7 GB 
of data was stolen from South Carolina's Department of Revenue, 
exposing Social Security numbers of 3.8 million taxpayers along with 
credit card numbers and bank account data.

November 25, 2013: The IRS's Unusual IT ``Success Story'' Is Failing; 
by Biranna Ehley, The Fiscal Times, https://www.thefiscaltimes.com/
Articles/2013/11/26/IRS-s-One-IT-Success-Story-Failing.

A major technology initiative at the Internal Revenue Service that was 
previously dubbed a ``rare federal IT success story'' has missed its 
deadline and is tens of millions of dollars over budget.

The latest attempt by the IRS to shift the data of 140 million 
taxpayers from an old master file on 1960s-era software to a modernized 
database is now estimated to cost $83 million--or 74 percent more than 
the agency anticipated, according to a new report from the Treasury 
Inspector General for Tax Administration (TIGTA).

The project, known as the Customer Account Data Engine 2 (CADE 2), 
missed its June deadline and won't be ready until at least January of 
2014. The new system, which will house all taxpayer data filed 
electronically, still lacks a functional security system, the audit 
said.

CADE 2, which the Government Accountability Office called a 
``successful major IT acquisition'' in 2011, now seems to be following 
in the footsteps of its predecessor, CADE 1--which was the IRS's first 
attempt to modernize its taxpayer database.

CADE 1 eventually fell 2 years behind schedule and went $37 million 
over budget due to inadequate definitions of system requirements and 
inaccurate cost and timeframe estimates, according to the GAO.

It was ultimately scrapped. In 2008 then-IRS commissioner Doug Shulman 
brought in an IT expert from Boeing, Terry Mulholland, to try again. 
Critics say transitioning the data from the old file to a new modern 
system was easily doable decades ago, and question why it has taken the 
IRS so long.

CADE 2 is eventually supposed to replace the current Individual Master 
File (IMF) with a relational database. The new system will allow the 
IRS to update taxpayer accounts and process tax returns quickly and 
easily every day, compared to the current system, which can only be 
updated weekly. The IRS says CADE 2 will be a ``key component of the 
IRS's data-centric technology strategy.''

That's if it doesn't meet the fate of CADE 1.

``I am troubled by these delays and the escalating costs associated 
with implementing this significant component of the IRS's modernization 
efforts,'' said J. Russell George of TIGTA. ``The IRS needs to be 
aggressive in its efforts to resolve these problems.''

April 11, 2014: Update: IRS misses XP deadline, will spend $30M to 
upgrade remaining PCs; by Gregg Keizer, Computerworld, https://
www.computer
world.com/article/2488189/update--irs-misses-xp-deadline--will-spend--
30m-to-upgrade-remaining-pcs.html.

The U.S. Internal Revenue Service (IRS) acknowledged last week that it 
missed the April 8 cut-off for Windows XP support and will be paying 
Microsoft for an extra year of security patches.

But the tax agency disputed an earlier estimate by Computerworld that 
put the cost of those patches in the millions, saying that it was 
paying Microsoft ``less than $500,000'' for the after-retirement 
support.

Microsoft terminated Windows XP support on Tuesday when it shipped the 
final public patches for the nearly-13-year-old operating system. 
Without patches for vulnerabilities discovered in the future, XP 
systems will be at risk from cyber criminals who hijack the machines 
and plant malware on them.

During an IRS budget hearing on April 7 before the House Financial 
Services and General Government subcommittee, the chairman, Rep. Ander 
Crenshaw (R-FL) wondered why the agency had not wrapped up its Windows 
XP-to-Windows 7 move.

``Now we find out that you've been struggling to come up with $30 
million to finish migrating to Windows 7, even though Microsoft 
announced in 2008 that it would stop supporting Windows XP past 2014,'' 
Crenshaw said at the hearing. ``I know you probably wish you'd already 
done that.''

According to the IRS, it has approximately 110,000 Windows-powered 
desktops and notebooks. Of those, 52,000, or about 47%, have been 
upgraded to Windows 7. The remainder continue to run the now retired 
XP.

September 8, 2014: IRS finds more key hard-drive crashes, claims no 
evidence of tampering; by Josh Hicks, The Washington Post, https://www.
washingtonpost.com/news/federal-eye/wp/2014/09/08/irs-finds-more-key-
hard-drive-crashes-claims-no-evidence-tampering/.

In a report to four congressional committees on Friday, the IRS said 
hard-drive crashes are to blame for the lost communications and that 
the computer malfunctions ``appear to be the same sorts of issues 
routinely experienced within the IRS, in other government agencies and 
in the private sector.''

The report also noted that the crashes occurred before the start of 
investigations into how the agency identified nonprofit advocacy groups 
for extra scrutiny. The IRS's inspector general released an audit last 
year that said the agency inappropriately targeted certain 
organizations based on their names and policy positions.
                                 ______
                                 
IRS chief John Koskinen testified at a hearing in June that the agency 
lost many of Lerner's e-mail records after her hard-drive crashed in 
2011. He said the agency tried unsuccessfully to recover the data and 
then sent the broken device away for destruction.

The IRS said in its report on Friday that the agency now knows of five 
more employees who are missing e-mails because of hard-drive crashes. 
The staff members include: Judy Kindell, who was Lerner's former senior 
adviser; IRS tax-law specialist Justin Lowe, who worked with Kindell; 
IRS manager Ron Shoemaker, who helped oversee the cases in question; 
and two Cincinnati-based IRS employees who had worked on some of the 
cases.

The agency said all of the employees contacted IT staff and attempted 
to recover their data after their computers malfunctioned.

The IRS failed to implement dozens of security upgrades to its computer 
systems, some of which could have made it more difficult for hackers to 
use an IRS website to steal tax information from 104,000 taxpayers, a 
government investigator told Congress on Tuesday.

The agency's inspector general couldn't say whether the upgrades would 
have prevented the breach. But, he added, ``I can say it would have 
been much more difficult had they implemented all of the 
recommendations that we made.''

Each year, the Treasury inspector general for tax administration audits 
the IRS's security systems and recommends improvements. As of March, 44 
of those upgrades had not been completed, said the inspector general, 
J. Russell George.

Ten of the recommendations were made more than 3 years ago.

In addition, the Government Accountability Office issued a report in 
March that identified more than 50 weaknesses in the IRS's computer 
security that had not been resolved. Until those weaknesses are fixed, 
``financial and taxpayer data will remain unnecessarily vulnerable to 
inappropriate and undetected use, modification or disclosure,'' the GAO 
said.

February 12, 2016: IRS outage caused by back-to-back failures, not 
cyberattack; by Kevin McCoy, USA Today, https://www.usatoday.com/story/
money/2016/02/12/irs-computer-outage-caused-back--back-failures/
80303306/.

An electrical voltage regulator on the computer server that handles tax 
returns for millions of Americans started to fail on February 3rd, 
Terence Milholland, the IRS's chief technology officer, testified at a 
Thursday hearing of the House Committee on Oversight and Government 
Reform.

As a technician worked to address the problem, a backup voltage 
regulator also failed, he said. Approximately 30 hours elapsed before 
the IRS was able to fix the regulators, which Milholland said come 
under ``high-stress conditions'' when the computer is operating, and 
resume normal service.

Seeking to allay any fears that something more sinister might have been 
to blame, Milholland said, ``This was, with absolute certainty, not a 
cyberattack. It was a failure of mechanical devices.''
                                 ______
                                 
The episode marked the latest in a series of computer problems that 
have embarrassed the IRS, and, in some cases, raised the risk that 
taxpayers' personal information could be accessed, used to steal 
taxpayers' identities, file fraudulent tax returns and collect refunds.

The tax agency this week disclosed that it detected unauthorized 
efforts to gain access to e-file personal identification numbers for 
more than 450,000 Social Security numbers in late January. 
Approximately 101,000 of those efforts succeeded in accessing an e-file 
ID number, the IRS said.

No personal taxpayer information on the computer system was 
compromised, and hackers generally would need data beyond just a PIN 
number to file a phony return, the tax agency said. IRS personnel are 
now mailing affected taxpayers alerts about the problem.

In the agency's most serious computer-related failure in recent memory, 
cyberthieves accessed as many as 334,000 taxpayer accounts. The hackers 
got into the computer system by using an IRS application called Get 
Transcript, which allows users to retrieve their tax account 
transactions, tax return information or wages and income reported to 
the IRS.

April 19, 2018: IRS's 60-Year-Old IT System Failed on Tax Day Due to 
New Hardware; by Aaron Boyd and Frank R. Konkel, Nextgov, https://www.
nextgov.com/it-modernization/2018/04/irs-60-year-old-it-system-failed-
tax-day-due-new-hardware/147598/.

The Internal Revenue Service attributed the agency's Tax Day crash to a 
piece of hardware supporting an IT system that is almost 60 years old.

Called the Individual Master File, components of the system--including 
20 million lines of computer code--date back to 1960, when John F. 
Kennedy was President.

IRS told Nextgov 18-month-old hardware supporting the Individual Master 
File experienced a caching issue causing the system to fail. The 
failure disrupted almost all other services and systems IRS provides 
because those systems ingest data from the Individual Master File. When 
those systems--such as Direct Pay and the structured payments portal--
called to the Individual Master File mainframe and got no response, 
they too failed.

Despite repeated warnings from the Government Accountability Office and 
Congress, IRS's plans to modernize the system are at least six years 
behind schedule and several hundred million dollars over budget.

``This was our biggest fear about one of these mission-critical systems 
crashing,'' Dave Powner, GAO's director of IT management issues, told 
Nextgov Thursday. ``Fortunately, it wasn't down for a long period of 
time, so in that way, we dodged a bullet.''

Still, the crash forced the IRS to extend the tax filing deadline one 
day, delaying some 14 million submissions. It could be several years 
before the Individual Master File is fully modernized and rid of 1960s-
era technology.

February 9, 2021: IRS Computer Glitch Causes 10s of Thousands to 
Mistakenly Be Told They Won't Receive Stimulus Check; by Brian New, 
CBS, https://www.cbsnews.com/texas/news/irs-computer-glitch-mistake-
stimulus-check/.

The IRS mistakenly told tens of thousands of Americans they won't be 
getting a stimulus check.

Notices to 109,000 taxpayers were sent out that said, ``We applied a 
credit to your 2007 tax account due to new legislation. We used all or 
part of your economic stimulus payment to pay your federal tax as the 
law allows. . . . As a result, you don't owe us any money, nor are you 
due a refund.''

However, none of this is true.

An apparent IRS computer glitch resulted in the wrong message being 
sent out to thousands of taxpayers who are awaiting their $600 stimulus 
payment.

Texas A&M Law School tax expert Bob Probasco said it appears a computer 
code from 14 years ago, the last time the federal government issued 
direct stimulus payments, got mixed up in the current program.

The notice that taxpayers were supposed to get was to inform them they 
haven't received their stimulus payment because their 2019 tax return 
had not been processed. Instead, the IRS's computer system sent them a 
``CP21C'' notice with a very different message.

``Everything is done by computers and the IRS's systems would have 
possibly been state-of-the-art 50 years ago, but they are hopelessly 
antiquated today,'' Probasco said. ``This creates problems every time 
you have to make changes, especially on short notice like with the 
stimulus payments.''

October 21, 2021: A 60-year-old IRS IT system won't finish modernizing 
until 2030; by Natalie Alms, FCW, https://fcw.com/digital-government/
2021/10/a-60-year-old-irs-it-system-wont-finish-modernizing-until-2030/
259253/.

The IRS completed most of its planned IT modernization activities for 
the last two fiscal years on schedule and within cost, but one of its 
efforts, intended as a replacement for a 60-year-old system, is now on 
track to replace core functions only--and it may not be complete until 
2030.

That's according to a Government Accountability Office report, which 
reviewed five IRS IT investments and found that they met most 
performance goals for FY 2019 and 2020.

The 60-year-old system slated for replacement is called the Individual 
Master File. It's the key source for individual tax data, and a 
modernized system would provide the infrastructure needed for real time 
digital taxpayer interactions, rapid access to data and agile response 
to legislative changes, according to the GAO report.

The program intended to modernize it, called Customer Account Data 
Engine 2, has seen many delays and cost changes since the IRS first 
started developing it in 2009, according to the GAO. A key milestone 
for replacing selected functions, for example, has been pushed back by 
nine years, from 2014 to 2023.

The CADE 2 program actually had lower reported costs than anticipated 
for 2020 and met most performance goals for the last two years, but GAO 
called its long-term performance and outlook ``troubling.''

The modernized system isn't scheduled to be finished until 2030. 
Development costs are now about four times higher than originally 
planned, and CADE 2 is also now expected to replace only core 
components of the old program, as opposed to the entire system.
                                 ______
                                 
                Prepared Statement of Hon. Mike Crapo, 
                       a U.S. Senator From Idaho
    Mr. Werfel, thank you for your willingness to serve and answer our 
questions.

    The IRS exists solely to serve taxpayers and fairly administer tax 
laws. The Internal Revenue Code requires the IRS Commissioner, and all 
IRS employees, to ``act in accord'' with codified taxpayer rights, 
including: the right to be informed; the right to quality service; the 
right to challenge the position of the IRS and be heard; the right to 
privacy; and the right to confidentiality.

    Over the last several years, Americans have time and again seen the 
IRS fail to meet these obligations, and they are rightly concerned 
about the vitality of their taxpayer rights. Statute requires the IRS 
Commissioner to ensure the IRS respects these rights, and the next 
Commissioner needs to show that he will faithfully stand up for the 
American taxpayer.

    The next IRS Commissioner must also demonstrate that he can be a 
fair, consistent, and impartial umpire for taxpayers, rather than 
reflexively pro-IRS. While I did not always agree with former 
Commissioner Rettig, he was consistent and called balls and strikes the 
same for everyone.

    Recently, the IRS simply overlooked statutory deadlines for 
implementing new laws, including third-party network reporting and EV 
tax credits. These delays seem conspicuous given that other recent and 
complex tax changes, including the amortization of R&D expenses, 
corporate book minimum tax, and stock buyback excise tax all took 
effect without necessary guidance.

    The need for an objective, consistent, and level-headed IRS 
Commissioner, who is laser-focused on taxpayer rights, is even more 
imperative given the staggering $80 billion in additional funding that 
the misnamed ``Inflation Reduction Act'' just gave the agency.

    For reference, $80 billion is more than 6\1/2\ times the IRS's 
typical annual budget. These additional funds come despite the fact 
that over the past 2-plus decades, Congress has appropriated the IRS 
hundreds of billions of dollars in annual funding, and tens of billions 
of dollars more in supplemental funding, with little improvement to 
show for it. The IRS continues to utilize outdated methods and 
processes that even the Taxpayer Advocate called ``crazy.''

    A recent report by the Treasury Inspector General for Tax 
Administration shows that these antiquated processes cost hundreds of 
times more than an updated approach that would better serve taxpayers 
and the IRS. This is just one example of how funding has become a 
scapegoat for mismanagement.

    It is no surprise to hardworking Americans that the IRS currently 
ranks dead last in a recent Gallup poll rating Federal agencies. 
Sending the IRS on an unchecked spending binge has no intrinsic value.

    Unless there are outsized results to match the gargantuan 
investment, the IRS's supplemental billions will simply become another 
example of government waste. Because the funding lacks any 
accountability measures or guard rails, the next IRS Commissioner 
shoulders the primary responsibility for outcomes, as well as planning, 
tracking spending, and transparently monitoring outcomes.

    Americans--and their elected representatives--are watching. Will 
the IRS be honest and fully and deeply transparent? Will the IRS use 
best practices, rely on unbiased data, and set common-sense goals? 
Given how the funding was conceived, designed, and adopted, I am 
skeptical, but I will look to you, Mr. Werfel, to fill the gap, if you 
are confirmed.

    The fact that nearly 60 percent of the funding will go toward 
hiring enforcement personnel--more than 14 times the funding set aside 
for serving taxpayers--is a particular concern. Unease about super-
sized IRS enforcement hiring has nothing to do with supporting evasion 
by ``wealthy tax cheats,'' but comes from a fear that the IRS will 
waste untold taxpayer dollars chasing speculative or marginal revenue 
recoveries, while hardworking Americans and small businesses end up in 
a dragnet.

    When I offered an amendment to statutorily protect taxpayers making 
less than $400,000 from increased audits, only my Republican colleagues 
stood up in support. No one on the other side voted ``yes.'' We have a 
statement from the Secretary of the Treasury that we won't see this 60-
plus percent of the $80 billion be spent on auditing those making less 
than $400,000, and the chairman has indicated that is the intent of 
this money, but it is not what the law says, because my amendment was 
not allowed to be adopted. Unenforceable edicts are easily broken.

    In sum, the new IRS Commissioner will shoulder immense 
responsibility. If confirmed, Mr. Werfel, you must be the change agent 
we have long been promised.

    Thank you, and I look forward to your testimony and detailed 
responses to our questions.
                                 ______
                                 
             Prepared Statement of Hon. Daniel I. Werfel, 
         Nominated to be Commissioner, Internal Revenue Service
    Chairman Wyden, Ranking Member Crapo, and members of the committee, 
I am honored and humbled to come before you today as President Biden's 
nominee for Commissioner of the Internal Revenue Service (IRS).

    I want to thank Senator Carper for his generous introduction, and I 
want to express my gratitude to the committee for considering my 
nomination. I also want to thank President Biden and his administration 
for placing their confidence in me.

    I am grateful to have my family with me this morning, supporting me 
today as they have through every step of my life: my wife Beth, my two 
children Sean and Molly, and my parents Fred and Barbara.

    From a young age, I saw the honor in serving others. I saw that 
honor in my grandfather, a World War II veteran and postal worker; and 
my mother, a social worker who helped place people with disabilities 
into gainful employment. I see that honor in my amazing wife, who has 
spent more than 25 years working as a psychologist in the public school 
system.

    Their examples inspired me to pursue a career in public service. I 
felt a great sense of pride when I showed up at the Office of 
Management and Budget (OMB) for my first day of work as a GS-9 in the 
late 1990s--and even more pride 13 years later when I last sat in a 
Senate confirmation hearing as the nominee to be OMB Controller. While 
at OMB, I served under nine different Directors of both political 
parties. This experience reinforced the importance of having a ``true 
north'' for how to best serve the American people.

    At OMB, I learned that the essential foundation of government is 
public trust. Public trust requires transparency, collaboration with 
oversight entities such as Congress, adherence to the rule of law, and 
responsible stewardship of taxpayer dollars. Public trust also requires 
that the government carry out its mission fairly and equitably.

    In 2013, with these lessons now a part of my professional DNA, I 
was selected to serve as Acting Commissioner of the IRS. I witnessed 
how dedicated and talented IRS civil servants are in fulfilling the 
critical mission of administering the Nation's tax system. Since 
leaving the IRS, I watched from afar how these employees navigated the 
challenges of historical underfunding and understaffing while providing 
economic lifelines to hundreds of millions of families and small 
businesses during the COVID-19 pandemic. Their ``true north'' is their 
deep belief that the American people need an IRS that provides all 
taxpayers with world-class customer service and implements the tax code 
in a way that is just, fair, equitable, and protects the U.S. 
Government's resources.

    I share in this belief. As an IRS alum, but more importantly as a 
taxpayer, I have been concerned about gaps in capacity that have 
impeded the IRS's ability to meet its critical mission. The result is 
that hardworking, honest taxpayers who need assistance in meeting their 
tax obligations are not getting the service they need. The IRS has also 
been ill-equipped to unpack complex and intricate returns of high-
income taxpayers and large corporations and thus has been unable to 
close the gap between what these taxpayers owe versus what they pay. 
Following the passage of the Inflation Reduction Act, Americans 
rightfully expect a more modern and high-performing IRS.

    Last year, Secretary Yellen issued a directive that the IRS will 
not increase audit rates, relative to historic levels, for small 
businesses and households making under $400,000, which I am committed 
to meeting. Therefore, if I am fortunate enough to be confirmed, the 
audit and compliance priorities will be focused on enhancing IRS 
capabilities to ensure America's highest earners comply with applicable 
tax laws. Also front and center will be efforts to modernize and 
dramatically improve taxpayer service and ensure that individuals and 
businesses eligible for tax benefits receive them. Meeting these 
priorities will require both significant technology upgrades and 
additional human resource capacity in areas such as customer service 
and expertise in complex tax matters. It will also require close 
attention to other elements of successful tax administration, including 
data security, reducing paperwork burdens, and impartiality and 
fairness in all matters. If confirmed, I will lead these efforts in 
close collaboration with this committee and will be unyielding in 
following my true north to increase public trust.

    While unheralded, effective implementation of our tax system is 
necessary to fund critical government services. For 8 months in 2013, I 
had the privilege to walk into the IRS and draw inspiration from the 
workforce and the solemn duty of this mission. As I reflect on the 
public service legacy of my family, I think about the example I will 
set for my children by rededicating myself to a career in public 
service. To be given this opportunity again would be the greatest honor 
of my life.

    Thank you for considering my nomination. I look forward to 
answering your questions.
                                 ______
                               
                        SENATE FINANCE COMMITTEE

                  STATEMENT OF INFORMATION REQUESTED 
                               OF NOMINEE

                      A. BIOGRAPHICAL INFORMATION

 1.  Name: Daniel Ivan Werfel.

 2.  Position to which nominated: Commissioner of Internal Revenue.

 3.  Date of nomination: November 14, 2022.

 4.  Address (list current residence, office, and mailing addresses):

 5.  Date and place of birth: April 24, 1971; Plainview, NY.

 6.  Marital status:

 7.  Names and ages of children:

 8.  Education (list all secondary and higher education institutions, 
dates attended, degree received, and date degree granted):

        Duke University.
        Durham, NC.
        Terry Sanford Institute of Public Policy.
        Dates attended: August 1993-May 1994; January 1997-May 1997.
        Master of public policy, May 1997.

        University of North Carolina at Chapel Hill.
        Chapel Hill, NC.
        School of Law.
        Dates attended: August 1994-May 1997.
        Juris doctor, May 1997.

        Cornell University.
        Ithaca, NY.
        College of Industrial and Labor Relations.
        Dates attended: August 1990-May 1993.
        Bachelor of science in industrial and labor relations, May 
        1993.

        New York Institute of Technology--Long Island Campus.
        Old Westbury, NY.
        Dates attended: September 1989-May 1990.

        John F. Kennedy High School.
        Plainview, NY.
        Dates attended: September 1985-June 1989.
        High school degree.

 9.  Employment record (list all jobs held since college, including the 
title or description of job, name of employer, location of work, and 
dates of employment for each job):

        Boston Consulting Group.
        Managing director and partner.
        Bethesda, MD.
        March 2014-present.

        U.S. Department of the Treasury, Internal Revenue Service 
        (IRS).
        Acting Commissioner.
        Washington, DC.
        May 2013-December 2013.

        U.S. Office of Management and Budget (OMB).
        Federal Controller.
        Washington, DC.
        October 2009-May 2013.
        Deputy Controller.
        Washington, DC.
        March 2006-October 2009.
        Chief, Financial Integrity and Analysis Branch.
        February 2004-March 2006.
        Policy Analyst, Education Branch.
        Washington, DC.
        April 2002-February 2004.
        Policy Analyst, Office of Information and Regulatory Affairs.
        Washington, DC.
        August 1997-June 2000.

        U.S. Department of Justice.
        Trial Attorney, Civil Rights Division.
        Washington, DC.
        June 2000-April 2002.

        Hedrick, Eatman, Gardner, and Kincheloe.
        Intern.
        Charlotte, NC.
        May 1996-August 1996.

        New Hanover County District Attorney's Office.
        Intern.
        Wilmington, NC.
        May 1995-August 1995.

10.  Government experience (list any current and former advisory, 
consultative, honorary, or other part-time service or positions with 
Federal, State, or local governments held since college, including 
dates, other than those listed above):

        Member, Government Accountability and Transparency Board.
        2011-2013.

        Member, Federal Accounting Standards Advisory Board.
        2006-2010.

        Member, Defense Business Board.
        2014-2016.

11.  Business relationships (list all current and former positions held 
as an officer, director, trustee, partner (e.g., limited partner, non-
voting, etc.), proprietor, agent, representative, or consultant of any 
corporation, company, firm, partnership, other business enterprise, or 
educational or other institution):

        Boston Consulting Group.
        Managing director and partner.
        2017-present.
        Director.
        2014-2017.

        Centre for Public Impact Board.
        Member.
        2022-Present.

12.  Memberships (list all current and former memberships, as well as 
any current and former offices held in professional, fraternal, 
scholarly, civic, business, charitable, and other organizations dating 
back to college, including dates for these memberships and offices):

        National Capital Region Red Cross Board.
        Member.
        2021-present.

        Terry Sanford School of Public Policy Alumni Board.
        Member.
        2017-present.

        National Academy of Public Administration.
        Fellow.
        2011-present.

13.  Political affiliations and activities:

        a.  List all public offices for which you have been a candidate 
        dating back to the age of 18.

       None.

        b.  List all memberships and offices held in and services 
        rendered to all political parties or election committees, 
        currently and during the last 10 years prior to the date of 
        your nomination.

       None.

        c.  Itemize all political contributions to any individual, 
        campaign organization, political party, political action 
        committee, or similar entity of $50 or more for the past 10 
        years prior to the date of your nomination.

------------------------------------------------------------------------
                   Recipient                        Date        Amount
------------------------------------------------------------------------
Biden for President *                             6/27/2020    $2,800.00
------------------------------------------------------------------------
Hillary for America *                            11/02/2016      $100.00
------------------------------------------------------------------------
Hillary for America                              10/19/2016      $300.00
------------------------------------------------------------------------
Hillary for America                               9/30/2016      $250.00
------------------------------------------------------------------------
Hillary for America                               9/28/2016      $200.00
------------------------------------------------------------------------
Hillary for America                               9/18/2016      $250.00
------------------------------------------------------------------------
Hillary for America *                             9/11/2016      $500.00
------------------------------------------------------------------------
John King Junior for Governor                     5/14/2021      $500.00
------------------------------------------------------------------------
* The public database maintained by the Federal Election Commission
  includes two separate, identical contributions completed on 6/27/2020,
  11/02/2016, and 9/11/2016. To the best of my knowledge only one such
  contribution was made on each of these dates.


14.  Honors and awards (list all scholarships, fellowships, honorary 
degrees, honorary society memberships, military medals, and any other 
special recognitions for outstanding service or achievement received 
since the age of 18):

        Recipient, Government Computer News ``Executive of the Year'' 
        Award, 2013.

        Recipient, Federal 100 Award, 2013.

        Recipient, National Grants Management Association Lifetime 
        Achievement Award, 2011.

        Recipient, Association of Government Accountants (AGA) 
        Distinguished Federal Leadership Award, 2010.

        Recipient, President's Meritorious Rank Award, 2008.

15.  Published writings (list the titles, publishers, dates, and 
hyperlinks (as applicable) of all books, articles, reports, blog posts, 
or other published materials you have written):

        This is a complete list of materials based on a comprehensive, 
        good faith, and exhaustive search of public and private digital 
        and paper files that I have access to.

Book Chapter

        ``Chapter 5.4: Through the Storm: Navigating the IRS through 
        Crisis to Recovery'' in Building a 21st Century SES: Ensuring 
        Leadership Excellence in Our Federal Government, National 
        Academy of Public Administration, 2017, https://s3.us-west-
        2.amazonaws.com/napa-2021/studies/building-a-21st-century-
        senior-executive-service/Building-a-21st-Century-SES-
        3.17.2017.pdf.

Articles and Blog Posts

        ``The High ROI of Workforce Skills Investment,'' Federal Times, 
        January 19, 2016, https://www.federaltimes.com/opinions/2016/
        01/19/the-high-roi-of-workforce-skills-investment/.

        ``How Governments Can Get Technology Transformations Right'' 
        (co-authored with Joost de Kock, Andrew Arcuri, and Florian 
        Fey), Boston Consulting Group, June 10, 2016, https://
        www.bcg.com/publications/2016/public-sector-transformation-how-
        governments-can-get-digital-transformations-right.

        ``Building Up the Backbone of Government Operations,'' Federal 
        Times, July 21, 2016, https://www.federaltimes.com/opinions/
        2016/07/21/building-up-the-backbone-of-government-operations/.

        ``Life in the Foxhole: The New Rules of the Communications 
        Game,'' Centre for Public Impact, February 27, 2017, https://
        www.centreforpublicimpact.org/insights/the-communications-game.

        ``A New Way to Spur Government Innovation,'' Centre for Public 
        Impact, July 13, 2017, https://www.centreforpublicimpact.org/
        insights/new-way-spur-government-innovation.

