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S. HRG. 109–751

NOMINATIONS OF ROBERT HOYT,

HON. MICHELE DAVIS, PAUL CHERECWICH, JR.,

AND HON. DEBORAH WINCE-SMITH

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

ON THE

NOMINATIONS OF

ROBERT HOYT, TO BE GENERAL COUNSEL, U.S. DEPARTMENT OF THE

TREASURY; HON. MICHELE DAVIS, TO BE ASSISTANT SECRETARY FOR

PUBLIC AFFAIRS, U.S. DEPARTMENT OF THE TREASURY; AND PAUL

CHERECWICH, JR. AND HON. DEBORAH WINCE-SMITH, TO BE MEMBERS OF THE IRS OVERSIGHT BOARD, U.S. DEPARTMENT OF THE

TREASURY

NOVEMBER 14, 2006

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

(II)

C O N T E N T S

OPENING STATEMENTS

Page

Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman, Committee

on Finance ............................................................................................................ 1

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 2

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 3

ADMINISTRATION NOMINEES

Hoyt, Robert, nominated to be General Counsel, U.S. Department of the

Treasury, Washington, DC .................................................................................. 5

Davis, Hon. Michele, nominated to be Assistant Secretary for Public Affairs,

U.S. Department of the Treasury, Washington, DC ......................................... 6

Cherecwich, Paul, Jr., nominated to be a Member of the Internal Revenue

Service Oversight Board, U.S. Department of the Treasury, Washington,

DC .......................................................................................................................... 6

Wince-Smith, Hon. Deborah, nominated to be a Member of the Internal

Revenue Service Oversight Board, U.S. Department of the Treasury, Washington, DC ............................................................................................................. 7

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Allen, Hon. George:

Prepared statement .......................................................................................... 15

Baucus, Hon. Max:

Opening statement ........................................................................................... 2

Cherecwich, Paul, Jr.:

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 16

Biographical information ................................................................................. 18

Responses to questions from committee members ......................................... 25

Davis, Hon. Michele:

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 27

Biographical information ................................................................................. 28

Responses to questions from committee members ......................................... 34

Grassley, Hon. Charles E.:

Opening statement ........................................................................................... 1

Hatch, Hon. Orrin G.:

Opening statement ........................................................................................... 3

Hoyt, Robert:

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 36

Biographical information ................................................................................. 38

Responses to questions from committee members ......................................... 46

Wince-Smith, Hon. Deborah:

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 49

Biographical information ................................................................................. 51

Responses to questions from committee members ......................................... 61

(III)

(1)

NOMINATIONS OF ROBERT HOYT, TO BE GENERAL COUNSEL, U.S. DEPARTMENT OF THE

TREASURY; HON. MICHELE DAVIS, TO BE

ASSISTANT SECRETARY FOR PUBLIC AFFAIRS, U.S. DEPARTMENT OF THE TREASURY; AND PAUL CHERECWICH, JR. AND

HON. DEBORAH WINCE-SMITH, TO BE MEMBERS OF THE IRS OVERSIGHT BOARD, U.S.

DEPARTMENT OF THE TREASURY

TUESDAY, NOVEMBER 14, 2006

U.S. SENATE,

COMMITTEE ON FINANCE,

Washington, DC.

The hearing was convened, pursuant to notice, at 10:04 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Charles E.

Grassley (chairman of the committee) presiding.

Present: Senator Hatch.

OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S.

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. Thank you all very much. It is my pleasure to

welcome four nominees. They each will bring a great deal of experience to the positions for which the President has nominated them.

I am sure all of them are eager to get started in their new roles,

and we in the Senate only stand in your way, more because of facilitating time and moving people around, not any reason to you

folks, personally.

We welcome Robert Hoyt, the President’s nominee to be General

Counsel, Treasury Department. Mr. Hoyt currently serves as Associate Counsel to the President and has previously worked for many

years with the law firm of Wilmer, Cutler, Pickering, Hale, & Dorr.

The next person is Michele Davis, nominated to be Assistant Secretary of Treasury for Public Affairs. Ms. Davis currently serves as

Deputy Assistant to the President and Deputy National Security

Advisor for Communications and has previously held the post of

Assistant Secretary for Public Affairs.

