Part of the program, that will give us a chance to hear from everyone and have maybe more than one round of questions. I am going to recognize the members in order of seniority. Those that were here and the latecomers, we will recognize them based on their arrival. E will go back and forth between the parties. I think most of you know that the 2014 appropriation cycle tested our endurance. It was only after the fiscal year started and after we had a Government Shutdown that the Budget Committee came to an agreement on the Discretionary Spending. Once we have that agreement enacted, we will do our sleeves and we went to work quickly and got a bipartisan on this appropriation bill. It is and thanks in no small part to our distinguished chairman, mr. Rogers, who is with us today. We hope this year will go more smoothly. We have got an agreement on the total Discretionary Spending that is in place. By that, i mean the way we are supposed to work and we will mark up our bills and subject them to amendments on the full committee and on the house floor. The administration hasnt submitted their budget of 2015 yet. We will have that soon. We have invited the commissioner to come back, probably in april. Today this is an oversight hearing. That really gets into how to spend the money that has been appropriated. How much will come a little bit later. I suggest that the two are very interrelated. How you spend the money that you have impacts how much money you will receive in the future. I think that we all know that you have come to the irs and what would be described as a difficult time. Some would say you have inherited a pretty big mess. We have a situation that is one of the dark periods in the irs history. There was a time when irs was awash with money and there was horse play and lavish parties. That was not good for anyone. At the same time, we found out the irs with singling out individuals on the groups of ndividuals and subjecting them to harassment and intimidation, bullying, if you will. That is what you inherited. Also, probably inherited an agency that wouldnt do a good job of dealing with the consumer, the folks at call the irs if they have questions. When your predecessor was sitting in the chair youre sitting in, i asked him at a hearing like this, do you think the irs has the trust of the American People . He said, yes. But i want to try to help you build that trust. Im sure that one of your goals as the new guy, as the new commissioner, is to rebuild the trust we have lost would not just this midi, but the American People. That is what you are about. I must tell you that some of the decisions you have made early on are of some concern to me as you try to rebuild that trust. For instance, 63 million of bonuses that were paid and eversing a decision that you predecessor made to not pay those bonuses is troublesome. I know that you do not begin this rulemaking process. There is a row that has been proposed that some would say rule that has been proposed that some would say now there is a rule for people to quiet peoples involvement and they are proposing a rule that some would argue it is the same thing and fringes upon the First Amendment right. You do not start the process, but you are continuing the process. One of the things i have read from time to time when you are slap in the face to the taxpayer. Their Consumer Services as they try to find out more from the irs, they will find that is going down and that the bonuses are going up. I would think that is hard to tolerate as a taxpayer or as an ndividual. We collected 2. 8 trillion. That was at a time when the sequester was going on. There is less money for the irs to have. All i have to say is i do not necessarily believe that a higher level of spending equals a higher level of service. That is why i think we have an oversight hearing to say how are you spending the money . It is not just how much you have, but how you spend it. I think how you spend it can improve even if you do not have as much as you would like to have. Everybody knows government needs money to provide services, right . But everybody also knows that these are difficult times in our country. We have got 17 trillion dollars in debt. We have an annual deficit this year that will be less than 1 trillion and we are all excited about that. The first time in five years it has been less than 1 trillion. Yes, government needs money, but i would say today the government need something more. In these discipline to rein in spending. It needs courage to make tough decisions. It needs commitment to make sure we do everything more efficiently and more effectively than we have done before. We want to work with you to help you do that, to help you set the right priorities which help you pend the money that we appropriate to you. We thank you for being here today. We will have questions. Before we do that, i want to turn to my friend, the Ranking Member. Let me say to him that it has been a whirlwind time, but he has been a great partner. We do not always agree on everything, but as we go through negotiations with our Senate Counterparts to come to this conclusion, it was a team effort. Thank you for that. Any comments . Thank you for your willingness to work with us, especially your staff. And our staff. Lets hope omnibus puts us back n the road of order. I would also like to welcome the new irs commissioner, john koshinen, for his first hearing before the subcommittee. Thank you for undertaking this endeavor at a challenging time for the irs. By now, most americans know that last year it was recorded that the irs had used inappropriate criteria to decide what 501 c 4 entities should be subject to greater scrutiny. As i said at the time, all members of congress were appalled by these actions. Ineffective liberal and conservative groups alike it affected liberal and conservative groups alike. At a hearing soon after the ontroversy into light, the question i asked was where to go from here . What must be