Department of the Treasury, Commissioner, Internal Revenue Service

Department/Agency: Department of the Treasury

Position:

Commissioner, Internal Revenue Service

Executive Schedule: Executive Level III - Presidential Appointment with Senate Confirmation

Major Responsibilities:

Administer and enforce federal tax laws
Interpret changes to the tax laws and tax rules
Assist policymakers in formulating legislation to improve the tax code and collection
Five-year term

Key Competencies and Preferred Qualifications:

Top tax Lawyer
Financial background
Expertise in U.S. Tax Code
Management experience
MBA

Insight:

As Benjamin Franklin once said, "In this world, nothing is certain but death and taxes." The commissioner of the Internal Revenue Service brings that latter reality home to every American taxpayer and business. The Internal Revenue Service (IRS) collects $2.4 trillion in taxes each year to fund most government operations and public services. This Treasury agency employs a staff of 100,000 to collect those taxes at a cost of $11 billion. It handles 235 million tax returns, with five out of six now filed electronically.

The IRS is always a work in progress. Tax laws change every year. Rates change often, and in 2008, for example, President Bush approved a bill giving middle class and lower middle class taxpayers a rebate to help stimulate the economy. The complexities of the tax code not only remain but, if anything, have gotten worse, with millions of middle-income Americans facing even steeper bills if they are hit by the dreaded Alternative Minimum Tax (AMT), which Congress neglected to index for inflation. At this writing, the Congress still is awaiting legislation to roll back the impact of the AMT for 2008, or millions of Americans will face larger than expected tax bills. That is hardly prudent policy in the teeth of the country's worst recession since the Depression.

Today, the IRS commissioner has a huge mandate to make sure the collection system works efficiently and new tax laws and rules are implemented promptly. It has an additional responsibility of navigating tax changes as the economic crisis envelops every sector of the country.

IRS Commissioner Douglas Shulman, appointed by President Bush and confirmed by the Senate in March 2008 to serve a five-year term, is in the hot seat these days in many ways over the rapidly changing tax code and the increasing reliance on the IRS in the current economic meltdown. President-elect Barack Obama made a promise to lower taxes on 95 percent of all taxpayers the central plank of his campaign. He also signaled that he would raise taxes on those earning more than $250,000 a year, and eliminate tax breaks for big corporations. Even before the Inauguration, his economic team, including Treasury Secretary-designate Timothy Geithner, was working with Democrats on Capitol Hill to shape a huge stimulus package in hopes of jolting the economy back to life.

In an effort to slow the rate of foreclosures, the IRS announced in December 2008 that it will make it easier for financially distressed homeowners behind on their taxes to refinance our sell their homes. "At the IRS, we need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today," Shulman said.

As a result, he says, IRS officials will respond more quickly to taxpayer requests to clear away liens and allow homeowners to proceed with refinancing or home sales. In the past, the process has taken 30 days after an application is filed, a spokesman said.

The IRS has been plagued for years by cost overruns and delays in modernizing its computers. In the last dozen years, it has spent more than $8 billion, and the moderniization is still not complete. However, many technology improvements have been made. Most taxpayers now file their returns electronically and receive funds directly deposited to their bank accounts. They can track the progress of their returns online. Some progress has been made since entactment of the IRS Restructuring and Reform Act of 1998.

At his confirmation hearing in late January 2008, Shulman said, "Since I've been nominated, many people have asked me if I would emphasize service or enforcement. But to be forced to choose between the two is a false choice. In order to execute its mission, the IRS must do both." He went on: "For taxpayers who pay their taxes willingly and on time, which is the great majority of Americans, there must be clear guidance, accessible education, and outstanding service. Our aim should be to make it as easy as possible for them to pay the correct amount of taxes in the most efficient and least burdensome manner possible. For taxpayers who intentionally evade paying their taxes, there must be rigorous enforcement programs. But whether serving taxpayers or enforcing the law, it is absolutely essential that American's believe the IRS is fair and that it respects the rights of all taxpayers." Sen. Charles Grassley (R-IA), the top Republican on the Senate Finance Committee, said, "Although he doesn't have in-depth tax expertise, Mr. Shulman brings a strong managerial background with him, and he will need all of his talents to succeed as IRS Commissioner."