Paul Cherecwich has been nominated to be a Member of the Internal Revenue Service Oversight Board. Throughout his career,

Mr. Cherecwich has served in several corporations as an employee

with the responsibility of tax compliance, and has extensive experience working with tax policy and administration.

2

Finally, we welcome Deborah Wince-Smith, also nominated to be

a Member of the Internal Revenue Service Oversight Board. In addition to having served as an Assistant Secretary of Commerce, Ms.

Wince-Smith has acquired significant operational experience from

serving on many boards and oversight bodies and is currently

president of the Council on Competitiveness.

OPENING STATEMENT OF HON. MAX BAUCUS,

A U.S. SENATOR FROM MONTANA

Senator BAUCUS. Mr. Chairman, at the Federal Convention of

1787, Alexander Hamilton said: ‘‘Real liberty is neither found in

despotism or the extremes of democracy, but in moderate governments.’’ We meet today to consider nominees for the Department

that Hamilton once headed, the Department of the Treasury, and

the IRS Oversight Board. In the times in which we now live, and

in our newly divided government, these nominees—and we here—

will need to bring new meaning to that idea of ‘‘moderate government.’’

The nominees before us today bring extensive experience and

knowledge to their positions. The President has nominated Michele

Davis to be Treasury Assistant Secretary for Public Affairs, Robert

Hoyt to be Treasury General Counsel, and Paul Cherecwich, Jr.

and Deborah Wince-Smith to be Members of the IRS Oversight

Board. I want to welcome the nominees to the Finance Committee.

Michele Davis is certainly qualified for the job to which she has

been nominated. Ms. Davis has already served for 2 years as Treasury’s Assistant Secretary for Public Affairs, before she left to work

in the private sector, and then as Deputy National Security Advisor

for Communications. Ms. Davis will bring these experiences, along

with her Congressional experience and skills in communications,

back to her old job as Assistant Secretary for Public Affairs. Ms.

Davis, I look forward to your using your position as Assistant Secretary for Public Affairs to elevate awareness of the tax gap problem that we currently face.

The President nominated Robert Hoyt to be Treasury’s top lawyer. He will oversee more than 2,000 attorneys and 1,600 support

staff. This is a job with great responsibility. And Mr. Hoyt’s years

in private practice, as well as his current job as Associate Counsel

to the President, make him well-qualified for this position. Mr.

Hoyt, I look forward to your using your position to increase enforcement and improve compliance to decrease the tax gap.

The President nominated Paul Cherecwich, Jr. and Deborah

Wince-Smith to be Members of the IRS Oversight Board. The IRS

Oversight Board serves an important function. The Board oversees

the Internal Revenue Service in its administration, execution, and

application of the tax laws.

Both Mr. Cherecwich and Ms. Wince-Smith will bring years of

advisory experience to the IRS Oversight Board. Mr. Cherecwich

was the Chair of the IRS Advisory Council in 2002 and a Member

in 2001. He is also the former International President of the Tax

Executives Institute.

Ms. Wince-Smith has served on the boards of directors of several

high-technology companies and various organizations. Ms. WinceSmith currently is the President of the Council on Competitiveness.

3

And she previously served as Assistant Secretary for Technology

Policy in the Department of Commerce.

At its meeting September 27th and 28th, the IRS Oversight

Board discussed with the Treasury the Department’s recently released document on the tax gap. The Treasury plan included many

of the Board’s recommendations made before the Senate Finance

Committee in July, 2006 and in its fiscal year 2007 budget recommendations.

Mr. Cherecwich and Ms. Wince-Smith, I will be looking for you

to be willing to be independent and confront the IRS Commissioner

and the Secretary of Treasury on the tax gap and other issues.

On the south side of the Treasury Building stands a statue of Alexander Hamilton. Hamilton’s image, and his admonition to moderate government, would be well for our nominees to remember in

their new roles at the Treasury and the IRS Board. We will look

forward to working with the nominees and to implementing that

moderation.

The CHAIRMAN. Senator Hatch would like to speak at greater

length about one of the nominees, and I will call on you at this

point.

