Biden Budget Proposal, Committee Updates, IRS Leak Investigations, and More

Senate Finance Committee Greenlights Werfel Nomination. On March 2, the Senate Finance Committee favorably reported the nomination of Danny Werfel to be the next commissioner of the IRS. Sens. Chuck Grassley (R-IA), Bill Cassidy (R-LA) and Todd Young (R-IN) voted with all 14 Democrats in favor of the nomination. In addition, Sen. Thom Tillis (R-NC) had previously said he would support the nomination, but he was ultimately unable to attend the executive session to cast his vote. Following this action, the Senate will soon consider Werfel’s nomination in a floor vote of the entire chamber.

Ultimately, committee Ranking Member Mike Crapo (R-ID) voted with eight of his fellow GOP committee members against the Werfel nomination. In the hearing the week prior, Crapo expressed his distrust of the IRS for its failure to ensure transparency and accountability in tax administration. Sen. John Cornyn (R-TX) echoed this sentiment, telling reporters, “if confirmed, Werfel will face a number of challenges in rebuilding the trust America’s tax collector has lost with the taxpayer over the years.”

Several Republicans also expressed concern over the IRS’ development of an operational plan detailing the agency’s proposed allocation of new Inflation Reduction Act (IRA) resources. Last year, Treasury Secretary Janet Yellen requested that the IRS furnish this operational plan by Feb. 17, but recent reports indicate that the agency has missed this deadline. At a conference held by the California Society of Enrolled Agents, IRS Wage and Investment Division Commissioner and Chief Taxpayer Experience Officer Ken Corbin tempered public expectations for the plan’s timeline, informing audience members that the operational document would be ready sometime in the spring.

Despite some GOP opposition, Werfel is expected to secure the needed simple majority of Senate support. An exact timeline for floor consideration has not yet been established, but Senate Majority Leader Chuck Schumer (D-NY) said on Monday that it could occur as early as tomorrow. Following the initial nomination hearing, Senate Finance Committee Chairman Ron Wyden (D-OR) has repeatedly expressed his desire to expedite the process to ensure proper implementation of IRA funding.

Jason Smith Informs Budget and Oversight Committees of Priorities. On Feb. 28, the House Ways and Means Committee held a markup of its Estimates Letter to the Committee on the Budget and Oversight and Authorization Plan for the 118th Congress. In the letters, committee Chairman Jason Smith (R-MO) reaffirmed his commitment to pursuing tax policies that benefit American workers and small businesses.

Generally, Smith said the committee’s proposed tax policy agenda will include efforts aimed at “re-shoring investment and jobs, strengthening our supply chains, growing retirement savings, developing workforce skills and experience and encouraging small business growth.” In reference to the looming debt limit, Smith said the committee would pursue policies to address the growing federal spending and reduce the need for future debt limit increases.

Smith also offered specifics on other legislative priorities, including his intention to reauthorize and modify the Temporary Assistance for Needy Families and Title IV-B entitlement spending programs. With these extensions, Smith hopes to include new oversight mechanisms and more substantial work requirements to prevent fraud and abuse.

Smith also focused his trade agenda on the committee’s plans to increase economic competitiveness with China and other U.S. adversaries. Specifically, Smith discussed the implementation of the Uyghur Forced Labor Prevention Act and the enactment of potential new legislation to expand the monitoring of intellectual property theft. (continue reading)

Smith and Schweikert Continue Investigations into IRS Leaks. On March 2, House Ways and Means Committee Chairman Jason Smith (R-MO) and Oversight Subcommittee Chairman David Schweikert (R-AZ) sent a letter to acting IRS Commissioner Douglas O’Donnell regarding possible taxpayer data security inadequacies. The letter specifically referenced the accidental disclosure of private information on two occasions in 2022.

Both leaks involved a set of Forms 990-T, a document used by tax-exempt organizations to report and pay income taxes unrelated to the entities’ exempt purposes. In August 2022, the IRS discovered that they had accidentally allowed a data set containing confidential filing information to be published on a searchable public IRS database. After correcting this error and deleting the files from the portal, the IRS accidentally republished most of the documents on Nov. 23, 2022, allowing them to remain online until early December.

The letter accused the Biden administration of thus far failing “to produce any information about the cause of the leaks or hold anyone accountable.” Furthermore, the GOP lawmakers requested that O’Donnell turn over all documents and communications related to the pair of leaks to the committee by March 16. Using this information, the Ways and Means Committee will look to enact policies to prevent such disclosures from happening in the future.

This request is part of Smith’s larger effort to crack down on data security at the IRS—a key topic of concern for myriad lawmakers on both sides of the aisle. Previously, Smith sent a letter to Treasury Inspector General for Tax Administration J. Russell George requesting an investigation concerning the high-profile leak of confidential taxpayer information to ProPublica in 2021. This request also compelled TIGTA to make public the results as quickly as possible after concluding the investigation. In the coming months, TIGTA will issue a report with recommendations concerning the IRS’ data security. (continue reading)