09/23/2022 | Press release | Distributed by Public on 09/23/2022 10:28
WASHINGTON, DC - Senator James Lankford (R-OK) joined Senate Finance Committee Republicans to send a letter to Internal Revenue Service (IRS) Commissioner Charles Rettig requesting detailed plans for how the agency will spend the massive $80 billion injection of mandatory funding recently granted to it under the Inflation Reduction Act, including how it will fix existing problems while satisfying the critical need for improved customer service, transparency and accountability.
Rather than vague plans outlined by Treasury to date, the Senators request detailed information on how the IRS will:
After strongly opposing the Democrats' so-called "Inflation Reduction Act," Lankford spoke on the Senate floor following time in Oklahoma during the August state work period, in which Oklahomans shared their dissatisfaction with Biden's economic blunders and the hardships they face. Oklahomans continue to share that they are very wary of the potential increases in IRS audits coming for families at all income levels.
Lankford published an op-ed in the National Review about the huge influx of IRS workers and what that spells for Americans at all income levels and their federal taxes. Lankford joined Senate Finance Committee Ranking Member Mike Crapo (R-ID) and all Finance Committee Republicans to introduce a bill to prevent the Internal Revenue Service (IRS) from using its massive, $80 billion infusion of taxpayer dollars to squeeze more revenue out of American taxpayers who earn less than $400,000 per year.
You can read the full letter HERE and below:
Dear Commissioner Rettig:
On August 17, 2022, Treasury Secretary Yellen asked you to work with Treasury's Deputy Secretary to develop a detailed plan for spending nearly $80 billion in newly enacted mandatory IRS funding, which was part of the Inflation Reduction Act (IRA). The deadline for the plan is February 17, 2023.
American taxpayers have a right to know exactly how the IRS will spend their money and a right to fair tax administration. As Members of the authorizing Committee charged with oversight responsibilities over both the IRS and Treasury, we are compelled to ask: how will the IRS fix its numerous existing problems while satisfying the critical need for transparency and accountability?
Rather than vague plans by Treasury and the IRS on how it may spend $80 billion delivered to it in partisan legislation, we request detailed answers on how the IRS will: (1) prioritize taxpayer services, (2) guard against partisan targeting, (3) protect taxpayer privacy, (4) modernize technology, and (5) track and publish timely and reliable metrics, timelines, and milestones to establish comprehensive transparency and accountability, and allow for meaningful independent oversight.
1. Prioritizing taxpayer service
These problems are serious and have lasted far too long. In 2021, taxpayers waited at length for their refunds and approximately 250 million calls to the IRS went unanswered. Millions of taxpayers should not wait well over a year for their refund or spend days trying to connect with the IRS. The situation is particularly dire for millions faced with 40-year high inflation and in need of their tax refund to support their families.
Service prioritization items to address
The IRS should use its additional funding to prioritize clearing the backlog of returns andcorrespondence, and expediently pay taxpayers who are owed a refund. The minimumperformance standard should be refunds issued within four to six weeks after receipt of a qualifying paper tax return. The IRS needs to answer its telephones and hold times should average five minutes or less. No taxpayer should ever experience a "courtesy disconnect" from the IRS. These minimum performance standards need to be met to safeguard the integrity of our tax system. It is a fundamental requirement that the IRS timely process returns and refunds, and promptly answer its telephones.
2. Stop biased targeting
Americans should be able to trust that the government will enforce the law without regard to political beliefs, religion, or party affiliation. Compared to other government agencies, the IRS has a broad and powerful reach into Americans' daily lives. The American people have a right to expect the IRS will exercise its power in a fair, neutral, and impartial manner. There should be no hint of religious or political bias or partisanship; the IRS must take this responsibility seriously.
Unfortunately, there has been and continues to be greater IRS scrutiny of conservative groups applying for tax-exempt status. This happened in 2010 and 2012, which led to the IRS paying a settlement of $3.5 million to Tea Party Groups. As recently as May 18, 2021, a religious organization was incorrectly denied 501(c)(3) tax-exempt status because it was, according to the IRS, "engaged in prohibited political campaign intervention." Shockingly and inappropriately, the IRS wrote to the organization that "The bible teachings are typically affiliated with the [Republican] party and candidates. This disqualifies you from exemption under IRC Section 501(c)(3)." The IRS reversed its rejection, but only after significant scrutiny. Such additional scrutiny should be unnecessary if the IRS applies the law in a neutral, unbiased way. Attention by the IRS must also be paid to prohibition of indiscriminate targeting based on financial status.
No-targeting items to address
The IRS should never exercise its authority to chill the First Amendment rights of any American. Given the IRS has received extra appropriations of nearly $80 billion, and with the continuous line of IRS targeting problems, the agency must ensure partisanship is eliminated.
We remind the IRS of the prohibition of financial status exams and the history that led to enactment of section 7602(e). Thus, if the IRS intends to draw artificial scrutiny thresholds based on arbitrary income thresholds, it must at least provide metrics to allow independent analysis of whether and how the political thresholds established are enforced.
Relatedly, please provide details of the IRS's plans for implementation of the unenforceable directive by the Treasury Secretary not to use the supersized near-$80 billion of additional appropriations to increase audit chances for households earning $400,000 per year or less, or small businesses, "relative to historic levels." We request information regarding:
3. Privacy protection
The IRS must hold taxpayer information securely in order to preserve its confidentiality. The law protecting taxpayer information rests on sound principles that evolved from adverse experiences with the misuse of tax information.