OPENING STATEMENT OF HON. ORRIN G. HATCH,

A U.S. SENATOR FROM UTAH

Senator HATCH. Well, thank you, Mr. Chairman. I want to welcome all of you here today. You are very good nominees. We are

very appreciative of your willingness to serve in this administration, and we know that each and every one of you will do a very

good job.

But in particular, I want to thank you, Mr. Chairman, for holding this nomination hearing today. I especially want to thank you

for allowing me to say a few words of introduction for one of the

nominees, Mr. Paul Cherecwich of Utah, who has been nominated

by the President to serve as a Member of the IRS Oversight Board.

I have known Paul Cherecwich for many years, and I heartily endorse the President’s nomination, as I do for each of you others. It

is difficult to think of anyone who is more qualified to serve as a

Member of the IRS Oversight Board.

Paul comes to this nomination with a wide variety of tax experience, which he will use to help the Oversight Board in its mission,

which is to improve the IRS so that it may better serve the public

and meet the needs of taxpayers.

Mr. Cherecwich certainly has the education and experience to

equip him as a strong contributor to the success of the IRS Oversight Board. He received his JD, along with MBA and an LLM in

Taxation. He taught tax law as an adjunct professor for several

years.

Paul served as the director of Tax at several important corporations, including Cordon Technologies in Utah, where he has decided

to make his home in retirement.

Moreover, Mr. Cherecwich has a great deal of experience working

with the IRS and the taxpayer community. He has served as the

chair of the IRS Advisory Council and was the international president of Tax Executives Institute, which is the premier association

of tax directors in all of North America.

4

In these positions, Paul has had many interactions and experiences with the challenges facing the IRS and taxpayers alike. Now

Paul—I wonder about him to a degree, because he is willing to sacrifice some of the pleasures of skiing, golfing, and fishing in Utah,

where all of those things are just great, along with some of the

companionship of his many grandchildren, to share his experience

and expertise to help oversee and improve our Federal tax system.

So, Paul, I applaud your service and your attitude, and I urge my

colleagues to join me in supporting your nomination, and as well

the nominations of these other wonderful people on this panel

today.

So, I am thankful that you have given me this opportunity, Mr.

Chairman. I hope we can push these nominations through pretty

quickly.

Mr. CHERECWICH. Thank you, Senator.

The CHAIRMAN. We do not swear witnesses in on this committee.

We assume everybody is going to tell us the truth.

Before we start with each of you giving a short opening statement, whatever you want to say about yourself, I would like to

have each of you now introduce family and friends who are with

you, because that is a tradition in this committee.

Mr. Hoyt, would you start out, please?

Mr. HOYT. Thank you, Mr. Chairman. I would like to introduce

my family members who are here today and who support me and

mean so much to me. First, my wife of 17 years, Alysia Hoyt, and

my son Justin, who is about to turn 7.

Anyone who knows me knows that Alysia and Justin mean the

world to me. They have been wonderfully tolerant of the sacrifices

required of my jobs. I could not have embarked on this new venture

without their commitment, love, and support.

Also with us today are Alicia’s parents, Tony and Barbara

Cuilwik, my sisters, Michelle Kirkpatrick and Lisa Lawrence, and

my brother, Michael Hoyt, along with his wife Ro, and their children, Ashley and Robert.

I have a great many friends. I will not introduce all of them who

are here today, because it would extend the hearing, I think, by

double. But I am very grateful to have their support.

Also, if you would permit me, I would just like to acknowledge

my parents, Joan and Bob Hoyt, both of whom have passed. I am,

of course, very sad that they cannot be here today, but I have always considered myself very lucky to know without reservation

that they were proud of the son they raised in me.

I hope very much that, if confirmed, I will conduct myself as

General Counsel in a way that would reflect the values that they

taught me. Thank you.

The CHAIRMAN. Thank you, Mr. Hoyt.

Now, Ms. Davis?

Ms. DAVIS. No.

The CHAIRMAN. All right.

Mr. Cherecwich?

Mr. CHERECWICH. I do not have anyone with me, sir.

The CHAIRMAN. All right.

And how about you, Ms. Wince-Smith?