        ``Why Startups Don't Bid on Government Contracts'' (co-authored 
        with Geoff Orazem, Greg Mallory, and Matthew Schlueter), Boston 
        Consulting Group, August 22, 2017, https://www.bcg.com/
        publications/2017/public-sector-agency-transformation-why-
        startups-dont-bid-government-contracts.

        ``Innovation in Defense: New Horizons on the Defense Agenda'' 
        (co-authored with Heinrich Rentmeister, Florian Frey, Patrick 
        Roche, and Mart Watters), Boston Consulting Group, September 
        2017, https://web-assets.bcg.com/img-src/BCG%20Report-
        Innovation%20in%20Defense-New%20Horizons%20on%20the
        %20Defense%20Agenda_tcm9-175650.pdf.

        ``Four Steps to High-Impact Strategic Planning in Government'' 
        (co-authored with Matt Boland and Troy Thomas), Boston 
        Consulting Group, May 17, 2018, https://www.bcg.com/
        publications/2018/four-steps-to-high-impact-strategic-planning-
        in-government.

        ``What Managers Should Do With 2018 Employee Viewpoint Survey 
        Data,'' Government Executive, September 24, 2018, https://
        www.govexec.com/management/2018/09/what-managers-should-do-
        2018-employee-viewpoint-survey-data/151516/.

        ``A Prescription for Better Performance: Engaging Employees at 
        VA Medical Centers'' (co-authored with Brooke Bollyky and Troy 
        Thomas), Boston Consulting Group, March 1, 2019, https://
        www.bcg.com/a-prescription-for-better-performance-engaging-
        employees-at-va-medical-centers.

        ``Beyond the Beltway: How Federal Leaders Can Engage Employees 
        Working Across the Nation'' (co-authored with Brooke Bollyky 
        and Troy Thomas), Boston Consulting Group, June 1, 2019, 
        https://www.bcg.com/beyond-the-beltway-how-federal-leaders-can-
        engage-employees-working-across-the-nation.

        ``Stimulus Offers a Rare Chance for Defense Agencies to Buy 
        Better'' (co-
        authored with Matthew Schlueter, Troy Thomas, Greg Mallory, 
        Robert Tevelson, Harish Hemmings, and Daniel Yoon), Boston 
        Consulting Group, April 29, 2020, https://www.bcg.com/
        publications/2020/denfense-agencies-procurement-patterns-to-
        change-due-to-covid-19-stimulus-funding.

        ``Start Reimagining Government Now'' (co-authored with Miguel 
        Carrasco, Priya Chandran, Vincent Chin, Patrick Hayden, Leila 
        Hoteit, and Suresh Subudhi), Boston Consulting Group, May 27, 
        2020, https://www.bcg.com/publications/2020/start-reimagining-
        government-now.

        ``Gearing Up for Day One of the New Term'' (co-authored with 
        Sharon Marcil, Meldon Wolfgang, and Troy Thomas), Boston 
        Consulting Group, October 16, 2020, https://www.bcg.com/
        publications/2020/preparing-for-day-one-of-the-new-
        presidential-term.

        ``Getting Smart as a New US Agency Leader'' (co-authored with 
        Sharon Marcil, Meldon Wolfgang, Brooke Bollyky, Troy Thomas, 
        and Catherine Manfre), Boston Consulting Group, December 16, 
        2020, https://www.bcg.com/publications/2020/how-to-effectively-
        transition-into-a-new-agency-leadership-role-in-the-united-
        states.

        ``How Agency Heads Can Make the First 100 Days Count'' (co-
        authored with Sharon Marcil, Meldon Wolfgang, Brooke Bollyky, 
        Troy Thomas, and Catherine Manfre), Boston Consulting Group, 
        January 15, 2021, https://www.bcg.com/publications/2021/
        strategies-for-agency-heads-to-make-the-first-100-days-count.

        ``Envisioning the Government Workforce of the Future'' (co-
        authored with Brooke Bollyky, Troy Thomas, Liz Lyle, Qahir 
        Dhanani, Kelly O'Connor, and Michael Snelgrove), Boston 
        Consulting Group, 2021, https://web-assets.bcg.com/7e/a7/
        3e6583f948dfa6012f2ff90e94f0/envisioning-the-government-
        workforce-of-the-future-4-pages-updated.pdf.

        ``How Purpose Can Empower Those in Public Service'' (co-
        authored with Sharon Marcil, Meldon Wolfgang, Brooke Bollyky, 
        Ashey Grice, Troy Thomas, and Catherine Manfre), Boston 
        Consulting Group, February 4, 2022, https://www.bcg.com/
        publications/2021/the-power-of-purpose-during-leadership-
        transitions.

        ``Shared Services Can Ignite Transformation in Government'' 
        (co-authored with Andrew Toma, Brooke Bollyky, Rashi Agarwal, 
        and Maggie Larkin), Boston Consulting Group, February 24, 2022, 
        https://www.bcg.com/publications/2022/transformation-in-
        government.

        ``Fighting Fraud in the CARES Act--Rebuild the `ROC,' '' The 
        Hill, April 22, 2022, https://thehill.com/opinion/technology/
        493877-fighting-fraud-in-the-cares-act-rebuild-the-roc/.

        ``A Quiet Legacy: The Bush Management Agenda Continues to 
        Impact Government'' (co-authored with Robert Shea), Government 
        Executive, October 7, 2019, https://www.govexec.com/management/
        2019/10/quiet-legacy-bush-management-agenda-continues-impact-
        government/160417/.

        ``Insight: Reimagining the Taxpayer Journey--How Tax 
        Administrators Can Lead the Way for Digital Government 
        Services,'' Bloomberg Tax, April 26, 2019, https://
        news.bloombergtax.com/daily-tax-report/insight-reimagining-the-
        taxpayer-journey-how-tax-administrators-can-lead-the-way-for-
        digital-government-services-14-15-16.

Testimony before Congress

        S. Hrg. 110-456: Single Audits: Are They Helping to Safeguard 
        Federal Funds?, hearing before the Federal Financial 
        Management, Government Information, Federal Services, and 
        International Security Subcommittee of the Committee on 
        Homeland Security and Governmental Affairs, 110th Congress, 
        October 25, 2007, https://www.govinfo.gov/content/pkg/CHRG-
        110shrg38984/pdf/CHRG-110shrg38984.pdf.

        S. Hrg. 110-501: Eliminating Agency Payment Errors, hearing 
        before the Federal Financial Management, Government 
        Information, Federal Services, and International Security 
        Subcommittee of the Committee on Homeland Security and 
        Governmental Affairs, United States Senate, 110th Congress, 
        January 31, 2008, https://www.govinfo.gov/content/pkg/CHRG-
        110shrg41449/pdf/CHRG-110shrg41449.pdf.

        H. Hrg. 110-103: H.R. 5712, Close the Contractor Fraud Loophole 
        Act, and H.R. 5787, Federal Real Property Disposal Enhancement 
        Act, hearing before the Subcommittee on Government Management, 
        Organization, and Procurement, Committee on Oversight and 
        Government Reform, House of Representatives, 110th Congress, 
        April 15, 2008, https://www.govinfo.gov/content/pkg/CHRG-
        110hhrg45945/pdf/CHRG-110hhrg45945.pdf.

        H. Hrg. 110-96: Federal Financial Statements for Fiscal Year 
        2007: Fiscal Outlook, Management Weaknesses, and Consequences, 
        hearing before the Subcommittee on Government Management, 
        Organization, and Procurement, Committee on Oversight and 
        Government Reform, House of Representatives, 110th Congress, 
        June 5, 2008, https://www.govinfo.gov/content/pkg/CHRG-
        110hhrg45612/pdf/CHRG-110hhrg45612.pdf.

        S. Hrg. 110-724: In the Red: Addressing the Nation's Financial 
        Challenges, hearing before the Federal Financial Management, 
        Government Information, Federal Services, and International 
        Security Subcommittee of the Committee on Homeland Security and 
        Governmental Affairs, United States Senate, 110th Congress, 
        June 26, 2008, https://www.govinfo.gov/content/pkg/CHRG-
        110shrg44120/pdf/CHRG-110shrg44120.pdf.

        S. Hrg. 111-575: Nomination of Daniel I. Werfel, hearing before 
        the Committee on Homeland Security and Governmental Affairs, 
        United States Senate, 111th Congress, September 16, 2009, 
        https://www.govinfo.gov/content/pkg/CHRG-111shrg53838/pdf/CHRG-
        111shrg53838.pdf.

        H. Hrg. 111-146: Oversight of Federal Financial Management, 
        hearing before the Subcommittee on Government Management, 
        Organization, and Procurement, Committee on Oversight and 
        Government Reform, House of Representatives, 111th Congress, 
        April 14, 2010, https://www.govinfo.gov/content/pkg/CHRG-
        111hhrg65550/pdf/CHRG-111hhrg65550.pdf.

        S. Hrg. 111-1058: Transforming Government Through Innovative 
        Tools and Technologies, hearing before the Federal Financial 
        Management, Government Information, Federal Services, and 
        International Security Subcommittee of the Committee on 
        Homeland Security and Governmental Affairs, United States 
        Senate, 111th Congress, August 4, 2010, https://
        www.govinfo.gov/content/pkg/CHRG-111shrg63827/pdf/CHRG-
        111shrg63827.pdf.

        H. Hrg. 112-7: A Look at the Fiscal Year 2010 Consolidated 
        Financial Report of the U.S. Government, hearing before the 
        Subcommittee on Government Organization, Efficiency, and 
        Financial Management, Committee on Oversight and Government 
        Reform, House of Representatives, 112th Congress, March 9, 
        2011, https://www.govinfo.gov/content/pkg/CHRG-112hhrg67257/
        pdf/CHRG-112hhrg67257.pdf.

        H. Hrg. 112-17: Transparency Through Technology: Evaluating 
        Federal Open-Government Efforts, hearing before the 
        Subcommittee on Technology, Information Policy, 
        Intergovernmental Relations, and Procurement Reform, Committee 
        on Oversight and Government Reform, House of Representatives, 
        112th Congress, March 11, 2011, https://www.govinfo.gov/
        content/pkg/CHRG-112hhrg67567/pdf/CHRG-112hhrg67567.pdf.

        H. Hrg. 112-22: Can a Civilian BRAC Commission Consolidate 
        Federal Office Space and Save Taxpayers Billions?, hearing 
        before the Subcommittee on Economic Development, Public 
        Buildings, and Emergency Management, Committee on 
        Transportation and Infrastructure, House of Representatives, 
        112th Congress, April 6, 2011, https://www.govinfo.gov/content/
        pkg/CHRG-112hhrg65644/pdf/CHRG-112hhrg65644.pdf.

        H. Hrg. 112-26: Improper Payments: Finding Solutions, hearing 
        before the Subcommittee on Government Organization, Efficiency, 
        and Financial Management, Committee on Oversight and Government 
        Reform, House of Representatives, 112th Congress, April 15, 
        2011, https://www.govinfo.gov/content/pkg/CHRG-112hhrg68043/
        pdf/CHRG-112hhrg68043.pdf.

        H. Hrg. 112-31: How to Stop Sitting on Our Assets: A Review of 
        the Civilian Property Realignment Act, hearing before the 
        Subcommittee on Economic Development, Public Buildings, and 
        Emergency Management, Committee on Transportation and 
        Infrastructure, House of Representatives, 112th Congress, May 
        12, 2011, https://www.govinfo.gov/content/pkg/CHRG-
        112hhrg66309/pdf/CHRG-112hhrg66309.pdf.

        S. Hrg. 112-300: Assessing Efforts to Eliminate Improper 
        Payments, hearing before the Federal Financial Management, 
        Government Information, Federal Services, and International 
        Security Subcommittee, Committee on Homeland Security and 
        Governmental Affairs, United States Senate, 112th Congress, May 
        25, 2011, https://www.govinfo.gov/content/pkg/CHRG-
        112shrg67640/pdf/CHRG-112shrg67640.pdf.

        S. Hrg. 112-251: Federal Asset Management: Eliminating Waste by 
        Disposing of Unneeded Federal Real Property, hearing before the 
        Federal Financial Management, Government Information, Federal 
        Services, and International Security Subcommittee, Committee on 
        Homeland Security and Governmental Affairs, United States 
        Senate, 112th Congress, June 9, 2011, https://www.govinfo.gov/
        content/pkg/CHRG-112shrg68008/pdf/CHRG-112shrg68008.pdf.

        H. Hrg. 112-70: Improving Oversight and Accountability in 
        Federal Grant Programs, hearing before the Subcommittee on 
        Technology, Information Policy, Intergovernmental Relations, 
        and Procurement Reform, Committee on Oversight and Government 
        Reform, House of Representatives, 112th Congress, June 23, 
        2011, https://www.govinfo.gov/content/pkg/CHRG-112hhrg71296/
        pdf/CHRG-112hhrg71296.pdf.

        H. Hrg. 112-130: Solutions Needed: Improper Payments Total $115 
        Billion in Federal Misspending, hearing before the Subcommittee 
        on Government Organization, Efficiency, and Financial 
        Management, Committee on Oversight and Government Reform, House 
        of Representatives, 112th Congress, February 7, 2012, https://
        www.govinfo.gov/content/pkg/CHRG-112hhrg74028/pdf/CHRG-
        112hhrg74028.pdf.

        H. Hrg. 112-145: The Status of Government Financial Management: 
        A Look at the Fiscal Year 2011 Consolidated Financial 
        Statements, hearing before the Subcommittee on Government 
        Organization, Efficiency, and Financial Management, Committee 
        on Oversight and Government Reform, House of Representatives, 
        112th Congress, March 1, 2012, https://www.govinfo.gov/content/
        pkg/CHRG-112hhrg74457/pdf/CHRG-112hhrg74457.pdf.

        S. Hrg. 112-531: Retooling Government for the 21st Century: The 
        President's Reorganization Plan and Reducing Duplication, 
        hearing before the Committee on Homeland Security and 
        Governmental Affairs, United States Senate, 112th Congress, 
        March 21, 2012, https://www.govinfo.gov/content/pkg/CHRG-
        112shrg73680/pdf/CHRG-112shrg73680.pdf.

        S. Hrg. 112-557: Assessing Efforts to Combat Waste and Fraud in 
        Federal Programs, hearing before the Federal Financial 
        Management, Government Information, Federal Services, and 
        International Security Subcommittee of the Committee on 
        Homeland Security and Governmental Affairs, United States 
        Senate, 112th Congress, March 28, 2012, https://
        www.govinfo.gov/content/pkg/CHRG-112shrg73679/pdf/CHRG-
        112shrg73679.pdf.

        H. Hrg. 112-25: Replacing the Sequester, hearing before the 
        Committee on the Budget, House of Representatives, 112th 
        Congress, April 25, 2012, https://www.govinfo.gov/content/pkg/
        CHRG-112hhrg73858/pdf/CHRG-112hhrg73858.
        pdf.

        H. Hrg. 112-144: Where Are All the Watchdogs? Addressing 
        Inspector General Vacancies, hearing before the Committee on 
        Oversight and Government Reform, House of Representatives, 
        112th Congress, May 10, 2012, https://www.gov
        info.gov/content/pkg/CHRG-112hhrg74454/pdf/CHRG-
        112hhrg74454.pdf.

        S. Hrg. 112-681: Security Clearance Reform: Sustaining Progress 
        for the Future, hearing before the Oversight of Government 
        Management, the Federal Workforce, and the District of Columbia 
        Subcommittee of the Committee on Homeland Security and 
        Governmental Affairs, United States Senate, 112th Congress, 
        June 21, 2012, https://www.govinfo.gov/content/pkg/CHRG-
        112shrg75219/pdf/CHRG-112shrg75219.pdf.

        S. Hrg. 112-583: Show Me the Money: Improving the Transparency 
        of Federal Spending, hearing before the Committee on Homeland 
        Security and Governmental Affairs, United States Senate, 112th 
        Congress, June 18, 2012, https://www.govinfo.gov/content/pkg/
        CHRG-112shrg76062/pdf/CHRG-112shrg76062.
        pdf.

        S. Hrg. 112-670: Assessing Grants Management Practices at 
        Federal Agencies, hearing before the Federal Financial 
        Management, Government Information, Federal Services, and 
        International Security Subcommittee of the Committee on 
        Homeland Security and Governmental Affairs, United States 
        Senate, 112th Congress, July 25, 2012, https://www.govinfo.gov/
        content/pkg/CHRG-112shrg76065/pdf/CHRG-112shrg76065.pdf.

        S. Hrg. 113-186: The Impacts of Sequestration, hearing before 
        the Committee on Appropriations, United States Senate, 113th 
        Congress, February 14, 2013, https://www.govinfo.gov/content/
        pkg/CHRG-113shrg79588/pdf/CHRG-113sh
        rg79588.pdf.

        H. Hrg. 113-14: The Road Less Traveled: Reducing Federal Travel 
        and Conference Spending, hearing before the Subcommittee on 
        Federal Workforce, U.S. Postal Service, and the Census, 
        Committee on Oversight and Government Reform, House of 
        Representatives, 113th Congress, February 27, 2013, https://
        www.govinfo.gov/content/pkg/CHRG-112hhrg80898/pdf/CHRG-
        112hhrg80898.
        pdf.

        S. Hrg. 113-114: Curbing Federal Agency Waste and Fraud: New 
        Steps to Strengthen the Integrity of Federal Payments, hearing 
        before the Committee on Homeland Security and Governmental 
        Affairs, United States Senate, 113th Congress, May 6, 2013, 
        https://www.govinfo.gov/content/pkg/CHRG-113shrg
        81293/pdf/CHRG-113shrg81293.pdf.

        H. Hrg. 113-79: Collected and Wasted: The IRS Spending Culture 
        and Conference Abuses, hearing before the Committee on 
        Oversight and Government Reform, House of Representatives, 
        113th Congress, June 6, 2013, https://www.govinfo.gov/content/
        pkg/CHRG-113hhrg86795/pdf/CHRG-113hhrg86795.
        pdf.

        H. Hrg. 113-FC10: The Status of Internal Revenue Service's 
        Review of Taxpayer Targeting Practices, hearing before the 
        Committee on Ways and Means, U.S. House of Representatives, 
        113th Congress, June 27, 2013, https://www.govinfo.gov/content/
        pkg/CHRG-113hhrg21121/pdf/CHRG-113hhrg21121.
        pdf.

        H. Hrg. 113-66/113-25: Evaluating Privacy, Security, and Fraud 
        Concerns with Obamacare's Information Sharing Apparatus, joint 
        hearing before the Subcommittee on Energy Policy, Health Care, 
        and Entitlements of the Committee on Oversight and Government 
        Reform, and the Subcommittee on Cybersecurity, Infrastructure 
        Protection, and Security Technologies of the Committee on 
        Homeland Security, House of Representatives, 113th Congress, 
        June 17, 2013, https://www.govinfo.gov/content/pkg/CHRG-
        113hhrg86193/pdf/CHRG-113hh
        rg86193.pdf.

        H. Hrg. 113-030: The Internal Revenue Service and Small 
        Businesses: Ensuring Fair Treatment, hearing before the 
        Committee on Small Business, United States House of 
        Representatives, 113th Congress, July 17, 2013, https://
        www.govinfo.gov/content/pkg/CHRG-113hhrg81937/pdf/CHRG-
        113hhrg81937.pdf.

        H. Hrg. 113-FC12: The Status of the Affordable Care Act 
        Implementation, hearing before the Committee on Ways and Means, 
        U.S. House of Representatives, 113th Congress, August 1, 2013, 
        https://www.govinfo.gov/content/pkg/CHRG-113hhrg21120/pdf/CHRG-
        113hhrg21120.pdf.

        H. Hrg. 113-71: Examining the Skyrocketing Problem of Identity 
        Theft Related Tax Fraud at the IRS, hearing before the 
        Subcommittee on Government Operations of the Committee on 
        Oversight and Government Reform, House of Representatives, 
        113th Congress, August 2, 2013, https://www.govinfo.gov/
        content/pkg/CHRG-113hhrg86438/pdf/CHRG-113hhrg86438.pdf.

16.  Speeches (list all formal speeches and presentations (e.g., 
PowerPoint) you have delivered during the past 5 years which are on 
topics relevant to the position for which you have been nominated, 
including dates):

        This is a complete list of materials based on a comprehensive, 
        good faith, and exhaustive search of public and private digital 
        and paper files that I have access to.

Lecture

        ``From Crisis to Strategy--Lessons Learned in Public Sector 
        Management.'' Harvard Kennedy School. September 22, 2022.

Government Matters TV Program (contributor)

        COVID-19 spending, Federal real estate top priorities for next 
        Office of Management and Budget controller, Government Matters 
        (govmatters.tv) (November 4, 2021).

        United States Postal Service hiring effort reflects country's 
        labor shortage, Government Matters (govmatters.tv) (August 30, 
        2021).

        Engaged workforce starts with connection to mission, says 
        former agency leader, Government Matters (govmatters.tv) (June 
        29, 2021).

        Proposal for dramatic increase in Internal Revenue Service 
        budget raises questions, Government Matters (govmatters.tv) 
        (May 3, 2021).

        Stimulus payment distribution could place burden on IRS during 
        tax season, Government Matters (govmatters.tv) (March 1, 2021).

        Filling Senior Executive Service roles, Government Matters 
        (govmatters.tv) (January 4, 2021).

        Open letter from bipartisan former officials calls for end to 
        Schedule F, Government Matters (govmatters.tv) (December 13, 
        2020).

        Customer Experience Officers at agencies, Government Matters 
        (govmatters.tv) (November 2, 2020).

        New IG memo finds GSA lacks a standard cleaning inspection 
        process, Government Matters (govmatters.tv) (September 10, 
        2020).

        Audit finds Internal Revenue Service has reduced fraud and 
        identity theft, Government Matters (govmatters.tv) (August 26, 
        2020).

        Utilizing Data to Improve Decision Making, Government Matters 
        (govmatters.tv) (August 12, 2020).

        Lessons from the oversight of past stimulus bills, Government 
        Matters (govmatters.tv) (August 11, 2020).

        Scaling back telework programs across government, Government 
        Matters (govmatters.tv) (August 11, 2020).

        Staffing the IRS to process tax returns during the coronavirus, 
        Government Matters (govmatters.tv) (August 9, 2020).

        The best places to work in government in 2019, Government 
        Matters (govmatters.tv) (August 3, 2020).

        The Internal Revenue Service and customer experience, 
        Government Matters (govmatters.tv) (January 7, 2020).

        The lasting impact of the President's Management Agenda, 
        Government Matters (govmatters.tv) (November 4, 2019).

        Debating the White House budget in Congress, Government Matters 
        (govmatters.tv) (September 5, 2019).

        Money saving properties of government cloud investments, 
        Government Matters (govmatters.tv) (July 1, 2019).

        Key management elements of the FY 2020 budget request, 
        Government Matters (govmatters.tv) (May 29, 2019).

        Impact of partial government shutdown on IRS operations, 
        Government Matters (govmatters.tv) (May 29, 2019).

        Agency success stories in reducing improper payments, 
        Government Matters (govmatters.tv) (May 29, 2019).

        Practical implications in merging of Education, Labor 
        Departments, Government Matters (govmatters.tv) (May 29, 2019).

        Government efforts to curb and reduce improper payments, 
        Government Matters (govmatters.tv) (May 29, 2019).

        White House releases President's Management Agenda, Government 
        Matters (govmatters.tv) (May 29, 2019).

        The need and impact of Federal employee recognition, Government 
        Matters (govmatters.tv) (May 13, 2019).

        Government Matters (Full Show)--January 16, 2018, Government 
        Matters (govmatters.tv) (January 16, 2018).

        How government agencies are preparing for possible shutdown, 
        Government Matters (govmatters.tv) (January 16, 2018).

        Foundations for Evidence-Based Policymaking Act passes in 
        house, Government Matters (govmatters.tv) (November 20, 2017).

Gov Actually Podcast on FedScoop.com (co-host)

          Episode 1: Introducing Gov Actually, https://soundcloud.com/
        user-813771492/episode-1-introducing-gov-actually.

          Episode 2: The Transition Pep Talk, https://soundcloud.com/
        user-813771492/episode-2-the-transition-pep-talk.

          Episode 3: Trimming the fat of the federal government, 
        https://www.fedscoop.com/gov-actually-episode-3-trimming-the-
        fat-of-the-federal-government/.

          Episode 4: OPM's Beth Cobert and ``the call,'' https://
        www.fedscoop.com/gov-actually-episode-4-opms-beth-cobert-and-
        the-call/.

          Episode 5: Federal leadership 101, https://www.fedscoop.com/
        gov-actually-episode-5-federal-leadership-101/, page 18 of 42.

          Episode 6: The political communication cycle, featuring Eric 
        Schultz, https://www.fedscoop.com/gov-actually-communication-
        cycle-eric-schultz-white-
        house/.

          Episode 7: The dissent channel, https://www.fedscoop.com/
        gov-actually-episode-7-the-dissent-channel-state-department/.

          Episode 8: Trump's OMB, https://www.fedscoop.com/gov-
        actually-episode-8-trumps-omb/.

          Episode 9: Can Innovation Survive Federal Downsizing?, 
        https://soundcloud.com/user-813771492/episode9.

          Episode 10: What We've Learned So Far, https://
        soundcloud.com/user-813771492/episode-10.

          Episode 11: How Regulation Works, https://soundcloud.com/
        user-813771492/episode-11-how-regulation-works.

          Episode 12: Martin O'Malley on leading and managing the 
        government of the future, https://soundcloud.com/user-
        813771492/episode-12-martin-omalleys-government-leadership.

          Episode 13: How Infrastructure Works, https://
        soundcloud.com/user-813771492/episode-13-how-infrastructure-
        works.

          Episode 14: Everything You Need to Know About CBO, https://
        soundcloud.com/user-813771492/everything-you-need-to-know-
        about-cbo.

          Episode 15: Summer of Gov, https://www.fedscoop.com/gov-
        actually-episode-15-summer-gov/.

          Episode 16: The Oscars of Government Service--Meet the 
        Sammies Finalists, part 1, https://www.fedscoop.com/gov-
        actually-episode-16-oscars-government-service-meet-2017-
        sammies-finalists-pt-1/.

          Episode 17: Meet the 2017 Sammies Finalists, part 2, https:/
        /www.
        fedscoop.com/gov-actually-episode-17-meet-2017-sammies-
        finalists-pt-2/.

          Episode 18: Meet the 2017 Sammies Finalists, part 3, https:/
        /www.
        fedscoop.com/gov-actually-episode-18-meet-2017-sammies-
        finalists-pt-3/. 

          Episode 19: Inside government disaster response, https://
        www.fedscoop.com/gov-actually-episode-19-inside-government-
        disaster-response/. 

          Episode 20: The other side of Trump's tax reform, https://
        www.fedscoop.com/gov-actually-episode-20-side-trumps-tax-
        reform/.

          Episode 21: Inside the CFPB Leadership Standoff, https://
        www.
        fedscoop.com/gov-actually-episode-21-inside-cfpb-leadership-
        standoff/.

          Episode 22: Government Shutdown 2018--What you need to know, 
        from firsthand experience, https://www.fedscoop.com/gov-
        actually-episode-22-government-shutdown-2018-need-know-
        firsthand-experience/.

          Episode 23: We Wish You a Merry President's Management 
        Agenda, https://soundcloud.com/user-813771492/episode-23-we-
        wish-you-a-merry-budget-season.

          Episode 24: Mistrust in the U.S. Government, https://
        www.fedscoop.com/gov-actually-episode-24-mistrust-u-s-
        government/.

          Episode 25: Dan and Danny are OPM ``co-directors for a 
        day,'' https://www.fedscoop.com/gov-actually-episode-25-dan-
        danny-opm-co-directors-day/.

          Episode 26: How the government buys things (and why it does 
        it the way it does), https://www.fedscoop.com/gov-actually-
        episode-26-government-buys-things-way/.

          Episode 27: Inside the Senate confirmation process, https://
        www.
        fedscoop.com/gov-actually-episode-27-inside-senate-
        confirmation-process/.

          Episode 28: Get Ready for Oversight, https://
        www.fedscoop.com/gov-actually-episode-28-get-ready-oversight/.

          Episode 29: An Idea to Prevent Future Government Shutdowns, 
        https://www.fedscoop.com/gov-actually-episode-29-idea-prevent-
        future-government-shutdowns/.

          Episode 30: The ``Dave'' episode, https://www.fedscoop.com/
        gov-actually-episode-30-dave-episode/.

          Episode 31: Press and the government, with James Rosen, 
        https://www.fedscoop.com/radio/gov-actually-episode-31-press-
        government-james-rosen/.

          Episode 32: USDA's relocation, and a conversation on 
        government modernization, https://www.fedscoop.com/radio/gov-
        actually-episode-32-usdas-relocation-conversation-private-vs-
        public-sector/.