Later, when Shulman easily won confirmation, Senate Finance Committee Chairman Max Baucus (D-MT) noted, "Millions of Americans - including our senior citizens and disabled veterans - are counting on Mr. Shulman to oversee the distribution of economic stimulus checks right and right away. Members of Congress are ready for a new and willing leader at the IRS who will seek to improve service to all taxpayers, and to tackle the tax administration issues that leave our country running in the red." Baucus promised the Senate Finance Committee's cooperation in making the IRS "a more efficient, effective, and responsive operation for all our citizens."

The rebate checks went out without a hitch, although that did not arrest the economy's nosedive.

The previous commissioner, Mark W. Everson, had promised tougher enforcement and scrutiny of corporations and high-income taxpayers when he took over the IRS in 2003, but faced questions in 2007 following complaints by auditors that they were being forced to close cases too early and losing billions of dollars in tax revenues. The agency countered that it had increased the number of companies whose tax returns it examined by 25 percent since 2001 while cutting back slightly on audits of the very largest companies.

The General Accountability Office reported in July 2008 that more than 1.6 million businesses owed $58 billion in unpaid federal payroll taxes and penalties. Unpaid payroll taxes - including the employer portion of Social Security and Medicare and the like amount taken out of workers' paychecks -- accounted for 20 percent of all outstanding business and individual taxes owed as of September, 2007.

Charles O. Rossotti, a successful businessman and co-founder of American Management Systems, was tapped by President Bill Clinton in 1997 to shake up the IRS. He ran the agency with a firm hand until 2002 and later wrote a book titled, "Many Unhappy Returns: One Man's Quest To Turn Around The Most Unpopular Organization In America."

President Lincoln and Congress in 1862 created the position of commissioner of Internal Revenue and enacted an income tax to pay for the Civil War. The income tax was repealed 10 years later, but in 1913, the 16^th Amendment to the Constitution gave Congress the authority to enact an income tax. Lawmakers promptly levied a 1 percent tax on income above $3,000. Today's rate are significantly higher, but not at the steep levels where they stood a generation ago, when Congress and the Reagan administration sought to simplify the code by whittling deductions and dramatically lowering the top marginal rate paid by the highest earners.

Key Relationships – Within the Government:

Secretary and Deputy Secretary, U.S. Department of the Treasury
Assistant Secretary for Tax Policy, Treasury
Attorney General, Deputy and Associate Attorney General, U.S. Department of Justice
Assistant Attorney General, Tax Division, Justice
Director and Deputy Director, Federal Bureau of Investigation, Justice
Assistant Director for Financial Crime, FBI, Justice
Deputy Secretary, Department of Homeland Security
Chairman, Securities and Exchange Commission
Director, Financial Crime Enforcement Network (FinCEN), Treasury
Comptroller General, General Accountability Office

Key Relationships – Outside the Government:

President and Executive Director, National Association of Attorneys General
American Bar Association
American Institute of Certified Public Accountants
Federation of Tax Administrators

Nomination Referred to:

Senate Finance Committee

Current Position Profile:

1. Douglas Shulman, M.P.A., J.D. (2008 - ). Financial industry regulator. Vice chairman of the Financial Industry Regulatory Authority (FINRA), formerly the National Association of Securities Dealers. Chief of staff to the bipartisan National Commission on Restructuring the IRS.

Recent Position Profiles:

2. Mark W. Everson, M.S., (2003-2007). Accountant. Deputy director for management at Office of Management and Budget. Executive of SC International Services, a Texas-based food services company. Served briefly as president of American Red Cross.

3. Charles O. Rossotti, M.B.A., (1997-2002). Co-founder of American Management Systems, a technology and consulting company. Aide to then-Secretary of Defense Robert McNamara from 1965 to 1969. Now senior adviser to the Carlyle Group, a venture capital firm.