5

Ms. WINCE-SMITH. Thank you, Mr. Chairman. I would like to introduce my husband, Ambassador Michael Smith, and my son,

Christian Smith. I am very sorry my older son, Devereux Smith,

cannot be with me. He is at school.

But I am very proud that my husband and son could be with me.

I would also like to echo that my husband and family have been

tremendous supporters for me, and I am very honored they could

be with me today. Thank you.

The CHAIRMAN. All right.

Now we will go back and, in the same order, give your opening

statements.

STATEMENT OF ROBERT HOYT, TO BE GENERAL COUNSEL,

U.S. DEPARTMENT OF THE TREASURY, WASHINGTON

Mr. HOYT. Thank you, Mr. Chairman, Senator Baucus, Senator

Hatch, and members of the committee.

The CHAIRMAN. And let me explain that Senator Baucus or other

Democrats cannot be with us right this minute—they will be here

shortly, I think—because the traditional post-election caucus is

going on with the select leadership.

Proceed.

Mr. HOYT. Thank you. I greatly appreciate the opportunity to appear before you today, and I am especially appreciative of the very

prompt scheduling of this hearing.

I am very honored to be President Bush’s nominee to serve as

General Counsel of the Department of Treasury. My period of service in President Bush’s White House and my exposure to his leadership and integrity have left a deep impression on me.

I am also grateful to Secretary Paulson for his confidence in recommending me for this position. If confirmed, I look forward to

working with the Secretary and furthering the administration’s

economic agenda.

Nearly 20 years ago I decided to build my legal career in Washington. I believe the many professional experiences I have had

since then have prepared me well to assume the role of general

counsel.

These include 15 years of private practice with a focus on representing companies on issues involving government regulation and

the capital markets; 6 years at the senior management levels of an

international law firm that has grown to have more than 1,000

lawyers; and close to a year and a half of working in the White

House Counsel’s office.

More than anything else, these experiences have taught me the

value of providing legal advice that reflects the highest levels of integrity, analysis, vision, and hard work.

Mr. Chairman, I come to this hearing with a keen understanding

that the legal issues facing the Treasury Department today are

among the most critical in government. The Department is a key

player in the continual strengthening of our National security and

the development and the implementation of our tax policy, and in

maintaining and expanding the most impressive economy in the

world.

I understand that these areas, and many others, are of great importance to the members of this committee and to the Congress as

6

a whole. If confirmed, I undertake to work with you to ensure that

the Department receives the best legal advice as it continues in its

great tradition at the center of America’s economic agenda.

Thank you.

The CHAIRMAN. Thank you, Mr. Hoyt.

[The prepared statement of Mr. Hoyt appears in the appendix.]

The CHAIRMAN. Now, Ms. Davis?

STATEMENT OF HON. MICHELE DAVIS, TO BE ASSISTANT SECRETARY FOR PUBLIC AFFAIRS, U.S. DEPARTMENT OF THE

TREASURY, WASHINGTON, DC

Ms. DAVIS. Thank you, Chairman Grassley, for the opportunity

to appear before you today. It is a great privilege to be considered

for the position of Assistant Secretary of the Treasury for Public

Affairs.

I am honored that President Bush has nominated me to serve in

this position and that you are taking the time to consider my nomination today. I also thank Secretary Paulson for his leadership and

for having the confidence in me to serve in this post.

The Treasury Department is at the center of President Bush’s efforts to work with Congress to keep America’s economy strong, to

promote global economic growth, and to prevent the use of the financial system to support terrorism and weapons proliferation.

The Public Affairs Office at Treasury plays an essential role in

explaining the work of the Department in these, and other areas.

I learned in my previous years working at the Treasury Department that informed public debate leads to a better policy.

If confirmed, I look forward to communicating our work to the

public, news media, financial markets, international audiences, and

to the Congress. I can think of no greater honor than to be asked

to do this job again and to work with Secretary Paulson. I am

eager to get to work with the talented people at the Department,

across the administration, and here in the Congress.

Thank you.

The CHAIRMAN. Thank you, Ms. Davis.

[The prepared statement of Ms. Davis appears in the appendix.]

The CHAIRMAN. Now, Mr. Cherecwich?