          Episode 33: The federal government's role in gun control, 
        https://www.fedscoop.com/radio/gov-actually-episode-33-federal-
        governments-role-gun-control/.

          Episode 34: The history and importance of whistleblowers, 
        https://www.fedscoop.com/radio/gov-actually-episode-34-history-
        importance-whistleblowers/.

          Episode 35: Wrapping up 2019 and the decade, https://
        www.fedscoop.com/radio/gov-actually-episode-35-wrapping-2019-
        decade/.

          Episode 36: The biggest challenges facing America's 
        governments, https://www.fedscoop.com/radio/gov-actually-
        episode-36-biggest-challenges-facing-americas-governments/.

          Episode 37: The Federal Government response to the 
        coronavirus, https://www.fedscoop.com/radio/gov-actually-
        episode-37-the-federal-government-respond-to-the-coronavirus-
        covid-19/.

          Episode 38: Reflecting on the coronavirus and reopening the 
        U.S., https://www.fedscoop.com/radio/gov-actually-episode-38-
        reflecting-coronavirus-reopening-u-s/.

          Episode 39: The cost-benefit analysis of saving an American 
        life, featuring Cass Sunstein, https://www.fedscoop.com/radio/
        gov-actually-episode-39-governments-cost-benefit-analysis-
        saving-american-life-w-cass-sunstein/.

          Episode 40: A Discussion on Race Through the Lens of 
        Government, https://www.fedscoop.com/radio/gov-actually-
        episode-40-discussion-race-lens-government/.

          Episode 41: Inspiring Americans to Serve, featuring 
        Congressman Joe Heck, https://www.fedscoop.com/radio/gov-
        actually-episode-41-inspiring-americans-serve-ft-congressman-
        joe-heck/.

          Episode 42: Talking presidential history with a 
        ``moonlighting'' presidential historian, https://
        www.fedscoop.com/radio/gov-actually-episode-42-talking-
        presidential-history-moonlighting-presidential-historian-
        hamilton-washington-jefferson/.

          Episode 43: Celebrating Federal Super Heroes with the 2020 
        Sammies, https://soundcloud.com/user-813771492/episode-43-
        celebrating-federal-super-heroes-with-the-2020-sammies.

          Bonus Episode: Live from the 2020 Sammies Gov Actually Watch 
        Party, https://soundcloud.com/user-813771492/bonus-episode-
        live-from-the-2020-sammies-gov-actually-watch-party.

          Episode 44: On the Transition, Hot Cocoa and Blankets, 
        https://soundcloud.com/user-813771492/episode-44-on-the-
        transition-hot-cocoa-and-blankets.

          Episode 45: Inside the Vital Railroad Industry, https://
        soundcloud.com/user-813771492/episode-45-inside-regulation-of-
        the-vital-railroad-industry.

          Episode 46: OMB in transition, https://www.fedscoop.com/
        radio/gov-actually-episode-46-behind-scenes-biden-transition/.

          Episode 47: Code for America CEO Amanda Renteria talks 
        modernizing government, https://www.fedscoop.com/radio/gov-
        actually-episode-47-code-america-ceo-amanda-renteria-talks-
        modernizing-government/.

          Episode 48: ``We the Possibility'' featuring Mitchell Weiss, 
        https://www.fedscoop.com/radio/gov-actually-episode-48-we-the-
        possibility-ft-mitchell-weiss/.

          Episode 49: Inside the response to the Colonial Pipeline 
        hack, https://www.fedscoop.com/radio/gov-actually-episode-49-
        inside-the-response-to-the-colonial-pipeline-hack/.

          Episode 50: Do Deficits Matter? featuring Steve McMillin, 
        https://soundcloud.com/user-813771492/episode-50-dp-deficits-
        matter.

          Bonus Episode: Here's to 50 and a Look Ahead, https://
        soundcloud.com/user-813771492/heres-to-50-and-a-look-ahead.

          Episode 51: Talking Government Innovation with Beth Simone 
        Noveck, https://www.fedscoop.com/radio/gov-actually-episode-51-
        talking-government-innovation-with-beth-simone-noveck/.

          Episode 52: Talking infrastructure, https://
        www.fedscoop.com/radio/gov-actually-ep-52/.

          Episode 53: Year in Review--The Pandemic Reveals Gaps in 
        Citizen Trust, https://soundcloud.com/user-813771492/episode-
        53-year-in-review-the-pandemic-reveals-gaps-in-citizen-trust.

          Episode 54: Touching on public trust again, https://
        www.fedscoop.com/radio/gov-actually-ep-54-touching-on-public-
        trust-again/.

          Episode 55: Inside the Russia-Ukraine War, with National 
        Security Expert Troy Thomas, https://soundcloud.com/user-
        813771492/episode-55-inside-the-russia-ukraine-war.

          Episode 56: The Future of Cities, with Maura Brophy, https:/
        /soundcloud.com/user-813771492/episode-56-the-future-of-cities-
        w-maura-brophy.

          Episode 57: The Supreme Court's Impact on Federal 
        Regulations, with Stuart Shapiro, https://soundcloud.com/user-
        813771492/episode-57-the-supreme-courts-impact-on-federal-
        regulations-w-stuart-shapiro.

        Boston Consulting Group Podcast Series ``American 
        Metamorphosis.'' Season 1, Episode 1: ``The Collider,'' https:/
        /www.theatlantic.com/sponsored/bcg-2021/bcg-american-
        metamorphosis/3565/#seasonone.

        Fed Heads Podcast. Episode 53: FedHeads vs. Gov Actually, 
        https://podcasts.
        apple.com/us/podcast/episode-53-battle-of-the-podcasts-
        fedheads-vs-gov-actually/id1345676550?i=1000434960628.

        Appearances as a witness before the Public Buildings Reform 
        Board.

          Public Buildings Reform Board public meeting, June 17, 2019, 
        https://www.pbrb.gov/pbrb/files/2021/01/Public-Meeting-
        Transcript-June-17-2019-1.pdf.

          Public Buildings Reform Board public meeting, July 16, 2019, 
        https://www.pbrb.gov/pbrb/files/2021/01/PBRB-Public-Meeting-
        July-16-Agenda.pdf.

17.  Qualifications (state what, in your opinion, qualifies you to 
serve in the position to which you have been nominated):

        Across a career spanning more than 25 years, I have been 
        committed to learning what it takes to achieve a higher-
        performing government. Playing roles ranging from junior 
        government staffer to agency principal, on initiatives ranging 
        from routine government operations to the high-stakes crises, 
        my professional journey has provided me with:

        A deep foundation of expertise on government processes--At the 
        Office of Management and Budget (OMB) and Department of Justice 
        (DOJ) in the early stages of my career, I developed an 
        understanding of the nuts and bolts of government processes--
        budget, financial management, personnel, acquisition, 
        regulations, enforcement, reporting, technology, and 
        communications. Notably, I led government-wide efforts during 
        both the Bush and Obama administrations to track, report, and 
        mitigate improper payments and fraud. Also, during the 2008/
        2009 financial crisis, I advised OMB and Treasury Department 
        leadership on the appropriate financial management steps to 
        take in the conservatorship of Fannie Mae and Freddie Mac as 
        well as the successful stand-up of the Troubled Assets Relief 
        Program (TARP) office (leading to a clean audit opinion in the 
        first year of TARP office existence).

        Expertise in public sector management and operations, including 
        managing large, complex efforts--As my career progressed and I 
        began to take on leadership roles in government, I gained 
        direct experience managing and leading at scale. When the 
        American Recovery and Reinvestment Act of 2009 was enacted, I 
        led the government-wide implementation of the transparency and 
        program integrity requirements of the $787 billion stimulus 
        program. This work included standing up a nationwide data 
        reporting system in a few short months and establishing the 
        internal control requirements and oversight mechanisms that led 
        to record low error and fraud in the program. During the 
        various Federal budget crises between 2011 and 2013, I served 
        as the administration's point person in preparing all Federal 
        agencies for successful implementation of government shutdown 
        and budget sequestration processes.

        Direct experience with the IRS on a broad range of tax 
        administration topics--Having earned a reputation across 
        government as a non-partisan government management expert, I 
        was selected to serve in 2013 as Acting Commissioner of the 
        Internal Revenue Service (IRS). In this role, I simultaneously 
        led the IRS's day-to-day work of administering the Nation's tax 
        system while responding to an organizational crisis involving 
        multiple congressional investigations. Despite the complexities 
        of the assignment, I successfully oversaw the launch of the 
        Affordable Care Act (ACA) technologies that IRS was responsible 
        for and navigated the IRS through a multiweek government 
        shutdown.

        Extensive experience working with Congress and other oversight 
        bodies--As noted in response to question 15 above, I have 
        testified before Congress more than 30 times across my career. 
        As OMB Controller and OMB's Acting Deputy Director for 
        Management, I worked closely with the Council of the Inspectors 
        General on Integrity and Efficiency (CIGIE) on a range of 
        issues to ensure effective oversight of Federal agencies was in 
        place. Also, I worked closely with the Government 
        Accountability Office on a range of issues, including their 
        audit of the annual Financial Report of the United States, a 
        report for which I served as the OMB lead author. At the IRS, I 
        worked closely with the Treasury Inspector General for Tax 
        Administration (TIGTA) to meet and exceed all of their 
        recommendations for addressing implementation issues they 
        identified with the tax-exempt review process.

        Experience and understanding of how private-sector entities 
        advance higher performance--Over the past 9 years, I have 
        worked in the private sector and gained experience on how 
        leading private-sector companies innovate and change to capture 
        opportunities and meet emerging risks. In my role, I worked 
        with public-sector organizations to consider and determine the 
        best approach for applying similar learnings in a government 
        context.

        Of note, I had the privilege of working with and learning from 
        an array of leaders across administrations and agencies. I 
        would be honored to continue my professional journey and serve 
        at the IRS as the Commissioner of Internal Revenue.

                   B. FUTURE EMPLOYMENT RELATIONSHIPS

 1.  Will you sever all connections (including participation in future 
benefit arrangements) with your present employers, business firms, 
associations, or organizations if you are confirmed by the Senate? If 
not, provide details.

        Yes.

 2.  Do yo have any plans, commitments, or agreements to pursue outside 
employment, with or without compensation, during your service with the 
government? If so, provide details.

        No.

 3.  Has any person or entity made a commitment or agreement to employ 
your services in any capacity after you leave government service? If 
so, provide details.

        No.

 4.  If you are confirmed by the Senate, do you expect to serve out 
your full term or until the next presidential election, whichever is 
applicable? If not, explain.

        Yes.

                   C. POTENTIAL CONFLICTS OF INTEREST

 1.  Indicate any current and former investments, obligations, 
liabilities, or other personal relationships, including spousal or 
family employment, which could involve potential conflicts of interest 
in the position to which you have been nominated.

        In connection with the nomination process, I have consulted 
        with the Office of Government Ethics and the Designated Agency 
        Ethics Official at the Department of the Treasury to identify 
        any potential conflict of interest. Any conflict of interest 
        will be resolved according to the terms of an ethics agreement 
        that I have entered into with the Treasury Department's 
        Designated Agency Ethics Official and that will be provided to 
        this committee. In the event that an actual or potential 
        conflict of interest arises during my appointment, I will 
        consult with the Treasury Department's ethics counsel and take 
        the measures necessary to resolve the conflict.

 2.  Describe any business relationship, dealing, or financial 
transaction which you have had during the last 10 years (prior to the 
date of your nomination), whether for yourself, on behalf of a client, 
or acting as agent, that could in any way constitute or result in a 
possible conflict of interest in the position to which you have been 
nominated.

        In connection with the nomination process, I have consulted 
        with the Office of Government Ethics and the Designated Agency 
        Ethics Official at the Department of the Treasury to identify 
        any potential conflict of interest. Any conflict of interest 
        will be resolved according to the terms of an ethics agreement 
        that I have entered into with the Treasury Department's 
        Designated Agency Ethics Official and that will be provided to 
        this committee. In the event that an actual or potential 
        conflict of interest arises during my appointment, I will 
        consult with the Treasury Department's ethics counsel and take 
        the measures necessary to resolve the conflict.

 3.  Describe any activity during the past 10 years (prior to the date 
of your nomination) in which you have engaged for the purpose of 
directly or indirectly influencing the passage, defeat, or modification 
of any legislation or affecting the administration and execution of law 
or public policy. Activities performed as an employee of the Federal 
Government need not be listed.

        None.

 4.  Explain how you will resolve any potential conflict of interest, 
including any that are disclosed by your responses to the above items. 
(Provide the committee with two copies of any trust or other 
agreements.)

        In connection with the nomination process, I have consulted 
        with the Office of Government Ethics and the Designated Agency 
        Ethics Official at the Department of the Treasury to identify 
        any potential conflict of interest. Any conflict of interest 
        will be resolved according to the terms of an ethics agreement 
        that I have entered into with the Treasury Department's 
        Designated Agency Ethics Official and that will be provided to 
        this committee. In the event that an actual or potential 
        conflict of interest arises during my appointment, I will 
        consult with the Treasury Department's ethics counsel and take 
        the measures necessary to resolve the conflict.

 5.  Two copies of written opinions should be provided directly to the 
committee by the designated agency ethics officer of the agency to 
which you have been nominated and by the Office of Government Ethics 
concerning potential conflicts of interest or any legal impediments to 
your serving in this position.

        Provided to the committee.

                       D. LEGAL AND OTHER MATTERS

 1.  Have you ever been the subject of a complaint or been 
investigated, disciplined, or otherwise cited for a breach of ethics 
for unprofessional conduct before any court, administrative agency 
(e.g., an Inspector General's office), professional association, 
disciplinary committee, or other ethics enforcement entity at any time? 
Have you ever been interviewed regarding your own conduct as part of 
any such inquiry or investigation? If so, provide details, regardless 
of the outcome.

        None.

 2.  Have you ever been investigated, arrested, charged, or held by any 
Federal, State, or other law enforcement authority for a violation of 
any Federal, State, county, or municipal law, regulation, or ordinance, 
other than a minor traffic offense? Have you ever been interviewed 
regarding your own conduct as part of any such inquiry or 
investigation? If so, provide details.

        None.

 3.  Have you ever been involved as a party in interest in any 
administrative agency proceeding or civil litigation? If so, provide 
details.

        During my time as Acting Commissioner of the IRS, I was named 
        in numerous legal proceedings in my official capacity. The 
        below list of identified cases is based on a comprehensive and 
        exhaustive search. I will supplement for the committee if 
        additional cases are discovered.


------------------------------------------------------------------------
         Case Name                     Court                  Date
------------------------------------------------------------------------
Freedom From Religion       United States District      December 26,
 Foundation, et al. v.       Court, Wisconsin Western    2012
 Daniel Werfel
------------------------------------------------------------------------
Blakley et al. v. Lew et    United States District      April 1, 2013
 al.                         Court, New York Southern
------------------------------------------------------------------------
Citizens for                United States District      May 21, 2013
 Responsibility and Ethics   Court, District of
 in Washington v. U.S.       Columbia
 Department of the
 Treasury, Internal
 Revenue Service et al.
------------------------------------------------------------------------
True the Vote, Inc. v.      United States District      May 21, 2013
 Internal Revenue Service    Court, District of
 et al.                      Columbia
------------------------------------------------------------------------
Linchpins of Liberty et     United States District      May 29, 2013
 al. v. United States of     Court, District of
 America et al.              Columbia
------------------------------------------------------------------------
Schussel v. Werfel          U.S. Court of Appeals for   June 3, 2013
                             the First Circuit
------------------------------------------------------------------------
SMA, LLC et al. v.          U.S. District Court for     June 6, 2013
 Sebelius et al.             the District of Minnesota
------------------------------------------------------------------------
Latos v. Werfel             U.S. Court of Appeals for   June 11, 2013
                             the First Circuit
------------------------------------------------------------------------
Latos v. Werfel             U.S. Court of Appeals for   June 11, 2013
                             the First Circuit
------------------------------------------------------------------------
Known Doe Plaintiffs 1-4    U.S. District Court for     June 24, 2013
 et al. v. Bedard et al.     the Eastern District of
                             California
------------------------------------------------------------------------
Daniel Medford et al. v.    U.S. District Court for     July 2, 2013
 Kathleen Sebelius et al.    the District of Minnesota
------------------------------------------------------------------------
Perez v. Werfel             United States Court of      July 16, 2013
                             Appeals, Second Circuit
------------------------------------------------------------------------
Watts v. Werfel             United States District      July 17, 2013.
                             Court, Colorado
------------------------------------------------------------------------
Sickles v. Internal         U.S. Bankruptcy Court for   July 30, 2013
 Revenue Service et al.      the District of Oregon
------------------------------------------------------------------------
Matthew v. United States    United States District      August 6, 2013
 of America et al.           Court, Texas Northern
------------------------------------------------------------------------
Hughes v. United States of  U.S. District Court for     August 15, 2013
 America et al.              the Western District of
                             Washington
------------------------------------------------------------------------
Haag v. United States of    United States District      August 16, 2013
 America et al.              Court, South Dakota
------------------------------------------------------------------------
Estate of S. Jayne Esgar    United States District      August 21, 2013
 v. USA et al.               Court, Colorado
------------------------------------------------------------------------
Charlton et al. v. Werfel   United States District      August 30, 2013
                             Court, New Jersey
------------------------------------------------------------------------
John E. Rott v. Oklahoma    Oklahoma District Court,    September 3,
 Tax Commission et al.       Garfield County             2013
------------------------------------------------------------------------
Caldwell v. Obama et al.    United States District      September 12,
                             Court, District of          2013
                             Columbia
------------------------------------------------------------------------
Dehko et al. v. Holder et   U.S. District Court for     September 25,
 al.                         the Eastern District of     2013
                             Michigan
------------------------------------------------------------------------
Dehko et al. v. Holder et   United States District      September 25,
 al.                         Court, Michigan Eastern     2013
------------------------------------------------------------------------
Feltl and Company, Inc. et  U.S. District Court for     September 25,
 al. v. Sebelius et al.      the District of Minnesota   2013
------------------------------------------------------------------------
Rott v. Oklahoma Tax        United States District      September 30,
 Commission et al.           Court, Oklahoma Western     2013
------------------------------------------------------------------------
Garner v. United States of  U.S. District Court for     October 1, 2013
 America et al.              the District of Columbia
------------------------------------------------------------------------
Kawa Orthodontics, LLP v.   United States District      October 1, 2013
 Lew et al.                  Court, Florida Southern
------------------------------------------------------------------------
Green v. Werfel             United States District      October 7, 2013
                             Court, Florida Middle
------------------------------------------------------------------------
Indiana et al v. Internal   U.S. District Court for     October 8, 2013
 Revenue Service et al.      the Southern District of
                             Indiana
------------------------------------------------------------------------
Johnson et al. v. Werfel    U.S. District Court for     October 10, 2013
 et al.                      the Eastern District of
                             Virginia
------------------------------------------------------------------------
Association of American     United States District      October 30, 2013
 Physicians and Surgeons     Court, Wisconsin Eastern
 Inc. et al. v. Koskinen
------------------------------------------------------------------------
Doboszenski and Sons, Inc.  U.S. District Court for     November 14,
 et al. v. Sebelius et al.   the District of Minnesota   2013
------------------------------------------------------------------------
Titus v. United States of   United States District      December 4, 2013
 America et al.              Court, New York Western
------------------------------------------------------------------------
Guancione v. Werfel et al.  U.S. Bankruptcy Court for   December 5, 2013
                             the Northern District of
                             California
------------------------------------------------------------------------
Polsky et al. v. Werfel     U.S. District Court for     January 27, 2014
                             the Eastern District of
                             Pennsylvania
------------------------------------------------------------------------
Keith Caldwell, Sr. v.      U.S. Court of Appeals for   April 17, 2014
 Barack Obama et al.         the D.C. Circuit
------------------------------------------------------------------------
Clark v. Dunn et al.        U.S. District Court for     April 21, 2014
                             the District of New
                             Jersey
------------------------------------------------------------------------
Blakley v. Lew              U.S. Court of Appeals for   April 22, 2014
                             the Second Circuit
------------------------------------------------------------------------
Rosalie Aubree Guancione    United States District      June 6, 2014
 v. Daniel I. Werfel et      Court, California
 al.                         Northern
------------------------------------------------------------------------
Tinnon v. Department of     United States District      June 16, 2014
 Treasury et al.             Court, Michigan Eastern
------------------------------------------------------------------------
Rott v. Oklahoma Tax        U.S. Court of Appeals for   July 18, 2014
 Commission et al.           the Tenth Circuit
------------------------------------------------------------------------
Melot v. Werfel             United States District      November 19,
                             Court, New Mexico           2014
------------------------------------------------------------------------
Rosalie Guancione et al.    U.S. Court of Appeals for   April 2, 2015
 v. Daniel Werfel et al.     the Ninth Circuit
------------------------------------------------------------------------
Rosalie Aubree Guancione    United States District      May 13, 2015
 v. Daniel I. Werfel et      Court, California
 al.                         Northern
------------------------------------------------------------------------
Green v. Werfel             U.S. District Court for     July 1, 2016
                             the Middle District of
                             Florida
------------------------------------------------------------------------
Bufkin v. Scottrade,        United States District      May 22, 2017
 Incorporated et al.         Court, Florida Middle
------------------------------------------------------------------------
Wells et al. v. Unknown     United States District      April 17, 2019
 Named IRS Employee et al.   Court, Texas Southern
------------------------------------------------------------------------
Michael Bufkin v.           U.S. Court of Appeals for   May 22, 2019
 Scottrade, Inc. et al.      the Eleventh Circuit
------------------------------------------------------------------------


 4.  Have you ever been convicted (including pleas of guilty or nolo 
contendere) of any criminal violation other than a minor traffic 
offense? If so, provide details.

        None.

 5.  Please advise the committee of any additional information, 
favorable or unfavorable, which you feel should be considered in 
connection with your nomination.

        None.

                     E. TESTIFYING BEFORE CONGRESS

 1.  If you are confirmed by the Senate, are you willing to appear and 
testify before any duly constituted committee of the Congress on such 
occasions as you may be reasonably requested to do so?

        Yes.

 2.  If you are confirmed by the Senate, are you willing to provide 
such information as is requested by such committees?

        Yes.
                                 ______
                                 
      Questions Submitted for the Record to Hon. Daniel I. Werfel 
      
                 Questions Submitted by Hon. Ron Wyden
                 
                       presidential audit program
                       
    Question. We have heard reports that the IRS didn't begin auditing 
Trump's tax returns until 2 years after he became President--and only 
assigned one auditor despite the complexity of the returns. This 
suggests that the program is broken.

    What is your plan to get the presidential audit program functioning 
properly and restore public confidence?

    Answer. In order for the tax system to work, taxpayers must have 
confidence that all taxpayers, regardless of who they are, pay what 
they owe and are treated fairly and impartially. I cannot speak to how 
the presidential audit program is currently working. If confirmed, I 
would put my time and attention into ensuring this program works as 
intended.
              
              using existing irs info to catch tax cheats
              
    Question. The IRS receives a lot of third-party information 
reporting that it hasn't been able to use because of a lack of funding. 
This includes information about pass-through income, capital gains, 
credit card receipts and foreign assets. The Inflation Reduction Act 
provided the IRS with more funding.

    What will you do to ensure the IRS starts using more of this data 
to catch wealthy tax cheats?

    Answer. It is essential that our tax system operates fairly, and 
right now, there is significant evidence that high earners are paying 
significantly less than what they owe in taxes. For example, an 
assessment from the National Bureau of Economic Research indicates that 
working people pay 99 percent of the taxes they owe, while 20 percent 
of the income from wealthy individuals and large corporations is 
shielded from IRS view. This outcome degrades public trust in our tax 
system because honest taxpayers should know that when they file an 
accurate return with the IRS that all other taxpayers, including the 
wealthiest Americans, are doing the same. Funding in the IRA will help 
address this disparity and allow the IRS to focus on the highest-income 
earners. As you know, I have a long career working in government and in 
the private sector focused on data-driven solutions, and, if confirmed, 
I will work to strengthen the manner in which relevant data is utilized 
to inform the best approach for deploying the IRA funds to improve tax 
compliance by the wealthy and large corporations, in addition to 
providing customer service and improving IT.

                       irs whistleblower program
                       
    Question. Whistleblowers have delivered a huge return on investment 
for the agency and can serve as effective partners to help the IRS to 
unpack sophisticated schemes used by wealthy taxpayers and large 
corporations. They have helped the IRS collect over $6 billion directly 
from wealthy individuals and businesses caught cheating on their taxes. 
That's why I am cosponsoring The IRS Whistleblower Program Improvement 
Act with Senator Grassley.

    Will you ensure the IRS whistleblower program gets the support it 
needs?

    What steps will you take to ensure claims are considered in a 
timelier manner and will you commit to reporting to me on the 
effectiveness of these measures?

    Answer. I thank you and Senator Grassley for your bipartisan work 
over the years on this important issue. It is critical that the IRS's 
whistleblower program be a top priority. To ensure the effectiveness of 
the current program I will seek to understand the following: (i) what 
metrics are in place to assess the health of the program (e.g., 
employee awareness, IRS responsiveness to claims, timing for 
resolution, etc.); (ii) what is the current performance versus 
historical; (iii) how does performance stack up against other similar 
Federal programs; (iv) what are the current improvement goals; and (v) 
who is accountable within the IRS for the program. If confirmed, I 
commit to getting up to speed on these matters and reporting back to 
you on my assessment and plans going forward.

                         high income non-filers
                         
    Question. My staff received information from the IRS indicating 
that 195 wealthy tax cheats who hadn't even filed a tax return going 
back to 2015 owed a whopping $692 million. These high fliers owed $1.77 
million per person. The IRS said it didn't have the resources to 
collect these taxes. The IRS now has IRA funding to get a better handle 
on the matter.

    What will you do to ensure my staff gets updates on this important 
issue, including the enforcement measures that have been taken with 
respect to the top 300 high-income non-filers for tax years 2015, 2016 
and 2017? Will you fully cooperate with information requests on this 
topic from the committee?

    Answer. It is critical that we demonstrate to the American people 
how Inflation Reduction Act dollars positively impact our tax system. 
In addition to improving technology and customer service, the IRS must 
also build public trust by showing that compliance is not focused only 
on those who have easier returns to examine. Public trust, 
transparency, accountability, and stewardship of taxpayer dollars are 
important guiding principles for me. If confirmed, I commit to working 
with the committee, within the appropriate laws and regulations, to 
keep you appropriately informed.
                                 ______
                                 
                 Questions Submitted by Hon. Mike Crapo
                 
    Question. I'd like to drill down on a question asked by several of 
my colleagues with respect to the IRS's recent ``level of service'' 
statistics for phone service in the 2023 filing season, to date.

    The National Taxpayer Advocate (NTA) has written and testified to 
Congress that the level of service statistic is problematic and does 
not adequately measure whether ``the agency is doing a good job 
communicating with taxpayers over the phone.''

    As additional evidence, the IRS's stated overall level of service 
statistic provided to the ``eight corners'' congressional staff for 
this filing season reads at over 89 percent as of February 3, 2023, 
notwithstanding that an IRS employee has only answered 2.8 million of 
the 7.1 million calls the IRS has received to date during open hours, 
i.e., 39.4 percent of calls.

    Based upon your experience managing and advising Federal agencies, 
do you agree (or disagree) that the NTA's concerns are valid? If not, 
why not?

    If so, and if confirmed as Commissioner, do you agree to identify a 
phone service metric that more adequately measures whether the IRS is 
providing taxpayers the phone service the Taxpayer Bill of Rights 
demands, and report back to me by Tax Day 2023 as to what this metric 
is and why it is an improvement over the level of service measure?

    Assuming you are confirmed, and once stakeholders have had an 
opportunity to comment on the metric, do you agree that the IRS will 
begin reporting this statistic in place of the level of service 
statistic? If not, why not?

    Answer. The National Taxpayer Advocate (NTA) is a critical, 
independent voice at the IRS, ensuring that every taxpayer is treated 
fairly and recommending changes to help taxpayers solve problems. 
Further, taxpayers deserve better customer service from the IRS, and I 
share your desire to improve IRS service, whether that's online, over 
the phone, or in person, based on the principle of the right to quality 
service. I believe the IRS must use data-driven performance metrics and 
have an evidence base for making decisions that will help improve 
customer service. If I understand your question correctly, the NTA has 
raised a question on whether the current methodology properly assesses 
the responsiveness and quality of IRS phone service. While I would want 
to better understand the IRS measurement approach and the NTA concerns 
before offering a more complete response to you, I appreciate you 
raising the issue given the importance of ensuring that measurement 
methodologies are robust, objective, and statistically sound. If 
confirmed, I look forward to studying NTA's concerns, working with them 
closely to understand every way we can improve and report on customer 
service, and working with the committee on the best way for the IRS to 
measure and report on its progress on level of service.

