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80–697—PDF 2012

S. HRG. 112–767 

NOMINATIONS OF MARK J. MAZUR, MATTHEW 

S. RUTHERFORD, AND MEREDITH M. BROADBENT 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

ON THE

NOMINATIONS OF 

MARK J. MAZUR, TO BE ASSISTANT SECRETARY FOR TAX POLICY, 

DEPARTMENT OF THE TREASURY; MATTHEW S. RUTHERFORD, TO BE 

ASSISTANT SECRETARY FOR FINANCIAL MARKETS, DEPARTMENT OF 

THE TREASURY; AND MEREDITH M. BROADBENT, TO BE A MEMBER 

OF THE UNITED STATES INTERNATIONAL TRADE COMMISSION 

MAY 8, 2012 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

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

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 2 

WITNESSES 

Archer, Hon. Bill, former U.S. Representative from Texas .................................. 5 

Portman, Hon. Rob, a U.S. Senator from Ohio ..................................................... 20 

ADMINISTRATION NOMINEES 

Mazur, Mark J., nominated to be Assistant Secretary for Tax Policy, Department of the Treasury, Washington, DC ............................................................. 6 

Rutherford, Matthew S., nominated to be Assistant Secretary for Financial 

Markets, Department of the Treasury, Washington, DC .................................. 8 

Broadbent, Meredith M., nominated to be a member of the United States 

International Trade Commission, Washington, DC .......................................... 9 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Archer, Hon. Bill: 

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

Baucus, Hon. Max: 

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

Broadbent, Meredith M.: 

Testimony .......................................................................................................... 9 

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

Biographical information ................................................................................. 29 

Responses to questions from committee members ......................................... 38 

Grassley, Hon. Chuck: 

Letter from Senator Grassley to Secretary Geithner, dated June 21, 2010 40 

Letter from Senator Grassley to Commissioner Shulman, dated September 13, 2011 ............................................................................................. 45 

Letter from Senator Grassley to Secretary Geithner and Commissioner 

Shulman, dated April 30, 2012 .................................................................... 53 

Hatch, Hon. Orrin G.: 

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

Prepared statement .......................................................................................... 57 

Mazur, Mark J.: 

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

Prepared statement .......................................................................................... 59 

Biographical information ................................................................................. 62 

Responses to questions from committee members ......................................... 72 

Portman, Hon. Rob: 

Testimony .......................................................................................................... 20 

Rutherford, Matthew S.: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 121 

Biographical information ................................................................................. 123 

Responses to questions from committee members ......................................... 130 

(III) 

(1) 

NOMINATIONS OF MARK J. MAZUR, TO BE 

ASSISTANT SECRETARY FOR TAX POLICY, 

DEPARTMENT OF THE TREASURY; 

MATTHEW S. RUTHERFORD, TO BE ASSISTANT SECRETARY FOR FINANCIAL MARKETS, 

DEPARTMENT OF THE TREASURY; AND 

MEREDITH M. BROADBENT, TO BE A 

MEMBER OF THE UNITED STATES 

INTERNATIONAL TRADE COMMISSION 

TUESDAY, MAY 8, 2012 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:07 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Wyden, Hatch, Grassley, Crapo, and Thune. 

Also present: Democratic Staff: Russ Sullivan, Staff Director; Gabriel Adler, Senior International Trade and Economic Advisor; Tiffany Smith, Tax Counsel; Lily Batchelder, Chief Tax Counsel; and 

Rory Murphy, International Trade Analyst. Republican Staff: Chris 

Campbell, Staff Director; Everett Eissenstat, Chief International 

Trade Counsel; and Nick Wyatt, Tax and Nomination Professional 

Staff Member. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The hearing will come to order. 

Tom Brokaw once said, ‘‘It’s easy to make a buck. It’s a lot tougher to make a difference.’’ Today the Finance Committee considers 

three nominees for roles where it is possible to make a difference. 

I welcome them and their families to the committee. 

Two of these nominees are up for important positions in the 

Treasury Department. The third is nominated for a central role at 

the International Trade Commission. 

Mr. Mazur, the President has nominated you to be Assistant Secretary of the Treasury for Tax Policy. In this role, you would lead 

Treasury’s team to develop and implement tax policy. You would 

help negotiate tax treaties, and you would provide analysis to help 

shape domestic and international tax policy. 

2 

We are working to reform our tax code for the first time in more 

than a quarter century. It will be difficult, and we will have to 

make tough choices. But a more simple tax code that spurs growth 

is crucial for our country to remain competitive. The analysis that 

comes from the Treasury Department will be crucial to make sure 

tax reform is done right. 

Mr. Rutherford, the President has nominated you to be Assistant 

Secretary of the Treasury for Financial Markets. In this position, 

you will advise the Treasury Secretary on domestic finance, financial markets, and the Federal debt. 