STATEMENT OF PAUL CHERECWICH, JR., TO BE A MEMBER OF

THE INTERNAL REVENUE SERVICE OVERSIGHT BOARD, U.S.

DEPARTMENT OF THE TREASURY, WASHINGTON, DC

Mr. CHERECWICH. Mr. Chairman, I am honored to appear before

this committee today as you consider my nomination to be a member of the IRS Oversight Board. It is an honor to have been nominated by President Bush to serve on this important board, and an

honor to have been introduced by Senator Hatch.

I am presently retired, having had a successful career as a tax

attorney, employed both in the business world and practitioner

world. Employed by three Fortune 500 corporations, I retired in

2000 from Cordon Technologies as vice president of Tax and Tax

Counsel, whereupon I joined the law firm of Miller & Chevalier as

‘‘of counsel.’’ I retired from that firm at the end of 2004.

7

During my career, I participated in several professional groups.

As a result of my contributions, I was asked to serve in leadership

roles on several trade association tax committees.

I was also selected by my peers to be the 1997–1998 international president of Tax Executives Institute, the preeminent association of corporate tax executives in North America.

Being a firm believer that we should all give something back to

the society and country which nurtures us, I served on the boards

of several charitable organizations.

I also served on several government advisory groups, including

the Massachusetts Governor’s Management Task Force, USTR’s Industry Advisory Committee on Customs, and the IRS Advisory

Council, where I was selected by its members to be the 2002 chair.

I am quite familiar with the IRS Oversight Board’s requirement

that they oversee the IRS and its administration, management,

conduct, direction, and supervision of the execution and application

of Internal Revenue laws.

In my capacity as TEI president, I met with the National Commission on Restructuring the IRS and testified both before the

House Ways and Means Committee and this committee in connection with pending legislation that was eventually enacted as the

IRS Restructuring and Reform Act of 1998.

Thus, I can say that I was present at the birth of the IRS Oversight Board, and hopefully my views at that time were of use to

those crafting the legislation that created it. Private life members

of the board are required to have professional experience and expertise in one or more of several critical skills areas.

Having worked in large business organizations as a tax professional, having served on the boards of several charitable organizations that deliver services to large numbers of clients, and having

served on government advisory boards, I believe I am qualified to

serve on the IRS Oversight Board.

Senator Hatch wondered why I would give up my favorite pastimes of golfing, skiing, and fishing. My wife had the same idea.

My wife, Ruth, of 42 years, asked me why I would want to serve

on the board. I told her that I did not want to pass up the opportunity to try to assist our government and its employees to be the

best that they can.

She asked me if I could make a difference. I told her I would not

know until I tried. I assure you, if confirmed, I will do my best to

help the IRS Oversight Board fulfill the mission that Congress has

established for it.

Thank you, Mr. Chairman. I will be pleased to answer questions

that you or others may have.

[The prepared statement of Mr. Cherecwich appears in the appendix.]

The CHAIRMAN. Ms. Wince-Smith?

STATEMENT OF HON. DEBORAH WINCE-SMITH, TO BE A MEMBER OF THE INTERNAL REVENUE SERVICE OVERSIGHT

BOARD, U.S. DEPARTMENT OF THE TREASURY, WASHINGTON, DC

Ms. WINCE-SMITH. Chairman Grassley, I thank you very much

for the opportunity to appear before you and this committee to conVerDate 11-MAY-2000 14:45 Mar 12, 2007 Jkt 095484 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 32234.000 SFIN1 PsN: SFIN1
8

sider my nomination to become a Member of the IRS Oversight

Board.

I am very honored that President Bush has nominated me for

this important position, and, if confirmed, I look forward to working with Congress and the administration to support the board’s

statutory mission to provide strategic guidance and oversight to the

operations of the Internal Revenue Service, and thereby strengthen

our Nation’s tax system.

Currently, I am the president of the U.S. Council on Competitiveness, a nonprofit, nonpartisan membership organization that brings

together leading CEOs, university presidents, and labor leaders, all

committed to improving U.S. productivity growth, our success in

global markets, and ensuring a rising standard of living for all

Americans.

