Sunday night at 8 00 eastern on cspans q a. I. R. S. Commissioner John Koskinen testified about Agency Operations and their impact on taxpayers. Including tax refund fraud, phone and Online Services and talks assistance centers. Senate Financial Committee chair orrin hatch begins with remarks on a scheduled vote on the nomination of Robert Lighthizer to be u. S. Trade epresentative. Senator hatch the committee will come toured to order. We are in a scheduled executive session in order to consider and hopefully report the nomination of Bob Lighthizer to be the u. S. Trade representative. Unfortunately, due to scheduling conflicts, it is apparent we will not be able to obtain a sufficient quorum to vote on this nomination today. This is a nominee who enjoys bipartisan support here in the committee. My hope is we will be able to move on this matter shortly after the Senate Returns on recess. So for the time being the executive session will be in recess subject to the call of the chair. Could i make a brief comment with respect to the lighthizer nomination . First, with respect to the lighthizer nomination, i would like to thank you for your continued work with us to address our concerns and priorities of democrats on this side of the dais. I am confident that we can find a way to have a positive and strongly bipartisan markup of mr. Lighthizer. And ill wrap up by saying, my sense is this place cant have enough comity, thats comity with a t, and i thank you for your efforts to work with us. I look forward to our hearing, of course. Senator hatch well, i thank you for your efforts and its been a pleasure to work with you in the past. I look forward to working with you in the future. I think we make a good team. We will now proceed with our scheduled Committee Hearing on taxrelated matters. Every year the committee holds a hearing on the tax Filing Season it provides us with a great and relevant opportunity to discuss and examine the operations of the Internal Revenue service, the Agency Charged with administering our complicated, convoluted tax code and collecting taxes from workers and employers across the country. With each passing year, taxpayers face new challenges tax returns, heir including, but not limited to, protecting their private information. Today we will discuss, among other things, the i. R. S. s efforts to address these types of challenges as well as the plans for progress and modernization in the near future. The finance committee has always taken its oversight responsibility with the i. R. S. Very seriously, and for good reason. The i. R. S. Is virtually the only federal agency that deals with every american citizen, everyone who does business here, every large employer, every mom and pop business, and very community organization. Over recent decades, as our tax grode has grown more complex, we have given the i. R. S. More and more to do, including administering social policy and implementing an evergrowing number of rules, regulations and notices. And quite frankly, i dont think many people are satisfied with the results. While i know the people at the agency often point to limited funding, there are other matters that have contributed to the current level of dissatisfaction, including outdated collection practices and bureaucratic wrangling as well as a number of poor management decisions. This committee has conducted oversight on a number of those poor decisions, including the politicization of Tax Administration, excessive spending on executive travel, and improper contracting practices. Congress needs to look closely at the i. R. S. And work to modernize and streamline its operations. This should include changes to the bloated and poorly managed Technology Used by the agency and the elimination of bureaucratic waste. Hopefully, during the course of todays hearing, we can get a better sense of the agencys plans to address these and other issues as well as its suggestions for congressional action. Of course, looming over this conversation is the ongoing and hopefully bipartisan effort to reform our broken tax system. Tax reform, if done right, should simply the tax code and make the i. R. S. s job much easier and allow the agency to focus on collecting revenue in the fairest and most efficient manner possible. More importantly, tax reform, if done right, should improve the way taxpayers intertact with the i. R. S. , reducing the countless hours and billions of dollars spent every year just to comply with the tax code and file accurate returns. The i. R. S. Is probably the most feared of all government agencies. The i. R. S. Yields immense power and authority over the lives of our citizens, and, for hardworking taxpayers, direct contact with the i. R. S. Is rarely, if ever, desirable. I think we can take steps to improve this, but it will likely require us to make significant changes to the tax code and to the i. R. S. Itself. Hopefully, the leadership at the i. R. S. Will be willing partners in this effort. Toward that end, i appreciate commissioner koskinens willingness to appear today. I look forward to what i hope will be a meaningful and substantive discussion of these important issues, and i appreciate the work that hes done over the years. We have a good relationship. Hes worked well with me, and i personally want to thank him and tell him i appreciate him and appreciate the service that hes given to this wonderful country. With that ill turn it over to senator wyden for his opening remarks. Senator wyden thank you very much, mr. Chairman. Now that americans are getting into crunch time with tax Filing Season, i want to begin todays hearing by