Don't Mess With Taxes

The last couple of years have been tough on taxpayers, tax pros, and the Internal Revenue Service.

I know few folks have any sympathy for the tax agency. But Uncle Sam's tax collector has had to deal with budget problems (the recent appropriations in the Inflation Reduction Act notwithstanding), aging computer systems, and loss of personnel.

All that was compounded by coronavirus pandemic limitations, and new duties thanks to COVID-19 law changes.

Now the IRS is facing the loss of its commissioner.

Acting chief uncertainty: IRS Commissioner Chuck Rettig's five-year term expires on Nov. 12.

Rettig's replacement must be named by President Joe Biden, then confirmed by the Senate. But both the executive and legislative branches have other things on their minds right now.

There are, of course, the midterm elections, then a lame duck session where Senators and Representatives will have to deal with the debt limit. Then there's the funding of federal offices that will run out of money on Dec. 16.

The Nov. 8 election results also will determine the urgency with which the current Democratic leaders address unfinished climate change and tax issues.

So realistically, there is no chance a new IRS chief will be in place by the time Rettig clears out in a couple of weeks.

That's why today (Oct. 28) U.S. Treasury Secretary Janet L. Yellen designated IRS Deputy Commissioner Douglas O'Donnell as Acting IRS Commissioner, stepping into the office when Rettig exits. 

Career tax employee: O'Donnell earned his Bachelor of Science degree in accounting from the University of Maryland at College Park. He is a career IRS employee, starting in 1986 as a revenue agent in Washington, D.C.

He now is IRS Deputy Commissioner for Services and Enforcement. Before assuming that role, he served as the Commissioner of the IRS Large Business and International (LB&I) Division for nearly six years. His agency resumé also includes roles as:

• Assistant Deputy Commissioner, International;
• Director, Competent Authority & International Coordination;
• Director of International Compliance, Strategy & Policy;
• Deputy Director, Pre-Filing and Technical Guidance; and
• Director of Field Operations, Heavy Manufacturing and Transportation Industry.

Yellen noted O'Donnell's IRS tenure "through every level of the agency," and said "his commitment to improving the experience of the American taxpayer will guide his and the agency's work as they continue their efforts to propel the IRS forward during a critical period of modernization."

You can read his A Closer Look column on dispute resolution within the IRS LB&I Division.

Support from Rettig: In a separate statement, Rettig cited his temporary successor's "strong set of skills and insight needed for this critical role. … I've relied on Doug's insight and knowledge during my term as Commissioner, and he is the ideal person to lead the agency during this period."

Rettig also noted the work that O'Donnell will face during the transition, including implementation of the recently enacted Inflation Reduction Act's new tax laws.

Temps at top not unusual: While having an interim IRS commissioner isn't ideal, it's not unusual.

Rettig, for example, wasn't confirmed until 10 months after his predecessor John Koskinen left the building at 1111 Constitution Avenue in northwest D.C. During that time, David J. Kautter was the acting IRS commissioner.

And before Koskinen took over the top spot, the tumult caused by how the IRS handled some Tea Party nonprofit organization applications resulted in two men, Steven Miller and Daniel Werfel, acted as agency commissioners for, combined, more than a year.

Leadership key, say former commissioners: Let's hope it won't take too long to find and install Rettig's formal, full-time replacement. And that's not just my wish.

Former IRS commissioners Fred Goldberg, Charles Rossotti, Mark Everson, and John Koskinen, who served under both Democratic and Republican administrations, along with former National Taxpayer Advocate Nina Olson issued a statement this month calling for quick action on Rettig's replacement.

"Only a confirmed commissioner can build external and internal support for such a big and complex transformation of an agency," the groups said in a statement reviewed by the New York Times. "Until that position is filled, essential improvements to the I.R.S. are at serious risk of delay, if not failure."

Time is of the essence: The pressure is on since, as noted earlier, the Senate's confirmation creates a built-in delay in filling the spot. Even in optimal circumstances, that process tends to drag.

And the atmosphere on Capitol Hill is far from optimal. The lame-duck Senate will remain split 50-50, meaning any Democratic opposition to the nominee will likely doom him or her.

If the GOP retakes the upper chamber on Nov. 8, that will complicate any commissioner confirmation that drags into 2023 and the next Congressional session.

But at least naming a potential new IRS commissioner will get that process started.

You also might find these items of interest:

• IRS says goodbye to Koskinen, hello Kautter
• Yellen directs IRS to use new $ for high-earner tax audits
• 13 famous tax quotes, including Goldberg's tax evasion assessment (on page 12)

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