done to prevent Something Like this from happening again . Think that the irs has made a good start at answering those questions. He irs has implement it all of the recommendations suggested by the taxpayer. The irs has also implemented numerous internal reforms that have brought more accountability and oversight to review decisions that are being made. Perhaps most importantly, the rs is making effort to further clarify what is and what is not olitical activity. Here is no doubt a number of roups have abused their claims to the 501 taxexempt status by engaging in political activity. This is not a right, but rather a responsibility. Too Many Organizations have been claiming it as a way to avoid transparency and taxes. Laster, i suggested the irs need to revisit these rules to provide greater clarity. As to what is considered a political activity for purposes of making a 501 designation, the rules proposed by the irs have attested to do just that in my opinion. I cannot say whether the irs struck the right balance, but i o know that they will take any and all concerns seriously though for finalizing them. However, this committee cannot help the irs and these reforms did we do not adequately fund gency. Fiscal year 2014 appropriations gave the irs more than the sequester level, but the irs is still being funded at its lowest level since fiscal year 2008. If we care about the fair implementation of our tax laws, this is simply unacceptable. Yall know at this level of funding, every additional dollar even to the irs allows them to bring in at least six dollars from taxes. We cannot ask more from the irs and provide them with less. That is not a good recipe for Tax Compliance or the nation. I hope the hearing will be of use as we discussed funding levels. I am concerned we might be here to engage in Election Year politics. Let me state the facts that are on the record already. It has been proven after significant investigation that the inappropriate targeting was both liberal and conservative groups alike not just one side. This targeting was not orchestrate by any political appointee or by an individual outside of the irs. The irs has been forthcoming in helping numerous investigations by using more than 150 employees to engage in 70,000 hours of work to provide the various investigations of more than 500,000 pages of documents. These are issues that simply do not need to be rehashed at this point again. Rather this hearing must look forward to fiscal year 2015 appropriations process is upon us and the focus of the committee needs to be on ensuring that copper reforms are in place and that the irs has a resources to complete its mission of serving the american taxpayer. And ensuring that everyone follows the law. We know the importance the irs has in ensuring we have the funding. You have seen this controversy to cut further resources would harm the irs and the American People as well. Welcome to the subcommittee. I hope that when we meet again in april, it will be under better circumstances. Thank you. Thank you. I would like to turn to the chairman of the full committee, mr. Rogers. Thank you. Thank you, commissioner. This is the very first of what will probably be 100120 committees our committee will onduct during the spring eason. You are the very first one. You have the privilege and honor of sitting in that chair for the first time. Before we get to the important business at hand of the day, let me first echo the chairman sentiment regarding the ppropriate of reparations process. Fiscal 2014 is a true result of compromise. My partnership with the Ranking Member and her counterpart on the senate side and Ranking Member shelby together, along with the subcommittee, we made responsible choices to reline our nations Funding Priorities and target precious tax dollars were they are needed the most, all the while continuing the trend of reducing federal Discretionary Spending. While the omnibus is a testament to the longstanding tradition of bipartisanship, now is not the time to rest on our laurels. As chairman crenshaw as mentioned, i expect the committee to move forward under regular order, draft legislation it is a product of rigorous oversight. We have much difficult work ahead of us. I am hopeful that the process will move swiftly and smoothly given that ryanmurray budget agreement. I think it is fitting that this commitment to regular order and transparency in the appropriations assess is reaffirmed at todays hearing with the irs. Just as congress has a supreme responsibility and stewardship of the taxpayer dollars, so too does the irs have that special duty to apply our countries tax laws fairly and uniformly. Commissioner koshinen, you have taken the helm of this agency during a tumultuous time to say the least. In the recent years, there have been grave violations of the Publics Trust that should give all americans cause for concern. I hope that you are the right person to write the ship right the ship. As i wrote to you earlier this month, i have serious concerns about the opposed regulation published by your predecessor in november. This rule would continue to target the First Amendment rights of the same conservative grassroots organizations that were unfairly scrutinized in applying for tax exempt status in the runup to that 2010 and 2012 elections. Given the agencys recent track record of improper political isolation and intimidation, i strongly believe this rule is a step in the wrong direction for an agency struggling to regain the americans public faith and onfidence. I look forward to hearing from you of your intentions in this respect today, particularly your plans to cooperate to make sure these dark days in the irs history books are truly behind us. Acting commissioner wefel last came before the committee detailing the irss wasteful spending on for most conferences and the Senior Executives who oversaw the 501 c 4 debacle in cincinnati have received ignificant performance bonuses. Listening to