Rettig takes over IRS amid budget challenges, regulatory crunch

Veteran tax lawyer Chuck Rettig has an overflowing plate awaiting him as IRS commissioner after the Senate confirmed him Wednesday for the agency’s top job.

While assessing budget needs and reviewing its information technology and security weaknesses, Rettig will also need to immediately make sure the IRS is ready for the upcoming filing season and continue the guidance assembly line that’s producing rules and regulations for the new tax cuts law which took effect this year.

Rettig could also find himself in an uncomfortable position if Democrats take control of the House and try to force the release of President Donald Trump’s tax returns to lawmakers, as some have threatened to do.

“People used to sometimes ask, ‘How complicated is tax administration? People file or they don’t file,'” said former IRS commissioner John Koskinen, Rettig’s immediate predecessor. “I’d tell them to just sit in my office for a day, any day of the week, and look at the range of issues.”

The Senate voted 64-33 to approve Rettig’s nomination, which Trump announced in February, giving the IRS a full-time leader for the first time since November, when Koskinen exited the post at the end of his five-year term. David Kautter has been serving as acting IRS commissioner in addition to his duties as the Treasury Department’s top tax policy official.

Preparing for next year’s tax filing is likely to consume much of Rettig’s early attention, according to Koskinen.

The upcoming filing season is particularly fraught considering the lower personal and business tax rates and myriad other changes under the Tax Cuts and Jobs Act, which Trump signed at the end of last year. No one wants a filing mess-up on their watch, especially with all the moving parts in play this season, said a former IRS official who spoke on condition of anonymity because of current job sensitivities.

The agency, along with Treasury and the OMB, is still in the midst of preparing many crucial regulations, notably for some complex international provisions of the new law. Some commissioners have been more hands on than others when it comes to rulemaking, and while it’s not clear where Rettig may fall on that spectrum, he’s at least expected to take stock of how the process is progressing and who’s involved in the effort for the IRS as taxpayers seek clarity as soon as possible.

Improving data security and combating tax-related identity theft are also part of Rettig’s portfolio, and he is certain to keep close tabs on those issues. As Kautter and others have noted, the IRS is subjected to more than 2 million attempted cyberattacks a day.

Outdated information technology systems at the IRS will also garner Rettig’s attention. Part of the system crashed on the last day of this year’s tax filing season. Though it was traced to a newer piece of equipment, parts of the overall setup at the IRS infamously date to the 1960s.

As an initiative is under way to install a more modern, agency-wide case management system for taxpayers, Koskinen said it’s important that IT staffers continue coordinating with the agency’s business staff to optimize the end product.

To support all of this, the IRS will need sufficient resources from Congress, which has starved the agency of funding, cutting it by some 20 percent since 2010. Increases this year and next year are tied to implementing the new tax law, and largely fail to address chronic underfunding for the agency.

Rettig, at his confirmation hearing in June, said he wouldn’t be shy about pushing to boost spending for the IRS, which stands to get between $11.3 billion and $11.6 billion for the 2019 federal fiscal year.

Koskinen, who clashed frequently with Republicans in Congress, mostly over the aftermath of a political targeting controversy during the Obama administration, expects his successor to have an easier time securing better spending levels for the agency.

“A new commissioner with a clean slate will be able to have meaningful discussions with members of Congress, particularly the appropriators, about the challenge of underfunding the IRS,” Koskinen said.

Rettig, a tax controversy specialist who’s been with the same California law firm for more than 35 years, is the first tax lawyer to helm the IRS since the late 1990s, when a series of business management executives began leading the agency following a 1998 law that restructured IRS operations.

Congress is again contemplating a raft of changes to how the IRS operates, and Rettig has a chance to weigh in now that he’s confirmed. Among provisions he signaled support for at his Finance Committee confirmation hearing is funding for employee training, language to regulate paid tax preparers, and authority for a more competitive and accelerated hiring process known as streamlined critical pay, which the agency has previously used to bring on new IT employees.

Rettig will also get the chance to surround himself with new deputies, should he choose to make changes, and select a handful of tax technicians from within and outside the IRS to help guide decisions, the former IRS official said. (Tax attorney Michael Desmond is still awaiting confirmation as IRS chief counsel, the only other political appointee at the agency.)

The new commissioner is also expected to take the measure of the agency’s legislative and public affairs staff to ensure their effectiveness in advocating his vision for the agency, the former IRS official said.

While Rettig’s confirmation wasn’t in doubt, it was long coming, most recently due to some Senate Democratic opposition not connected to Rettig’s professional credentials. Oregon Sen. Ron Wyden, the top Democrat on the Finance Committee, and some of his colleagues protested a recent Treasury decision to stop most donor disclosure requirements for nonprofit groups, as well as a legal limit on the federal deduction for state and local taxes imposed this year. Both policy changes were made without Rettig’s involvement.

Wyden and 30 other Democrats, along with the chamber’s two independents, voted against Rettig’s confirmation. Another 15 Democrats voted for him, as did every Republican voting.

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