Don't Mess With Taxes

IRS Commissioner John Koskinen makes a point during a Congressional hearing.

John Koskinen did it! He survived his term as Internal Revenue Service Commissioner.

Today is the last day for the tax agency's 48th commissioner. Officially, his term expires on Sunday, Nov. 12. Since Friday, Nov. 10, is the federal Veterans Day holiday, today is the last day Koskinen will come into his office in downtown Washington, D.C.

It was not an easy four years.

Fighting to keep the job: Koskinen came to the job in December 2013 while it was in the midst of the politically charges and polarizing scandal that revolved around how the tax agency dealt with applications from Tea Party affiliated groups seeking tax-exempt 501(c)(4) status.

In October, the Treasury Inspector General for Tax Administration acknowledged liberal groups also were subject to the same IRS treatment. That late assessment, however, did little to quiet Koskinen's Congressional critics.

Such negativity toward the IRS and its head honcho was the norm for Koskinen's four years in office. He regularly battled House and Senate committees looking into the nonprofit approval process, as well with Congress as a whole over its decisions to continually slash the IRS budget.

All the while, a group of Republican Representatives was pushing for Koskinen's firing or impeachment. They had to settle for a House committee censure.

Tax pro regulation loss, ID theft security wins: Beyond the halls of Congress, Koskinen and his crew faced off against and lost to tax professionals who opposed the agency's effort to more stringently regulate them.

The IRS had more success under the 78-year-old former businessman in stemming the flow of untaxed money to offshore accounts.

And as tax identity theft and refund fraud was exploding, Koskinen and the IRS established and enhanced, in conjunction with tax pros, software companies and state tax departments, security systems and efforts to counter the criminal efforts.

At the taxpayer filing level, the anti-scam efforts were generally successful. However, the IRS itself was the victim of a couple of hacks.

Now as he packs up his desk, how's Koskinen feeling?

"Survival is its own reward," the man lauded as a turnaround specialist when he was nominated for the U.S. Treasury position recently told the New York Times.

Welcome, Kautter: The next IRS commissioner's five-year term begins Monday, Nov. 13. Donald J. Trump has not named a permanent replacement for Koskinen.

Instead, Trump has tapped David Kautter (left), currently the Assistant Treasury Secretary for Tax Policy, as acting IRS Commissioner. He will serve in both posts until a new commissioner is named.

Before joining the Treasury Department, Kautter was partner-in-charge with RSM US LLP, a tax and consulting services firm.

Before that, Kautter served as the managing director of Kogod Tax Center, an independent tax research institute located at American University’s Kogod School of Business.

He also spent more than 30 years at Ernst & Young LLP (EY), where he served as director of national tax for more than 13 years

Kautter, who was confirmed for his Treasury post in August, will continue to carry out his Treasury duties, including working on tax reform, while serving as the IRS' acting commissioner, according to Treasury Secretary Steven Mnuchin.

Deputy IRS Commissioners Kirsten Wielobob and Jeff Tribiano will continue to run the day-to-day operations of the IRS, with each reporting to Kautter.

"David will provide important leadership while we wait to confirm a permanent Commissioner,” said Mnuchin in a statement following the White House decision. He also cited Kautter's "illustrious 40-year career in tax policy" and expressed his confidence "that the IRS and the American people will benefit from his experience and insight."

Dubious about double duty: Others, however, are not so sure.

Howard Gleckman, Senior Fellow at the Tax Policy Center, acknowledged Kautter's strong resume as tax policy expert with years on Capitol Hill and as a tax practitioner.

"But choosing him to temporarily replace the retiring IRS Commissioner John Koskinen while keeping his Treasury post is a mistake. He might be able to do either job well but he can't do both," wrote Gleckman in TPC's TaxVox blog.

In that blog post, Gleckman elaborated on the four reasons — capacity, contrasting roles, need for a permanent IRS commissioner and perception of politics — why he believes Kautter is the wrong choice.

Former IRS Commissioner Lawrence B. Gibbs, now senior counsel at Miller & Chevalier Chtd., had praise for Kautter, describing him as "bright, unassuming. He has no ego. That I think will play very well at the IRS."

Yet Gibbs, who served as the tax agency chief from 1986-1989, also indicted concern about Kautter's dual roles. "He’s going to be tested on the Hill," Gibbs told Tax Notes. "I think when he testifies, the Democrats are always going to be asking which hat he's wearing."

49th Commissioner by summer? Concerns about Kautter's two tax roles could be relatively short-lived, albeit while tax reform is still being thrashed out on Capitol Hill.

The White House could soon name a permanent successor to Koskinen.

Or Kautter could be in both posts into next summer. The Federal Vacancies Reform Act limits acting federal officers to 210 days of service, putting Kautter's end date on June 10, 2018.

The acting service limit, however, can be waived if a first or second nominee to the post is pending before the Senate.

You also might find these items of interest:

• IRS Commissioner Koskinen gets public service award
• Turn out the lights, the Tea Party nonprofit scandal is over 
• IRS commissioner talks tax reform, simplification & additional taxpayer digital options