Currently celebrating our 20th anniversary, the council yesterday released our anniversary index ‘‘Where America Stands’’ that

is benchmarking U.S. economic performance against our global

competitors and identifying the key issues to strengthen our economy going forward.

I also serve on a number of public- and private-sector boards of

directors and national policy committees, including the board of directors of the NASDAQ stock market, the Board of Governors of

Argonne National Laboratory, and the University of California’s

President’s Council for the Department of Energy’s Los Alamos and

Lawrence Livermore National Laboratories.

The corporate governance systems for these large, complex organizations in both the public and private sectors encompass diverse

fiduciary and oversight responsibilities, such as strategic direction,

budget and audit, executive management, compensation, technology development, and operational risk. As a director, I am committed to the highest standards of ethics, transparency, and accountability.

Prior to 1993, I had the privilege to serve in the U.S. Government for 17 years, beginning my career as a Federal employee at

the National Science Foundation, and then serving in the administration of President George H.W. Bush as the Assistant Secretary

for Technology Policy in the Department of Commerce.

If confirmed, Mr. Chairman, I will draw upon my diverse expertise and executive management experience in both the government

and the private sector to support the efficient and effective management of the IRS, an agency that is so central to U.S. Government operations, our Nation’s financial stability, and the efficacy of

our tax system.

As set forth in the Restructuring and Reform Act this committee

enacted in 1998, this Oversight Board clearly plays a critical function in ensuring that the IRS’s strategic management goals, operational efficiency, and cost-effective execution align with its mission

to implement and enforce the Nation’s tax revenues and laws.

Integral to this mission, in my view, is the need for the IRS to

accelerate its delivery of best-in-class customer service to all taxpayers, making the twin pillars of customer service and compliance, hallmarks of excellence for our Nation’s tax system.

Mr. Chairman, if confirmed, I pledge to work on behalf of the

American people to fulfill my duties as a Member of the Oversight

9

Board, and I hope I will bring some innovation to this important

public sector institution, so critical to the health of our economy.

Thank you.

[The prepared statement of Ms. Wince-Smith appears in the appendix.]

The CHAIRMAN. Thank you very much.

We have three questions that we always ask every nominee.

They are very short questions, and I would ask each of you, after

I read the first question, to respond as I call your name.

First, is there anything that you are aware of in your background

that might present a conflict of interest with the duties of the office

to which you have been nominated? Mr. Hoyt?

Mr. HOYT. No, Mr. Chairman.

The CHAIRMAN. Ms. Davis?

Ms. DAVIS. No.

The CHAIRMAN. Mr. Cherecwich?

Mr. CHERECWICH. No, sir.

The CHAIRMAN. Ms. Wince-Smith?

Ms. WINCE-SMITH. No, Mr. Chairman.

The CHAIRMAN. Second, do you know of any reason, personal or

otherwise, that would in any way prevent you from fully and honorably discharging the responsibilities of the office to which you

have been nominated? Mr. Hoyt?

Mr. HOYT. No, Mr. Chairman.

The CHAIRMAN. Ms. Davis?

Ms. DAVIS. No, Mr. Chairman.

The CHAIRMAN. Mr. Cherecwich?

Mr. CHERECWICH. No, Mr. Chairman.

The CHAIRMAN. And Ms. Wince-Smith?

Ms. WINCE-SMITH. No, Mr. Chairman.

The CHAIRMAN. Third, do you agree, without reservation, to respond to any reasonable summons to appear and testify before any

duly constituted committee of Congress, if confirmed? Mr. Hoyt?

Mr. HOYT. Yes, Mr. Chairman.

The CHAIRMAN. Ms. Davis?

Ms. DAVIS. Yes, sir.

The CHAIRMAN. Mr. Cherecwich?

Mr. CHERECWICH. Yes, Mr. Chairman.

The CHAIRMAN. And Ms. Wince-Smith?

Ms. WINCE-SMITH. Yes, Mr. Chairman.

The CHAIRMAN. Thank you.

I do not have very many questions, and do not take it personally

if we do not ask some of you questions.

First, for the nominees of the Oversight Board, please tell me

what you believe the role of the IRS Oversight Board to be and

what your goals will be as members of that board.

