WASHINGTON – President Obama's choice to head the Internal Revenue Service told senators Tuesday he will work to restore public trust in the agency in the wake of the tea party scandal even as the IRS takes on new responsibilities administering the president's health care law.
At the same time, John Koskinen warned that budget cuts are threatening the agency's ability to effectively collect revenue and enforce the nation's tax laws.
"In every area of the IRS, taxpayers need to be confident that they will be treated fairly, no matter what their background or their affiliations," Koskinen told the Senate Finance Committee. "Public trust is the IRS' most important and valuable asset."
Obama nominated Koskinen, a retired corporate and government official with experience managing numerous organizations in crisis, to take over the IRS in August.
It appears likely the Senate will confirm the 74-year-old turnaround specialist to a five-year term, which would last beyond Obama's stay in office. Both Sen. Max Baucus, chairman of the Finance Committee, and Sen. Orrin Hatch, the committee's top Republican, said they support Koskinen's nomination.
Hatch, however, warned that he expects Koskinen to fully cooperate with congressional investigations into the agency's targeting of tea party groups. Koskinen said he would.
"As far as I'm concerned, the top priority for the next IRS commissioner should be to restore the agency's damaged credibility with the American people and their trust that the actions taken by the IRS are fair and impartial," said Hatch, of Utah.
Baucus, a Montana Democrat, said he hopes to quickly approve Koskinen's nomination, sending it to the full Senate.
"Mr. Koskinen has a history of succeeding in demanding roles," Baucus said. "He is the right person to take on this challenge, and with filing season approaching, the IRS needs its leader in place."
The IRS came under fire in May when agency officials acknowledged that agents had improperly targeted tea party and other conservative groups for additional scrutiny when they applied for tax-exempt status. The Justice Department and three congressional committees, including the Finance Committee, launched investigations.
The investigations, which are ongoing, have shown that IRS workers in a Cincinnati office started singling out conservative political groups in the spring of 2010, and continued to do so until 2012. IRS supervisors in Washington oversaw the targeting, but there has been no evidence released so far that anyone outside the IRS knew about the targeting or directed it.
After the targeting became public, Obama demanded the resignation of the acting IRS commissioner and several other top officials were removed from their positions or allowed to retire. The commissioner in charge of the agency when the targeting occurred, Douglas Shulman, left last year when his term expired. Shulman was a Bush appointee.
Koskinen has extensive experience in the public and private sectors. He came in to overhaul mortgage buyer Freddie Mac after its near-collapse in the financial crisis at the end of President George W. Bush's administration. He also helped restructure the assets of the largest failed life insurance company in U.S. history, Mutual Benefit Life, and helped reorganize the Penn Central Transportation Company after it became the largest bankruptcy in U.S. history.
His government experience includes handling preparations for potential computer problems associated with the Year 2000, and, as District of Columbia city administrator from 2000-03, helping restore it to financial stability after years of mismanagement.
With about 90,000 employees, the IRS processes more than 140 million individual income tax returns each year. Starting next year, the IRS will administer much of Obama's new health care law.
The IRS, which is part of the Treasury Department, will be in charge of enforcing the mandate that most individuals have health insurance, and collecting fines from people who don't. The IRS will also distribute subsidies to help people buy insurance in new state-based marketplaces known as exchanges.
Koskinen said the IRS has done its part to effectively prepare for the health law. "The excellent work that the agency has done in this regard should serve it well as it continues in its implementation efforts," Koskinen said.
But, he warned, budget cuts are undermining the agency.
"The IRS will have 11,000 fewer people working during this upcoming filing season while processing the largest number of returns in its history," Koskinen said. "I don't care how efficient you become, that is not a recipe for success or improved compliance and taxpayer service.
Obama has asked for a 14 percent increase in the IRS budget for next year, in part to help the agency administer the health care law. House Republicans have responded by proposing to cut the agency's budget by about one-fourth.