[Congressional Record Volume 155, Number 200 (Wednesday, December 23, 2009)]
[Senate]
[Pages S13879-S13881]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            NOMINATION HOLDS

  Mr. GRASSLEY. Mr. President, I, Senator Chuck Grassley, intend to 
object to proceeding to the nominations of Lael Brainard to be Under 
Secretary of the Treasury, Michael Mundaca to be an Assistant Secretary 
of the Treasury, Mary Miller to be an Assistant Secretary of the 
Treasury, and Charles Collyns to be an Assistant Secretary of the 
Treasury.
  My support for the final confirmation of these nominees will rest on 
the response to concerns I have with respect to Internal Revenue Code 
section 6707A. A letter outlining these concerns was sent to both 
Secretary Geithner and Commissioner Shulman on December 22, 2009, and I 
ask unanimous consent that my letter be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                      U.S. Senate,


                                         Committee on Finance,

                                Washington, DC, December 22, 2009.
     Hon. Timothy F. Geithner, Secretary,
     U.S. Department of Treasury, Pennsylvania Avenue, NW, 
         Washington, DC.
     Hon. Douglas Shulman, Commissioner,
     Internal Revenue Service, Constitution Avenue, NW, 
         Washington, DC.
       Dear Secretary Geithner and Commissioner Shulman: I am 
     writing to express my disappointment with actions taken by 
     both the Department of the Treasury (Treasury) and the 
     Internal Revenue Service (IRS) with respect to Internal 
     Revenue Code (IRC) sections 382 and 6707A.
       On November 18, 2008, I wrote to then Secretary Paulson 
     regarding Notice 2008-83, which changed the rules governing 
     the deductibility of losses under IRC section 382(h). The 
     facts and circumstances surrounding the issuance of that 
     Notice raised concerns about the independence and merits of 
     the decision.
       Treasury's most recent guidance on this same issue, Notice 
     2010-2, raises the same concerns. Accordingly, I request that 
     you provide the Finance Committee with all records relating 
     to communications pertaining to the issuance of Notice 2010-2 
     between Treasury officials, Citigroup, Inc., or other 
     Troubled Asset Relief Program (TARP) participants and/or 
     their representatives. Please also provide a timeline for, 
     and documentation of, Treasury and IRS discussions and 
     approvals for Notice 2010-2 as well as any discussions about 
     the impact this notice would have on the tax gap. In 
     cooperating with the Committee's review, no documents, 
     records, data, or other information related to these matters, 
     either directly or indirectly, shall be destroyed, modified, 
     removed, or otherwise made inaccessible to the Committee.
       I understand that Treasury believes that Notice 2010-2 was 
     justified, in part, because it would help protect the 
     government's interest in Citigroup, Inc. Yet, it appears that 
     Notice 2010-2 may generate billions of dollars of tax savings 
     for Citigroup, Inc. Please provide documentation of any 
     discussions of impact on the tax gap resulting from Notice 
     2010-2.
       The quick and immediate relief provided to Citigroup, Inc. 
     stands in stark contrast to Treasury and IRS's position on 
     providing relief to small business owners who have been 
     assessed penalties under IRC section 6707A. As you know, 
     Chairman Baucus and I have been working throughout this year 
     with our counterparts in the House of Representatives

[[Page S13880]]

