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IRS Leader’s Looming Exit Leaves Hole at Tax Agency as Expansion Begins

OCTOBER 23, 2022 | PUBLISHED IN

Quoted from Mark W. Everson Former IRS Commissioner; alliantgroup Vice Chairman

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With less than three weeks left in Charles Rettig’s term as Internal Revenue Service commissioner, President Biden hasn’t picked anyone to replace him, leaving the tax agency without a leader to spearhead the $80 billion agency expansion that Democrats just pushed through Congress.

The delay in choosing and confirming Mr. Rettig’s replacement nearly certainly means an interim IRS commissioner after Nov. 12. That acting commissioner might be reluctant to make binding decisions that affect the agency’s long-term future.

Any vacancy lasting until January would let Republicans influence or reject a Biden nominee should they win a Senate majority in November’s election.

The Biden administration didn’t place enough priority on finding an IRS commissioner over the past two years, and the decision is now likely to fall to the next Congress, said Ben Koltun, director of research at Beacon Policy Advisors LLC in Washington.

Administration officials have been talking to potential candidates for the five-year term as they near a decision, said a person familiar with the search. If Democrats hurry and dedicate Senate floor time to the position, there might be time during the postelection congressional session to confirm a nominee.

Finding an IRS chief is no easy task, even in more normal times. The tax agency can be unwieldy, with a long list of mandates, archaic computer systems, layers of bureaucracy and about 80,000 workers across the country.

Candidates undergo particularly intense vetting, including reviews of multiple years of tax filings. And they must be prepared for high-stakes tax politics, navigating between lawmakers eager for aggressive enforcement and others warning that more funding will result in intrusive enforcement.

The $80 billion, approved by Congress in the climate and healthcare law known as the Inflation Reduction Act, makes the job more attractive but attracts more scrutiny. That funding, unusual for an agency that had years of hiring freezes and flat budgets, offers a leader some new challenges in hiring and implementation, along with the resources to make a long-lasting difference.

“It can be a highly controversial role, and it’s high visibility and I think some people are reluctant to be in a role like that,” said David Kautter, who was interim IRS commissioner and a senior Treasury official in the Trump administration.

Mr. Rettig, picked by President Donald Trump, is a tax lawyer, but tax skills aren’t a prerequisite for the job. The administration is seeking someone with management experience who can bring private-sector skills and is familiar with the constraints of public-sector work, the person familiar with the search said. Beyond the tougher enforcement, the aim is to find someone who can transform how the IRS manages data and communicates with taxpayers, making the experience more like dealing with a large bank.

Mr. Kautter said he would encourage the administration to look to the business world for people with experience managing information technology and data processing. During the search that ended with Mr. Rettig’s nomination, Mr. Kautter said he talked to chief financial officers from several large companies.

The money will also put the next commissioner under a more intense spotlight and remove funding shortfalls as a reason for agency missteps. Whoever is chosen will face pressure from the administration and Democratic lawmakers to deliver on promises of better taxpayer service, fewer backlogs, updated technology and tougher enforcement.

The administration’s pick will need a bold vision and a focus on stopping tax-dodging by corporations, partnerships and wealthy individuals, said Sen. Ron Wyden (D., Ore.), chairman of the Senate Finance Committee, which oversees the IRS.

“The next commissioner needs to be ready for political opposition,” he said. “In terms of timeline, the sooner the better.”

Sen. Mike Crapo (R., Idaho), the ranking member of the Finance Committee who is the likely candidate to lead it if Republicans win a Senate majority, declined through a spokeswoman to comment.

Republicans have called for tough oversight on the expanded IRS and have focused on the administration’s pledge to not increase audit rates on middle-income households. They will also try to repeal or reshape the $80 billion or limit the agency’s annual budget.

If Republicans control the Senate, Mr. Koltun said, they could seek concessions about IRS priorities as the price for moving a nomination. So far, there has been little indication that a nomination is imminent.

“Biden, he’s waiting,” Mr. Koltun said. “He doesn’t want to give oxygen to Republican talking points during the midterms about the IRS.”

Once there is a pick, the job could be vacant for a while. Mr. Rettig was confirmed seven months after his nomination. His two predecessors were confirmed about four months after theirs.

White House press secretary Karine Jean-Pierre said Oct. 17 that the lack of a nominee wouldn’t slow down the IRS overhaul. Treasury and IRS officials are working on an implementation plan for the $80 billion.

An interim commissioner, either a career IRS executive or an outsider, would have the same basic power as a Senate-confirmed official. Typically, however, temporary leaders are less inclined to make significant changes or take risks.

“A confirmed commissioner speaks with the full authority of the institution,” said Mark Everson, who was IRS commissioner from 2003 to 2007. “An acting commissioner just won’t take certain decisions that will bind the agency for the future.”

Mr. Everson, now vice chairman of Alliantgroup, a tax consulting firm, said the post can be difficult to fill because not everyone wants to do it.

“It’s not like running the parks service, or something like that,” said Mr. Everson, who joined with three other former commissioners and the former national taxpayer advocate in a public statement warning about the delayed nomination. “You own the whole tax system.”