More than 15 months after the news and advocacy outlet ProPublica began disclosing confidential, private, and legally protected taxpayer information and named particular individuals in an ongoing series of articles, and despite announcements of various inquiries and investigations, nothing is known about the source of the massive leak or hack.
In response to Senate Finance Committee inquiries made to the IRS Commissioner of this major data-security breach, the Commissioner responded, "We do not yet know whether there has been a data breach or a threat of a breach."18 It is remarkable to learn that the IRS and Treasury do not believe there has even been a threat of a breach in light of numerous unchallenged public claims to the contrary by ProPublica.
During a recent Senate Finance Committee hearing, when asked about the ProPublica leak, the Secretary of the Treasury replied that the administration had no new developments to report, the leak has been "very damaging," and the Treasury Department is doing "everything in our power to make sure there is not inappropriate access to such data." To date, everything in Treasury's power seems limited to announcements of ongoing investigations.
There have been many reasons for concern another leak will happen. Indeed, the IRS and Treasury recently revealed yet another lapse in safeguarding confidential, legally protected private taxpayer information on around 120,000 filers.20 The Government Accountability Office (GAO) and the Treasury Inspector General for Tax Administration (TIGTA) have also recently published reports with specific details on how taxpayer information held by the IRS might be at risk for a data breach from outside or inside.
Privacy protection items to address
ProPublica Leak: The American people remain in the dark about who was responsible and how it was allowed to happen. Although we understand TIGTA is investigating the leak to ProPublica, the IRS is not a bystander in this "very damaging" event. ProPublica is explicit, it received a "vast trove of Internal Revenue Service data" (emphasis added).
Congress and the American people deserve answers from the IRS. We want to know:
External threats: The IRS must place a high priority on implementing comprehensive security controls to protect confidential information. TIGTA's July 18, 2022 annual report provides a valuable starting point.
Internal threats: Protecting taxpayer privacy must be a top priority for the IRS.
4. Information Technology (IT) modernization
Considering technology's importance and potential, the IRA allocates $4.75 billion, or six percent of its total funding, to "business systems modernization." Returns on technological upgrades, which are presumably productivity enhancing, do not factor into Treasury or IRS discussions of funding and headcount requests for the IRS, at least not in analytically balanced ways.
The IRS must carefully manage its investments in its technology infrastructure and make every effort to avoid the problems it has experienced in the past, including. Such failures include:
IT items to address
Modernizing the IRS's technology infrastructure must be a top priority. With an additional $4.75 billion of the supersized IRS funding allocated to technological improvements, and with the IRS's Integrated Modernization Business Plan providing loose sketches of what the IR wants to do and how it plans on doing it, there is room for realizing productivity gains and accompanying improved taxpayer service.
Nevertheless, experience dictates a need for vigilance and multiple avenues of oversight because mistakes, such as FATCA IT, mail machines, and return processing, can quickly absorb the $4.75 billion and become another story in the 40-year history of the IRS being unable to modernize its technology.
Refinement and clear articulation of metrics and milestones that independent overseers can objectively use for monitoring any IRS IT and/or business plan modernization are required.
5. Transparency and accountability
In an August 17 letter, Treasury Secretary Yellen acknowledged the necessity for accountability mechanisms by stating the requested plan on utilization of supersized IRS funding "must include metrics for areas of focus and targets over the course of the coming years." We agree that the IRS needs to be measurable, held accountable and, we would add, independently overseen. However, an IRS funding plan cannot be produced solely for the benefit and interests of one political party, administration, or class of taxpayer. The IRS should be transparent and accountable to all Americans.
The IRS needs to report to Congress and the American people clear, reliable metrics for monitoring productivity improvements and related customer service improvements facilitated by its supersized budget.
The IRS must be accountable by providing performance metrics that can be independently reproduced and verified by Congress, watchdogs and taxpayers.
The IRS should report performance metrics regularly at meaningful intervals. The objectives, milestones, and timelines must be clear so that Congress can regularly monitor progress and quickly identify problems.
The IRS must be open, transparent, and responsive in a timely way with oversight from Congress, TIGTA, the National Taxpayer Advocate, and the Comptroller General of the United States.
We are concerned about whether the IRS will voluntarily comply with accountability and transparency standards.
For example, on September 22, 2021, we learned through TIGTA, not the IRS, that IRS management destroyed 30 million paper-filed information returns without first processing them.
Another example was learning from TIGTA about the underwhelming result of the $347 million FATCA IT "investment" discussed above.
With an infusion of $80 billion of new funding, the IRS must be accountable, and accountability requires transparency and timely communication with its authorizing Committees. In the interest of learning of and helping shape IRS plans, we must know:
How does the IRS propose it will show Congress and the American people that it will proceed by transparently using resources in a fair, neutral and optimal manner, rather than allocating resources in accord with politicized prioritization and policy goals, especially given that funding derived from a partisan legislative process:
1. Non-filing taxpayers;
2. Cash economy tax evasion;
3. So-called gig economy workers;
4. COVID-relief fraud and improper payments;
5. FATCA enforcement;
6. Earned income tax credits;
7. American opportunity tax credits;
8. Low-income housing tax credits;
9. Net premium tax credits;
10. Child tax credits (including the enhanced CTC);
11. Sick and paid family leave tax credit; and
12. Employee retention tax credit.
We respectfully request prompt responses, by October 28, 2022, to all of our questions and information requests posed above with attention and details required in your response. We require timely responses, and expect that further inquiries regarding utilization of supersized IRS funding will be forthcoming, as oversight must commensurately increase relative to the outsized IRS funding increase.