    Question. Based upon your comments at the hearing, I understand you 
profess a strong belief that government must act in a way to bolster 
the public's trust--in both process and results--as well as use ``best 
practices'' in planning for and implementing changes, particularly ones 
with complexity, cost, and significant risks.

    Do you believe it is necessary that all IRS planning, analysis, and 
study be conducted using best practices, including the selection of 
experts and identification and preparation of data?

    Does the use of unqualified or biased experts (including any 
individual or organization that may stand to benefit from the action) 
and/or flawed data reduce the prescriptive value of a study?

    If confirmed as Commissioner, will you commit to only using best 
practices in planning, analysis, and studies conducted by the IRS?

    Answer. Yes, I believe that following best practices is critical to 
ensuring the success at any organization. Over my career, I have 
strived to bring a rigorous, analytical approach to decision-making and 
believe we must ensure the data used to make decisions are of the 
highest quality. As noted in your question, for evidence to have 
fidelity, it must be compiled objectively. Based on my experience, you 
can help ensure objectivity through a variety of steps, including for 
example, transparency on the methodology and being open to feedback on 
the methodology through peer review. If confirmed, I intend to bring 
these principles to my work at the IRS and will be keen to understand 
where this committee believes there is a risk of bias or subjectivity 
in the evidence base we create to guide decision-making.

    Question. We understand that you have been wholly uninvolved in the 
IRS's planning with respect to spending the $80 billion in additional 
funding. From a process management standpoint, this is far from ideal 
because the plan is likely to be complete before you ever have a chance 
to provide input on it.

    Do you believe it will be necessary for the IRS to provide regular 
updates to its plan in order to not only capture your insights--now and 
in the future--but also be transparent and accountable about what is 
working and what is not? If so, and if confirmed, do you commit to 
providing these?

    Answer. Yes, I believe there should be regular updates and that 
transparency and accountability will be critical to success. Since I am 
not currently at the IRS, I do not know the exact cadence that would 
work best. However, if confirmed, I will work with IRS and Treasury to 
ensure the committee and the American people are updated with 
appropriate frequency. I look forward to sharing more specifics if I am 
confirmed.

    Question. Many small and medium-sized businesses may not file for 
the R&D tax credit on their original return, but instead file an 
amended return to claim the credit. The IRS has recently instituted a 
new policy that requires companies applying for the R&D tax credit on 
an amended return to provide a detailed discussion of why their company 
qualifies for the R&D tax credit.

    My understanding is that in practice this new policy has placed 
significant burdens on small and medium-sized businesses due to the 
fact that the IRS has not provided adequate, detailed guidance and 
examples of the information the IRS is looking for the taxpayer to 
provide.

    In addition, taxpayers are waiting months and months for an IRS 
reply to questions regarding the information the IRS is seeking from 
the taxpayer--because there has not been adequate staffing of this new 
initiative by the IRS.

    The policy--and particularly the IRS administration of this new 
policy--has undermined the goal of Congress in enacting the R&D tax 
credit of incentivizing and supporting innovative small and medium 
sized companies.

    Based upon your experience, do you believe that requiring ill-
defined information relating to a credit will negatively impact either 
the utilization of the credit and/or tax administration?

    If confirmed, will you provide me a more detailed response to the 
issue of how the IRS's requirement is impacting R&D credit claimants 
and the IRS in writing within 90 days of your being sworn in as 
Commissioner?

    Answer. I believe it's important for the IRS to provide as much 
clarity as possible when administering the tax code. Where possible, 
tax administration should be improved to reduce complexity, within 
legal and regulatory bounds. If confirmed, I would look forward to 
studying this issue and working to ensure the committee is best 
informed about this specific issue of tax administration. I recognize 
how critical the R&D tax credit has been to members on both sides. It 
will be a priority to respond to these and other R&D tax credit 
questions after consulting with those at IRS responsible for these 
matters, if confirmed.

    Question. A number of my colleagues and I are concerned about the 
IRS's processing of employee retention tax credit (ERTC) claims, and 
hear from both constituents, stakeholders, and even the local taxpayer 
advocate that IRS delays in processing these vital payments are harming 
taxpayers (and tax administration). I also have heard that there have 
been numerous fraudulent ERTC claims, which are clogging the IRS and 
leading to significant delays for legitimate claimants. If confirmed, 
will you provide me within 90 days of being sworn in a detailed 
response regarding the current backlog of ERTC claims, including a 
concrete description of what you plan to do to resolve these and 
address issues of fraudulent claims?

    Answer. Through this nomination process, I have heard from many 
Senators about the employee retention tax credit and the impact of 
delays on small businesses and nonprofits. I understand the importance 
of ensuring taxpayers receive the tax benefits they are owed and the 
frustration that delays can cause. If confirmed, I commit to 
prioritizing this issue and briefing the committee on what I learn.

    Question. I am concerned, as is the NTA, that the IRS will 
prioritize achieving certain service metrics at the expense of 
delivering on others, such as prioritizing answering phones but de-
prioritizing processing paper returns. If confirmed, do you commit to 
directing the IRS to use its resources systemically and address all 
taxpayer service areas with equal importance as opposed to arbitrarily 
singling out one or the other?

    Answer. In any organization, it is imperative to seek success for 
all core goals. Customer service is one of these goals at the IRS. If 
confirmed, I commit to studying the IRS's current and future resource 
allocation and looking for any way to improve customer service whether 
it be over the phone, in-person, online, or by mail. I am particularly 
interested in benchmarks from world class customer service 
organizations from both the private and public sectors. From these 
benchmarks, we can identify best practices in terms of measurement and 
performance. I think the American people deserve an IRS that can meet 
and exceed these benchmarks and, if confirmed, will work tirelessly 
toward that end.

    Question. Who do you believe should ultimately be responsible for 
the IRS's planning for and implementation of its IRA funding (e.g., the 
IRS Commissioner, the head of the IRS's IRA Implementation Office, 
Director of IRA Implementation at the Treasury Department, the Treasury 
Secretary, etc.) and do you believe the IRS must clearly inform the 
public about where the responsibility lies?

    Answer. I do not currently know all the legal and regulatory 
requirements involved in the Inflation Reduction Act's implementation, 
but, if confirmed, I would look forward to working within all 
applicable requirements to ensure all are met. If confirmed, I would 
work with Congress to ensure all actions taken are transparent, to 
build trust with Congress and the public. All this being said, if 
confirmed as IRS Commissioner, I will embrace accountability, 
transparency, and stewardship of taxpayer dollars for all activities 
that occur on my watch.

    Question. If confirmed as Commissioner, how will you act when you 
are required to make decisions that have policy implications?

    Answer. The role of the IRS is principally in administering the tax 
code, not tax policymaking. As such, if confirmed, if there are matters 
that involve policy implications, I would work with Congress and 
Treasury to inform and consult on the ability of the IRS to effectively 
implement policies, balancing such factors as data security, 
administrative burden on taxpayers, resource needs, and more. It will 
be important to me, if confirmed, to have policymakers informed about 
IRS implementation actions.

    Question. Taxpayers and those who work with or around the IRS 
desperately want a functional and modern IRS.

    When you consider what the IRS should fund with the relatively 
meager $4.7 billion in additional funding for IT modernization that the 
IRA gave it, what are the characteristics of those systems and 
technology it should prioritize?

    Recently, the Government Accountability Office noted that the IRS's 
modernization efforts have been hampered by competing priorities which 
are delaying the modernization of critical infrastructure systems and 
impede the IRS's ability to effectively serve taxpayers. In our 
conversations, you have mentioned observing similar dynamics at other 
Federal agencies. If confirmed as Commissioner, what areas of 
technology modernization are you most focused on for improving the way 
the IRS serves taxpayers?

    Answer. Throughout my career, I have worked with many Federal 
agencies to ensure any funding provided by Congress is fully utilized 
in the most effective way possible. If confirmed, I would look forward 
to learning more about the IRS's current technology needs and focusing 
current resources on both areas where core infrastructure can be 
improved and where technological improvements can result in better 
customer service.

    While I would want to reserve any final conclusions about what the 
key priorities should be until I have spent time at the IRS 
understanding the current environment, my current thinking is that the 
top modernization priorities fall into three buckets: ensuring the 
Individual Master File and Business Master File are updated to a modern 
platform to optimize data security and cyber resiliency, given the 
sensitivity of data maintained in those systems; embedding innovative 
technology into IRS's service work--whether on the phones or online--to 
help significantly increase responsiveness to taxpayers trying to make 
contact with the IRS; and digitizing paper forms into machine-readable 
output upon receipt to manage and get healthy on inventory and help 
increase overall efficiency of return processing.

    Question. You testified repeatedly about upholding the public trust 
in the IRS, and repudiated things that degrade that trust. Based on 
your experience and belief, do you believe that the fact that taxpayer 
information illegally obtained by ProPublica remains in the possession 
of ProPublica and continues to be used by ProPublica degrades the 
public's trust in the IRS and the security of information provided to 
the IRS?

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and the IRS. My understanding is that this matter was 
immediately referred to the appropriate authorities, including the 
Treasury Inspector General for Tax Administration (TIGTA), the 
Department of Justice, and Treasury's Office of Inspector General, each 
of which conduct their work independently of the IRS. I cannot 
speculate about that work, any potential findings, or the timeline. I 
can commit to you that, if confirmed, I will ensure the IRS continues 
to prioritize protecting taxpayer information and will take any 
appropriate action to do so.

    Question. A particular pain point for tax practitioners are systems 
whereby bulk filers, including third parties, interact with the agency.

    Do you agree a modernized IRS must provide these services--and 
provide them well?

    If confirmed, will you commit to reporting back to me with respect 
to your plan for implementing modern systems that allow for tax 
practitioners, businesses, and bulk filers to interact with the IRS 
more easily, including (without limitation) a portal for bulk filers to 
authenticate on a firm-wide basis, interact with the IRS electronically 
on routine issues such as requesting account holds, uploading 
correspondence, validating EINs, requesting transcripts, asking for 
payment frequency or filing frequency verification, and providing 
payment information to be located/properly applied to the account?

    Answer. Yes, if confirmed, I would look forward to learning about 
this specific issue, where the IRS has current capabilities, and 
working with you and your staff to improve service, including for 
practitioners and other bulk filers.
                                 ______
                                 
               Questions Submitted by Hon. Chuck Grassley
               
    Question. According to the National Taxpayer Advocate, in fiscal 
year 2021 telephone assistance reached an all-time low of only 11 
percent of calls answered by an IRS employee, and this rate only 
increased to 13 percent in fiscal year 2022. Additionally, millions of 
pieces of paper taxpayer correspondence including tax returns piled up 
while the IRS was shuttered in 2020 and the IRS still struggles with a 
backlog. As of February 4, 2022, the IRS was still processing 2 million 
2022 or prior year tax returns and millions of other pieces of taxpayer 
correspondence.

    While the partisan legislation enacted last year provides nearly 
$80 billion in additional funding, the smallest share of around $3 
billion is reserved for taxpayer service. Super-sizing enforcement with 
the more than $45 billion provided would be unfair to taxpayers who 
have struggled to contact the IRS or whose correspondence is buried in 
a pile with millions of other taxpayers.

    If confirmed, do you pledge to utilize the more than $3 billion 
provided for taxpayer service to resolve the IRS customer service and 
filing processing backlogs before bringing the enforcement hammer down 
on taxpayers who may already be trying to comply with their tax 
obligations?

    Answer. Implementation of the laws passed by Congress is a critical 
responsibility of any Federal agency. If confirmed, I look forward to 
quickly learning what the IRS's plans and resource allocation are and 
ensuring customer service is a priority. As I discussed in the hearing, 
I would plan to prioritize improving service and getting back to 
healthy inventory levels and closing the tax gap where IRS has 
historically lacked the capacity to unpack complex returns of wealthy 
and corporate tax evaders.

    Critical to this approach is making sure that working families and 
small businesses see no increase in audit rates relative to historic 
levels, consistent with Secretary Yellen's pledge. Instead, the entire 
focus for these taxpayers when it comes to new funds under the 
Inflation Reduction Act should be on customer service, return 
processing, and providing them upfront help to file accurate returns 
and access the credits and deductions for which they may be eligible.

    Question. In your written testimony, you echo Secretary Yellen's 
directive asserting that the additional IRS funding ``will not increase 
audit rates, relative to historic levels, for small businesses and 
households making under $400,000. . . .'' However, a number of open 
questions remain as to how the IRS will implement this directive, 
including what measure of income will be used (i.e., AGI, MAGI, taxable 
income, etc.) and what metrics will be used to determine past and 
present audit rates.

    Please provide a detailed explanation of how, if confirmed, you 
intend to implement Secretary's Yellen's directive, including 
identifying what measure of income and audit metrics will be used to 
comply with the directive.

    Answer. Secretary Yellen and the IRS have committed that the IRA 
funding will not be used to increase audit rates, relative to historic 
levels, for households and small businesses making under $400,000 a 
year. As I said at the hearing, I will work to meet Secretary Yellen's 
pledge and ensure that the IRA funding is not used to increase audit 
scrutiny on middle-income Americans or small businesses. As I have not 
been involved yet with the planning process for the IRA funding, I do 
not have specifics on how IRS will implement this directive.

    This is an important question, and the committee and the American 
people will need to understand how the IRS is upholding Secretary 
Yellen's commitment. If confirmed, I look forward to ensuring that IRS 
be clear about implementation of this commitment.

    Question. The IRS Funding Accountability Act authored by Senator 
Thune and I would require the IRS to regularly update Congress on audit 
rates and other enforcement actions by income group. If confirmed, will 
you direct the IRS to provide quarterly reports to Congress on audit 
rates and enforcement actions? Also please indicate if you would be 
willing to include the following in such reports:

          An analysis identifying historic and current audit rates by 
        income group, including a group reflecting the IRS calculation 
        of taxpayers earning less than $400,000, beginning in 2018 
        through the current fiscal year.

          A detailed description of what constitutes an ``audit'' to 
        the IRS, and whether and how that definition differs from how 
        the National Taxpayer Advocate, the Comptroller General of the 
        United States, or the Treasury Inspector General for Tax 
        Administration defines an audit.

          A categorization of the number of audits for each income 
        group which were, correspondence audits, office audits, field 
        audits, audits under the Tax Compliance Measurement program, 
        and any other audits.

          A description of all taxpayer compliance actions or 
        initiatives expected to be undertaken using funding provided by 
        the Inflation Reduction Act that do not rise to the level of an 
        audit.

    Answer. I believe it's important that the IRS's plans are 
transparent, updated, and clear to you and the American people. Since I 
am not currently at the IRS, I do not know the intervals or format that 
would work best. However, if confirmed, I will work with IRS and 
Treasury to ensure you and the American people are updated on the 
progress and would be committed to studying these four recommendations 
as part of that process.

    Question. During your nomination hearing you were asked about 
providing initial and current annual reports on IRS plans to spend the 
$80 billion in additional funding provided by the Inflation Reduction 
Act. In August of 2022, Secretary Yellen requested that IRS issue an 
``operational plan'' for deploying the $80 billion.

    What is your understanding of the status of this plan? Will it be 
released this month in accordance with Secretary Yellen's directive?

    Answer. I am not familiar with any aspect or timing of the plan 
beyond reading public news reports.

    Question. According to the Treasury Inspector General for Tax 
Administration (TIGA), IRS is also developing a more detailed FY 2023 
``IRA spend plan.'' As with the ``operational plan,'' if confirmed, 
will you commit to publicly releasing this plan?

    Answer. I am not familiar with any aspect of this plan. However, 
transparency will be a critical element of my approach as Commissioner, 
if confirmed. I look forward to keeping you the public informed on our 
plans.

    Question. During your nomination hearing, Chairman Wyden asked you 
to commit to provide a prompt response in writing to any questions 
addressed to you by any Senator of the committee, and you agreed to 
that.

    On Friday, February 10, 2023, Secretary Yellen finally responded to 
written questions sent to her after a June 7, 2022, hearing on the 
President's Fiscal Year 2023 budget request. Aside from not being 
prompt, the response included the disclaimer that ``Secretary Yellen's 
responses to these Questions for the Record reflect information 
available as of the date of receipt of these questions, June 16, 
2022.''

    Do you pledge to respond to all questions and letters promptly and 
with information that is as current as reasonably available?

    Answer. Yes.

    Question. Should you have any difficultly in fully responding to 
any of my requests or questions, will you work with my staff to reach 
an acceptable accommodation rather than providing a woefully outdated 
or incomplete response?

    Answer. Yes.

    Question. As I mentioned at the hearing, the IRS whistleblower 
program has helped raise more than $6 billion, but has the potential to 
bring in billions more if used effectively. Please address the 
following questions.

    Do you agree that the IRS whistleblower program is an important and 
underutilized tool in addressing the tax gap and will you work with 
myself, this committee, and Congress to improve the ability of the IRS 
whistleblower program to speedily process whistleblower claims?

    Do you agree that for the IRS whistleblower program to be 
effective, the IRS as a whole needs to cultivate and maintain a culture 
of support for whistleblowers that recognizes and rewards their value? 
Will you ensure that all components of the IRS, including the Office of 
Chief Counsel are supporting the work and mission of the IRS 
Whistleblower Office?

    If confirmed, will you commit to working with the Director of the 
IRS Whistleblower Office to develop a plan improving the function of 
the office such that more awards are paid out in less time? 
Furthermore, will you report back to me within 60 days of your 
confirmation on the plan's progress?

    Answer. I thank you and Chairman Wyden for your bipartisan work 
over the years on this important issue. It is critical that the IRS's 
whistleblower program be treated with the highest priority. To ensure 
the effectiveness of the current program I will seek to understand the 
following: (i) what metrics are in place to assess the health of the 
program (e.g., employee awareness, IRS responsiveness to claims, timing 
for resolution, etc.); (ii) what is the current performance versus 
historical; (iii) how does performance stack up against other similar 
Federal programs; (iv) what are the current improvement goals; and (v) 
who is accountable within the IRS for the program. If confirmed, I 
commit to getting up to speed on these matters and reporting back to 
you on my assessment and plans going forward.

    Question. The IRS private debt collection program was established 
in 2015 on bipartisan basis. Its primary role is pursue tax debts that 
the IRS would otherwise ignore. The program initially got off to a slow 
start in part due to resistance from within the IRS. However, in recent 
years it has proven its ability to return significant sums to the 
Treasury. Since 2019, it has collected nearly $3 billion in net 
revenue, including over $1.3 billion in FY 2022 alone.

    If confirmed, will you ensure this program continues to be used to 
its full extent under the law?

    Answer. If confirmed, I will work with the IRS to make sure all 
taxes owed are collected in an efficient and effective manner. I am 
interested in understanding more about the current status of the 
private debt collection program and will work with you and your team on 
how this program can best support the IRS mission.

    Question. You have worked at the Boston Consulting Group (BCG) 
since March 2014. Please address the following questions related to 
your employment at BCG.

    Since joining BCG, has the firm entered into any contracts, or made 
an effort to enter into any contracts, with the IRS or Treasury 
Department?

    Are there any existing engagements between the BCG and the IRS or 
Treasury Department?

    If you have done any work relating to the IRS or Treasury 
Department for BCG, please describe the goals and results of any 
projects you worked on.

    What foreign countries did you perform work on behalf of while with 
BCG?

    Is there any provision in any contract between yourself and the BCG 
that makes any distinction between you leaving the firm for other 
private employment, versus you leaving the firm to work for the Federal 
Government in a high-level position?

    Answer. As part of this confirmation process, I was eager to make 
all required disclosures concerning my current employment to ensure 
there are no conflicts of interest, perceived or otherwise. It is my 
understanding that I have fully complied with all required disclosures 
and remain committed to being available to respond to any questions to 
ensure the committee has appropriate transparency. Of note, all of my 
government clients during my time at BCG have been U.S. Federal 
agencies. As I mentioned in my due diligence meeting with your staff, 
earlier in my BCG tenure (i.e., more than 5 years ago), I was asked, on 
occasion, to provide operational advice to other firm clients, 
including government clients in the United Kingdom, Australia, Saudi 
Arabia, and UAE. I spent less than 1 percent of my time over 9 years on 
these types of calls. Neither the IRS nor Treasury have been a client 
of mine during my BCG tenure. In terms of my contractual departure 
requirements, I have a noncompete clause which would impact my ability 
to join a competitor consulting firm. However, taking on a government 
role does not trigger this clause.

    Question. In 2013, you served as Acting Commissioner of the IRS 
just after it came to light that the agency had inappropriately singled 
out certain social welfare organizations for extra scrutiny. That 
episode highlighted how important it is for the IRS to avoid even the 
appearance of political bias if it is to do its job effectively. 
Unfortunately, that hasn't stopped certain members of Congress from 
writing the IRS to urge them to investigate certain non-profits that 
support causes or hold political views opposite their own.

    If confirmed, how would you respond to such requests?

    Do you agree IRS must not allow politically charged comments or 
letters from members of Congress to influence its enforcement 
decisions?

    Answer. In order for our tax system to work, taxpayers must have 
confidence that all taxpayers, regardless of who they are, are being 
treated fairly and impartially. If confirmed, I will make sure that 
taxpayers--regardless of background and whether they are individuals, 
small businesses, or nonprofits--are being treated fairly and that the 
tax laws are being applied impartially and equally to all. Your 
question raises a particularly unique dimension of tax administration--
how to address specific requests from Congress that are not broad in 
scope, but narrow and applicable to compliance or investigation in a 
given matter. If confirmed, this is an area where I will seek this 
committee's advice on the best approach to ensure that the IRS and 
Congress are working in a manner together that meets the objectives of 
equity, fairness, and building trust.

    Question. At your hearing, I asked about IRS implementation of 
recommendations by the Treasury Inspector General (TIGTA) pertaining to 
cloud systems and protecting taxpayer data. One example of the 
recommendations to which I referred comes from a September 2022 TIGTA 
report. In that report, TIGTA recommends that the IRS ``[e]xpedite full 
implementation of the cloud security control infrastructure'' and in a 
second recommendation requests the IRS [d]evelop an implementation plan 
for selected cloud capability gaps.'' Concerning the first 
recommendation, in their response to TIGTA, the IRS notes that through 
the Internal Revenue Manual (IRM) the ``IRS has a robust and 
comprehensive security control infrastructure documented within IRM 
10.8.1 and 10.8.24 for cloud implementations.'' TIGTA responds by 
noting ``[t]he IRS's corrective action does not address the intent of 
our recommendation.''

    If confirmed will you agree to seriously and systematically address 
IRS information technology issues by not only addressing 
recommendations from evaluators such as GAO and TIGTA, but to ensure 
that IRS systems and taxpayer information are actually secure?

    Answer. Data security and protecting taxpayer information is one of 
the most important responsibilities of the IRS. During my tenure at 
OMB, I observed cases where Federal agencies came short of meeting an 
IG or GAO recommendation and always sought to closely review and 
understand these circumstances. When I left OMB and went to the IRS in 
2013, I was very focused on making sure the IRS fully implemented all 
TIGTA recommendations made during my tenure. If confirmed, I will 
seriously and systematically consider all TIGTA recommendations.
                                 ______
                                 
                Questions Submitted by Hon. John Cornyn
                
    Question. During the COVID-19 pandemic, Congress created the 
Employee Retention Tax Credit (ERTC) to support employers who kept 
their employees working. Numerous Texas small businesses have yet to 
have their ERTC processed. Many of these businesses have been forced to 
take extraordinary measures to stay afloat, including layoffs and 
additional loans. For example, one constituent has been waiting for 
their ERTC since September 2021. This small business utilizes a third-
party payer who submits this business's ERTC information to the IRS on 
quarterly payroll tax returns.

    The return filed by the third-party payer shows the aggregate 
amount of ERTC being claimed by its small business clients, but also 
includes an attached ``schedule'' that itemizes the amount of ERTC 
claimed by each small business. It appears that the IRS may be focusing 
on the aggregate amount reported rather than using the itemized 
information to look through each individual ERTC claim to process them 
faster and get help to small businesses that have been waiting for 
years in some instances.

    If confirmed, will you commit to making the necessary improvements, 
including using the itemized ERTC claim information, to deliver the 
credit that these small businesses are owed?

    Answer. Through this nomination process, I have heard from many 
Senators about the Employee Retention Tax Credit and the impact of 
delays on small businesses and nonprofits. I understand the importance 
of ensuring taxpayers receive the tax benefits they are owed and the 
frustration that delays can cause. If confirmed, I commit to 
prioritizing this issue and briefing you and your staff on what I 
learn.

    Question. A number of my constituents help support small businesses 
by facilitating small business payroll, benefits, human resources, tax 
administration, and many other tasks, which allows small businesses to 
focus on their core competency, grow, and create more jobs. 
Unfortunately, it has come to my attention that bureaucratic 
impediments have led to extended delays in processing the Employee 
Retention Tax Credit (ERTC) owed to these small businesses. In 
addition, I have been informed that the IRS has been asked repeatedly 
about ways they could help speed up the process for small businesses 
that utilize these third parties.

    I have previously contacted the IRS on behalf of a number of small 
business constituents (who utilize a third party) about addressing 
these obstacles but the response from the IRS was unhelpful. If 
confirmed, will you commit to reviewing and implementing the necessary 
measures that will help expedite the processing of ERTC claims for 
small businesses that use third parties to assist with tax 
administration?

    Answer. Please see the answer to the question above.

    Question. In October 2022, the Internal Revenue Service released 
tax gap estimates for tax years 2014 through 2016. The gross tax gap is 
the difference between what the IRS believes is the ``true'' tax 
liability for a given period and the amount of tax paid on time by 
taxpayers. What percentage of the tax gap is not collectible? If you do 
not have this information, will you commit to providing it to me within 
90 days of being sworn in as Commissioner should you be confirmed?

    Answer. Closing the tax gap is essential both to protect the 
government's bottom line and to ensure the government is funded to 
provide essential services. If confirmed, I commit to studying the 
IRS's tax gap, understanding where there are gaps in both information 
and collection, and communicating the findings with you and this 
committee.

    Question. Please provide a breakdown of the tax gap by income. 
Specifically, what percentage of the tax gap is attributable to 
households making less than $50,000; $100,000; $250,000; $400,000; 
$1,000,000 and over $1,000,000? Please also include a breakdown by 
income for the numbers of taxpayers/households contributing to the tax 
gap for each group and the dollars for each group. If you are unable to 
provide this information, will you commit to providing full and 
complete numbers to me within 90 days of being sworn in as Commissioner 
should you be confirmed?

    Answer. Please see the answer to the question above.

    Question. Please provide a breakdown of the tax gap attributable to 
sole proprietorships; pass-through entities; and C Corporations, both 
in terms of percentage, numbers, and dollars. Please provide these 
numbers as best as you can now. If you are unable to provide this 
information, will you commit to providing full and complete numbers to 
me within 90 days of being sworn in as Commissioner should you be 
confirmed?

    Answer. Please see the answer to the question above.

    Question. Please provide me the metrics for measuring your 
performance as Commissioner, should you be confirmed, in addressing the 
tax gap.

    Answer. If confirmed, I hope that my performance would be measured 
by improved customer service at the IRS--including getting back to 
healthy levels on inventory; better phone and in-person service for 
taxpayers; lawful administration of the tax code; progress in closing 
the tax gap created by wealthy and corporate evaders; successful 
deployment of technology that among other outcomes, strengthens data 
security, allows for more agility in meeting emerging requirements, and 
embeds innovative solutions in customer service; increased integrity of 
program and administrative expenditures--and by open and transparent 
communications with this committee and the public. In terms of more 
specifics on the tax gap, I am looking forward to engaging the team at 
the IRS to understand current priorities and determining whether 
updates to those priorities would be appropriate, in line with 
Secretary Yellen's commitment to not increase audit rates, relative to 
historical levels, for individuals earning less than $400,000 and small 
businesses. As I mentioned during the hearing, I have an initial 
hypothesis that one area of priority should be building capacity within 
the IRS to unpack complex and intricate returns of wealthy taxpayers so 
we can better assess any balances due that are being uncollected today. 
Beyond this, I would also seek to prioritize parts of the gap that do 
the most damage to taxpayer trust, including for example intentional 
tax evasion among any and all taxpayer groups.

    Question. During your confirmation hearing, you told the committee 
in response to a question: ``I typically look to CBO in terms of how 
they score legislation.''

    Do you think the Congressional Budget Office (CBO) estimate of the 
revenue generated from the $80 billion in mandatory spending provided 
to the IRS by Public Law 117-169 is accurate?