Before you answer, maybe just a short bit of advice for you to do

your job effectively from a person that was involved in the Commission studying and bringing about the reconstituting of the IRS: just

do not become captives of the bureaucracy.

Mr. Cherecwich, you do not need to respond to my comment.

That is just advice for you. Just answer my question.

Mr. CHERECWICH. Well, I understand that the IRS Oversight

Board is to function in a manner very similar to that of a private

10

sector board of directors, and that is supervising the administration, management conduct, and direction of the execution and application of the Internal Revenue laws.

I know that a number of the principal functions of the IRS Oversight Board are to review the strategic plans of the IRS and to approve them, and to review the annual budget and to provide an

independent submission of the budget to the Congress.

The CHAIRMAN. Ms. Wince-Smith?

Ms. WINCE-SMITH. I would echo what my colleague has said, that

having served on corporate boards I am very much aware that the

IRS Oversight Board should be very much involved in working

with the IRS to develop its strategic direction to ensure that its

goals and efficiency are aligned with its core mission, and also to

play a very important role in ensuring that many of the strategic

goals for modernization are moving forward.

The CHAIRMAN. Thank you.

The next question is for Mr. Hoyt. That is in regard to what your

priorities would be as General Counsel and how you would see your

role in terms of tax guidance and regulation. How has your background prepared you for this position, and how will it help you accomplish your objectives?

Mr. HOYT. Thank you, Mr. Chairman.

In terms of the priorities that I would bring to the job, if confirmed, I think there are three that stand out. The first is clearly

to be providing the Secretary with the best legal advice that he can

get on all the various issues that he needs to deal with and pursue

as he helps pursue the President’s economic agenda.

A second priority is to ensure that the Treasury Legal Division

is operating at peak performance to provide all of the various departments within the Treasury, and other departments within the

executive branch, with the best possible legal advice on all of the

various issues that emanate out of Treasury and affect area operations of the government.

Then, finally, a priority for myself is I would like to leave the job,

if confirmed, knowing that I have helped in the pursuit of successful economic policy for the country.

To come to the part of your question that relates to the tax code

and tax policy, I think that is clearly one of the essential roles of

the department. It is one of the essential roles of the General

Counsel’s Office, to make sure that the tax code and all of the tax

professionals within the Department, both within the Legal Division and the Department as a whole, within the Internal Revenue

Service, are being responsive to the various provisions of the laws

that need to be implemented, that need to be implemented effectively, in a timely fashion, and to be sure that we are communicating with the committee to make sure that we are in synch

with implementing the laws that the committee is helping to draft,

that the Congress is passing, that are very important to successful

tax policy of the country.

The CHAIRMAN. All right. Another question for you, Mr. Hoyt, is,

in regard to Sarbanes-Oxley. Through the newspapers, we have

gotten some idea about Treasury being involved with reforming

Sarbanes-Oxley, specifically mentioning Secretary Paulson as being

11

active in the area. Of course, this is primarily within the jurisdiction of the SEC.

Could you explain what role or leadership Treasury is taking in

this area and what priority this is for Treasury compared to other

responsibilities, particularly jurisdiction over taxes? Please also

explain, what is the relationship between Treasury and outside

groups that are providing proposals in this area.

Mr. HOYT. Certainly, Mr. Chairman. I think, perhaps, a core

principal to begin with when one is talking about Sarbanes-Oxley

or any of these issues, is that investor confidence is the bedrock of

the American capital markets and the key to our markets being

competitive on an international level. The Sarbanes-Oxley legislation went a long way to restore and preserve that confidence when

the markets were reacting to a variety of corporate scandals.

As I understand the policies articulated by the Secretary, and the

priorities, it is to participate in a multi-agency review of our markets, of the various forms of government activity that regulate

those markets, and all with the objective of maintaining and preserving a balance that preserves integrity, preserves investor confidence, but also without impairing businesses, to the extent that

our markets become unattractive and non-competitive.

As I understand the process, it is, to be clear, a multi-agency

process with involvement by the Securities and Exchange Commission, the Public Accounting Oversight Board, and various other departments and agencies.

But it is also of great interest to the Treasury Department,

which has among its responsibilities ensuring the integrity of the

American capital markets and the financial system.

