Our system, all of it was customized and developed in the 50s and 60s. Weve replaced that system with those expenditures. But we still have over 50 applications that need to be replaced. But to show what weve been able to do that, that refund app got 200 million hits last year. 150 million returns across just 85 are processed electronically. That was not only not possible, it was inconceivable 15 years ago. We have made substantial strides. But the 300 million on the Affordable Care act are all challenges for us. Fortunately, the Filing Season this year has been implemented. We have 145,000 foreign Financial Institutions about to provide us data under the foreign account Tax Compliance act. All of those systems had to be built and rebuilt to obama sosh that data. If we could continue with the refund the resources we needed, wed get rid of a lot of these systems. Taxpayers would be able to go on line, as they do with bank of america, wells fargo or fidelity and deal with us without paper, without calls. Theyd be able to do all of their transactions easily and efficiently. Were talkble about can i catch up with where Financial Institutions are. And to do that, we have to keep spending the money. I certainly would like to i know my time is up. Ill make this my last question. All of that is stoered in antiquated systems. Rather than having to hunt for the return. Right now, weve aut mated the return. Weve been investigating this since may, 2013. My staff has interviewed over 30 irs and treasury o fishls and reviewed over a million pages. Last year senator widen and i were almost ready to ask the committee to release the final report. However, right around that time, we learned that the irs did not produce all emails to and from the key figure in the investigation because of what the irs claimed was a failed hard drive. At that time, members of this committee will have ample opportunity to explore the irs matter in great detail. We will have to do this carefully because of the restrictions set by section 63 of the tax code which generally prohiblts specific information. I urge all members to save their questions on the investigation of irs organizationings. And, on that matter until theyve had a chance to review the final report. Senator, do you have any comments . Just very briefly, mr. Chairman and colleagues. This is the only bipartisan inquiry that has been conducted or is being conducted on this issue. I just want to emphasize as chairman hatch did in his statement that we are working very closely together and colleagues, we are committed to making sure that this will be the one bipartisan inquiry on this important topic. Thank you, senator. Senator casey . Mr. Chairman, thanks very much. Mr. Commissioner, grateful to have you here. Probably one of the toughest in this town. We can ask for reforms and change and Better Service we have to be willing to support the resources to get the irs there to get any other agency where they need to go. We estimate that the agency will lose about 1400 through attrition through fy 15 that were not able to replace. When you go down that list of cuts and consequences, one of the results of thoo is middle class families and very vulnerable folks out there have to navigate a complex system with a little help. So your challenges in the budget become probables down the road for middle class and for vulnerable families. So i support your efts to get the resources you need to be able to do your job. Its not good enough for us to just say theres a problem were not going to ask you to solve it. I want to ask you about the letter i sent a week ago last monday on the 26th. Regarding everything has an acronym, as we know. This is a tfop. The tax forts out let program where as many folks know free tax forms are sent out, in pennsylvania, were getting a high, high volume of calls and communication regarding the fact that because of the budget cuts the distribution is in Rural Communities. We have millions of people that live in rural areas. This is a big issue. So what Additional Resources or tools or support would allow you to maintain the past years level of service regarding these forms and instruction booklets. People havent relied on those forms. One of the things were trying to make clear to people and well get you the anxious before the week is out. Is that forms are are down loadble from our web siet. Everybody has access to the forms. We recognize not everybody has access to the internet. And the challenge for the library is many allow you to in fact, use their computers. Is that they could down load can down load those forms, but theres a cost to that. They have to run their printers and theyre running on tight budgets. So we dont underestimate the significant e kans of that problem. Overall, our concern has been as we try to figure out where to minimize the impact as much as we can weve historically set out large volumes of libraries and others as we track them only act 10 or 15 of the statements are huge. So were producing a huge volume of paper. Weve tried to therefore figure out what forms to use so we can produce those. But it is drektly a result of trying to avoid shutting the place down where can we cut costs . As much as we can. So its only a matter of a few myon to be able to produce all of that. Weve cut back over time as mart of our 200 million weve saved. Weve sent a copy of the instructions and returns. Nobody gets those anymore. And we save about 60 million a year because of those and other attempts to go forward. But we are anxious to work with libraries and others. We have no choice where we are this year to try to figure out what the right mix is for them so that they can have copies for people who need them and not burden the libraries with this kausz. As quickly as you can get an answer. Were getting a lot of calls on this. One of the problems is the irs gave an 800 number. They said were going to have this Problem Solved