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Thune Demands Answers on IRS Bonuses

GOP Senators seek answers from IRS Commissioner on IRS employee tax compliance problems

May 6, 2014

Washington, D.C. — 

U.S. Senator John Thune (R-South Dakota) joined his Republican colleagues on the Senate Finance Committee in sending a letter to Internal Revenue Service (IRS) Commissioner John Koskinen demanding answers as to how the IRS plans to prevent future bonus payments from being given to employees with conduct, performance, and tax compliance issues.

On April 22, 2014, the Treasury Inspector General for Tax Administration (TIGTA) issued a report outlining a number of alarming facts about the IRS’s system for awarding bonuses to its employees. Amid the findings, TIGTA found that between October 1, 2010, and December 21, 2012, more than 2,900 IRS employees with recent conduct issues resulting in disciplinary action received more than $2.8 million in monetary awards. Among these, more than 1,100 IRS employees with federal tax compliance problems received more than $1 million in cash awards.

“TIGTA’s findings represent yet another black eye for the IRS at a time when the agency’s reputation has yet to recover from the targeting of 501(c)(4) conservative groups,” said Thune. “It is unconscionable that while the American people spent $168 billion complying with the tax code, many of the IRS employees responsible for collecting federal taxes failed to pay their own taxes. Even worse, these IRS employees actually received bonuses for their subpar performance. The IRS must rescind the bonus payments and take immediate steps to stop taxpayer-funded bonuses to employees who have failed to pay their taxes or fulfill their responsibilities.”

Thune joined GOP Finance Committee members in sending the letter, including: Senators Richard Burr (R-North Carolina), John Cornyn (R-Texas), Mike Crapo (R-Idaho), Mike Enzi (R-Wyoming), Chuck Grassley (R-Iowa), Orrin Hatch (R-Utah), Johnny Isakson (R-Georgia), Rob Portman (R-Ohio), Pat Roberts (R-Kansas), and Pat Toomey (R-Pennsylvania).

The text of the senators’ letter follows:

May 5, 2014

The Honorable John A. Koskinen
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20230

Dear Commissioner Koskinen:

We write regarding the Treasury Inspector General for Tax Administration’s (TIGTA) report to the public on April 22, 2014, citing the several thousand IRS employees with either substantial conduct or tax compliance problems who received monetary or time-off awards. In several cases, personnel were given awards even though they had willfully understated tax liabilities, made late payments of tax liabilities or had under-reported income. Any of these violations would have placed an average taxpayer under IRS scrutiny and certainly not have ended with them receiving a bonus.

The distribution of these awards at a time when the IRS is under scrutiny for its actions concerning the political activity of conservative social welfare organizations and when its performance of basic taxpayer service functions have materially worsened call into question the agency’s commitment to the fair enforcement of our tax laws.

In recent testimony to the House Appropriations Committee, you testified that “the IRS is committed to carrying out its core responsibilities and working to preserve the public’s faith in the essential fairness and integrity of our tax system.” The distribution of monetary and time off rewards to personnel who have substantively violated the federal tax laws is entirely inconsistent with this statement and particularly galling given other recent actions by your agency. In the same testimony, you noted

“…we recognize that there has been a loss of confidence among taxpayers and particularly within Congress in regard to the way we manage operations, particularly the management problems that came to light last year in the section 501(c)(4) area. One of my responsibilities is to ensure that we are minimizing risks and quickly solving management and operational problems that may arise, so that Congress can be confident that when we request additional funding the money will be used wisely.”

The revelations revealed in TIGTA’s report contradict these statements and further erode public confidence in the nation’s tax enforcement agency when it already has been plagued with questions about its ability to apply laws in an equitable and unbiased manner. These bonuses further denigrate the IRS’s relationship with taxpayers, who are experiencing “a deterioration in performance” due to budget constraints.

In your April 7, 2014, testimony, you also estimate that every dollar “invested” in the IRS budget produces $4 in enforcement revenue. Given this calculus, the money spent on the bonuses identified in the TIGTA report would fully fund a number of the enforcement programs requested for FY 2015. The payment of awards to IRS employees who disregard the law creates an obvious conflict of interest with the agency’s mandate to ensure integrity of the tax system and is very troubling at a time when the agency asks for additional appropriations for enforcement activities. The IRS’s decision to issue bonuses to personnel who have violated the tax laws is foolhardy and wasteful in such a challenging fiscal climate.

We would appreciate an explanation of how the agency’s award system accounts for improper conduct by IRS employees. Further, we believe bonus payments to employees who have violated federal tax laws are improper and should, to the extent consistent with the law, be immediately rescinded.

We would also like an explanation of how you plan to expeditiously adopt measures and standards to prevent future awards from being given to employees with conduct and performance issues. Specifically, we respectfully request that you provide information (including a time frame) on the following:

  1. Why the IRS has elected not to consider recent disciplinary actions resulting from employee misconduct when determining award eligibility;
  2. Changes in personnel policy, performance standards, and initiatives that would strengthen IRS employee compliance with work place and tax laws in a way consistent with expectations and general practices among successful businesses;
  3. The feasibility of changes to NTEU National Agreement II (“…will not preclude a performance award that otherwise would be granted unless such preclusion is necessary to protect the integrity of the Service.”) to prohibit the provision of an award when there have been substantiated violations of the federal tax laws;
  4. Whether giving performance awards to IRS employees that violated the federal tax laws is necessary to protect the integrity of the IRS; and
  5. The number of IRS employees that violated the federal tax laws, as identified in the TIGTA report, who were disciplined for these violations.

We ask that you provide the requested information as soon as possible, but no later than June 1, 2014.  If you have any questions regarding this letter, please contact Chris Allen of Senator Roberts’ staff at (202) 224-4774 Bart Massey of Senator Enzi’s staff at (202) 224-3424, and Jim Lyons of Ranking Member Hatch’s staff at (202) 224-4515.

The American public expects and deserves something better from our highest tax administration agency; namely actions displaying a commitment to a higher standard that provides an example to the citizens the agency serves.

Thank you for your attention to this request.