Congress, including the first africanamerican republican in the house, and the first woman veteran in the senate. Keep track of members of congress on cspan. Org. The congressional chronicle page as lots of good information including Voting Results and statistics. Irs commissioner John Koskinen tuesday on the 2016 budget request before the Senate Finance committee. He discussed tax scams, and shortages at the irs. The president s budget calls for an 18 increase for the agency. This is just over two hours. Welcome to the irs commissioner John Koskinen. Also fiscal year 2016 Budget Proposal. Commissioner koskinen. More than 152 years ago the finance Committee Received a letter from george butwell who president lincoln had apointed as the first commissioner of the international revenue. The letter came in response to an inquiry from the committee seeking information about the commissioners organization, his budget and the activities of his office. Does that sound familiar . In his letter, dated january 21st, 1863, commissioner bodwell tried to answer the committees questions by starting by first asking congress for more money. Specifically he wroelt, quote, before proceeding to estimate the expenses of assessing and collecting the revenue, i desire to express the opinion that an increase in the pay of assessors is very important if not absolute necessary, unquote. Now, that part does sound familiar to me. Absolute necessary unquote. Now, that part does sound familiar to me. As you and i continue this historic and important relationship, i hope we can begin the 114th congress on new footing. The issues before us are too great for that relationship to be anything but open, honest and productive. We will certainly disagree a lot on your agencys implementation of obamacare, on the application of premium tax credits the federal exchanges and on irs spending, just to name a few issues. Sometimes the relationship will be contentious. Sometimes it will be congenial. I hope more of the latter than the former but that will depend a lot on you. And maybe a little bit on us, too. When we look at the irss operations, there are a handful of basic principles the agency must follow in order to maintain its working relationship with this committee. Today im going to talk about three of those principles. First, the irs must spend taxpayer dollars wisely. Because the agency that collects taxes from American Workers and businesses, your agency will continue to be under a special scrutiny when it comes to how it spends the Money Congress appropriates. And unfortunately, the irss operations do not appear to be able to withstand such scrutiny at this time. When you reverse the positions of your predecessors to employees who have not paid their taxes, when your agency throws lavish conferences and when you spend tens of millions of dollars on Public SectorUnion Activity, the public loses faith in your ability to spend your money wisely. Now, some of that wasnt your fault. When your agency faced tens of billions of dollars in improper payments every year, when the irs owes refund checks to a single address and when a quarter of all tax credit payments are improper the public loses faith in the irss ability to protect tax dollars carefully. Secondly, the irs must treat taxpayers fairly and respect their rights. Recent scandals have given americans reason to doubt that the irs will treat them fairly. While the targeting of applicants for taxexempt status may have happened before your tenure taxpayers must have confidence that those days are over. Now, just before mr. Koskinen you became commissioner, limit the ability of welfare organizations to engage in speech about matters of public importance. After an outcry from all sides of the political spectrum the proposed regulation was withdrawn. But now i hear you have a plan to reissue it. I think this would be a mistake, and i hope you dont go down that path of trying to limit political speech. That would only further put your agency in needless critical debate and controversy. Third, and finally the irs must be open and honest with this committee. We must have a mutual trust between us. I believe you to be an honest man. And when you tell me something i take you at your word. But its because of this trust that i am concerned about a recent development in the committees investigation of political targeting at the irs. Last july, your agency told the committee that had completed its production of documents regarding lois lerner. The central figure in the investigation. And late last month this committee worked to finalize its investigative report, your agency delivered 86000 pages of new documents including 30,000 pages of new lois lerner documents including new emails. 30,000 pages of new documents emails, boxes that i have here about onetenth of those. Just in this pile that i cant even lift. I might be able to if i stand up. But i have about onetenth of those. These documents are central and relevant to the committees investigation, they were given to us without notice or explanation roughly 20 months after we made our initial document request and really after we thought we were going to be able to, senator wyden and i were going to be able to have a final report. This prolongs the committees investigation and raises more questions that it answers. We will be following up on this matter more after todays hearing. Now, commissioner koskinen, we are here today to discuss your agencys operations and the president s Budget Proposal. There is much to discuss on these two topics, and i look forward to hearing your testimony and answers. In your opening remarks id appreciate it if you took the time to address three specific concerns that i have. First id like to hear what the irs planned to do plans to do to address the consistency consistently high levels of fraud and overpayments to the unearned income tax credit. Second id like to hear what specific changes you plan to make in the agencys spending habits to deal with