in 4 weeks, 5 weeks, 6 weeks. Its not enough time. Weve got something in the order of 20 Million People in if country, 14 of the total that dont file electronically. The faster you can get answers is better. The problem is in printing forms, the tax legislation that got passed late, so that throws our printing process out. And thats why by the end of this month well have available for people to be able to mail them and fwr my understanding the end of february, that seems like forever. Especially if people are trying to file refunds. But we will have those forms available and printed before the month is out. I will get you the answer to that later this week. There is a vote on the floor now. Were going to continue to hold this hearing during the vote. Id like to make sure all members are able to ask questions. Senator nelson, youre next. Almost 5 5 billion a year is going out as a result of criminals using somebody elses Social Security number you have a pilot study going on in three jurisdictions. Youre doing it in florida in larng part because ive raised a ruckus as a result of a lot of these criminals. Much to the annoyance and heart ache of the legitimate taxpayer. And, unless they can get that pin, personal Identification Number they can be the get the system to operate because the irs says oh, youve already filed a tax return. And they cant get their legitimate taxpayer return filed and their refund if they have one due. So i thank you for getting out those pin numbers next week. But in those three jux dictions since one of those jurisdictions is my state im going to apply for a permanent personal Identification Number and see how the system is. And i am filing this week legislation to set up a personal, permanent pin. Now, the next and most agree jous part of this is that a lot of these false tax returns are being filed by inmates in the prisons. In the federal prison system, as well as the states. We brought this to the attention of the ir zx a couple of years ago. You all implemented a and we passed, in law, that gaf you temporary authority of which you could then break your confidentiality and share with the prison systems the fact that someone had filed a false tax return and indeed, its an inmate. We then followed up that temporary authority with a Permanent Authority in law two years ago. But its yet to be implemented. Can you help us, please . Were working with state prison authorities. Its in theyre interest as well to find out whether prisoners are actually engaged in illegal action. And so the statutetorial support from the congress was critical to us. And it has already made a big impact which youre right we need now to have all the state prison authorities enter into the memorandums of understanding with us to go forward. So you had the memorandum in place with regard to the federal prison system . Yes the federal prison we exchanged data with them and thats been able to give us we know what the roles are like. We are there. Its really at the state level when we need state authority and state agreements. Then i want to utilize this hearing here today for the word to go out to the respective 51 prison systems. That if you want your folks to get mad just let them know that prisoners are filing false tax returns getting lots of money back and the state prison systems ought to get on the ball and sign this mem randing of understanding. And if i also want to use this hearing to encourage your people to get those mous when the state steps forward and wants an mou, get it done. I would like to correct one thing. Just because if you go online youll discover, we are actively pushing the Pilot Program in the three states, youll note. When you get an ip pib e pin, an Identity Protection pin, well give it to you fr one year. Its a permanent process. Each year youll get a new pin so that its because otherwise, were concerned that the pins will be stolen. So what it is is a way of updating every year. So when you get yours, some ways i know personally me, ive discovered its a very good program. The reason we havent launched it nationally is because we want to see how efficient it goes. We hope this year, as many people as possible in florida georgia and the District Of Columbia will sign up for ip pins. You just had another person sign up. Me. Beginning again in 2011, at the same time the irs began targeting 57ly cants. The irs gab gift tax audits and began makes contributions to various tax organizations. These audits are contrary to congressional policy and legal pres debit e dent when we got wind of this the irs stopped auditing these contributions. This is a very complicated area of the law. Would administer guidance to ensure that the audits would not be ramped up again. Its been about three years and weve yet to see any guidance or information. Its important to provide certainty to our citizens that the irs is no going to select gift tax assessments based on politics. So my question is when do you plan to provide guidance on these audits or would you be in favor of guidance codifying with respect to application of the gift tax to c 4rks and other tax kpecht organizations. It is in consideration were taking a look at it across the board because they are related to the whole question of the tax exempt status and organizations across the spectrum. But in response to your question, any Time Congress would like to legislate in this area, it would be fine with us. Its clear and easy for people to understand. So it is tied up with the entire question of okay, first, organizations across the board. I understand you want 67 million bucks more. Is that the number . Actually, the president s budget for this year would be our present buchblgt is 10 pbtbudget is 10. 9 billion. The president s request is 12. 