chairman crenshaws remarks, it seems like deja vu all over again. The irs discharge with the massive undertaking of a mandate under the Affordable Care act, the greatest intrusion of this agency into personal health care ecisions in history, combating Identity Theft and refund fraud, and addressing International Compliance issues. Among many other competing priorities, you can understand why additional reviews and more training conferences with heightened security i can scrutiny, we hope to ascertain how the irs will go about planning is training conferences to ensure that they are goal oriented and effective, as well as compliant with the irss procurement processes. I also hope you can explain to the satisfaction of this committee how and why 63 million in performance bonuses are appropriate or beneficial to the taxpayer . E are all painfully aware we are in the middle of some grim budget times. Every federal agency, especially he irs is duty bound to root out excess and waste. When we provide you with more than 11 billion annually to fulfill these duties, we expect you to spend it wisely and effectively. Mr. Commissioner, i hope we have your commitment to work with this committee to achieve our shared vision of protecting the taxpayers and their hardearned dollars. We look forward to hearing the testimony and wish you the best of luck. Thank you. We will turn to the commissioner for his testimony. If you have any written remarks you would like to submit, you can keep your oral testimony in the neighborhood of five minutes. The floor is yours. Turn on the microphone. All right. Mr. Chairman, Ranking Members, members of the subcommittee, thank you for the opportunity to be here before you today to give an overview of the irs operations. Im honored to serve as the irs commissioner and serve the agency and the dedicated employees. I believe the success of the irs is vital to the country. I want to outline what i believe are the key challenges and what i will focus on moving forward. We just started a new Filing Season four weeks ago. Over 30 99 returns have been filed. We sometimes many returns have been filed. Many are being filed electronically. Im confident that things do the hard work of our employees, the Filing Season will continue to go well. We also want to put to rest the issues of concern surrounding tax exempt status. He management problems associated with the 501 c 4 application process has shaken the Publics Trust in the irs under the former acting commissioner. We have made great progress in this area. It is my duty to make sure we omplete that work. Public trust is the irss most valuable asset. The irs needs to build on the progress it has made to improve Tax Compliance in a number of areas. One of the most critical is refund fraud. The irs has gotten better at resolving identity that cases. We are resolving those cases for taxpayers much faster. On average, it takes about 920 for new cases we can and will do better. The irs needs to keep looking for ways to improve the service we provide to taxpayers, which is critical to ensuring our system of voluntary compliance works properly. I am deeply concerned that chairman noted the significant reduction in the irs budget here our current funding level at 11. 3 billion dollars is roughly 900 million below what it was four years ago. We now have about 10,000 fewer employees than four years ago, including fewer officers and agents. As a result, the irs estimates it will not be able to collected billions of dollars in enforcement revenues. We expect audits conducted by the irs will be time to buy an estimated 100000 and a number of collection activities will decline by 190,000. One of our concerns is to deliver the service for the taxpayer needs are this taxis and. Almost 40 of taxpayers who called were unable to reach an irs employee. That is unacceptable. Our employees are doing their best to answer every call they can. Our service goal is 70 . Fullyear, we estimate 18 million taxpayer calls will not be able to reach us. Another area of concern is the amount of time people wait to get in person help that our assistance to get a person. The best of a play efforts and an expansion of online offerings can only go so far to help with these problems. There has been a loss of confidence within congress and this immediate regards to the way the irs has manages operations. One of my response abilities to make sure we solve management and operational problems that may arise so that congress and the subcommittee can be confident that our funding will always be used wisely and we understand the need to be careful stewards of taxpayer dollars entrusted to us. A look forward to working with congress and the subcommittee to solve the budget problems. I hope that one of my legacies at the end will put agency on a solid and funding level. This concludes my statement. I will be happy to take your questions. Thank you. Let me start the question process. In my Opening Statement, and mentioned the issue responding to the questions that people have. You mentioned that 40 of the calls went unanswered. As we have this oversight hearing, we talked about how you spend the money. I want to pursue how you make the decisions in terms of priorities. Where do you decide to spend money and where do you decide you are not able to spend money when you have limited resources . The subcommittee oversees about 30 different agencies. Your agency receives the largest amount of money. It receives more than half of all of the money that is allocated to distribute to agents. We have to make decisions in terms of priority and who is spending their money wisely and who is not. You obvious they have a lot of willie way leeway to make those decisions with the irs. He seems to me one of the most important things you do is deal with Consumer Services. You are like the front door. The phone call is the entryway to the irs. That is a lot of peoples First Contact when they make a phone call. If they find out the