discussing what usually happens when early april rolls around. Around this time of year, president s usually release their tax returns to the public. Its been a tradition for decades, but apparently thats not going to happen in 2017. It looks like this president will choose to keep hiding his returns and ignoring this very low ethical bar, even though its clear his blind trust isnt blind at all, and the separation he promised hed make from his businesses seems to be nonexistent. Second, around this time of year is when the whole executive branch gets on the same page to pitch its Budget Proposal to the public and the congress. Not so this year. With this executive branch, it seems like the one hand often doesnt know what the other hand is up to. On the one hand, you have the treasury secretary, who came before this committee as a nominee and said he was committed to making sure the r. S. Had the resources to do its job. Mr. Mnuchin said he wanted to improve xpayers, Customer Service and he said the big staffing cuts in recent years were, to mr. Mnuchin, a concern, and it would be a very quick conversation with donald trump to get it fixed. Apparently that conversation hasnt happened, or if it did, the message didnt get through. When the public got its first glimpse of the trump budget, the i. R. S. Didnt get the investment secretary mnuchin talked about when he was here at the committee. For next year, instead, it got another 239 million cut. What that would mean is that Customer Service would get worse, more taxpayers would fall victim to hackers and preventable scams, and the good times will roll again while honest taxpayers get fleeced. This is not an academic debate. Right now, the online data retrieval tool that students and families use to fill out their Financial Aid forms is down because of cybersecurity problems. Hackers were using stolen personal information like names, birth dates and Social Security numbers to steal taxpayer dollars. Youd think an administration that talks about running government like a business would want to go out and invest in cybersecurity when it finds a hack. But thats not whats happening here. Instead, the administration is repeating the same old pattern cut after cut to i. R. S. Resources, meaning Taxpayer Service and Data Security could get worse and worse. And i want to close with a couple of comments as it relates to this whole discussion of tax reform that the chairman mentioned. Usually around this time taxpayers are collecting all their forms and receipts, theyre sitting down to file their taxes, and theyre saying, will the congress ever manage to simplify this mess we call the tax code and help the middle class . And they might even be a little hopeful this year, because they heard the president and members of congress say tax reform is right up at the top of the agenda. But so far, when you parse the details, it looks like some republican members of congress and the administration are locked in competition to see who can propose the biggest tax cut for the fortunate few. And for the typical working family, there isnt a lot in the trump plan or the house better way blueprint that helps that workingclass family get ahead, and in some respects, it really looks like theyre getting a tax increase. So ill close, mr. Chairman, by way of saying, to me, right at the heart of bipartisan tax reform is recognizing that we really, today, have two tax codes. Theres one system for the cop and the nurse and its come pulsery. Every time compulsory. Every time they get a paycheck that tax is taken right out of it. No special deal in the cayman islands. And then theres a system for those who are fortunate, who can hire all the lawyers and accountants and take advantage of these murky kind of rules. And that system, with the right advice from the tax experts, you can sort of pay what you want when you want to and sometimes you pay nothing at all. Its grossly unfair to just sit by when you have these two tax systems in america, one of which is stacked against the working family. That has to be a key part of bipartisan tax reform. And nobody is going to tell me that its not possible to do it. In my time on this committee, ive been involved with a number of our thoughtful members from the other side of the aisle. Senator greg and i sat next to each other on a sofa every week a two years to produce comprehensive federal income tax plan. And danny coates, when he was on this committee, did exactly the same thing. But, mr. Chairman, what we have to do is get away from this partisan, reconciliationonly from f approach and say the getgo, democrats and republicans, as you and i do so often, sit down at the outset and we try to make sure that we got a system that works for everybody. And that the working person gets a fair shake, and i want to renew that i think there are a lot of members on our side of the aisle that would like to work in that kind of vain and i look forward to our discussions. Senator hatch well, thank you, senator. Appreciate your comments. Today todays witness is the honorable John Koskinen, the 48th commissioner of the Internal Revenue service. Commissioner koskinen was confirmed to this position in december, 2013. Before coming to the i. R. S. , commissioner koskinen served for four years as a nonexecutive chairman of freddie mac, including a period where he was the acting c. E. O. Prior to that, he held various highprofile Public Service positions, including president of the u. S. Soccer foundation, deputy mayor of the district of columbia, and Deputy Director for management at o. M. B. The commissioner also spent more than two decades