    Yes or no, do you agree with CBO's projection that some of the 
increased revenues will be collected from taxpayers with income less 
than $400,000?

    Answer. I do consider CBO to be an important source for scoring the 
deficit impact of legislation; however, I am not intimately familiar 
with all the details of this specific CBO estimate. As I said in my 
testimony, last year, Secretary Yellen issued a directive that the IRS 
will not increase audit rates, relative to historic levels, for small 
businesses and households making under $400,000 a year, which I am 
committed to meeting.

    Question. For every dollar initially assessed against taxpayers, 
what percentage is collected by the IRS? If you do not know the answer, 
will you commit to providing this information to me within 90 days of 
being sworn in as Commissioner should you be confirmed?

    Answer. If confirmed, I look forward to studying and understanding 
this issue, and keeping you and your staff informed.

    Question. What is the current ``no-change'' audit rate? Please 
break it down by type of audit (i.e., mail/correspondence, office, 
field, National Research Program). If you do not know the answer, will 
you commit to providing this information to me within 90 days of being 
sworn in as Commissioner should you be confirmed?

    Answer. If confirmed, I look forward to studying and understanding 
this issue, and keeping you and your staff informed.

    Question. The centralized partnership audit regime enacted by Pub. 
L. 114-74 is designed to streamline IRS enforcement for partnerships 
subject to its rules, including the largest and most complex 
partnerships, which may not opt out of the regime. The Treasury 
Inspector General for Tax Administration (TIGTA) issued a report in 
2022 (Report Number 2022-30-020) on the implementation of the audit 
regime and found that almost 80 percent of these audits resulted in no 
change in the amount owed by the taxpayer. Furthermore, the no-change 
audit rate for the largest and most complex partnerships has increased 
year over year since the new regime has been in place.

    TIGTA recommended that the IRS address these high no-change rates 
by establishing goals and processes to measure expected outcomes from 
the new regime against observed outcomes, which could help explain what 
the high no-change rate is telling us. The IRS disagreed with this 
recommendation.

    Do you agree with TIGTA's recommendation?

    Do you believe that the no-change audit rates are at an acceptable 
level?

    If not, what strategy do you think should be in place to reduce 
them?

    Answer. Working with TIGTA would be a key priority of mine, if 
confirmed. I am not intimately familiar with these recommendations, 
but, if confirmed, I will look forward to studying these 
recommendations and considering any recommendation to improve customer 
service and taxpayer experience at the IRS. If confirmed, I will 
seriously and systematically consider all TIGTA recommendations.

    Question. The IRS's mission is to ``provide America's taxpayers top 
quality service by helping them understand and meet their tax 
responsibilities and by applying the tax law with integrity and 
fairness to all.'' Unfortunately, the IRS has a long history of 
struggling to meet its mission.

    Twenty-five years ago, in response to IRS wasting billions of 
dollars on its failed Tax Systems Modernization Program, Congress 
passed legislation reforming the IRS. It gave the Commissioner 
additional hiring-and-firing power, redesigned the agency to serve 
particular categories of taxpayers, created an oversight board, and 
laid the groundwork for a multiyear budgeting approach to IRS 
modernization efforts.

    Unfortunately, not much has changed over time, and the problems 
seem to be growing in both scope and severity:

          Ten years ago, we heard about inappropriate IRS targeting of 
        the Tea Party and other conservative organizations who found 
        themselves on so-called ``Be-On-the-Lookout'' lists and treated 
        them with heightened audit scrutiny.

          Taxpayers have had to suffer through recent filing seasons 
        marred by poor telephone service and slow processing of paper-
        filed tax returns. In fact, the backlog of original and amended 
        returns and correspondence is still millions of cases deep.

          Americans are also familiar with the massive leak of private 
        taxpayer information to ProPublica, which remains an unsolved 
        mystery to this day.

          We learned last year that confidential data of about 112,000 
        taxpayers released by the IRS last summer was republished in 
        late November and remained online until early December.

          We know about the agency's failure to provide timely 
        guidance with respect to the Federal tax treatment of special 
        State tax refunds and the implementation of the new 1099-K $600 
        reporting requirement imposed by the American Rescue Plan. In 
        the words of the National Taxpayer Advocate, ``the failure to 
        address issues like these proactively is harmful to taxpayers, 
        but also creates rework for the IRS that timely guidance would 
        have avoided.''

          Finally, there is the laundry list of reports released over 
        the past 30-plus years by the Treasury Inspector General on Tax 
        Administration and the Government Accountability Office on the 
        IRS's inability to effectively modernize its computers and 
        protect confidential taxpayer information.

    Public Law 117-169 rewards the IRS with an additional $80 billion 
in automatic funding.

    Do you believe that the IRS is currently meeting its stated 
mission?

    Do you believe the IRS has done enough to earn back the trust of 
the American People and receive a boost of $80 billion dollars without 
even a plan in place?

    Answer. The IRS needs to transform into a modern 21st-century tax 
administrator that provides the service taxpayers deserve. As I 
discussed in the hearing, I believe there are numerous performance gaps 
in current IRS operations that can be improved. I also believe that 
resources provided by the IRA present an opportunity to close such 
gaps. As your question suggests, earning public trust will require a 
transparent and clear plan and early results that demonstrate resources 
are, in fact, improving service levels.

    Question. The IRS has recently instituted a new policy that 
requires taxpayers applying for the R&D tax credit on an amended return 
to provide a detailed discussion of why their company qualifies for the 
R&D tax credit. The policy provides that the IRS will review the 
taxpayer's submission, and if the taxpayer's submission is found to be 
inadequate, for an initial period, the taxpayer has a 45-day period to 
perfect their claim in response to the IRS's review.

    My understanding is that, in practice, this new policy has placed 
significant burdens on small and medium-sized businesses because the 
IRS has not provided adequate, detailed guidance and examples of the 
information the agency is looking for the taxpayer to provide. 
Furthermore, when the IRS rejects a filing, they are not providing the 
taxpayer with detailed taxpayer-specific guidance on what information 
is needed to satisfy any outstanding concerns.

    In many instances, taxpayers are also waiting months and months for 
a reply from the IRS. This delay can mean that the taxpayer can be 
barred from applying for the R&D tax credit because the statute of 
limitations on filing an amended return will have ended--forcing the 
taxpayer to file in District Court if they wish to preserve their 
rights to file an amended return.

    What are your initial thoughts on this matter?

    Is this an acceptable level of taxpayer service?

    Should you be confirmed, will you commit to providing a more 
detailed response to me in writing within 90 days of being sworn in as 
Commissioner?

    Answer. It's important for the IRS to provide clarity wherever 
possible in administering the tax code. This is a core component of 
providing the best customer service to working families and small 
businesses. Where there are areas of tax administration that can be 
improved to reduce complexity, I believe it should be studied and 
improved upon, if possible, within legal and regulatory bounds. If 
confirmed, I would look forward to studying this issue and working to 
ensure you and your staff are best informed about this specific issue 
of tax administration.

    Question. In November 2016, the IRS issued Notice 2016-66 listing 
micro-captives as a ``transaction of interest'' to gather facts to 
determine which are abusive. Since then (over 6 years later), the IRS 
has not provided any guidance, but I have been told the IRS treats any 
micro-captive subject to the notice as ``abusive.'' I also have been 
told that a settlement offer is made to the taxpayer at the inception 
of an examination on the assumption that all micro-captives have the 
same fact pattern and that the appeals process is unavailable. It 
appears that there is no, if any, indication that any single taxpayer's 
unique facts are given consideration and that the IRS is taking a 
``one-size-fits-all'' approach. This reportedly forces many taxpayers 
to settle due to the high cost of litigation and effectively eliminates 
the opportunity to have a hearing in the Independent Office of Appeals. 
I have also been made aware that in coordinated issue cases the IRS 
Commissioner seeks to have the same outcome for all taxpayers. I am 
getting complaints that such an approach has hampered the independence 
of the Office of Appeals, particularly in other factually intense cases 
such as valuation cases. And this lack of independence is causing a 
backlog in the Tax Court.

    As you know, the Taxpayer First Act (Pub. L. 116-25) provides 
taxpayers with an appeals hearing on the merits of their case. I have 
also authored legislation called the Small Business Taxpayer Bill of 
Rights that, among other things, would improve the appeals process by: 
requiring taxpayer consent before allowing IRS Counsel or compliance 
personnel to participate in Appeals Conferences; prohibiting the 
Independent Office of Appeals from raising new issues or theories 
during a conference with taxpayers and the IRS; making ex parte 
discussions between the Independent Office of Appeals and other IRS 
employees a fireable offense; and establishing an alternative dispute 
resolution program that would allow taxpayers to request mediation by 
an independent, neutral party not employed by the IRS.

    What do you think the role of the Independent Office of Appeals 
should be in resolving disputes between the IRS and taxpayers?

    Do you think a ``one-size-fits-all'' approach that ignores specific 
facts and circumstances is an appropriate approach for effective tax 
administration and IRS examination of taxpayer returns?

    Answer. The IRS Independent Office of Appeals is one aspect of the 
customer service and taxpayer experience at the IRS, with an aim to 
resolve disputes in a way that is fair. If confirmed, I look forward to 
engaging with all staff at the IRS to better understand how they work 
now and ways that the IRS can improve. Also, I would be very concerned 
about a ``one-size-fits-all'' approach in resolving tax issues. 
Specifically, I would look to the Taxpayer Bill of Rights where 
taxpayers have the right to be heard in challenging an IRS position and 
the right to an appeal. I believe a ``one-size-fits-all'' approach 
would not be aligned with these rights.

    Question. During your confirmation hearing, you told the committee: 
``Sales taxes are regressive.''

    The Tax Cuts and Jobs Act imposed a $10,000 cap on the State and 
Local Tax (SALT) Deduction. Do you think eliminating the $10,000 SALT 
cap is regressive and would disproportionately benefit high-income 
taxpayers?

    Are you aware that the Joint Committee on Taxation (JCT) has told 
Congress that almost half of the benefit of eliminating the $10,000 
SALT cap goes to millionaires and billionaires, almost 70 percent of 
the benefit goes to those making more than $500,000, and taxpayers 
making less than $50,000 will see no tax relief?

    Are you aware that the Congressional Research Service (CRS) has 
written, ``The SALT Cap predominantly affects taxpayers with higher 
incomes. . . . [T]he benefit of SALT deductions in terms of tax savings 
is also larger for taxpayers with higher incomes . . . [t]he SALT Cap 
increased the Federal tax burden of high-income taxpayers.'' (The SALT 
Cap: Overview and Analysis, R46246, March 2020)?

    Do you agree with JCT and CRS? If not, why not?

    Answer. In my personal capacity, it's my understanding that some 
versions of SALT can be regressive depending on the structure, just 
like many other taxes. When it comes to the sales tax, sales taxes are 
generally thought to be regressive because they increase tax burden as 
a percent on low-income taxpayers more than on high-income taxpayers. 
However, I am not intimately familiar with these analyses. The role of 
the Commissioner of Internal Revenue is to administer the tax code, 
which, if confirmed, I would look forward to discussing on matters 
involving implementation of the tax laws.

    Question. During your confirmation hearing, you told the committee: 
``[I]'m a rule follower. And I would only take actions that are 
consistent with what the IRS's authority are under the law.'' On 
December 23, 2022, the IRS announced in Notice 2023-10 a delay in the 
reporting threshold for third-party settlement organizations that was 
set to take effect for the current tax filing season. Because of this 
delay, third-party settlement organizations will not be required to 
report the tax year 2022 transactions on a Form 1099-K to the IRS as 
enacted and required by Pub. L. 117-2. I opposed this intrusive and 
burdensome proposal and cosponsored the SNOOP Act of 2022, which 
eliminates this new reporting requirement.

    Can you explain what the legal basis is for the delay announced in 
Notice 2023-10?

    Do you think the IRS has the legal authority to make this decision 
without congressional action? If so, please explain.

    Answer. The American Rescue Plan included a provision to require 
third-party settlement organizations to report certain transactions to 
the IRS. It was set to take effect this year. It's my understanding the 
IRS recently announced a 1-year delay. I am not familiar with the 
specifics surrounding this decision and therefore, cannot speak to the 
legal or regulatory authorities that served as the basis for this 
delay. If confirmed, I look forward to learning about this issued delay 
and updating you and your staff.
                                 ______
                                 
              Questions Submitted by Hon. Robert Menendez
              
    Question. What percentage of users attempting to access IRS 
services are able to successfully complete the ID.me enrollment process 
without encountering any issues?

    What percentage of users attempting to access IRS services 
experience problems with ID.me and what are the main challenges they 
encounter in using it?

    What percentage of Black, Hispanic, and Asian-American and Pacific 
Islander (AAPI) users attempting to access IRS services report having 
issues using ID.me? Please provide similar statistics by age groups.

    Answer. It is essential that our tax system operates fairly and 
that taxpayer data is secure and protected. I do not have specifics on 
IRS's decision-making around ID.me or other identity verification/
authentication tools nor do I have access to statistics about the 
program. But I would like for you and the committee to know that 
protecting taxpayer data and privacy is of utmost importance to me--and 
to the employees at the IRS. I commit to learning more about this 
issue, if I am confirmed, and engaging with you and your staff.
                                 ______
                                 
                 Questions Submitted by Hon. John Thune
                 
    Question. Senator Grassley and I introduced the IRS Funding 
Accountability Act, which includes the support of every Republican on 
the Finance Committee. The bill has a common-sense aim: to increase 
oversight of the $80 billion in additional IRS funding.

    Timely and reliable information from executive branch agencies, 
such as the IRS, is vital in order for Congress to exercise its 
constitutional role of conducting oversight.

    In addition to requiring annual spending plans for the $80 billion 
in funding, our bill would require the IRS to provide quarterly reports 
to Congress on the actual expenditure of these funds.

    Regardless of the time frame for enactment of our bill, will you 
commit to provide Congress quarterly reports on the expenditure of the 
$80 billion?

    Answer. I believe it's important that the IRS's plans are 
transparent, updated, and clear to you and the American people. Since I 
am not currently at the IRS, I do not know the exact cadence that would 
work best. However, if confirmed, I will work with IRS and Treasury to 
ensure you and the American people are updated with appropriate 
frequency. I look forward to sharing more specifics with you on this.

    Question. The Treasury Inspector General released a report last 
week that stated, ``With the ability to undertake enforcement hiring 
under the Inflation Reduction Act, the IRS needs a more strategic 
approach to the allocation of examination resources.''

    The report found that the IRS does not have a coordinated approach 
to develop an annual enterprise-wide examination work plan, and TIGTA 
recommended the IRS establish such an annual plan.

    In addition, a separate TIGTA report found that the IRS's ``Report 
to Congress'' does not contain specific and measurable performance 
goals or expected outcomes to measure progress, which could lead to an 
inefficient use of resources.

    In your personal opinion, would the IRS benefit from better 
developing, articulating, and tracking its performance goals to 
Congress?

    In your personal opinion, would the IRS--and American taxpayers--
benefit from knowing how the IRS is developing, articulating, and 
tracking performance goals related to its recent $80 billion funding 
allocation?

    Answer. During my tenure at OMB, I observed cases where Federal 
agencies came short of meeting an IG or GAO recommendation. When I left 
OMB and went to the IRS in 2013, I was very focused on making sure the 
IRS fully implemented all TIGTA recommendations made during my tenure. 
If confirmed, I will seriously and systematically consider all TIGTA 
recommendations. Of note, I agree with the premise of your questions 
that there would be benefit in both tracking performance goals in 
general and with respect to the IRA.

    Question. In May of 2018, you contributed to an article published 
by the Boston Consulting Group that outlines four steps to high-impact 
strategic planning in government.

    When explaining the fourth step of strategic planning, execution, 
the article reads that leaders ``should hold regular evidence-based 
progress reviews with key managers, including officials who have direct 
oversight of programs that support each strategic objective.''

    The article continues, ``The most effective government 
organizations understand that without accountability and the right 
incentives, even the best strategic plan will likely never become 
reality.''

    I was encouraged to see this, as the IRS Funding Accountability Act 
would require the IRS and Treasury Department to make quarterly reports 
to Congress on how the Inflation Reduction Act's funds to the IRS are 
spent, and provide annual reports on key performance goals.

    Given your stated support of oversight to enable the most effective 
government organizations, do you personally believe it is good public 
policy for the IRS to provide Congress with, at minimum, an annual 
spending plan, including performance goals and results, of the IRA 
funds?

    Answer. Please see the answer to your first question.

    Question. On August 17, 2022, The New York Times reported that 
Secretary Yellen directed the IRS to draft within 6 months a plan for 
the IRS's allocation of $80 billion in funding. The article stated that 
``The plan must have metrics for its various areas of improvement so 
that Congress can hold the agency accountable.''

    Given that Secretary Yellen made that directive 6 months ago, when 
do you expect the plan for the $80 billion in IRS funding to be shared 
with Congress?

    Have you personally seen the plan, in whole or in part? If so, when 
was that shared with you?

    In order for Congress to hold the IRS accountable to its 
significant funding allocation, do you think it is reasonable for the 
IRS to share its plan for the funds to Congress in advance of spending 
the money (excluding for taxpayers services, which received only 3 
percent of the overall funds)?

    Are you aware of how much of the $80 billion in funding has been 
spent as of February 17, 2023? If so, what is the amount?

    Answer. I am not familiar with any aspect, timing, or status of the 
plan or funds spent, beyond reading public news reports. If confirmed, 
I look forward to working with you and your staff in a transparent way.

    Question. Given that the aforementioned directive from the Treasury 
Secretary is nonbinding, it would appear the Treasury Department and 
the IRS can bypass important deadlines--and basic accountability--of 
the unprecedented $80 billion funding allocation without recourse.

    In order to build trust with taxpayers, do you believe it would be 
helpful for the IRS to share an annual spending plan, including 
performance goals and metrics, of how the agency intends to utilize 
funds allocated from the Inflation Reduction Act? Why or why not?

    Answer. Please see the answer to your first question.

    Question. While it is constructive to find bipartisan policies to 
narrow the tax gap, it is worth noting that the United States has a 
relatively high and stable voluntary tax compliance rate. According to 
recent IRS data, about 84 percent of taxes were paid voluntarily and on 
time. After enforcement efforts and late payments are taken into 
account, about 86 percent of taxes were paid. Tax compliance levels 
remain substantially unchanged since at least the 1980s.

    In your opinion, do agree that the United States has a relatively 
high and stable voluntary tax compliance rate?

    Do you agree that narrowing the tax gap requires a comprehensive 
strategy and effective execution from the IRS, appropriate safeguards 
and accountability to taxpayers, and effective oversight and 
accountability of the IRS? Why or why not?

    Answer. Voluntary tax compliance is the bedrock of the U.S.'s tax 
collection system. Closing the tax gap is essential both to protect the 
government's bottom line and to ensure the government is funded to 
provide essential services. I believe it is essential to strive to 
improve tax compliance rates, focusing on wealthy and corporate tax 
evasion. I agree that narrowing the tax gap requires a comprehensive 
strategy that is presented in an open and transparent way.

    As I discussed in the hearing, I believe there are numerous factors 
that are required to build trust in the effectiveness of our tax 
system, including for example, equity and fairness in compliance 
activities, access, data security, and clarity on what is expected. 
Many of these principles are outlined in the Taxpayer Bill of Rights. 
If confirmed, I commit to studying the IRS's tax gap, understanding 
where there are gaps in both information and collection, ensuring that 
any steps taken advance the principles of the Taxpayer Bill of Rights, 
and communicating with you and this committee about my findings.

    Question. As discussed at the Senate Finance Committee hearing, it 
has been almost 2 years since the leak or hack of private taxpayer 
information that ended up in the hands of ProPublica, a left-leaning 
media outlet. The confidential taxpayer information from that data 
breach has been subsequently used to push a highly partisan political 
agenda. Despite public assurances from the Treasury Department and 
former IRS officials to keep Congress apprised of the breach, there has 
been no meaningful follow-up from the Biden administration.

    In your personal opinion, how does the lack of accountability in 
regard to this breach of taxpayer data reflect on the IRS, and what 
type of impact do you think it has on the public's trust in the agency?

    Notwithstanding potential proposals from TIGTA and other government 
agencies about the leak or hack of private taxpayer data, how would you 
seek to ensure that confidential taxpayer information from the IRS is 
not improperly shared again?

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and the IRS. My understanding is that this matter was 
immediately referred to the appropriate authorities, including the 
Treasury Inspector General for Tax Administration (TIGTA), the 
Department of Justice, and Treasury's Office of Inspector General, each 
of which conduct their work independently of the IRS. I cannot 
speculate about that work, any potential findings, or the timeline. I 
can commit to you that, if confirmed, I will ensure the IRS continues 
to prioritize protecting taxpayer information and will take any 
appropriate action to do so and will seriously and systematically 
consider all TIGTA recommendations.

    Question. Unless IRS technology modernization is defined and 
measured, it would seem that any modernization effort may prove 
elusive.

    In your opinion, what constitutes IRS ``technology modernization'' 
and what areas of technology modernization are you most focused on to 
improve taxpayer services?

    Answer. For too long, the IRS lacked the resources to adequately 
serve communities and small businesses and has some of the oldest IT 
systems in government. The IRS needs to modernize its technology and 
become a 21st-century tax administrator that provides better service 
for taxpayers.

    While I would want to reserve any final conclusions about what the 
key priorities should be until I have spent time at the IRS 
understanding the current environment, my current hypothesis is that 
the top modernization priorities fall into three buckets: ensuring the 
Individual Master File and Business Master File are updated to a modern 
platform to optimize data security and cyber resiliency, given the 
sensitivity of data maintained in those systems; embedding innovative 
technology in the call center to help significantly increase 
responsiveness to taxpayers trying to make contact with the IRS; and 
imaging paper forms into machine-readable output to manage and 
eliminate backlogs and help increase overall efficiency of return 
processing.

    Question. How do you consider the role of third parties, such as 
tax preparers and tax software, in the taxpayer experience? What ways, 
if any, would you seek to improve the working relationship between the 
IRS and such third parties to enhance the taxpayer experience?

    Answer. We can and must look for any strategies or methods to work 
to make the tax filing process simpler and less burdensome on 
taxpayers. One area of particular focus should be better understanding 
the taxpayer experience and how effective different channels are for 
tax preparation and filing. With information from taxpayers on their 
experience, and with input from broad array of stakeholders, including 
preparers themselves, I will be better positioned to answer your 
question on roles and ways of improving the working relationship. If 
confirmed, I look forward to looking at all opportunities to enhance 
the taxpayer experience at the IRS.
                                 ______
                                 
              Questions Submitted by Hon. Thomas R. Carper
              
    Question. I consistently hear from constituents who file paper tax 
returns about the lengthy and difficult experience they have with the 
processing of their returns. I have long advocated for the expansion of 
e-filing, especially through the Free File program that provides lower- 
and middle-income taxpayers an option to e-file their returns at no 
cost. However, the Free File program has been plagued by low usage 
rates, which is why I asked the Government Accountability Office (GAO) 
to study the Free File program's overall effectiveness. In its report 
released last April, the GAO called on the IRS to identify and develop 
additional options for taxpayers to e-file their tax returns for free. 
The Inflation Reduction Act also provided $15 million to the IRS to 
study the cost and feasibility of creating a direct, e-file program. I 
look forward to reading the IRS's report to Congress in May 2023.

    If confirmed, how will you prioritize and tackle the challenges 
with respect to the current state of the Free File program?

    Answer. There's a recent IRS statistic that it can take an average 
of 13 hours to file an individual income tax return and hundreds of 
dollars. That's unacceptable, in particular for working families and 
small businesses. It is critical that IRS work on strategies and devote 
resources to make tax filing easier, simpler, and less burdensome for 
taxpayers. The IRA calls for the IRS to deliver a study of the 
feasibility of a direct file system and examination of taxpayer 
preferences. If confirmed, I look forward to engaging with IRS 
employees on the development and outcomes of the required study and any 
next steps it identifies.

    Question. In the Consolidated Appropriations Act of 2021, which was 
signed into law December 27, 2020 by President Trump, Congress included 
a slightly amended version of the Carper-Collins Incentivizing Offshore 
Wind Power Act. This provision created a long-term investment tax 
credit for the offshore wind industry under section 48 of the tax code. 
This offshore wind investment tax credit is critical to ensure the 
clean energy of offshore wind--and the manufacturing and construction 
jobs that go along with the industry--are a reality in this country.

    Prior to the passage of the Consolidated Appropriations Act of 
2021, Senator Collins and I tried for over a decade to provide long-
term tax certainty for the offshore wind industry through a stand-alone 
investment tax credit. So it is to our dismay there remains uncertainty 
around the implementation of the offshore wind investment tax credit 
because of delays by the Internal Revenue Service (IRS). In placing the 
offshore wind investment tax credit under section 48 of the tax code, 
it was our intent to allow all the necessary offshore wind assets to 
qualify for the credit. This includes assets like the subsea cables and 
voltage transformers that are critical to bringing the offshore wind 
electricity to the electric grid. The Bluebook released by the Joint 
Committee on Taxation, JCS-1-22, reaffirmed this congressional intent. 
However, to date, the IRS and Treasury have not released guidance 
clarifying that offshore wind developers can treat assets leading up 
to, and including, the onshore transformer and project substation as 
qualifying for purposes of claiming the investment tax credit.

    In this country, there is an offshore wind project pipeline of more 
than 40GW, with projects in various stages of development. We are 
inching closer to finally having a constructed and operational offshore 
wind farm in Federal waters. Right now, any delays in guidance is 
punishing the early offshore wind developers, further threatening the 
momentum of the industry.

    If confirmed, will you commit to moving quickly on the backlog of 
decisions the IRS needs to make to help deploy clean energy, such as 
decisions involving the investment tax credit for offshore wind?

    Answer. The role of the IRS is to administer the tax code 
efficiently and lawfully. I understand the need for the IRS, in 
partnership with Treasury, to issue tax regulations in an efficient 
manner and note your concerns about the impact of delays. If confirmed, 
I look forward to working with Treasury and the IRS Chief Counsel to 
understand the regulatory agenda and the ongoing work to administer the 
tax code in an efficient and fair manner.
                                 ______
                                 
                 Questions Submitted by Hon. Tim Scott
                 
    Question. On December 15, 2022 Bloomberg Law reported the 
``confidential data of about 112,000 taxpayers inadvertently published 
by the IRS over the summer was mistakenly republished in late November 
and remained online until early December.'' After the first disclosure, 
the Finance Committee was told, in writing, preventive measure would be 
taken so such a leak would not happen again. Yet it happened again a 
few months later. Ultimately, the Internal Revenue Service blamed a 
third-party contractor for the second disclosure. As Commissioner, how 
would you hold accountable those ensuring preventive measures were 
taken, but where not, and the contractor who leaked taxpayer 
information the second time? Do you think it would be reasonable to let 
those taxpayer whose information was disclosed?

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and to the IRS. In order to fulfill its mission, the 
IRS must safeguard the information of millions of Americans, and, as we 
all would expect, we see the IRS do this successfully year after year. 
If confirmed, I would take any unauthorized disclosure of taxpayer data 
extremely seriously, as I know my predecessors did. And, as has been 
done in the past, I would ensure that the matter was referred to the 
appropriate investigative authorities and that any appropriate remedial 
action was taken upon conclusion of the investigation.

    Question. It is my understanding that a lack of IRS guidance 
concerning WOTC could potentially result in windfall payments to firms 
that are merely claiming tax credits for employees who happen to meet 
WOTC criteria. The WOTC program requires an employer to obtain the pre-
screening information set forth in Form 8850 ``on or before'' the job 
offer date, which helps ensure that an applicant's WOTC eligibility 
will positively influence an employer's hiring decision. Contrary to 
this requirement, I understand that some service providers may have set 
up screening practices that result in screening job applicants for WOTC 
eligibility after they have already been offered employment. Those 
providers could take the view that they are not violating the WOTC 
instructions because ``offer of employment'' is undefined for WOTC 
purposes, and thus that ``conditional'' or ``contingent'' offers do not 
trigger the screening requirement prior to becoming a ``final'' or 
unqualified offer. What is your timeline to provide clarification and 
guidance to employers on what constitutes an ``offer of employment,'' 
triggering the screening requirement for the purpose of WOTC?

    Answer. The role of the IRS is to administer the tax code 
efficiently and lawfully. I understand the need for the IRS, in 
partnership with Treasury, to issue tax regulations in an efficient 
manner. If confirmed, I look forward to working with Treasury and the 
IRS Chief Counsel to understand the regulatory agenda and to work to 
administer the tax code in an efficient and fair manner.