the budgetary shortfalls you publicly decried. Third, id like to hear about any contingency plans you have in place in case the Supreme Court invalidated the current structure of the Affordable Care act tax subsidyies later this year. I hope that today can mark the beginning of a new chapter in the long historic relationship between the irs and Senate Finance committee. I hope theres a good chapter, but once again that is audibly up to you, it seems to me. Let me just say that, you know, this is onetenth of what were talking about. This is a huge number of documents. And you can see one reason why im a little bit concerned and maybe a little bit upset as well. Senator wyden, i turn to you for your opening statement. Thank you very much. And mr. Koskinen, i share chairman hatchs concern about bringing our bipartisan inquiry to a halt. And to get that done to complete it in a thoughtful and a bipartisan way were going to need these documents. As the chairman noted, we thaurt thought they were going to get some and were going to need them quickly. Whenever i talk with oregonians in meetings or town halls, the conversation always comes down to the same core issue, the struggling middle class. Years after economists first said that the recession officially ended, too many middleclass americans feel like theyre standing on quicksand because the recovery has yet to reach them. So the challenge facing policymakers is putting americas middle class on solid economic ground. Growing their paychecks and ensuring that our recovery reaches everyone across america. That challenge is going to be top of mind at each of the three hearings colleagues that we hold this week. Tomorrow and thursday, the committee will talk with hhs secretary burrwell about the administrations plans to save americans money on health care, create jobs increase wages and invest in the middle class. Today the committee has an opportunity to discuss the status of americas accounting department. The Internal Revenue service with the commissioner, John Koskinen. With w2 forms in the mail and the tax season beginning, our countrys annual headache is now setting in. And i want to emphasize that today taxpayers reside in two separate worlds. In one world a middleclass Office Employee pays taxes directly out of her wages and she is subjected every spring to the painstaking process of filing returns. Colleagues for that Office Worker there are no complicated tax avoidance strategies at her disposal. She doesnt have any shelters. She doesnt have any vehicles for her to hide her income. Meanwhile, in the other tax world, teams of accountants go out to pry open loopholes that are hidden in the tax code, and the line between right and wrong is murky at best. The inherent unfairness of americas tax system is a blow that falls hardest on the middle class. And it takes a number of forms. The most obvious is that every year families spend more time and money filling out their taxes. People are worried about compiling all their records completing all the forms, and then filing them correctly. Unfortunately, the tax code itself hasnt gotten any simpler, and the lack of resources that the irs has slowed service in a number of instances to a crawl. Nina olsen who is the independent irs Taxpayer Advocate calls and i quote here that this is the most serious problem facing taxpayers. When americans call into irs help lines they often sit in long queues listening to hold music. Protections against Identity Theft are delayed. Taxpayers are worried they might be victims of scams cant end up getting the timely assistance that they need. Families that depend on a refund help cover the mortgage or tuition get left waiting. Now, theres a second issue to consider today. According to the Internal Revenue service, nearly 400 billion in taxes go unpaid each year. Thats the tax gap. One of its biggest causes is the dishonesty of tax cheats and scammers who avoid paying what they owe. And its important to reflect on who gets the short stick as a result. Its the middleclass age earner once again whose taxes come straight out of their paycheck. Honest taxpayers have to make up the difference when the laws dodge their responsibilities, and thats wrong. But until congress simplifies and restores fairness to the broken tax code, multinationals and those with highpriced accountants can continue to find loophole loopholes. There is no question that the irs can make better use of the resources it has. That is true for every federal agency, every private business, and the congress itself. And it has been acknowledged by commissioner koskinen and his predecessor. Meanwhile, policymakers cant lose sight of the biggest challenge today, which is putting our middle class on solid economic ground. Theyre going to be many more opportunities for this committee to work on a bipartisan basis with the commissioner and the irs to make the system work better for middleclass families including through comprehensive tax reform. Ultimate goal ought to be fairness. And as i wrap up i want to come back to the fact that taxpayers shouldnt be divided into two worlds. And one of those today carries a much heavier burden than the other. Commissioner, we look forward to working with you and our colleagues to make that a reality, and i thank you mr. Chairman. Well thank you senator. Commissioner koskinen has been serving as the head of the irs since december 2013. He has broad Public Sector experience including having chaired chaired freddie mac and Deputy Director for management of the office of management of budget. Three really difficult and trying positions. Mr. Koskinen also has extensive private sector experience including working as the president of the United States soccer foundation, and is the president and ceo of palmeri company. He graduated with a j. D. From the university of law and a b. A. In physics from duke university. We want to thank you, mr. Commissioner, for being here today and please begin with your statement. Senator