9 through an integrity cap adjustment. According to senator balm and senator carton that were here they really want to use the money that you are not receiving now for 9,000 enforcement em poi yees . Weve lost 5,000. It would allow us to hire 3,00 employees in the Service Centers answering phone calls so our level of service would go back to 80. So this is phone calls. This not knocking on doors with regards to audits and so forth. Are you going to just aim at sophisticated rich people . I know some rich people that are not sophisticated. Everybody wants to talk about middle class class warfare. And the idea by my colleagues would focus on rich, whos rich . Is that 250,000 . Im thot worried about what you said. Im worryied about whether or not your words are feeling down. Particularly if theyre at the office of chief counsel. So what im going to do is not ask you to answer questions from me right now but i would like to raise with you questions and points about that program and submit them for answer in writing and give you an opportunity to give very complete answers. And i would just ask now for your commitment to provide complete and thorough response for the record on that issue whistle blower. Id be delighted to do that. Obviously, since those in the United States were undocumented are not legally allowed to work, it makes no sense to provide them a subs sill day tour. Current policy reflects this by requiring those claiming the eitc to provide a Social Security number for themselves, their spouse and any children. However, the irs chief counsel advice issued march of 2000 not now, 2000, suggests that individuals granted deferred action would be able to amend returns for the previous years to claim the eitc for years they worked illegally in the United States once they obtained Social Security numbers. So, mr. Commissioner, can you confirm that those granted deferred action will be eligible to benefit from the eitc for years in which they were wokking without papers in the United States once they obtained a once they obtain a Social Security number . Yes, if the way the Program Works is those without a Social Security number and there are thousands who file with it tins every year and people paying their taxes even though theyre not legally here, they are not eligible for the earned Income Tax Credit Program. Once you get a Social Security number, however, whatever the programs are then the Program Allows you to file for an earned Income Tax Credit Program in terms of whether you can do that retroactively, the normal statutes of limitations would apply as to when you can apply, file abamended return, in effect. Underneath all of that, you would have to file returns in the past now, im not going to argue what you said because i think you stated the way it is. But this is a problem you get into. The irs is an interpretation of the eligibility requirements undermines congressional policy of not rewarding those for working illegally in the United States. Does the irs have any intention of revisiting the 2000 chief counsel advice . At this point im not aware that were going to do that, but id be happy to get back to you. Im suggesting to you that it should be done because congressional policy is that ewe dont reward those who come here undocumented. So i would ask you to look at that and respond in writing. My last question will have to be in. Ive been investigating charitable hospitals that is suing its low Income Patients when they cant afford to pay for care as part of the tax exempt status. Charitable hospitals are required to offer a community benefit. What is the irs doing to meet hospitals that arent following their own policies when it comes to low income care . We take this issue seriously. As you know, weve had additional Regulatory Guidance for hopts as to how to meet their riemts, which are required. One of the hopes is streamlining for the 5013 c organizations. We make it much easier to qualify and give us more efficient use of our resources to audit at the back end. So that we think the points youve been raising are very important ones. These are, in many cases significant Financial Institutions that are tax exempt, to some extent, to e because they have a requirement to provide community sfszs. And its an important area for us to be aware of for hospitals to understand what their responsibleties are and tgs our responsibility across the entire tax code that weve taken up audits and enforcement activities to reenforce the need for compliance. Senator, youre next. Thank you, mr. Chairman. And thank you, commissioner, for being here. I was here for bart of your testimony and in response to questions. Youve got a tough job. They took some of the reforms of people on this side oeft aisle and that side of the aisle and i think were in a situation now where people are looking for a commitment by the irs to do a better job on a dozen things today. After that process i know that the image of the agency improved is a tough agency to love because its taking away your hardearned dollars. Im very concerned with what i hear. I think we do need the irs to figure out how to run more efficiently. Its before the internet was used as extensively as it is now. And one of my concerns has been a specific program that would help in terms of this budget issue that you have taurked about today. There is a decision made by your managers that has significantly raised cost for the inc. En sill. But also for taxpayers, its resulted in an additional 3470,000 calls your decision to shut down the authorization electronic account resolution applications. I would think with your manpower being stretch and your resours being stretched that you would not want to make a decision like that that would cost the agency so much and be harmful to taxpayers. My question is this type of internet based that the program provided something that you are intended to bet back involved with and are you going to implement it more effectively next time . Why did you shut it down . Youre going to reestablish those applications . Im happy to take a look at it. We dont have an