     to provide relief that can only be accomplished through 
     legislation and we expect that legislation to be enacted very 
     soon. As a supporter of closing the tax gap, I very much 
     appreciate the IRS's difficult position with respect to 
     protecting the government's interest in collecting taxes and 
     penalties due and appreciate the IRS's moratorium on 
     collection enforcement activity.
       However, according to Commissioner Shulman's letter to 
     Chairman Baucus dated July 17, 2009, 72% of section 6707A 
     penalty assessments were imposed on small businesses and 
     small business owners. The penalty is clearly being assessed 
     disproportionately on small businesses compared to larger 
     taxpayers. In addition, the placement of liens on these 
     taxpayers, even though they are not yet being enforced, is a 
     significant threat to their operations. Many small businesses 
     use business assets or mortgage personal residences to secure 
     lines of credit for the businesses. Imposing liens has 
     significant negative implications for a small business that 
     has limited access to capital.
       I discussed this issue with Commissioner Shulman last 
     month. I understand my staff has also discussed this again 
     with IRS staff since then but that the IRS insists that 
     placement of liens is necessary to protect the government's 
     interest. I am troubled and frustrated by this position. It 
     is inconsistent with the administration's publicly expressed 
     concern about the difficulties facing small businesses in 
     accessing capital.
       I am also concerned that there is a disconnect between what 
     Treasury and IRS staff in Washington, DC think is happening 
     and what is actually happening in the field. For example, 
     when my staff discussed with your staff the issue of IRC 
     section 6723 being used to justify the placement of liens, 
     your staff denied this was happening. Yet, after providing 
     the name of a specific taxpayer who was subject to such a 
     lien, my staff was informed that there may be a systemic 
     issue in either the Automated Lien System or the Integrated 
     Collection System.
       My staff has also informed me that some of the assessments 
     and liens are the result of Treasury and IRS regulations and 
     procedures, such as the decision to disallow disclosures on 
     amended returns and the decision to pursue 6707A assessments 
     while other examination issues remain unresolved. Until 
     Treasury regulations and IRS procedures can be revised to 
     clear up the confusion, I request that IRS remove all liens 
     on small businesses resulting from 6707A assessments unless 
     there is a known risk that the taxpayer will evade payment of 
     the penalties. Since the pending legislation will 
     significantly reduce the 6707A assessment amount, liens may 
     no longer be necessary.
       As a supporter of closing the tax gap, I very much 
     appreciate the IRS's difficult position with respect to 
     protecting the government's interest in collecting taxes and 
     penalties. If the IRS believes that removal of a lien would 
     result in the IRS being unable to collect the penalty amount 
     as revised by the pending legislation, please provide a 
     description of these situations. However, I ask you to 
     consider using your discretion as was done for big financial 
     corporate TARP participants who will benefit from Notice 
     2010-2.
       I appreciate your prompt attention to this matter. Please 
     contact my staff with any questions or concerns.
       Sincerely,
                                                   Chuck Grassley,
                                                   Ranking Member.

  Mr. GRASSLEY. Mr. President, I want to explain my position on the 
nomination of Lael Brainard to be Under Secretary of the Treasury for 
International Affairs. I voted against Dr. Brainard in the Finance 
Committee, and I want the record to show that I am opposed to her 
nomination in the full Senate.
  Dr. Brainard was nominated on March 23 of this year, and the Finance 
Committee's routine vetting began shortly after that. For the past 9 
months Dr. Brainard has given evasive, incomplete, and inconsistent 
answers to questions asked by the Committee minority and majority. I 
have said this before, but every nominee who passes through the Finance 
Committee has been treated the same for the nearly 9 years I have been 
either chairman or ranking member. Dr. Brainard was treated in a manner 
consistent with how past nominees have been treated, but she did not 
respond in a consistent manner. On November 18, the Finance Committee 
released a memo covering three basic issues that arose during the 
vetting of Dr. Brainard. The nominee had a chance to review and make 
comments on this memo before it was released.
  The first issue covered in the memo involves responses to questions 
on the Finance Committee questionnaire pertaining to previous late 
payments of taxes and whether or not the nominee is current on taxes 
owed. The nominee had to submit four separate responses to one question 
as the committee came to gradually discover that Rappahannock County, 
VA, property taxes had been paid late in 2005, 2006, 2007, and 2008. 
The issue is not that someone forgot to pay their property taxes on 
time; the issue here is the difficulty the Finance Committee had in 
getting complete, accurate, and correct answers out of Dr. Brainard. 
Committee staff spent most of 2009 attempting to get straight answers 
from Dr. Brainard, and the whole time this was going on the nominee had 
not paid her 2008 property taxes. The nominee finally disclosed the 
late payment of the 2008 property taxes on October 12, 2009, though the 
taxes had actually been paid in September. Answers on this specific 
issue from the nominee reflect a troubling aspect that is 
characteristic of many of Dr. Brainard's answers. Though Dr. Brainard 
owns the Rappahannock County property with her husband, she has 
consistently avoided taking any responsibility for the payment of taxes 
owed.
  As I said before, the issue is not that someone forgot to pay county 
property taxes on time. Though a chronic inability to pay taxes timely 
is a serious concern, the real problem here is the inability of the 
nominee to be straight with myself, our staff, and the committee as a 
whole.
  The second issue discussed in the November 18 memo involves the 
completion of several forms I-9, employment eligibility verification, 
which is required to document that a new employee is authorized to work 
in the United States. The nominee will tell you that all of her 
employees are eligible to work in the United States, and I do not 
dispute that. As before the issue here is the inability of the nominee 
to respond in a straightforward manner to questions. Additionally, the 
number of forms I-9 produced by the nominee with significant 
irregularities was very unusual. The committee released six different 
forms I-9 with irregularities. The committee memo discusses each of 
these, but possibly the most problematic is one form where it appears 
that dates have been written over to change the year. When questioned 
by committee staff about these forms I-9 in a meeting with the nominee 
and her accountant, the accountant asked to speak to the nominee alone, 
without committee staff in the room. The nominee sent a letter to 
myself and Chairman Baucus apologizing for the irregularities but 
offering no substantive explanation for many of them.
  The third issue discussed in the Finance Committee memo involves the 
nominee's deduction of one-sixth of her household expenses from 
partnership income as an office-in-home deduction. Committee staff 
simply asked the nominee to show how she determined that one-sixth was 
the appropriate percentage, and the nominee has provided many different 
answers to this question. The Finance Committee memo summarizes Dr. 
Brainard's attempts to explain her office-in-home deduction with a 
variety of formulas adding up to a variety of answers. As before, the 
real issue here is not what percentage the nominee should have used to 
calculate her office-in-home deduction; the issue is the inability of 
the nominee to respond to what should be simple questions in a 
straightforward way.
  As the committee memo notes, on her 2008 partnership return, the 
nominee reduced the size of her office-in-home deduction by half from 
one-sixth to one-twelth. Dr. Brainard said that this change was made 
because committee staff had been asking questions regarding her earlier 
use of the office-in-home deduction. The nominee did not amend her 
partnership returns for 2005, 2006, and 2007 where an office-in-home 
deduction of one-sixth was taken. I am not able to say that either 
number is correct or incorrect because the nominee provided several 
contradictory answers to this question.
  As I have been saying, the larger issue here is not that someone was 
late in paying county property taxes, or the appropriate size of an 
office-in-home deduction. The larger issue is the apparent 
unwillingness or inability of a person, nominated by the President, to 
answer questions asked by a standing committee of the Senate in a 
straightforward manner. The reason Dr. Brainard's nomination took a 
full 9 months to the day to be discharged by the Finance Committee is 
that she spent 9 months giving evasive, incomplete, and inconsistent 
answers to committee staff in response to what are generally routine 
questions.
  The only thing that is perhaps even more troubling than a nominee who