    Question. IRS employee's performance evaluation includes judging 
their adherence to diversity, equity, inclusion, and accessibility 
(DEIA) principles. As Commissioner, how will you implement DEIA 
performance evaluations so that IRS employees are clear as to the 
objective criteria used to evaluate their DEIA performance? As 
Commissioner, how will you respond if the developed DEIA criteria 
conflict with existing equal employment opportunity laws?

    Answer. I agree that performance criteria should be clear and 
consistent with all relevant personnel laws. As I am not currently at 
the IRS, I am not familiar with the IRS's current performance 
evaluation principles. However, if confirmed, I look forward to 
studying the IRS's performance evaluation system and working to ensure 
the IRS workforce continues to improve.
                                 ______
                                 
             Question Submitted by Hon. Benjamin L. Cardin
             
    Question. The Employee Retention Credit (the ERC) was created by 
the CARES Act and was extended by subsequent pandemic relief 
legislation. The goal of this tax credit was to encourage businesses to 
keep employees on their payroll. As chairman of the Senate Small 
Business Committee, I know that the ERC was vital in helping small 
businesses across the country retain their workforce and keep their 
doors open during the pandemic. This credit has been and continues to 
be essential for the financial health of many. Unfortunately, I have 
received significant outreach from constituents that the IRS is taking 
several months to process these businesses' returns claiming the ERC, 
resulting in businesses unable to receive their ERC in a timely manner.

    What can the IRS do to help ease the backlog of ERC claims and 
ensure a timely delivery of this credit to businesses depending on the 
ERC?

    Answer. Through this nomination process, I have heard from many 
Senators about the Employee Retention Credit and the impact of delays 
on small businesses and nonprofits. I understand the importance of 
ensuring taxpayers receive the tax benefits they are owed and the 
frustration that delays can cause. If confirmed, I commit to 
prioritizing this issue and briefing you and your staff on what I 
learn.
                                 ______
                                 
                Questions Submitted by Hon. Bill Cassidy
                
    Question. Louisiana has many historic districts and buildings that 
benefit from historic preservation easements. This tool helps protect 
historic buildings, and transform many iconic structures in a manner 
that retains historic character. I am an advocate for protecting and 
expanding the use of historic preservation programs, and advocated for 
amendments in the last Congress to protect the integrity of the 
historic preservation easement program.

    A nonprofit group in my State recently contacted my office asking 
for my assistance to direct the IRS to remove the haze of confusion 
that unnecessarily deters would-be donors of historic preservation 
easements. The conservation easement reforms passed in the 2022 omnibus 
bill require the IRS to issue safe harbors to taxpayers who are 
attempting to use this program as Congress intended. Safe harbors 
addressing matters such as extinguishment clauses and proceeds 
regulations should help to clear the decks of much of the controversy 
otherwise heading toward Tax Court.

    If confirmed, can you ensure the IRS will meet the 120-day deadline 
for issuing the safe harbors required by the conservation easement 
provisions included in the omnibus?

    Will you work to have a separate safe harbor issued for historic 
preservation easements, including provisions that clearly differentiate 
between historic buildings and green space easement transactions?

    Will you work with me to ensure that this safe harbor works as 
intended, and to ensure that taxpayers utilizing historic preservation 
easements have the full opportunity to cure any alleged deficiencies in 
deeds or other paperwork to comply with the safe harbor?

    Answer. Yes, I commit to doing what is necessary to meet 
congressional requirements associated with historic preservation 
easements. Further, and as I discussed in the hearing, I understand how 
important certainty and clarity can be for investment in these critical 
historic preservation programs. In fact, the very first right listed on 
the Taxpayer Bill of Rights is the right taxpayers have to know what 
they need to do to comply with the tax laws. A priority of mine, if 
confirmed, is to further improve clarity across the IRS's work.

    If confirmed, I commit to working with Treasury and the IRS Chief 
Counsel to understand the regulatory agenda, to work to understand 
where the IRS can efficiently and fairly implement priority 
regulations, and keep you and your staff updated on this progress.
                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
               
    Question. Historic preservation tax incentives have been used 
successfully throughout Ohio to rehabilitate historic buildings, 
increase available housing, and revitalize urban neighborhoods.

    If confirmed, will you work with stakeholders to promote the 
legitimate use of historic preservation easements and protect the 
integrity of this tax incentive?

    Answer. If confirmed, I very much look forward to working with 
stakeholders to protect the integrity of the tax system and ensure tax 
programs, like the historic preservation easements, are administered in 
a fair and efficient manner.

    Question. I have heard from small business owners across Ohio who 
filed for the Employee Retention Credit (ERC) and have yet to receive 
their refund. Some have been waiting for more than a year for the funds 
to which they're entitled. For many of these small businesses, these 
payments could mean the difference between remaining open and having to 
lay off employees, cut back hours, or even close their doors 
permanently.

    If confirmed, what steps will you take to address this backlog?

    Answer. Through this nomination process, I have heard from many 
Senators about the Employee Retention Credit and the impact of delays 
on small businesses and nonprofits. I understand the importance of 
ensuring taxpayers receive the tax benefits they are owed and the 
frustration that delays can cause. If confirmed, I commit to 
prioritizing this issue and briefing you and your staff on what I 
learn.

    Question. Over the past several years, Ohioans have faced long call 
center wait times and long waits to get their tax returns. It's 
important that the IRS have the resources and staff to answer calls 
from Ohioans, ensure timely returns, and crack down on tax cheats. As 
you know, the Inflation Reduction Act is already helping to improve 
customer service and help get Ohioans their tax refunds faster. 
Resources from the IRA will also enable the IRS to replace retiring 
workers in a timely manner and support its work going after 
corporations and wealthy individuals that have cheated the system for 
years, and that too often pay less in taxes than middle-class families 
do.

    If confirmed, will you commit to working in partnership with my 
office and others to ensure timely responses to Ohioans reaching out to 
the IRS for assistance?

    Answer. Yes, improving customer service will be a key priority of 
mine, if confirmed. Your constituents and the American people have a 
right to quality service, which I hope to help further at the IRS, if 
confirmed.

    Question. If confirmed, will you commit to supporting the IRS 
workforce in its mission to provide timely responses and refunds to 
Americans during and outside of tax season?

    Answer. Yes, if confirmed, I am committed to working with the IRS 
workforce to provide timely responses to American taxpayers. As I 
mentioned in the hearing, the Taxpayer Bill of Rights is important to 
me, which includes the right to be informed, the right to quality 
service, and the right to finality. I hope to help further that work, 
if confirmed.

    Question. Do you share Treasury Secretary Yellen's commitment to 
not increasing audits on Americans making less than $400,000, but 
instead to focus additional resources on going after those individuals 
and businesses that are purposefully cheating the system?

    Answer. As I said in my testimony, last year, Secretary Yellen 
issued a directive that the IRS will not increase audit rates, relative 
to historic levels, for small businesses and households making under 
$400,000 a year, which I am committed to meeting. If I am fortunate 
enough to be confirmed, the audit and compliance priorities will be 
focused on enhancing IRS capabilities to ensure America's highest 
earners comply with applicable tax laws.
                                 ______
                                 
               Questions Submitted by Hon. James Lankford
               
    Question. Do you agree that it is not the role of the IRS or any 
other government agency to deny an otherwise available public benefit 
to an organization on account of its religious status?

    Answer. In order for our tax system to work, taxpayers must have 
confidence that all taxpayers, regardless of who they are or what their 
affiliation is, are treated fairly and impartially. If confirmed, I 
will make sure that taxpayers--regardless of background and whether 
they are individuals, small businesses, or nonprofits--are being 
treated fairly and that the tax laws are being applied impartially and 
equally to all.

    Question. If confirmed, you will oversee the processes and 
procedures to determine exemption of organizations from Federal income 
tax under IRC section 501(c)(3). Will you commit that no decisions are 
based on bias for or against a political or religious viewpoint?

    Answer. If confirmed, it would be a top priority of mine to ensure 
the tax laws are administered fairly and impartially. Given the risk 
that bias has to the integrity of the tax system, if confirmed I will 
use my authority to ensure that the IRS meets this priority 
successfully.

    Question. Will you commit to transparency to Congress on the on the 
process, procedures, reviews, communication, and training regarding 
determination of tax exempt status for applicant organizations?

    Answer. Public trust requires transparency, collaboration with 
oversight entities such as Congress, adherence to the rule of law, and 
responsible stewardship of taxpayer dollars. Public trust also requires 
that the government carry out its mission fairly and equitably. If 
confirmed, these are the principles I will continue to carry forward 
into this role.

    Question. Is there ever a basis for the IRS to write regulations, 
issue guidance, or implement in a way that contradicts statute? If 
applicable, how would you decide that the congressional intent is 
different than what was written?

    Answer. It is the role of the IRS to administer the tax code 
efficiently, fairly, and fully consistent with law. While I understand 
that there can often be differing interpretations of the law, if 
confirmed, I will work with the tax-writing committees, Congress more 
broadly, and the Treasury Department to administer the tax code 
consistent with the statutes enacted into law.

    Question. The unauthorized disclosure of returns or return 
information is a felony under 26 U.S.C. Sec. 7213(a)(1),(2). It is also 
a felony under Federal law to publish returns or return information 
that were disclosed to the publisher by someone else under 26 U.S.C. 
Sec. 7213(a)(3).

    If confirmed, how will you enforce Federal law and coordinate with 
the appropriate authorities on those publishing protected, taxpayer 
information?

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and to the IRS. In order to fulfill its mission, the 
IRS must safeguard the information of millions of Americans, and, as we 
all would expect, we see the IRS do this successfully year after year. 
If confirmed, I would take any unauthorized disclosure of taxpayer data 
extremely seriously, as I know my predecessors did. And, as has been 
done in the past, I would ensure that the matter was referred to the 
appropriate investigative authorities and that any appropriate remedial 
action was taken upon conclusion of the investigation.

    Question. A recent GAO report found that 33 percent of the 
applications, 23 percent of the software instances in use, and 8 
percent of the hardware assets are legacy systems. The IRS spends about 
$635 million on applications, $324 million on software, and $115 
million on hardware in FY 2022 for operations and maintenance. The IRS 
doesn't specifically track the costs for its legacy systems because of 
OMB's directive to use the technology business management (TBM) 
approach to budgeting). A recent GAO report said the IRS documented 21 
IT initiatives in its modernization portfolio.

    Knowing what you know about the recent failures of IRS technology, 
what IT modernization initiatives will you prioritize?

    Answer. For too long, the IRS lacked the resources to adequately 
serve communities and small businesses and has some of the oldest IT 
systems in government. The IRS needs to modernize its technology and 
become a 21st-century tax administrator that provides better service 
for taxpayers.

    While I would want to reserve any final conclusions about what the 
key priorities should be until I have spent time at the IRS 
understanding the current environment, my current thinking is that the 
top modernization priorities fall into three buckets: ensuring the 
Individual Master File and Business Master File are updated to a modern 
platform to optimize data security and cyber resiliency, given the 
sensitivity of data maintained in those systems; embedding innovative 
technology into IRS's service work--whether on the phones or online--to 
help significantly increase responsiveness to taxpayers trying to 
contact the IRS; and digitizing paper forms into machine-readable 
output upon receipt to manage and get healthy on inventory and help 
increase overall efficiency of return processing

    If confirmed, I look forward to getting up to speed on the current 
modernization efforts and future plans and engaging with you and your 
staff on IRS's progress.

    Question. IMF is the IRS's primary storage hub for individual tax 
account data. The IRS had said the IMF would not be fully replaced 
until 2030. The IRS now does not have a completion date. GAO said IMF 
is ``written in an archaic language requiring specialized skills that 
are increasingly hard to find.''

    How would you handle IMF in the short term and replace it in the 
long term?

    Answer. As noted in my response to the previous question, I believe 
modernizing the core tax processing system--including IMF and BMF--
should be a priority on IRS's agenda. By gradually decommissioning our 
legacy infrastructure, we will also be able to deprecate outdated 
programming languages, which are inefficient to use and understood by 
only a small subset of technologists. If confirmed, I will immediately 
seek to understand the current state of the IMF and BMF, any plans 
underway for modernization, any previous plans that were paused or 
suspended so we can learn from past experience, and working to develop 
a strategy that lays out a clear path forward. As a general rule, I 
believe we will need to strategically balance the activities required 
to decommission the legacy systems with the activities required to 
introduce modernized infrastructure such that we can maintain 
continuity in tax processing while also preparing IRS's technology 
infrastructure for the future.
                                 ______
                                 
             Questions Submitted by Hon. Michael F. Bennet
             
    Question. The IRS administers the Earned Income Tax Credit (EITC) 
and Child Tax Credit (CTC), which currently lift 12 million kids out of 
poverty. But about one-fifth of eligible Americans do not claim the 
EITC.

    There are many reasons for this, including a lack of awareness 
about the credit, difficulty filing, or confusion over eligibility.

    How can the IRS help more eligible families claim the EITC and CTC? 
Can you commit to setting clear goals for increasing uptake of the EITC 
and CTC?

    Answer. It is essential that all taxpayers know about and receive 
the credits, deductions, and other tax incentives for which they are 
eligible--whether that's certain individual credits like the CTC and 
EITC or small businesses who applied for the Employee Retention Credit. 
Over the last few years, the IRS sent millions of Advance CTC payments 
and Economic Impact Payments, demonstrating their success in reaching 
many taxpayers who would not otherwise file a tax return or did not 
know they were eligible for these new credits. However, I know there is 
more to do in this space as millions of taxpayers fail to claim tax 
credits and incentives for which they are eligible. If confirmed, I am 
committed to raising awareness about existing tax benefits and helping 
taxpayers learn about the tax benefits they are eligible for and 
understand how to claim them.

    Question. The IRS estimates that Americans spend on average 13 
hours and $250 fulfilling their legal obligation to file a tax return 
every year. What will you do as Commissioner to make the filing process 
easier, and to reduce the cost and burden on Americans for simply 
complying with the law?

    Answer. It is critical that IRS work on strategies and devote 
resources to make tax filing easier, simpler, and less burdensome for 
taxpayers. If confirmed, I look forward to engaging with IRS employees 
on the development and execution of strategies to improve tax 
administration in a way that improves customer service and helps honest 
taxpayers more simply comply with their tax obligations. While I would 
want to reserve any final conclusions about what the key priorities 
should be until I have spent time at the IRS understanding the current 
environment, my current hypothesis is that a critical step should be 
embedding innovative technology in the call center to help 
significantly increase responsiveness to taxpayers trying to contact 
the IRS.

    Question. Treasury and the IRS face an enormous new challenge of 
implementing the $270 billion of clean energy tax credits in the 
Inflation Reduction Act (IRA). These credits are the driving force 
behind the reduction in greenhouse gas emissions in the new law. What 
can Congress do to ensure the IRS has the capacity to meet its new and 
urgent responsibilities?

    Answer. I understand the significant responsibility the IRS has in 
implementation of the IRA, and my job as Commissioner would be to 
ensure that it is implemented it in a fair and impartial manner. 
Households and businesses across the country are eligible for 
significant benefits pursuant to the IRA, including energy tax credits. 
As Commissioner, if confirmed, I would work to ensure that taxpayers 
can understand and access the tax benefits they are eligible for and 
ensure that the law is implemented and enforced impartially and would 
look forward to working in partnership with you and the committee on 
status and progress of these efforts.
                                 ______
                                 
                Questions Submitted by Hon. Steve Daines
                
    Question. My Putting First Responders First Act was signed into law 
as part of the retirement legislation that we considered in this 
committee last Congress. This law will make compensation received by 
disabled first responders tax exempt even after retirement, and 
importantly, would end improper audits of disabled first responders 
that stem from ambiguity around their retirement age. However, the 
version that was signed into law moved the effective date of the bill 
to 2026, which was different from the committee-passed version that had 
this provision taking effect immediately. The unfortunate consequence 
of this is that erroneous IRS audits of disabled first responders could 
continue for the next several years.

    If confirmed, will you commit to ending improper audits of disabled 
first responders? If confirmed, and you believe you need to discuss 
this with relevant IRS staff, will you commit to getting back to me 
with an answer within 6 weeks once confirmed?

    Answer. If confirmed, I commit to understanding this issue, looking 
for ways to ensure customer service, taxpayer experience, and fair 
administration of the tax code are prioritized. As I discussed in the 
hearing, I believe equity to be a critical factor in effective 
implementation of the tax system. In particular, if confirmed, I want 
to make sure that the IRS meets people where they are and complies with 
all elements of the Taxpayer Bill of Rights. This will absolutely 
include disabled first responders who deserve a responsive IRS that 
meets them where they are to ensure they have the support they need in 
meeting any tax obligations. Also, I have no knowledge of the status of 
audits of this group, but, if confirmed, I commit to learning about 
this issue, benefiting from your insights, and working with you and 
your staff to keep you updated.

    Question. In November, then-Ranking Member Brady, sent a letter to 
then-IRS Commissioner Rettig questioning why the agency sent letters to 
9 million individuals right before the election alerting them to 
potential tax benefits.

    Given your extensive management experience, do you think it made 
sense to send out these mailers to potentially ineligible individuals, 
and add additional work to the IRS's plate at a time when the agency 
had 9 million unprocessed 2021 returns and over 18 million tax returns 
awaiting IRS action?

    Answer. It is critical that the IRS get healthy on its inventory so 
that taxpayers can resolve issues and get refunds more quickly. At this 
point, I am not familiar with any decision-making around this specific 
issue or work the IRS has done, but I know the IRS has been working 
diligently on the inventory and as a part of my commitment to improved 
customer service, getting healthy on inventory will be one of my 
priorities if I am confirmed.

    Question. Given that the IRS is tasked with enforcing tax laws, and 
has a poor track record of keeping taxpayer information private, do you 
think it is appropriate that the agency be given even more information 
and power by virtue of having it prepopulate tax returns?

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and to the IRS. If confirmed, I am committed to making 
data security a top implementation priority. This would involve:

          Establishing for the organization that data security is a 
        top priority;
          Setting measurable goals with an objective to mitigate any 
        risk of unauthorized disclosure;
          Assessing the current capabilities of the process, 
        personnel, and technology to secure data effectively, 
        identifying gaps, and establishing a robust action plan to 
        timely to close;
          Establishing a program of continuous improvement so that the 
        organization is routinely assessing its capabilities and risks 
        and making improvements to keep ahead of the risks;
          Benchmarking other organizations and sectors for emerging 
        data security solutions and ensuring that all approaches are up 
        to date in terms of maximizing effectiveness; and
          Ensuring personnel are fully aware of their responsibilities 
        and feel accountable to secure data.

    I believe these steps would establish a critical evidence base 
useful in guiding any path forward that changes the manner in which tax 
returns are prepared.

    Question. Given recent reports of delays and errors in processing 
tax returns and issuing refunds, particularly in light of staffing and 
technology issues, what steps do you plan to take to improve the IRS's 
ability to process returns and issue refunds in a timely and accurate 
manner, and how do you plan to address concerns about the agency's 
customer service and taxpayer support programs?

    Answer. Similar to the approach outlined in response to the 
previous questions, if confirmed, I would intend to assess the baseline 
performance and establish an action plan to close gaps. Specifically:

          Establishing for the organization that processing returns to 
        timely issue refunds is a top priority;
          Setting measurable goals with an objective to mitigate any 
        risk of delays in refund issuance;
          Assessing the current capabilities of the process, 
        personnel, and technology to process returns;
          Establishing a program of continuous improvement so that the 
        organization is routinely assessing its capabilities and risks 
        and making improvements to keep ahead of the risks; and
          Ensuring personnel are fully aware of their responsibilities 
        and feel accountable to improve performance on timely issuance 
        of refunds.

    If confirmed, meeting these steps will likely require both 
significant technology upgrades and additional human resource capacity 
in areas such as customer service and processing. If confirmed, I will 
lead these efforts in close collaboration with this committee and 
further public trust with American taxpayers.

    Question. The IRS has been criticized for its poor customer 
service, with long wait times and difficulty getting in touch with a 
representative. How do you plan to address these issues and ensure that 
taxpayers are able to get the assistance they need in a timely and 
efficient manner?

    Answer. See the response to the question above, which outlined a 
planned approach of assessing a baseline and establishing a plan for 
improved performance. The efforts to improve processing and timely 
issue refunds are interconnected with improved performance of gaining 
access to IRS for help when needed. While I would want to reserve any 
final conclusions about what the key priorities should be until I have 
spent time at the IRS understanding the current environment, my current 
hypothesis is that a critical step should be embedding innovative 
technology in the call center to help significantly increase 
responsiveness to taxpayers trying to contact the IRS.

    Question. What specific steps do you plan to take to address 
concerns about the IRS's use of data analytics and technology, 
particularly in light of recent reports of potential privacy violations 
and other abuses of power by the agency?

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and to the future of the IRS. In order to fulfill its 
mission, the IRS must safeguard the information of millions of 
Americans. In response to your third question, I outline a high-level 
set of steps to assess the current baseline on data security and 
privacy. This approach will help assess how and whether data analytics 
and technology impact privacy and data security issues. If confirmed, I 
would prioritize this across all workstreams that would come across my 
desk and work with this committee to ensure the IRS's activities are 
transparent.

    Question. The IRS has been criticized for its handling of taxpayer 
information, particularly in light of recent data breaches. How do you 
plan to ensure that taxpayer data is secure and protected from 
unauthorized access?

    Answer. Please see the response to your third question.

    Question. The IRS has recently been using advanced algorithms and 
data analysis tools to monitor and track taxpayer activities. How do 
you plan to ensure that the IRS remains transparent in its use of these 
tools and does not infringe on the privacy rights of taxpayers?

    Answer. Protecting taxpayer privacy rights is paramount to building 
and maintaining trust. Since I am not at the IRS, I am not aware of the 
IRS's current internal tools and processes. However, if confirmed, 
ensuring transparency and protecting taxpayer information would be a 
key priority of mine that I am committed to working with you and this 
committee on.

    Question. The IRS has been working to implement a new system for 
processing tax returns, which has faced delays and technical 
challenges. How do you plan to ensure that this new system is 
implemented effectively and efficiently, and that taxpayers are not 
negatively impacted by any delays or issues?

    Answer. If confirmed, I would plan to prioritize customer service 
and taxpayer initiatives, including doing all we can to tackle customer 
service issues head-on and ensuring that all taxpayers, including small 
businesses, receive the best-in-class service they deserve.

    Question. Can you provide specific examples of how you have worked 
to reduce waste, fraud, and abuse in government programs in your past 
roles, and how do you plan to apply these principles to your leadership 
of the IRS, particularly with regard to tax enforcement and compliance?

    Answer. First, during both the Bush and Obama administrations, I 
led government-wide efforts to measure and remediate improper payments 
as well as to reduce waste in Federal real estate holdings. During this 
time, the government made important advances in making improper payment 
rates public, launching new solutions to root out fraud, and freezing 
the footprint of Federal real estate.

    Second, I was the OMB lead on coordinating and implementing the 
government-wide reporting and accountability requirements of the 
American Recovery and Reinvestment Act (ARRA). The launch of 
Recovery.gov created a new bar in the transparency of Federal spending 
and the $787 billion stimulus bill was widely considered to be 
implemented with historically low levels of payment errors.

    Critical to success in these endeavors was ensuring that all 
stakeholders understood the importance of program integrity and felt 
accountable for results. I will plan to bring these principles to the 
IRS, if confirmed.

    Question. During your confirmation hearing before the Senate 
Finance Committee on February 16, 2023, you pledged not to expand tax 
audits on businesses and households making less than $400,000 per year. 
What authorities will you rely on to ensure the IRS is held accountable 
to that commitment?

    Answer. Secretary Yellen and the IRS have committed that the IRA 
funding will not be used to increase audit rates, relative to historic 
levels, for households and small businesses making under $400,000 a 
year, which I am committed to upholding. As I have not been involved 
yet with the planning process, I do not have specifics on how IRS will 
implement this directive. But if confirmed, I look forward to ensuring 
that IRA implementation complies with this commitment and will keep 
this committee informed of these efforts.

    Question. In a letter to the former Commissioner of the IRS on 
August 10, 2022, the U.S. Secretary of the Treasury said that audit 
rates for households earning less than $400,000 would not rise 
``relative to recent years.'' Can you specify to which years that 
refers?

    Answer. As I said in my testimony, I am committed to meeting 
Secretary Yellen's commitment and, if confirmed, look forward to 
ensuring this directive is followed through on. I do not know the 
specifics for how the IRS tracks or measures their metrics, but, if 
confirmed, I look forward to working with you and this committee in a 
transparent way.

    Question. In your report titled, ``Charting a Path Forward at the 
IRS: Initial Assessment and Plan of Action'' (June 24, 2013), you 
wrote, ``At this time, while fact gathering is still underway, we have 
not found evidence of intentional wrongdoing by IRS personnel, or 
involvement in these matters by anyone outside of the IRS.'' Do you 
still believe there was no intentional wrongdoing by IRS personnel and 
what are the reasons for your position?

    Answer. This report was published 30 days after I arrived at the 
IRS and the referenced conclusion was based on the available 
information at the time. Over the next 8 months, I continued to ensure 
that relevant investigative authorities, including Congress and TIGTA, 
were provided access to all the discovery requested to draw final 
conclusions about all matters related to this matter, including the 
behavior of involved IRS personnel. After my departure, it is my 
understanding that the Senate Permanent Subcommittee on Investigations 
and TIGTA, after review of more than 800,000 responsive documents and 
transcribed interviews of dozens of IRS employees with knowledge or 
involvement in the matter, both issued final reports. I believe the 
findings and conclusions of these exhaustive reports and investigations 
should be the definitive source on whether IRS personnel engaged in 
intentional wrongdoing in this matter.

    Question. In March 2021, President Biden signed Executive Order 
14019 calling for every Federal agency to ``promote voter registration 
and voter participation'' and to expand access to ``accurate election 
information.'' Should the Internal Revenue Service be involved in 
promoting voter registration and voter participation and expanding 
access to accurate election information? If yes, how would you as 
Commissioner execute this executive order and what would be an example 
of what you would do?

    Answer. The IRS's primary responsibility is to administer the tax 
code. I am not intimately familiar with the current rules and 
regulations regarding this specific matter, but, if confirmed, I look 
forward to administering the tax code in accordance with all applicable 
rules and regulations.

    Question. There has been some discussion of having the IRS prepare 
returns on behalf of taxpayers by using the information (e.g., wages, 
investment income) reported to the IRS.

    What additional legislative authority would the IRS need to prepare 
tax returns in this manner? If you believe the IRS does not need 
additional authority, could you please cite the existing authority that 
would authorize the IRS to do this?

    Answer. I am not intimately familiar with the IRS's current rules, 
regulations, or authorities regarding this matter. If confirmed, I look 
forward to working with this committee to consult on the 
administrability considerations of any matter.

    Question. Processing paper returns remains a weakness for the IRS, 
with a paper return backlog still in the millions. In response to this 
backlog, Erin Collins, the National Taxpayer Advocate, directed the IRS 
to implement existing scanning technology, including 2D barcoding, to 
expedite processing tax returns filed on paper. Despite this directive, 
the IRS failed to implement such technology for the 2023 filing season.

    If you are confirmed, do you commit to ensuring the IRS implements 
2D barcoding technology for the 2024 tax filing season?

    Answer. The National Taxpayer Advocate's recommendations are 
extremely important to consider. If confirmed, I look forward to 
working with the National Taxpayer Advocate to improve customer 
service, taxpayer experience, and implementing policies that can help 
taxpayers, including the use of scanning technologies to increase IRS's 
speed and efficiency in processing paper returns and correspondence.

    Question. An increasing number of constituents across Montana have 
contacted my office frustrated about their inability to get in-person 
help at IRS Taxpayer Assistance Centers (TAC) due to inadequate 
staffing.

    If you are confirmed, what immediate steps will you take to ensure 
all five IRS TAC offices in Montana are fully staffed and operational? 
Under your leadership, will the IRS place as much emphasis on in-person 
IRS resources for taxpayers as online/phone resources?

    Answer. Working to fully staff Taxpayer Assistance Centers is a 
priority of Secretary Yellen's and mine, if confirmed. In order for 
taxpayers get the best customer service possible, we must do all we can 
to improve service, be it in-person, online, or through the mail.

    Question. After having spent the past several years at Boston 
Consulting Group, what three lessons, skills, or perspectives from your 
time in the private sector do you plan to implement at the IRS if you 
are confirmed?

    Answer. First, my experience has led me to believe that strong and 
engaged leaders set and communicate clear priorities, proactively align 
resources to those priorities, and work to remove any barriers to 
success. Second, I have learned that there will always be stakeholders 
who stand to benefit from maintaining the status quo. Strong leaders 
understand the stakeholder map and have a robust strategy to actively 
engage and communicate across diverse stakeholders to help ensure 
momentum for change versus the inertia that will set in if you are 
passive. Third, I believe that innovation means developing, trying, and 
testing new approaches. Strong leaders set up an environment conducive 
to innovation by establishing conditions that allow for innovation with 
strong risk mitigation and accountability protocols in place.

