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Koskinen likely to face IRS bonus questions from tax panel

John Koskinen is likely to see his honeymoon as new Internal Revenue Chief come to an abrupt end today.

Koskinen, a private-sector turnaround specialist who became the IRS' 48th commissioner in late December, will be on the hot seat at a Ways and Means Oversight Subcommittee hearing this morning.

It is Koskinen's first appearance before the House tax-writing panel. He will be the only witness. The last time he was on Capitol Hill it was on the Senate side for his confirmation hearings.

John Koskinen during IRS commissioner hearing_C-SPAN
Click image for C-SPAN tape of Koskinen's confirmation hearing.

In announcing the hearing, subcommittee chairman Rep. Charles W. Boustany Jr. (R-La.) noted that Koskinen will be asked about the ongoing investigation into the Exempt Organizations Unit's targeting of groups seeking 501(c)(4) nonprofit status based on political leanings, proposed regulations for such social welfare groups, the backlog of nonprofit applications for tax-exempt status, the Affordable Care Act and improper payments for tax credits.

Bonuses are back: Since the hearing was scheduled, however, there's been another politically controversial development.

Koskinen and the National Treasury Employees Union (NTEU) reached an agreement that will partially reinstate the IRS' bonus program to union employees. The tax agency will pay reduced awards to union employees who earned performance awards last year. In exchange, the NTEU won't pursue litigation.

Almost $98 million in employee bonuses -- $76 million for union workers; $19.3 million for nonunion workers, including managers; and $2.5 million for executives -- were canceled by then Acting IRS Commissioner Daniel Werfel. The move was made to save enough money to keep IRS workers at their desks instead of furloughing them during last year's sequester.

The agency now will create a bonus pool of $43 million to be split among union members. In an email to IRS employees obtained by Tax Analysts, Koskinen told workers that the bonuses are expected to be paid in April.

NTEU President Colleen M. Kelley said the smaller award payouts are not ideal, but that smaller bonuses now were preferable to waiting for completion of legal proceedings.

"Payment of these earned awards to employees is in important step in recognizing their valuable contributions to the IRS and the nation," Kelley added.

Koskinen agreed. "This is money best spent on our existing employees," he said. "I firmly believe that this investment in our employees will directly benefit taxpayers and the tax system."

Unhappy lawmakers: Many on Capitol Hill do not share those sentiments.

The agency's bonus system came under fire in the early stages of Congressional investigation into the 501(c)(4) matter. Many Representatives and Senators were particularly irked that Lois Lerner, the former head of the IRS' tax-exempt division, might receive a bonus. Lerner refused to testify before a House Oversight and Government Operations Committee, was placed on paid leave and subsequently retired from the IRS.

When the IRS-NTEU bonus deal was announced, Sen. Orrin Hatch (R-Utah) issued his own statement denouncing reinstatement of the bonuses.

"It's hard to think of a group of people less deserving of bonuses than IRS employees," said the ranking Republican on the Senate Finance Committee. "Frankly, this is outrageous. I understand that not every IRS worker was responsible, but this just is the wrong signal to send the American people who were rightly outraged by how this agency treated people for their political views."

While it's Hatch's tax-writing counterparts in the House who will be questioning Koskinen today, Hatch vowed to discuss "this matter with IRS Commissioner Koskinen, especially since his predecessor rightly took the step of cancelling these bonuses."

If you want to watch the political fireworks over IRS bonuses and other issues, the hearing will begin at 9 a.m. Eastern time. Check the Ways and Means website for streaming of the session, as well as C-SPAN, which has the hearing on its program schedule.

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