[[Page S13881]]

doesn't seem to take the vetting done by a Senate Committee seriously 
is the reaction we have seen by others, including some who serve in 
this body. Some apparently see the due diligence and vetting done on 
nominees as an assembly line that produces a guaranteed outcome.
  We have seen what I believe to be political operatives from outside 
the Senate selectively leak information in a effort to target the 
Finance Committee's process of vetting nominees and even the specific 
staffers who carry out this work. These political operatives have had a 
lot of work to do, as Dr. Brainard is the fifth nominee from the 
current administration to run into significant problems during the 
Finance Committee vetting process. The Finance Committee vetting 
process has not changed in the nearly 9 years I have been chairman or 
ranking member. What has changed are the specific nominees and the 
apparent willingness of some to tolerate and excuse issues that would 
have disqualified nominees from the previous administration.
  Nominees in the previous administration would have had trouble 
garnering support if they had these sorts of problems, and I made it 
clear my job was not to defend a problematic nominee. Most people do 
not know about these problematic nominees from the past because in some 
cases they did not get a hearing and in others they were not nominated 
in the first place.
  There is only one person who could tell us why the vetting process 
for this nominee took so long, and that person is Lael Brainard.
  I have been trying to ask her questions for 9 months now without much 
success, so now my questions are for the critics of the Finance 
Committee process and those determined to see this nominee confirmed no 
matter what.
  How long should we allow a nominee to provide incomplete and 
contradictory answers before we simply decide that person ought to be 
confirmed anyway?
  Who is important enough not to be obligated to follow the same rules 
and obligations as all other nominees?
  What high government official is so important that they ought to be 
exempt from the burden of routine Congressional oversight?
  Is knowing the right people a substitute for simple honesty and 
strength of character?
  As for myself, I am going to answers these questions by reiterating 
my opposition to the nomination.
  I, Senator Chuck Grassley, do not object to proceeding to the 
nominations of Lael Brainard to be Under Secretary of the Treasury, 
Michael Mundaca to be an Assistant Secretary of the Treasury, Mary 
Miller to be an Assistant Secretary of the Treasury, and Charles 
Collyns to be an Assistant Secretary of the Treasury.

                          ____________________