    Question. In 2013, as Acting Director of the IRS, you told members 
of Congress that taxpayers had lost faith in the agency and pledged 
that you were ``committed to restoring that trust.'' A decade later, 
little has changed to positively impact the relationship between the 
IRS and taxpayers. While no one solution will repair the relationship, 
the IRS could begin in earnest by listening to taxpayers.

    Will you commit to conducting surveys, focus groups, and other 
efforts to determine how taxpayers themselves would like the agency to 
improve customer service?

    Answer. Directly engaging with taxpayers is essential and will be a 
priority of mine, if confirmed. From my time in the private sector, I 
understand there are innovative and robust ways to understand the 
``customer experience'' by gaining insight into their perspective. If 
confirmed, I look forward to bringing these solutions to the IRS so 
that we better understand the ``taxpayer experience'' with the IRS and 
make changes to continuously improve that experience.

    Question. The unprecedented influx of appropriations the IRS is 
receiving under the Inflation Reduction Act has placed heightened 
levels of congressional scrutiny on the agency.

    How do you plan to engage with the Finance Committee, Ways and 
Means, and Congress to ensure the IRS maintains the highest level of 
transparency? Will you proactively and openly engage with TIGTA, GAO, 
and other IRS watchdogs?

    Answer. I am committed to productive and consistent engagement with 
this committee, Ways and Means, Congress, TIGTA, GAO, and other IRS 
watchdogs. Public trust requires transparency, collaboration with 
oversight entities such as Congress, adherence to the rule of law, and 
responsible stewardship of taxpayer dollars. The oversight work 
conducted by TIGTA and GAO is invaluable to the proper functioning of 
the IRS. It is vital that the IRS be responsive to their inquiries and 
maintain a cooperative relationship that encourages transparency and 
accountability. If confirmed, I would look forward to continued 
engagement with all oversight bodies.

    Question. I was pleased to support the Taxpayer First Act, which 
became law in July 2019. As you know, section 2201 of the Act requires 
the IRS to update the system it currently operates that allows 
financial institutions to request tax transcript data when underwriting 
a loan. The law requires the IRS to implement an online process that 
provides transcripts in as near to real time as possible, making the 
loan process faster and more efficient for consumers and lenders. The 
process today (called the Income Verification Express Service, 
``IVES'') relies successfully on lenders to verify the identity of the 
borrower--something they are already required to do by law.

    During the process of implementing the IVES, the IRS collected $72 
million from the lending industry to assist in funding the development 
of the IVES functionally. It is my understanding the user base of this 
system has communicated to the IRS that the proposed identity 
verification process will prevent them from using the system due to the 
increased friction for their customers. I am concerned the IRS has been 
resistant to partnering with the IVES user community to find a workable 
solution.

    Are you aware of the IRS's plans to spend $72 million collected 
from the IVES user community on a system that has been called into 
question for workability?

    Will you commit to encouraging the IRS to work with the IVES user 
community on a workable solution before the change in identification 
verification is made?

    Has Treasury or the IRS conducted any impact analysis on the use of 
the IVES system if the new identify verification changes are 
instituted?

    Answer. As I am not currently at the IRS, I am not familiar with 
the IRS's plans or analyses regarding the IVES program. However, if 
confirmed, it would be important to me to look forward to engaging all 
stakeholders as to how the IRS can improve customer service and the 
taxpayer experience.
                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
                 
    Question. Following the Tea Party targeting scandal at the IRS in 
2013, you were appointed to be the Acting IRS Commissioner by President 
Barack Obama. Now, 10 years later, you have been nominated to lead an 
organization that is once again struggling to maintain taxpayer trust. 
Between the severe backlog of return processing, millions of unanswered 
phone calls, and a continued lack of information regarding the 
unprecedented leak of taxpayer information by ProPublica, it is 
increasingly challenging for many taxpayers to put their trust in the 
IRS. This is deeply concerning, as the agency plays a vital role in 
maintaining important societal structures.

    What lessons did you learn during your time as Acting Commissioner 
and, if confirmed, how do you plan to apply those lessons to the IRS 
today?

    Answer. When I was Acting Commissioner, I relied on the lessons I 
learned as a career civil servant that the government is operating at 
its best when it is transparent, accountable, and builds trust with the 
public. For example, a strong public administrator looks for ways to 
make things transparent to the public. A strong public administrator 
understands the important role that oversight entities play. A strong 
public administrator empowers the workforce to be a part of the 
solution and help chart the path forward and when doing so, helps 
ensure people at all levels of the organization feel accountable to 
meet the mission effectively. If confirmed, I will bring those same 
guiding principles to my work at the IRS.

    Question. Additionally, can you please highlight how you intend to 
rebuild taxpayer trust and restore the IRS to its goal of ``providing 
America's taxpayers top quality service'' as highlighted in the IRS 
mission statement?

    Answer. Public trust is essential in the operation of government. 
The IRS should be clear about which parts of the tax gap it seeks to 
close and them demonstrate results that are consistent with these 
priorities. If confirmed, I head into the IRS with a directive from 
Secretary Yellen to improve customer service and to ensure that new 
funds appropriated under the IRA do not increase audit rates on 
individuals and small businesses that earn less than $400,000 per year. 
Also consistent with my understanding of Secretary Yellen's directive, 
we should increase the IRS's capacity to address any tax evasion of 
high-income or corporate taxpayers. If we can make the IRS's plans 
clear in meeting this directive and then demonstrate results, I think 
the IRS will increase public trust.

    Question. While you have committed to working to institute new 
technologies at the IRS that will decrease processing time and increase 
the IRS's ability to effectively serve taxpayers for the future, in the 
short term I continue to hear from many of my constituents who are 
unable to get in contact with their local Taxpayer Assistance Centers 
(TACs) to address outstanding issues with their returns in person. 
While one of the issues is staffing capacity, taxpayers who are 
interested in a TAC appointment are unable to get through to the 
nationwide telephone scheduling service to set up that appointment. 
Therefore, even when the TACs do have capacity, taxpayers are unable to 
take advantage of that capacity because the only method of setting up 
those appointments--the nationwide telephone scheduling line--is not 
properly managed.

    Do you believe it is important in some circumstances that taxpayers 
have access to in-person IRS services? Why or why not?

    Answer. Yes, in-person IRS service is a critical component in the 
IRS's customer service toolkit. I believe that there should be multiple 
channels for being accessible to taxpayers so the IRS can provide 
service in the variety of ways that taxpayers need, whether that's in 
person, on the phone, or online. If confirmed, meeting taxpayers where 
they are will be an important part of the daily mission.

    Question. If confirmed, do you commit to investigating this issue 
further and implementing improvements and/or alternatives to ensure 
that taxpayers can secure available TAC appointments?

    Answer. Yes, if confirmed, ensuring taxpayers can access Taxpayer 
Assistance Centers will be a continued priority, one that I understand 
has been improved upon this filing season.

    Question. Do you believe there are at least some positions at the 
IRS, such as positions at local Taxpayer Assistance Centers, that 
require employees to conduct their work in the relevant IRS facility, 
yes or no?

    Answer. I believe there are many circumstances that require in-
person work.

    Question. If you answered ``yes'' above, do you believe it is 
important that now, in 2023, employees in those positions return to in-
office work?

    Answer. If confirmed, it will be a priority of mine to ensure IRS 
employees are where they need to be to carry out the IRS's mission most 
effectively.

    Question. How do you plan to address situations in which employees 
whose positions are best performed at an IRS facility resist returning 
to in-office work?

    Answer. If confirmed, it will be important to work with the IRS 
workforce in all manners to ensure taxpayers are receiving world class 
customer service. I understand the work patterns in many industries 
have shifted in the aftermath of the COVID-19 pandemic. If confirmed, I 
look forward to engaging the IRS workforce on the steps necessary to 
position every employee to maximize their success and contributions.

    Question. On or around April 7, 2022, members of the Senate Finance 
Committee submitted questions for the record (QFRs) to former IRS 
Commissioner Charles Rettig regarding the IRS's annual budget hearing. 
The committee only received responses to those QFRs from the IRS on or 
around January 25, 2023, which was over 9 months after they were 
originally submitted and approximately 3 months after Mr. Rettig 
stepped down from his position as Commissioner. It is unacceptable to 
wait so long for QFR responses. Members of the Senate Finance Committee 
cannot properly exercise our oversight function when we are unable to 
get responses to our questions in a timely fashion. The timing of the 
responses also begs the question as to who actually drafted them, since 
they were submitted to the committee long after the Commissioner--to 
whom they were addressed--was no longer at the IRS.

    If confirmed, do you commit to returning QFR responses to Senate 
Finance Committee members within 3 months of the date of transmission 
from the committee, ``yes'' or ``no''?

    Answer. Timely communication with and responses to Congress will be 
a priority of mine.

    Question. In June 2021, troves of confidential taxpayer information 
were leaked to the public as part of a ProPublica expose. Frankly, it 
is unacceptable that after nearly 2 years, we are still in the dark 
about the source of this leak. Regardless of an individual's income, 
the IRS has a duty to each and every taxpayer to protect their 
information.

    If confirmed to this position, do you commit to working with proper 
investigatory authorities and my House and Senate colleagues to get 
answers on this concerning breach of taxpayer information?

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and the IRS. My understanding is that this matter was 
immediately referred to the appropriate authorities, including the 
Treasury Inspector General for Tax Administration (TIGTA), the 
Department of Justice, and Treasury's Office of Inspector General, each 
of which conduct their work independently of the IRS. I cannot 
speculate about that work, any potential findings, or the timeline. I 
can commit to you that, if confirmed, I will ensure the IRS continues 
to prioritize protecting taxpayer information and will take any 
appropriate action to do so.

    Question. If confirmed, do you commit to (i) investigating whether 
high net worth individuals' tax information is set aside in a separate 
location (whether physically or electronically) from the taxpayer 
information of the general population and (ii) reporting back to me and 
the committee on your findings within 4 months of confirmation? If the 
answer is ``no,'' please explain.

    Answer. Working with this committee and other oversight entities 
will be an important priority of mine, if confirmed. I commit to 
learning more about this issue and timely follow-up with you and this 
committee, in line with applicable laws and regulations.

    Question. As you are no doubt aware, there have been instances of 
IRS employees, even staff in leadership capacities, who have unfairly 
targeted taxpayers based on their political or religious beliefs.

    As you were appointed to be Acting Commissioner following what is 
likely the most notorious of these scandals, what are your thoughts on 
targeting certain individuals based on these factors?

    Answer. In order for our tax system to work, taxpayers must have 
confidence that all taxpayers, regardless of who they are, are being 
treated fairly and impartially. If confirmed, I will make sure that 
taxpayers--regardless of background and whether they are individuals, 
small businesses, or non-profits--are being treated fairly and that the 
tax laws are being applied impartially and equally to all.

    Question. What did you do to prevent such discrimination from 
happening again when you took on the role as Acting IRS Commissioner?

    Answer. While Acting Commissioner, I worked diligently to treat 
taxpayers fairly and impartially, which included transparency and 
accountability with this committee and oversight entities. As soon as I 
arrived, I began implementing all TIGTA recommendations for improving 
the tax-exempt functions. I also made public our progress on this 
implementation. Of note, I very quickly ordered a termination of the so 
called ``be on the lookout'' lists where applications for tax exempt 
status were being set aside based on the name of the organization 
rather than the substance of the application itself. I also worked 
diligently to respond to all discovery requests from investigative 
entities. Ultimately, more than 800,000 pages of documents were 
provided as well as dozens of interviews from IRS employees. This 
discovery was the basis for public reports made on the matter by TIGTA 
and congressional committees. A key step taken was my appointment of 
the IRS first Chief Risk Officer and the launch of an enterprise risk 
management program. Following my departure, TIGTA issued a report 
commending the IRS for improvements made to the tax-
exempt function. In 2021, the IRS was internationally recognized for 
its risk management program by the Risk and Insurance Management 
Society (RIMS).

    Question. If confirmed to this position, what do you plan to do to 
ensure the IRS always operates on a fair and neutral basis?

    Answer. I can think of no more important factor in building trust 
than working to ensure fairness and neutrality. There are various 
levers that can be used to ensure neutrality is maintained, including, 
for example, employee training, continuous review of policies and 
practices, and leveraging ongoing input from oversight entities such as 
TIGTA. Of note, when I was last at the IRS 10 years ago, I worked 
diligently to treat taxpayers fairly and impartially, which included 
transparency and accountability with this committee and oversight 
entities. A key step taken was my appointment of the IRS first Chief 
Risk Officer and the launch of an enterprise risk management program. 
In 2021, the IRS was internationally recognized for its risk management 
program by the Risk and Insurance Management Society (RIMS). If 
confirmed, I would expect the IRS risk management program will be 
incredibly important in coordinating reviews, trainings, and activities 
necessary to reinforce the importance of neutrality, impartiality, and 
fairness in all IRS activities.

    Question. As you know, in August 2022, President Biden signed the 
Inflation Reduction Act into law. Contained in the bill was nearly $80 
billion in increased funding for the IRS over a 10-year period. Of this 
significant increase, $45.6 billion was allocated for ``enforcement'' 
efforts, a 69-percent increase from previous spending projections.\1\ I 
am concerned that there are not sufficient safeguards in place to 
ensure proper utilization of the funds enacted by the Inflation 
Reduction Act.
---------------------------------------------------------------------------
    \1\ https://crsreports.congress.gov/product/pdf/IN/IN11977.

    If confirmed to this position, do you commit to working with 
Congress and the appropriate oversight agencies to ensure that all the 
supplemental funding provided by the Inflation Reduction Act is being 
---------------------------------------------------------------------------
used to better serve taxpayers?

    Answer. If confirmed, I commit to learning about the IRS's plans 
and initiatives to improve customer service and staying in close 
communication with this committee about progress.

    Question. If you answered ``yes'' to the question above, do you 
agree that your commitment applies to working with and providing 
updates to both the Senate Finance Committee majority and minority?

    Answer. Yes, the role of the IRS is to be impartial and neutral in 
administering the code.

    Question. Although Secretary Yellen stated that ``audit rates will 
not rise relative to recent years for households making under $400,000 
annually'' in a letter to former Commissioner Rettig, many of my 
colleagues and I remain concerned that hardworking low- and middle-
income families and small businesses will be adversely affected by 
these increased enforcement efforts.

    What actions do you plan to take to ensure that individuals and 
small businesses making less than $400,000 annually are not targeted 
for audits?

    Answer. Secretary Yellen and the IRS have committed that the IRA 
funding will not be used to increase audit rates, relative to historic 
levels, for households and small businesses making under $400,000 a 
year, which I am similarly committed to following through on. As I have 
not been involved yet with the planning process, I do not have 
specifics on how IRS will implement this directive. But if confirmed, I 
look forward to ensuring that IRA implementation complies with this 
commitment and to keeping this committee informed of these efforts.

    While I would want to reserve any final conclusions about steps I 
would want to take if confirmed, it would be important to have a clear 
methodology, ensure there is policy within the IRS regarding the use of 
resources for compliance activities, and conduct training to ensure 
ongoing clarity on the directive.

    Question. As demonstrated by the apparent ProPublica leak, there 
are serious concerns about the IRS's ability to maintain 
confidentiality regarding private citizens' tax information. Another 
area of concern is maintaining privacy of persons who choose to donate 
to nonprofit organizations. The U.S. Supreme Court has recognized donor 
privacy as protected under the First Amendment, from NAACP v. Alabama 
(1958) to Americans for Prosperity Foundation v. Bonta (2021). Donor 
privacy is essential to philanthropic freedom and allows donors the 
right to remain anonymous should they wish. Despite this constitutional 
right, some groups have advocated for mandatory disclosure of donors. I 
worry that if we acquiesce to such demands, we risk suppressing 
philanthropy, an important pillar of our society. We should instead 
focus on preserving and even expanding vital protections for anonymous 
charitable giving.

    If confirmed to this position, do you commit to working with me, my 
colleagues on this committee, and stakeholders on preserving donor 
privacy and ensuring personal donor information does not get disclosed 
by the IRS? Please answer ``yes'' or ``no.'' If your answer is ``no,'' 
please explain.

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and to the mission of the IRS. In order to fulfill its 
mission, the IRS must safeguard the information of millions of 
Americans. If confirmed, I would prioritize this across all workstreams 
that would come across my desk and work with this committee to ensure 
the IRS's activities are transparent.

    Question. A number of Hoosier small and medium-sized businesses 
rely on small captive insurance arrangements to insure against risk. 
They are concerned that the IRS's focus on the industry, which they 
believe is overly punitive and inaccurately characterizes the nature 
and purpose of these arrangements, will eliminate the availability of 
these insurance products and leave them without other viable options.

    If confirmed to this position, do you commit to working with small 
captive insurance companies and related stakeholders to find a 
mutually-agreeable and fair path forward on this issue? Please answer 
``yes'' or ``no.'' If your answer is ``no,'' please explain.

    Answer. Yes, if confirmed, I look forward to working with all 
stakeholders regarding ways to improve customer service and taxpayer 
experience. In particular, small businesses are a key constituency I 
would hope to keep openly engaged with, which I understand is a 
bipartisan priority of this committee. I am not aware of the issue, but 
I will reflect on the commitment I made during the hearing to closely 
adhere to the taxpayer bill of rights. Taxpayers such as the small and 
medium-sized businesses in Indiana have numerous rights that, if 
confirmed, I will work to uphold, including the right to be informed of 
what is expected of them, the right to pay no more than the correct 
amount of tax, and the right to challenge an IRS position and be heard. 
If confirmed, I look forward to ensuring these rights are adhered to 
for all taxpayers and will work with you to make sure that is the case 
for businesses in your State.
                                 ______
                                 
               Question Submitted by Hon. Mark R. Warner
               
    Question. As you know, I am a supporter of remote notarization. In 
the last Congress I cosponsored the SECURE Act, which is intended to 
streamline the use of remote notarization in a variety of contexts. 
Remote notarization has proven itself as a way to execute important 
documents in a safe and efficient fashion. During the height of the 
COVID-19 pandemic, the IRS temporarily allowed certain documents to be 
executed through remote notarization. The agency has now proposed to 
make this policy change permanent. Can you commit to moving swiftly to 
finalize this proposal? And what are your thoughts on the subject more 
broadly?

    Answer. Meeting taxpayers where they are is an important aspect of 
providing world-class customer service and bettering the taxpayer 
experience. There are many ways in which the IRS may be able to 
modernize and reflect the needs of taxpayers today. If confirmed, I 
look forward to learning more about the status of the remote 
notarization project and working to implement all IRS responsibilities 
in accordance with all laws and regulations.
                                 ______
                                 
             Questions Submitted by Hon. Sheldon Whitehouse
             
    Question. In Citizens United v. Federal Election Commission, 558 
U.S. 310 (2010), the Supreme Court ostensibly reasoned that unlimited 
outside spending would not distort our politics because the public 
would be able to see who was behind the spending. Even the Citizens 
United justices recognized that unlimited political spending without 
transparency would be corrupting. But the Court failed to account for a 
major way to mask who is spending: 501(c)(4) nonprofits, which can 
spend up to 50 percent of their income on political campaign 
intervention, do not have to disclose their donors. As a result, secret 
spending from outside groups in our elections has exploded. Since 2010, 
dark money groups have poured over $2.6 billion into Federal elections. 
At least $3 out of every $10 in outside spending reported to the FEC 
since Citizens United can be traced to dark money groups, according to 
OpenSecrets.

    Has the IRS tracked the amount of political campaign intervention 
spending through 501(c)(4)s since Citizens United?

    Answer. As I am not currently at the IRS, I do not know if or how 
the IRS tracks this. I know this issue is critical to you and, if 
confirmed, I am committed to providing you a more comprehensive 
response to this question as I learn more.

    Question. Tax-exempt entities under section 501(c)(3) are 
prohibited from engaging in any political campaign activity. At the 
same time, 501(c)(3)s are allowed to share employees, office space, 
resources, board members, and even funding with affiliated 501(c)(4) 
entities.

    How does the IRS ensure that 501(c)(3) funding is not used for 
impermissible 501(c)(4) political campaign intervention? Has the IRS 
ever tested whether the corporate veil between a 501(c)(3) and 
501(c)(4) is real or a sham?

    Answer. As I am not currently at the IRS, I do not know what 
policies or procedures the IRS has in place for this. I know how 
important this is to you and, if confirmed, I am committed to providing 
you a more comprehensive response to this question as I learn more.

    Question. Networks of entities organized under section 501(c)(4) 
can make grants to each other to flout the supposed 49.9-percent 
political campaign intervention limit for such entities. If a group of 
associated 501(c)(4)s pass money along to each other (e.g., group A 
spends half of its budget on political campaign intervention and gives 
the other half to group B, which does the same for groups C and D), the 
total political spending of the original donation can reach over 90 
percent.

    How does the IRS use information in Schedule I and Schedule R to 
track grants between groups to ensure compliance with the limit? Has 
the IRS ever investigated donation cycling among coordinating 
501(c)(4)s?

    Answer. As I am not currently at the IRS, I do not know what 
policies or procedures the IRS has in place for this nor do I have 
knowledge of any ongoing investigations. If confirmed, I am committed 
to providing you a more comprehensive response to this question once I 
am able to discuss this matter with those responsible for this at the 
IRS.

    Question. It has been over a decade since Congress passed the 
Foreign Account Tax Compliance Act (FATCA), with bipartisan support, to 
provide the IRS the information it needs to find hidden income in 
offshore accounts. However, according to the Treasury Inspector General 
for Tax Administration ``the IRS has taken virtually no compliance 
actions to meaningfully enforce'' it.\2\ According to the IRS Chief 
Research and Analytics officer in 2021 testimony before the Tax and IRS 
Oversight Subcommittee, preliminary research found that U.S. households 
hold as much as $2 trillion in offshore tax havens--double what prior 
research had found.\3\
---------------------------------------------------------------------------
    \2\ TIGTA, Report No. 2018-30-040, Despite spending $380 million, 
the IRS is still not prepared to enforce Compliance with the Foreign 
Account Tax Compliance Act (July 2018).
    \3\ Closing the Tax Gap: Lost Revenue from Noncompliance and the 
Role of Offshore Tax Evasion, Before the Senate Finance Subcommittee on 
Taxation and IRS Oversight, 117th Cong. (2021) (testimony of Barry 
Johnson), https://www.finance.senate.gov/hearings/closing-the-tax-gap-
lost-revenue-from-noncompliance-and-the-role-of-offshore-tax-evasion.

    Before the passage of the Inflation Reduction Act (IRA), Secretary 
Yellen explained that human resource and information technology 
limitations caused by resource constraints had hampered the IRS's 
---------------------------------------------------------------------------
ability to make effective use of the information collected under FATCA.

    With the help of additional funding under the IRA, will you ensure 
that FATCA fulfills its promise to crack down on offshore tax evasion? 
How? What will be the initial steps taken that show this activity has 
begun?

    Answer. The IRA provides the funding to transform the IRS into a 
21st-century agency with better customer service, updated technology, a 
high-quality workforce, and resources to go after those who seek to 
evade their tax obligations. I do not have a specific idea of the IRS's 
current enforcement of FATCA, but, if confirmed, I look forward to 
understanding the work that is underway and working with you and your 
office on this important enforcement priority.

    Question. Rule-of-law nations find it difficult to track down and 
seize Putin's and his oligarchs' dirty assets, which are carefully 
hidden using shell companies, tax havens, and other tricks. 
Unfortunately, some of these assets may be concealed in the United 
States: while foreign banks report on the offshore accounts of U.S. 
taxpayers under the Foreign Account Tax Compliance Act (FATCA), U.S. 
banks do not share information about foreign taxpayers. In the words of 
one expert on financial crime, this double standard helped lead the 
U.S. to become ``a truly world-class tax haven.''\4\
---------------------------------------------------------------------------
    \4\ Oliver Bullough, ``The great American tax haven: Why the super-
rich love South Dakota,'' The Guardian, November 14, 2019, https://
www.theguardian.com/world/2019/nov/14/the-great-american-tax-haven-why-
the-super-rich-love-south-dakota-trust-laws.

    The President's FY 2023 budget proposed to share information with 
foreign partners about foreign accounts held at U.S. financial 
---------------------------------------------------------------------------
institutions--known as reciprocal FATCA.

    How could this proposal help to track down the dirty assets of 
Russian oligarchs?

    How would this proposal help the IRS crack down on offshore tax 
evasion? What will you do to make this happen?

    Answer. I appreciate your leadership and understand the importance 
of working internationally to ensure tax compliance goals are met. 
While I have not closely studied this specific proposal, I commit to 
studying the issue, if confirmed, and working with you to discuss how 
the IRS can enforce the relevant tax laws and close the tax gap by 
improving enforcement, focusing on wealthy and corporate tax evasion.
                                 ______
                                 
                Questions Submitted by Hon. Thom Tillis
                
    Question. Recently, the Government Accountability Office noted that 
IRS's modernization efforts have been hampered by competing priorities 
which are delaying the modernization of critical infrastructure 
systems, thus impeding the IRS's ability to effectively serve 
taxpayers. While the Inflation Reduction Act included a massive $80 
billion in new funding for the IRS, only a very small percentage is 
targeted to modernization.

    If confirmed as Commissioner, what areas of technology 
modernization are you most focused on for improving the way IRS serves 
taxpayers?

    Answer. While I would want to reserve any final conclusions about 
what the key priorities should be until I have spent time at the IRS 
understanding the current environment, my current hypothesis is that 
the top modernization priorities fall into three buckets: ensuring the 
Individual Master File and Business Master File are updated to a modern 
platform to optimize data security and cyber resiliency, given the 
sensitivity of data maintained in those systems; embedding innovative 
technology in the call center to help significantly increase 
responsiveness to taxpayers trying to make contact with the IRS; and 
imaging paper forms into machine-readable output to manage and 
eliminate backlogs and help increase overall efficiency of return 
processing.

    If confirmed, I look forward to getting up to speed on the current 
modernization efforts and future plans and engaging with you and your 
staff on IRS's progress.

    Question. Would you prioritize creating a system where taxpayers 
could file their individual tax returns directly with the IRS or would 
you instead focus on other more pressing areas of need?

    Answer. If confirmed, it would be essential to administer the tax 
laws that are on the books and focus on solutions the IRS can deploy to 
improve customer service and the taxpayer experience. I will work with 
you to ensure you have visibility into priority actions on various 
pressing items, and in particular, planned steps related to the study 
or implementation of direct file options.

    Question. As Commissioner, will you focus on administering the tax 
code in a non-partisan fashion, while relying on Congress--not the 
IRS--to make policy decisions?

    Answer. Yes, if confirmed, it would be my priority to act in 
accordance with the responsibilities of the IRS Commissioner, which 
means administering the tax code in a fair, just, and impartial way.

    Question. Do you believe the IRS should directly prepare tax 
returns on behalf of American taxpayers, or do you view that as an 
inherent conflict of interest?

    Answer. There's a recent IRS statistic that it can take an average 
of 13 hours to file an individual income tax return and hundreds of 
dollars. That's unacceptable, in particular for working families and 
small businesses. It is critical that the IRS work on strategies to 
make tax filing easier, simpler, and less burdensome for taxpayers.

    The IRA requires the IRS to deliver a study of the feasibility of a 
direct file system and examination of taxpayer preferences. If 
confirmed, I look forward to engaging with you on this study and its 
recommendations.

    Question. Do you think it is appropriate that the IRS, which is 
tasked with enforcing tax laws (and can't keep taxpayer information 
private) be given even more information and power by virtue having it 
prepopulate tax returns?

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and to the IRS. If confirmed, I am committed to making 
data security a top implementation priority. This would involve:

          Establishing for the organization that data security is a 
        top priority;
          Setting measurable goals with an objective to mitigate any 
        risk of unauthorized disclosure;
          Assessing the current capabilities of the process, 
        personnel, and technology to secure data effectively, 
        identifying gaps, and establishing a robust action plan to 
        timely to close;
          Establishing a program of continuous improvement so that the 
        organization is routinely assessing its capabilities and risks 
        and making improvements to keep ahead of the risks;
          Benchmarking other organizations and sectors for emerging 
        data security solutions and ensuring that all approaches are up 
        to date in terms of maximizing effectiveness; and
          Ensuring personnel are fully aware of their responsibilities 
        and feel accountable to secure data.