hatch, Ranking Member wyden and members of the committee, thank you for the opportunity to discuss operations. We at the irs value our working relationship with this committee, with the chairman and the Ranking Members and look forward to a productive dialogue and constructive working relationship over the next two years of this congress. First of all, im pleased to report that the 2015 tax Filing Season opened on schedule on january 20th and is going well so far. Weve accepted more than 16 million tax returns and weve started issuing refunds. And in fact to show you how much people care about the refunds, weve accepted 16 million returns and already had 80 hits on wheres my refund app on the website. Opening the current Filing Season on schedule was a major accomplishment, given the challenges we faced. This achievement is a direct result of the dedication commitment and expertise of the irs work force. Along with normal Filing Season preparations, there were significant challenges and extra work to get ready for the tax changes related to the Affordable Care act and the foreign account Tax Compliance act. We also had to update our systems to reflect the tax extender legislation passed in december. Despite this success, i remain deeply concerned about the agencys ability to continue to deliver on its mission in light of significant reductions in our budget. Just a month ago the agencys fiscal 2015 budget was set at 10. 9 billion. 346 million less than 2014 and really an amount 600 million less than last year when another 250 million in mandated costs and inflation that we must absorb are counted. Plus, thats on top of a 600 million cut the irs had already taken as a result of governmentwide sequestration in 2013. The irs is the only major agency that was not subsequently restored to the presequester level. These funding cuts are so significant that efficiency alone cannot make up the difference. We continue to find efficiencies where we can and are presently saving 200 million a year as a result of significantly reduced office space, printing and mailing and use of contractors. But weve reached the point of having to make very critical performance tradeoffs. In allocating our limited resources for 2015, we tried to attempt to do another. Rather than going into greater detail about this, let me respond quickly to the points the chairman raised. First with regard to the earned income tax credit, we are concerned about the high level of improper payments and the volume. The agency has been working for over ten years struggling with this challenge. And as ive testified before this committee before we are asking congress to give us additional tools to deal with the problem. They would include legislation to provide us with w2s earlier. We should be able to get them at the same time employees do so that we could match and find fraud and improper payments earlier. If we had correctible error authority, we could correct errors and returns, particularly eitc returns. But the only way we can correct them now is by doing an audit. And finally if we had the ability to require minimum standards of tax preparers, over half of the eitc returns are prepared by preparers, the vast majority of whom do a great job. A reasonable number are stymied by the complications of the act and a small number of preparers are actually crooks. Who take advantage of taxpayers and seize all or portions of their refunds. This committee and senator wyden have a bill that would restore our ability to require minimum standards for tax preparers just the way there are minimum standards for everybody from hairdressers to others who provide public services. Weve taken actions wherever we can. The Famous Convention that was held inadvisedly five years ago no longer could be held for training or conferences has to be signed off personally by me and reviewed and signed off by the treasury department. So i am confident that those situations are not going to arise again. With regard to the foreign investigation, we represented to you last spring that we had completed the production of documents related to the determination process. Since then we have provided hundreds of thousands of pages of additional documents requested by anyone of the six various investigations going on. The documents you have received are not more documents about the determination process. They are documents that have been requested by different committees particularly in the house, or more information about other peripheral players in the program, other detailed documents with regard to emails from those participants. All of those are responsive to requests weve had which none of them have anything to do with the determination process, but weve been pleased to provide them in an attempt to answer any question that anybody has in request for documents on any matter. Our cover letter i thought explained where these documents came from. They are not, in fact, inconsistent with the earlier representations weve made. My time is running out. I will be happy to answer questions about the president s budget for 2016 which would go a significant way toward restoring our ability. If i had a little additional time, that would be very helpful. I would then other point you raised with regard to our payment of performance awards to those who are delinquent in their taxes first of all, i would like the record to note the irs has the highest compliance rate of any agency in government including the congress. Over 99 of our employees are compliant with their taxes. And thats because they take it seriously. Its an important responsibility for anybody who works for the Internal Revenue service to be current on their taxes. Those who are not compliant include those who are making installment payments, who are working toward compliance, but it is clear and its clear to our employees that if you willfully do not pay your taxes not only are you ineligible anymore for an award, youre subject to disciplinary action including i