in the private sector, holding various leadership positions at the palmieri company, including Vice President , c. E. O. And chairman. This came after his work for several years at various legislative and Administrative Offices in federal and municipal government as well as a number of years practicing law. Commissioner koskinen has a law degree from Yale University school of law, a bachelors degree from duke university. We want to welcome you back to the finance committee, mr. Commissioner, and want to thank you once again for being here today. We like to have you please begin with your opening remarks. I ask that you limit your Opening Statement to around five minutes, if you can. Commissioner koskinen thank you, mr. Chairman. Chairman hatch, Ranking Member wyden, members of the committee, thank you for the opportunity to appear before you today. Mr. Chairman, i genuinely appreciate your kind and thoughtful words of support. Im pleased to report that the 2017 Filing Season has gone well so far. Through march 31, the i. R. S. Has received more than 93 million individual returns, on the way to a total of about 152 million. Weve issued over 74 million refunds for more than 213 billion, with an average refund totals 2,900. The 2017 Filing Season is notable for a change congress made in 2015 that took effect this year. It requires the i. R. S. To hold tax returns until february 15 each year if they claim the earned income tax credit or the additional Child Tax Credit. This change slowed the overall pace of refunds early in the Filing Season, but that pace accelerated with the release of more than 50 billion in eitc and actc refunds after february 15. The new requirement to hold earned income tax credit and Child Tax Credit returns and another change enacted by congress to accelerate the filing date of forms w2, together have helped the i. R. S. To spot incorrect or fraudulent returns. Receiving w2s earlier also allows us to release refunds to compliant taxpayers more quickly, avoiding unnecessary delays. In regard to phone service, were seeing an improved level of service on our tollfree lines, as we did in Filing Season 2016. Our phone level of service is currently running above 76 , and we anticipate the average for the Filing Service overall will be about 75 . The improvement is the direct result of additional funding granted by the congress in 2016 to improve service to taxpayers as well as to strengthen cybersecurity and expand our efforts against Identity Theft. The funding freed up resources to the correspondence inventory which 850,000 pieces and thats down to 660,000. We continue to experience Strong Demand for our Online Services. Taxpayers have visited our website, i. R. S. Gov, more than 320 million times so far this year. The popular is wheres my refund, the electronic tracking tool, has been used more than 228 million times. Others include direct pay, which allows taxpayers to may payments online, has been used more than 4. 6 million times this year. A brand new tool, the balance due feature, lets taxpayers view their i. R. S. Account, balance online, including the amount they owe for tax penalties and interest. This online tool has been used about 547,000 times since it was launched in november. The new balance due feature is also important because it represents the first step toward a fully functional i. R. S. Online account for taxpayers. Were developing this as part of our efforts to enhance and expand Important Services for all taxpayers no matter what their circumstances. Service at our Taxpayer Assistance Centers has improved this year. In recent years, many assistant centers saw such heavy demand during the Filing Season that taxpayers were lining up for hours before the centers opened. In 2015 we tested the idea of letting people make appointments in advance. We extended the appointment for this Filing Season. As a result we have mo reports of long lines so far anywhere in the United States. Another important area is the growing problem of stolen identity refund fraud. Over the past few years, we made steady progress in protecting against this crime and this progress has accelerated since 2015, thanks to the collaborative efforts of the Security Summit group. The strong unique partnership between the public and private sectors has produced real results. In fact, the number of people who reported to us they were victims of Identity Theft declined from 698,000 in calendar year 2015 to 376,000 in 2016. A drop of 46 . Even with this progress, the fraud filters in our systems are still catching a large number of false returns. Last year our system stopped more than 6. 5 billion dollars in fraudulent refunds on 969,000 returns filed by identity thieves. It shows that Identity Theft is still a major threat to the Tax Administration and we need to keep up the fight. Turning to upcoming legislation, we recognize that the congress is considering tax reform. The i. R. S. Doesnt take a position in tax reform or any other area, but we do have a great interest in working with congress to make sure whatever policies are adopted are easy for us to administer and easy for taxpayers to understand. We also Hope Congress will make any tax changes perspective and build in lead time so we can prepare taxpayers and our systems for the changes. Chairman hatch, Ranking Member wyden and members of the committee, that concludes my introductory statement and i ook forward to your questions. Senator hatch thank you, mr. Chairman. We appreciate you being here. We appreciate your comments. Let me begin the question with this question. Last month the Internal Revenue service and t