Serrano Statement for Hearing on Internal Revenue Service
Thank you Mr. Chairman. I would also like to welcome new Internal Revenue Service Commissioner John Koskinen for his first hearing before the subcommittee. I thank you for your service to our nation, and for undertaking this endeavor at a very challenging time for the IRS.
By now, most Americans know that last year, it was reported 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, which affected liberal and conservative groups alike. We all believe the IRS must enforce our tax laws in a fair, even-handed manner, and that did not occur here.
At a hearing soon after the controversy came to light, the question I asked was, 'Where do we go from here?' What must be done to prevent something like this from happening again?
I think that the IRS has made a good start at answering those questions. The IRS has implemented all of the recommendations suggested by the Taxpayer Inspector General for Tax Administration in this area. The IRS has also implemented numerous internal reforms that have brought more accountability and oversight to the review decisions that are being made. And perhaps most importantly, the IRS is making an effort to further clarify for 501(c)(4) organizations, what is, and what is not, political activity.
There is no doubt that in recent years, a number of groups have abused their claim to 501(c)(4) tax exempt status by primarily engaging in political activities. This tax-advantaged status is not a right, but rather, a responsibility, and too many organizations have been claiming it as a way to avoid transparency and taxes. Last year, I suggested that the IRS needed to revisit these rules to provide greater clarity to organizations, and to their own auditors, as to what is considered a 'political' activity for purposes of making a 501(c)(4) designation. The rules proposed late last year by the IRS have attempted to do just that. I cannot say whether the IRS has struck the exact balance necessary in these proposed rules, but I do know that they will take any and all concerns seriously before finalizing them.
However, this committee cannot help the IRS in these reforms if we do not adequately fund the agency. The fiscal year 2014 Consolidated Appropriations Act gave the IRS $92 million 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, then this is simply unacceptable. We all know that at this level of funding, every additional dollar given to the IRS allows them to bring in at least 6 dollars from tax cheats. We cannot keep asking more and more of the IRS while providing them with less and less. That is not a good recipe for tax compliance or for this nation.
I hope this hearing will be of use to members of this subcommittee as we discuss funding levels for the IRS in the fiscal year 2015 appropriations process, but I am concerned that we might be here to just engage in election year politics. So let me simply state the facts that are on the record after significant congressional investigation. Yes, the inappropriate targeting affected both liberal and conservative groups alike. No, this targeting was not orchestrated by any political appointee, or by any individual outside of the IRS. And yes, 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 with more than 500,000 pages of documents. These are issues that simply do not need to be rehashed at this point.
Rather, this hearing must look forward. The fiscal year 2015 appropriations process is upon us, and the focus of this committee needs to be on ensuring the proper reforms are in place, and that the IRS has the resources to complete its mission of serving the American taxpayer and ensuring that everyone follows the law. We all know the importance the IRS has in ensuring that we have the funding to pay for everything from national defense to Head Start. Using this controversy to cut further resources from the agency will not just harm the IRS, but the American people as well.
Commissioner, once again, welcome to the subcommittee, and I hope that when we meet again in April, it will be under better circumstances.
Thank you, Mr. Chairman.