It, I am sure, would not come at any sacrifice to any of the other

important priorities of the Treasury Department, and I know that

the Secretary is attentive to all of the various priorities that need

to be on his plate.

The CHAIRMAN. All right.

To you, Mr. Hoyt. The President recently signed the pension bill,

and it had some reforms for charities in it that I was very much

involved in. One of the important provisions was one dealing with

supporting organizations and directing Treasury to put out guidance requiring a more effective pay-out requirement.

An increase in pay-out requirement would mean more money

going to the public charities that do so much important work to

help the poor in our communities. That is obviously a goal of President Bush. Congress made it clear that Treasury should be looking

at the pay-out requirements that have been in place and have been

very effective for the foundations and charities.

I recognize that IRS and Treasury staff are very busy putting out

guidance in response to the pension bill, but I would like to have

your commitment that when you are in place and sworn in as General Counsel, that you will make it a priority to get guidance out

within 90 days on the issue of pay-out.

Also, that you will ensure that the guidance follows the intent of

Congress by putting more money into the hands of public charities

with a pay-out requirement that is at least equal to private foundations.

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Finally, given the amount of work that must be done and the

guidance in this area of tax-exempt organizations after the pension

bill, I encourage you to show leadership in encouraging and supporting adequate staffing at the IRS’s Chief Counsel and Treasury

Tax Policy.

Mr. HOYT. Mr. Chairman, I am aware of your concern, and the

committee’s overall concern, with supporting organizations. I am

also aware of the legislation that passed this summer on pension

reform that contained a number of provisions directed at charities.

I understand that many of the bill’s provisions, both the pure

pension provisions and also those provisions going to charitable organizations, were immediately effective, and the Department has

been working very hard, I understand, to issue essential guidance

for the individuals and the companies that need to come into compliance with those new rules this year.

I can, and will, certainly commit that, if confirmed, I will work

closely with the various components in Treasury, Internal Revenue

Service, the Chief Counsel’s Office there, the Office of Tax Policy,

and other professionals to facilitate the issuance of guidance, all of

the guidance, required by the pension bill as quickly as that can

be done.

The CHAIRMAN. Yes. One more statement, and not a question, to

the new members of the Oversight Board. As I recall now, almost

8 years ago, I suppose, is when the Commission was operating,

when we had our hearings on abuses that the IRS was doing, that

there was kind of an attitude that seemed to be more punitive and

aggressive towards small business than large corporations, and

probably more towards individuals than corporations generally, but

small business particularly.

I think one of the reasons for setting up the IRS Oversight Board

was to make sure that we had some input in those areas. We have

seen some change of direction by IRS, so I am not saying this to

scold anybody.

I am just saying I hope you feel a special responsibility to look

out for the people whom we felt were being hurt by the IRS, people

who were powerless versus the government bureaucracy. Quite

frankly, we found an attitude that people tended to fear the IRS

more than the FBI, or any other agency of government. Also, that

sort of attitude might lead to people in the underground economy

more than it would otherwise be if we were open.

We came to the conclusion that two things would help people to

pay their taxes, not one penny more than they owed, not one penny

less: the extent to which we provided, the first time people made

a contact with the IRS, a real person talking to them, and, second,

getting correct information. That is probably the best way to get

the maximum amount of money coming in.

Assuming that what I just told you is not contrary to the record

of that time, because I do not review that record every day before

I have people like you before me, I would appreciate it very much

if you would look out for those powerless people who used to be

harassed, and maybe to some extent may still be harassed by the

IRS, more than the people who can hire the high-priced lawyers to

protect themselves.

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So, I have no more questions to ask, but, because other members

could not be here, I would ask that the staff of those members, if

they want questions for the record for you folks to answer in writing, that those be in by 6 p.m. tomorrow.

Then I would also ask unanimous consent, which I give, to making sure that Senator Baucus’ statement is put in the record at the

point after my opening statement, and again emphasize that Senator Baucus takes the work of the Oversight Board very seriously.

I am sure he would emphasize some of the things that I have said,

but he just could not be here because of the leadership caucus.

Thank you all very much. The hearing is adjourned.

[Whereupon, at 10:37 a.m., the hearing was adjourned.]

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