    I believe these steps would establish a critical evidence base 
useful in guiding any path forward that changes the manner in which tax 
returns are prepared.
                                 ______
                                 
           Questions Submitted by Hon. Catherine Cortez Masto
           
    Question. I was so grateful to work with Senator Cornyn on 
legislation that was included in the SECURE 2.0 retirement bill we 
passed last year that allows domestic violence survivors to withdraw 
penalty-free from their retirement plans. But I think a lot more must 
be done and I think the IRS can play an important role in supporting 
survivors and ensuring that their tax benefits aren't mistakenly going 
to their abusers.

    Will you commit to reviewing what IRS can do to help victims by 
protecting their privacy and improving their ability to access the 
agency's resources?

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and to the mission of the IRS. In addition, if 
confirmed, it would be a priority of mine to meet taxpayers where they 
are and focus on solutions to improve customer service and the taxpayer 
experience, especially for those who are most vulnerable.

    Question. According to the 2023 Purple Book submitted to Congress 
by the National Taxpayer Advocate, taxpayers with incomes below $50,000 
had about 90 percent of their audits conducted by physical 
correspondence, and 40 percent or more did not respond to the IRS. Much 
of that problem can be attributed to people who have moved and may not 
have gotten the outreach. I have a lot of concerns about this because 
that reliance on physical correspondence has a big impact on places 
where people move around a lot, like my State.

    Can you speak to how you view a challenge like this and how to move 
IRS into a direction where it can better correspond with taxpayers?

    Answer. Because I am not at the IRS, I am not familiar with all 
current rules and regulations regarding the IRS's current 
correspondence operations. However, if confirmed, I pledge to consider 
any and all opportunities to better serve taxpayers, be it in-person, 
online, or over the phone.

    Question. Right now the labor market is very competitive and all 
organizations are competing for workers. One challenge the IRS has had 
in the past is that its hiring process is very long.

    Can you speak to any thoughts you have on being a competitive 
employer and how this process can be streamlined?

    Answer. Attracting, recruiting, and retaining a world-class 
customer service workforce will be a top priority of mine, if 
confirmed. It is a unique opportunity to build the IRS into a world 
class customer service organization at this time. If confirmed, I look 
forward to understanding the IRS's current processes in place for 
building such a world-class workforce and working with you and this 
committee to learn of any additional efforts that could help.

    Question. Given the complexity that comes with filing taxes for 
many Americans, they often have questions and go to the IRS website for 
answers. It can be difficult to navigate and I think there can be a lot 
of improvements in getting the taxpayer the answers they need.

    Can you speak to any experience you have in your previous roles in 
improving transparency and simplifying resources? As well as your 
thoughts on how IRS might use tools like AI to help answer taxpayer 
questions?

    Answer. Across my career, I have worked on various initiatives to 
increase transparency. First, during both the Bush and Obama 
administrations, I led government-wide efforts to measure and remediate 
improper payments, including the launch of PaymentAccuracy.gov. Second, 
I was the OMB lead on coordinating and implementing the government-wide 
reporting and accountability requirements of the American Recovery and 
Reinvestment Act (ARRA). The launch of Recovery.gov created a new bar 
in the transparency of Federal spending. To make this website a 
reality, I worked with all 50 States to successfully launch 
FederalReporting.gov.

    With respect to AI, I believe there are significant opportunities 
to benchmark how world-class customer service organizations in both the 
private and public sectors integrate AI into channels such as call 
centers and digital applications. I believe the IRS should benchmark 
these solutions and develop a strategy to integrate a new approach to 
improve taxpayer service.

    Question. I introduced legislation last year that would help ensure 
that consumers who win fraud cases are not unfairly taxed on fees 
awarded to their attorneys. A loophole in the U.S. tax code unfairly 
penalizes consumers who rightly win their claims of abuse or fraud by 
allowing wrongdoers to send 1099s for their damages and attorney's fees 
even though they do not receive those funds.

    Are you aware of this issue, and how can we work together to ensure 
that we are protecting wronged consumers from yet another harm?

    Answer. I am not intimately familiar with this issue, but, if 
confirmed, I would look forward to understanding how the administration 
of this law works and working with you to provide technical assistance 
from the IRS on this legislation.

    Question. Section 13103 of the Inflation Reduction Act 
(Sec. 48(e)(1)(A)(i)) provides a bonus investment tax credit for 
certain renewable energy investments (wind and solar projects less than 
5 megawatts) made in certain low-income communities. Consistent with 
the law, Treasury was tasked with releasing this guidance 180 days 
after IRA enactment. Consistent with the law, preliminary guidance was 
released on February 13, 2023.

    Congress clearly intended for residents in low-income communities 
to benefit from this program starting this year. Beyond the plain 
language of the law, which took effect January 1st, the then chairman 
of the Ways and Means Committee (Chairman Neal) and Congressman Danny 
Davis inserted statements into the Congressional Record on the day the 
Inflation Reduction Act passed the House that emphasized this point. 
And as you may know, I worked tirelessly in the Senate to pass the 
largest expansion and extension of the solar investment tax credit in 
history.

    I appreciate how busy Treasury is implementing the IRA. However, 
the guidance for section 13103 released on February 13th (Notice 2023-
17) effectively bars any investment in low-income communities until at 
least the third quarter of this year. Frankly, I'm concerned this 
program may not get any project built this year. Obviously, that is 
counter to the administration's Justice40 goals and advancing solar 
access and equity.

    I would strongly urge you to consider issuing additional guidance 
in short order that allows low-income residents and communities to 
immediately benefit from this program. I understand that there is basic 
guidance that Treasury can issue now that will unlock investment in 
low-income communities.

    I also understand that Treasury has the authority to revise the 
guidance and program rules at any time. Why not open the program for 
2023 now, while continuing to make improvements to the program for 2024 
and beyond?

    Answer. As I am not currently at the IRS, I am not familiar with 
any operational considerations underway at the IRS regarding this tax 
credit program. However, if confirmed, I will work to understand the 
IRS's role in this credit's implementation and keep you informed of 
what I learn.
                                 ______
                                 
              Questions Submitted by Hon. Marsha Blackburn
              
    Question. Late last year, the IRS dealt with yet another leak of 
sensitive information; this time for over 100,000 taxpayers. To make 
matters worse, while the sensitive data was reportedly taken offline, 
the old files were not purged from the system and were back online by 
December 1st. More concerningly, it was not the IRS nor the contractor 
who caught this mistake but a third-party researcher who alerted the 
IRS that the files were publicly available.

    I think it's safe to say that the IRS has a data security problem. 
The amount of sensitive information the IRS collects on taxpayers is 
staggering, and these leaks will not stop until data security is 
prioritized.

    Do you commit to ensuring that third-party IRS contractors 
adequately protect and handle sensitive taxpayer information?

    Answer. Data security and protecting taxpayer information is one of 
the most important responsibilities of the IRS. If confirmed, I will 
take this responsibility seriously and work tirelessly with the IRS 
workforce to advance data security and protect taxpayer information.

    Question. In your opinion, what does securing data mean to you?

    Answer. I believe there are numerous critical components to an 
effective plan for securing data. First, establishing for the 
organization that data security is a top priority. Second, setting 
measurable goals with an objective to mitigate any risk of unauthorized 
disclosure. Third, assessing the current capabilities of the process, 
personnel, and technology to secure data effectively, identifying gaps, 
and establishing a robust action plan to timely close gaps. Fourth, 
establishing a program of continuous improvement so that the 
organization is routinely assessing its capabilities and risks and 
making improvements to keep ahead of the risks. Fifth, benchmarking 
other organizations and sectors for emerging data security solutions 
and ensuring that all approaches are up to date in terms of maximizing 
effectiveness. Sixth, ensuring personnel are fully aware of their 
responsibilities and feel accountable to secure data. If confirmed, I 
look forward to ensuring the IRS is taking the above actions given how 
critical data security is to the mission.

    Question. Recently, the IRS updated its website with suggested 
guidance for taxpayers with digital assets. In particular, the IRS 
suggests that taxpayers who receive mining or staking rewards should be 
prepared to pay taxes twice--on initial receipt as they participate in 
the validation of each block in a blockchain and upon ultimate 
disposition later of this created property. Such treatment would 
counter typical treatment for created property under the law, where 
such property is taxed only on disposition.

    The IRS has produced conflicting signals regarding digital assets 
and how to bring consistent tax clarity to the millions of Americans 
participating in permissionless blockchain ecosystems. Will you commit 
to working with my office to fine-tune the IRS's guidance for taxpayers 
with digital assets?

    Answer. I am not intimately familiar with the IRS's current 
treatment of digital assets since I am not currently at the IRS. 
However, if confirmed, I look forward to working with you and your 
office, once I've had the opportunity to understand the IRS's 
procedures and assess the administrability of the tax laws.

    Question. Earlier this year, the IRS issued proposed guidance on 
the Service Industry Tip Compliance Agreement (SITCA) program. This 
program would create a tip-reporting program between the IRS and 
service industry employees to improve tip-reporting compliance. SITCA 
intends to serve as the main tip compliance program for various service 
industries whose employee earns part of their wage through tips.

    Do you commit to ensuring that those who make under $400k are not 
subject to increased audits due to this program?

    Answer. Secretary Yellen and the IRS have committed that the IRA 
funding will not be used to increase audit rates, relative to historic 
levels, for households and small businesses making under $400,000 a 
year. It's my understanding that the IRA funding is not intended to 
increase audit scrutiny on low- and middle-income Americans or small 
businesses. As I have not been involved yet with the planning process 
for the IRA funding, I do not have specifics on how IRS will implement 
this directive. But if confirmed, I look forward to ensuring that IRA 
implementation complies with this commitment.

    Question. Do you commit to ensuring that the SITCA program does not 
become mandatory for service industry businesses to participate in?

    Answer. Since I am not currently at the IRS, I am not intimately 
familiar with the specifics of this program. As was noted during the 
hearing, the SITCA program is a voluntary program. However, if 
confirmed, I commit to learning more about the program that is 
underway, studying its impacts, and engaging with stakeholders and 
Congress on what I learn.

    Question. Will you commit to not including miners, stakers, and 
other distributed ledger validators within the broker guidance that is 
due to be promulgated by the IRS?

    Answer. Since I am not currently at the IRS, I am not familiar with 
the status and development guidance being developed by the IRS. 
However, if confirmed, I commit to learning more about the IRS and 
Treasury rulemaking efforts to date, studying its impacts, and engaging 
with stakeholders and Congress on what I learn.

    Question. Can you commit to providing clear guidance on digital 
asset-related issues and making digital asset guidance a priority?

    Answer. Clarity is an important component of tax administration, 
ensuring taxpayers and stakeholders clearly understand their tax 
obligations. If confirmed, I look forward to working across the IRS, 
including with the Chief Counsel, and Treasury, to maximize, to the 
fullest extent possible, clarity in guidance provided in relation to 
these important issues.

    Question. There continues to be a significant processing backlog in 
Tennessee, especially with respect to amended employment tax returns, 
leaving many small businesses in Tennessee waiting for more than 2 
years for these funds. Currently, at least 20 employers are awaiting 
over $4 million in refunds. This backlog is frustrating as Congress 
intended to quickly support businesses experiencing serious financial 
hardships during the COVID-19 pandemic. With the additional resources 
recently provided to the Service, what plans do you have to resolve the 
backlog? How do you plan to resolve these issues related to aggregate 
filers?

    Answer. It is critical that the IRS get healthy on its inventory so 
that taxpayers can resolve issues and get refunds more quickly. I am 
not familiar with any 
decision-making around this specific issue or work the IRS has done, 
but I know the IRS has been working diligently on the inventory and as 
a part of my commitment to improved customer service, getting healthy 
on inventory will be one of my top priorities, if I am confirmed.
                                 ______
                                 
              Questions Submitted by Hon. Elizabeth Warren
              
    Question. The Taxpayer Bill of Rights, which you mentioned in your 
hearing that you read daily, states that taxpayers have ``the Right to 
a Fair and Just Tax System.''\5\ Yet years of politically motivated 
cuts to the Internal Revenue Service (IRS) budget have led to serious 
equity and discrimination problems with IRS audits. According to a 
recent report by the Transaction Records Access Clearinghouse (TRAC), 
which uses IRS data, millionaires had only a 1.1 percent chance of an 
audit.\6\ In FY 2022, the number of millionaires audited was less than 
half of what it was a decade earlier.\7\ This data suggests the 
continuation of a long trend of diminishing oversight and enforcement 
for high-net-worth individuals. Meanwhile, low-income taxpayers filing 
for the EITC have over a five times higher chance of being audited than 
other taxpayers.\8\ Furthermore, recent findings in a study by 
economists from the Treasury Department and multiple universities 
determined that the audit rate for black taxpayers is three to five 
times higher than the rate for other taxpayers.\9\
---------------------------------------------------------------------------
    \5\ Internal Revenue Service, ``Taxpayer Bill of Rights,'' https://
www.irs.gov/taxpayer-bill-of-rights#fair.
    \6\ Transaction Records Access Clearinghouse, ``IRS Audits Few 
Millionaires But Targeted Many Low-Income Families in FY 2022,'' 
January 4, 2023, https://trac.syr.edu/reports/706/.
    \7\ Id.
    \8\ Transaction Records Access Clearinghouse, ``IRS Continues 
Targeting Poorest Families for More Tax Audits During FY 2022,'' March 
29, 2022, https://trac.syr.edu/tracirs/latest/682/.
    \9\ New York Times, ``Black Americans Are Much More Likely to Face 
Tax Audits, Study Finds,'' Jim Tankersley, January 31, 2023, https://
www.nytimes.com/2023/01/31/us/politics/black-americans-irs-tax-
audits.html.

    The Taxpayer Bill of Rights also entitles taxpayers right to ``be 
informed of IRS decisions about their tax accounts and to receive clear 
explanations of the outcomes,'' as well as the right to ``challenge the 
IRS's position.''\10\ But due to budget cuts, the IRS has increasingly 
relied on correspondence audits to scrutinize 
low-income taxpayer returns.\11\ According to experts, these audit 
notices and math error notices are hard to understand and cause 
confusion and frustration for taxpayers.\12\ Ninety percent of audits 
of taxpayers with incomes below $50,000 are conducted by 
correspondence, much higher than the rate for those with higher 
incomes.\13\ The additional funding from the Inflation Reduction Act 
should be used to rectify these and other equity issues at the IRS.
---------------------------------------------------------------------------
    \10\ Internal Revenue Service, ``Taxpayer Bill of Rights,'' https:/
/www.irs.gov/taxpayer-bill-of-rights#fair.
    \11\ Bloomberg Tax, ``IRS Service Woes Slowing Streamlined Low-
Income Taxpayer Audits,'' Naomi Jagoda and Richard Tzul, June 21, 2022, 
https://news.bloombergtax.com/daily-tax-report/irs-service-woes-
slowing-streamlined-low-income-taxpayer-audits.
    \12\ Id.
    \13\ National Taxpayer Advocate, ``Annual Report to Congress 
2022,'' pp. 18-19, https://www.taxpayeradvocate.irs.gov/reports/2022-
annual-report-to-congress/full-report/.

    Under your leadership, will the IRS commit to reversing the long 
trend of decreasing audit rates for millionaires and to reversing the 
---------------------------------------------------------------------------
increasing audit rates for low-income filers such as EITC recipients?

    Answer. It is essential that our tax system operates fairly and 
right now, there is significant evidence that high earners are paying 
far less than what they owe in taxes. For example, an assessment from 
the National Bureau of Economic Research indicates that working people 
pay 99 percent of the taxes they owe, while 20 percent of the income 
from wealthy individuals and large corporations is shielded from IRS 
view. This outcome degrades public trust in our tax system because 
honest taxpayers should know that when they file an accurate return 
with the IRS that all other taxpayers, including the wealthiest 
Americans, are doing the same. Funding in the IRA will address this 
disparity and focus on the highest-income earners. As you know, I have 
a long career working in government and in the private sector focused 
on data-driven solutions, and, if confirmed, I will focus my time on 
ensuring the IRS uses the IRA funds to improve tax compliance among 
wealthy and corporate tax evaders.

    Question. Following President Biden's first executive order on 
racial equity, the Treasury Department has recently completed racial 
equity analysis for tax benefits, but has not done so for tax 
enforcement. Do you believe that Treasury Department and IRS should 
extend its work on racial equity to studying and addressing racial 
inequities in tax enforcement? Why or why not?

    Answer. Fairness is an essential element of tax administration. We 
have to understand whether the approaches in tax administration have a 
disparate impact on any population, especially populations that are 
most vulnerable. If confirmed, I will work with the IRS to talk to 
those who are familiar with these impacts and report back to this 
committee on my findings, as I able to within the bounds of all 
applicable laws, rules, and regulations.

    Question. With the additional funding from the Inflation Reduction 
Act, in addition to not raising audit rates on taxpayers making less 
than $400,000 will you prioritize improving the correspondence audit 
process and the math error notice process to ensure clarity, equity, 
and protection of taxpayer rights?

    Answer. I agree the priorities of clarity, equity, and protection 
of taxpayer rights are the bedrock of an IRS that builds public trust, 
which I am committed to prioritizing, if confirmed.

    Question. The combination of Republican-led IRS budget cuts and 
lobbying from high-net-worth individuals and large corporations has 
made it more difficult and costly for Americans to file their taxes. 
According to the IRS, the average American spends 13 hours and $250 
every year to file their taxes.\14\ But, for tens of millions of 
Americans this process could take minutes with a truly free and 
simplified filing program. Yet, the IRS outsourced their Free File 
program to the tax preparation industry, which serves only 3 percent of 
taxpayers when 70 percent are eligible.\15\ It is time for the IRS to 
reclaim Free File and develop additional options for free online 
filing--just like the Government Accountability Office has recommended 
\16\ and the American public overwhelmingly supports.\17\
---------------------------------------------------------------------------
    \14\ Internal Revenue Service, ``IRS Tax Year 2022 1040 (and 1040-
SR) Instructions,'' p. 107, January 20, 2023, https://www.irs.gov/pub/
irs-pdf/i1040gi.pdf#page=107.
    \15\ U.S. Government Accountability Office, ``IRS Free File 
Program: IRS Should Develop Additional Options for Taxpayers to File 
for Free,'' April 28, 2022.
    \16\ Id.
    \17\ Data For Progress, ``Senator Warren: Filing Taxes Should Be 
Free, Fast, and Easy,'' July 14, 2022, Elizabeth Warren, https://
www.dataforprogress.org/blog/2022/7/13/senator-warren-filing-taxes-
should-be-free-fast-and-easy.

    At a Senate Finance Committee hearing on June 7, 2022 Secretary 
Yellen stated, ``I absolutely agree with the comments you made about 
[Free File]. It hasn't worked. We need to develop a new system. There's 
no reason in the world that a modern economy shouldn't have a system 
that makes it easy for such a large group of taxpayers to file their 
returns. . . . It's definitely something we should do and when the IRS 
is adequately resourced, it's something that will happen.''\18\ 
Subsequently, the IRS received an additional $80 billion in funding, 
including significant funding for operations support such as 
information technology, business systems modernization, and a task 
force to design an IRS-run free ``direct efile'' tax return system.
---------------------------------------------------------------------------
    \18\ Senate Committee on Finance, ``The President's Fiscal Year 
2023 Budget,'' June 7, 2022, https://www.finance.senate.gov/hearings/
the-presidents-fiscal-year-2023-budget.

    Do you believe that simple free and online filing tools are pivotal 
to the success of the IRS, and will you prioritize working with 
---------------------------------------------------------------------------
Secretary Yellen to develop them?

    Answer. There's a recent IRS statistic that it can take an average 
of 13 hours to file an individual income tax return and hundreds of 
dollars. That's unacceptable, in particular for working families and 
small businesses. It is critical that IRS work on strategies and devote 
resources to make tax filing easier, simpler, and less burdensome for 
taxpayers. The IRA calls for the IRS to deliver a study of the 
feasibility of a direct file system and examination of taxpayer 
preferences. If confirmed, I look forward to engaging with IRS 
employees on the development and outcomes of the required study and any 
next steps it identifies.

    Question. According to recent reporting, major tax preparation 
companies, such as H&R Block, TaxAct, and TaxSlayer have been 
``secretly transmitting sensitive financial information'' of American 
users to Meta and Google using a widely used code called the Meta Pixel 
and Google Analytics.\19\ This is not only an appalling breach of 
trust, but also likely illegal, given strict laws and regulations about 
taxpayer data privacy. Both software tools are invisible to users but 
record their browsing history and even information they enter online, 
transferring them to Meta and Google to enable targeted 
advertising.\20\ Reportedly, the data includes names and email 
addresses, and more sensitive financial information such as income, 
filing status, refund amounts, health savings account usage, 
dependents' names and college scholarship amounts.\21\
---------------------------------------------------------------------------
    \19\ The Markup, ``Tax Filing Websites Have Been Sending Users' 
Financial Information to Facebook,'' Simon Fondrie-Teitler, Angie 
Waller, and Colin Lecher, November 22, 2022, https://themarkup.org/
pixel-hunt/2022/11/22/tax-filing-websites-have-been-sending-users-
financial-information-to-facebook.
    \20\ Id.
    \21\ Id.

    The Internal Revenue Code clearly states that ``returns and return 
information shall be confidential,'' with limited exceptions.\22\ One 
of the exceptions is for a taxpayer to designate a third party to 
receive return information, but those third parties ``shall not use the 
information for any purpose other than the express purpose for which 
consent was granted and shall not disclose return information to any 
other person without the express permission of, or request by, the 
taxpayer.''\23\ A tax preparer ``who knowingly or recklessly (1) 
discloses any information furnished to him for, or in connection with, 
the preparation of any such return, or (2) uses any such information 
for any purpose other than to prepare, or assist in preparing, any such 
return'' faces civil and criminal liability, including $1,000 per 
unauthorized disclosure or actual and punitive damages, and up to 1 
year in prison.\24\
---------------------------------------------------------------------------
    \22\ 26 U.S.C. Sec. 6103(a).
    \23\ 26 U.S.C. Sec. 6103(a).
    \24\ 26 U.S.C. Sec. 7216; 26 U.S.C. Sec. 7431; 26 U.S.C. Sec. 6713.

    Under your leadership, will the IRS commit to protecting taxpayers' 
sensitive financial information, including by pursuing enforcement 
---------------------------------------------------------------------------
action against large tax preparation companies who break the law?

    What specific action(s) would you take to protect taxpayers' data?

    Answer. The safety and security of taxpayer data is of paramount 
importance to me and to the mission of the IRS. In order to fulfill its 
mission, the IRS must safeguard the information of millions of 
Americans. If confirmed, I would take any unauthorized disclosure of 
taxpayer data extremely seriously, as I know my predecessors did. And, 
as has been done in the past, I would ensure that the matter was 
referred to the appropriate investigative authorities and that any 
appropriate remedial action was taken upon conclusion of the 
investigation.
                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon
                       
    The committee meets today to discuss Danny Werfel's nomination for 
IRS Commissioner. I want to welcome Mr. Werfel back to the Finance 
Committee, where we know him well.

    I expect a large part of this hearing will focus on the IRS funding 
included in the Inflation Reduction Act. That's where I'll begin, and I 
want to focus on three main points.

    First, for some time I've talked about the two-tiered tax system in 
America: one for firefighters, nurses, and teachers, whose taxes come 
straight out of their paychecks; another for billionaires and high-
flyers, who to a great extent can pay what they want and when they 
want. Today we'll focus on ending the two-tiered system of enforcement 
in our tax laws. That's needed today--and it's a big part of what 
Democrats sought to address in the Inflation Reduction Act--because 
audit rates are a lot higher today for those of modest means than the 
very wealthy.

    Second, finally, thanks to the Inflation Reduction Act, the IRS is 
getting the resources it needs to go after tax cheating by the big 
guys: the wealthy and corporations. There are members who oppose that 
effort, and I get that they want to deflect and distract. That's why 
you're hearing these wild, made-up fantasies about 87,000 agents armed 
with rifles, busting down people's doors. If you don't want to engage 
on the real issue, which is tax cheating by the wealthy and 
corporations, you change the channel and talk about something else.

    And third, contrary to a lot of baseless attacks you hear today, 
improving technology and staffing up the customer service side of the 
IRS is a big win for law-abiding families and small businesses. In my 
view they'll be less likely to face an audit thanks to the Inflation 
Reduction Act.

    I'll walk through those point by point, beginning with the two 
standards of enforcement.

    Working people and the middle class today have a 99-percent rate of 
compliance with the tax code. Yet working families who claim the Earned 
Income Tax Credit are audited far more often than the wealthy.

    It didn't get that way by accident. A decade of Republican budget 
cuts gutted the IRS's ability to do the kind of in-depth enforcement 
work it takes to make sure corporations and the wealthy are paying what 
they owe.

    From 2012 to 2020, our economy got a whole lot bigger, but the 
total dollar amount of unreported taxes uncovered by corporate audits 
fell by nearly 60 percent. Over the last decade, audit rates of wealthy 
taxpayers making more than $5 million a year fell by 90 percent. On the 
other hand, the audit rate for working people didn't budge, even though 
the IRS was working with fewer resources. That means working Americans 
bore a much heavier burden.

    That's where the second main point comes in. When Democrats wrote 
the Inflation Reduction Act, we decided it was long past time to say to 
big corporations and the tax cheats at the top: ``Nobody is above the 
law, not even you.''

    That's why the bill included new resources for enforcement. 
Democrats have been clear that this funding will not go to audits of 
Americans who earn less than $400,000. In fact, during the debate on 
the bill, Republicans actually struck legislative language from the 
bill that would have constructed even stronger guard rails on that 
issue.

    For Democrats, this is about going after the cheating at the top 
and doing a better job of collecting what the wealthy and corporations 
already owe. The official tax gap projection says that $540 billion in 
taxes go unpaid each year. Donald Trump's IRS commissioner Charles 
Rettig said it could be as high as $1 trillion. The Inflation Reduction 
Act funding is going to help get at that issue too.

    Finally, better technology and more customer service personnel for 
the IRS can go a long way to relieving headaches for typical taxpayers 
and small businesses. For years it's been a struggle to get anybody on 
the phone when you call the IRS with a question. In Spring 2021, only 
11 percent of phone calls got through. Last year it was 13 percent. In 
the early stages of this filing season, it's up to almost 90 percent. A 
huge improvement.

    These tech upgrades and more personnel ought to reduce the odds 
that a law-abiding family or small business faces an audit. These days, 
taxpayer information goes into a host of outdated systems that struggle 
to communicate with each other. Fixing that will help the IRS better 
use the information it already has. If the IRS can answer its own 
questions and resolve issues proactively, it's less likely that a busy 
parent or an owner of a local restaurant opens the mailbox one day to 
find a scary letter from the tax man.

    With that, I want to thank Mr. Werfel for his willingness to return 
to public service and the IRS. I think the President made an excellent 
choice with his nomination. I'm looking forward to our discussion.
                                 ______










                                 

                             Communication

                              ----------                              


               National Association of Tax Professionals
February 14, 2023

The Honorable Ron Wyden             The Honorable Mike Crapo
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
Washington, DC 20510                Washington, DC 20510

Re: Hearing to Consider the Nomination of the Honorable Daniel I. 
Werfel to be Commissioner of the Internal Revenue Service

Dear Chairman Wyden and Ranking Member Crapo:

I am writing on behalf of the National Association of Tax Professionals 
(NATP) members to express our support for the nomination of Daniel 
Werfel as the next Commissioner of the Internal Revenue Service (IRS). 
NATP is the largest association dedicated specifically to providing 
federal tax professionals with the resources, connections and education 
they need to serve their clients with the highest level of excellence. 
Our 24,000 leading tax professional members believe in a superior 
standard of ethics and exemplify professional excellence as they serve 
more than 11 million U.S. taxpayers.

In addition to previously serving as an interim IRS Commissioner, Mr. 
Werfel has held various senior positions within the federal government, 
including the Controller of the Office of Management Budget and OMB 
Deputy Director for Management. He has effectively managed large and 
complex organizations, bringing together diverse teams to achieve 
common goals. Strong leadership of the Service is needed now more than 
ever as priorities for the $80 million allocation from the Inflation 
Reduction Act will be determined and implemented.

Our members and their clients deserve significant improvements within 
the IRS, and we hope Mr. Werfel's priorities will include the 
following:

      Technology modernization that will improve the overall 
efficiency of the tax filing process.
      Hiring staff to make an immediate impact on wait times and 
customer service quality.
      Training and development for current staff on new tax laws, 
modern customer service practices and new technologies that the agency 
is adopting.

In conclusion, we are optimistic about the leadership that, if 
confirmed, Mr. Werfel can bring to the IRS. We encourage the committee 
to conduct a thorough and swift hearing so that significant 
improvements can be experienced by the U.S. taxpayers as soon as 
possible.

Thank you for considering our endorsement.

Sincerely,

Scott Artman, CPA, CGMA
Executive Director


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