Everyone agrees we need to reduce our deficits and our debt. We 

need to do it in a way that maintains stability in the markets, and 

it must put our economy on stable footing for the future. This is 

the biggest long-term challenge government faces. 

Ms. Broadbent, the President has nominated you to be a Commissioner on the United States International Trade Commission, 

otherwise known as the ITC. As Commissioner, you would enforce 

U.S. anti-dumping and countervailing duty laws. These laws are 

essential for American manufacturers and American workers to 

compete for business here at home. Our companies can compete 

with anyone as long as they have a level playing field, and these 

laws help ensure that they do. 

You would also help enforce U.S. intellectual property rights. An 

ITC report I requested found that China’s intellectual property violations cost the United States economy nearly $50 billion each 

year. These violations have also cost us millions of jobs. Vigorous 

enforcement of intellectual property rights helps innovative companies create 21st-century jobs here at home. Without that enforcement, it is hard for our companies to compete, and we depend on 

the ITC to enforce those rights. 

As Tom Brokaw said, it is tough to make a difference. The positions you have all been nominated for involve some of the most important economic issues facing our country. We need people to fill 

them who are ready to make a difference. 

So I congratulate you, each of you, on your nominations and 

thank you for being here today. 

Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Thank you, Mr. Chairman. I want to thank our 

witnesses for their willingness to step into the arena, and I want 

to thank your families for their support as well. 

First, I have a few matters to address to Mr. Mazur and Mr. 

Rutherford. 

On February 14 of this year, Secretary Geithner appeared before 

this committee to discuss President Obama’s fiscal year 2013 budget. I, along with other members of this committee, submitted written questions for the record. Responses to those questions were due 

on April 30, and I specifically requested that those responses be 

provided by that deadline so that I would have adequate time to 

review them in preparation for this hearing today. 

Now, those responses were not provided to me until yesterday. 

I have agreed with the chairman to hold this hearing, but I must 

3 

say that the Treasury Department’s pattern of either refusing to 

respond to Senators’ questions or only strategically responding the 

night before it wants something from this committee is getting a 

little bit old. 

Treasury, unfortunately, seems to think that the Senate’s questions come with an option to blow past deadlines and respond, if 

at all, whenever it chooses. Now, this failure to respond to the Senate is neither fruitful nor acceptable. 

Mr. Mazur, I have seen from your questionnaire that you have 

worked on tax and economic policy for many years at the IRS, the 

Joint Committee on Taxation, and the Council of Economic Advisors, among other places. If we are actually going to be able to 

tackle tax reform, and I mean real tax reform, we will need all of 

the expertise and seriousness of purpose that we can get. 

Unfortunately, unlike in 1986, the administration does not seem 

interested in leading the way and helping to forge a serious proposal for fundamental tax reform, and that is being, in my opinion, 

charitable. In fact, the President seems content to ignore our bloated tax code, which burdens the entire economy, and the looming 

tax hikes that are creating economic uncertainty and undoubtedly 

holding back the recovery and job creation. Instead, the Senate is 

spinning its wheels on showboats designed to generate campaign 

talking points rather than meaningful tax reform. 

Mr. Mazur, it would be good to hear from you an actual comprehensive vision for tax reform. 

Mr. Rutherford, your position would entail advising senior Treasury leadership on many matters, including the financing of the 

Federal debt. Though fiscal policy is generally decided by Congress, 

in your position you could be especially effective in providing transparency about the government’s ability to meet its obligations. 

Treasury’s failure to provide adequate information to the Senate 

about our Nation’s fiscal situation during last year’s debt limit impasse was a serious shortcoming, in my opinion. 

Now, Congress will be in a better position to make sound fiscal 

policy if we have sound information from the Treasury Department 

on our fiscal position. I hope that you share my expectation that 

when members of Congress ask basic questions of Treasury, like 

how much cash is in the Federal till, the results should not be 

stonewalling by Treasury. 

Now, I want to welcome Meredith Broadbent, who is nominated 

to be a member of the United States International Trade Commission. Ms. Broadbent’s distinguished career includes work as a key 

policy advisor and counsel to the House Ways and Means Committee. She also worked within the executive branch, coordinating 

the work of the Office of Industry, Market Access, and Telecommunications at the Office of the U.S. Trade Representative. 

Most recently, she served as senior advisor and chair of international business at the Center for Strategic and International 

Studies. And, while any of these accomplishments standing alone 

is enough to be considered successful, Ms. Broadbent served admirably in each role. She should be justly proud of her work, and I 

am certainly proud of you. 

Finally, I want to take a minute to recognize Floyd Williams, 

whom I understand is in attendance today and will soon be retiring 

4 

from Federal service. Floyd has served as National Director for 

Legislative Affairs at the Internal Revenue Service since 1996 and 

can share with today’s Treasury nominees what it is like to be on 

the receiving end of urgent requests for information from this committee. 

Originally from Fayetteville, AR, Floyd worked at the Tax Foundation before working for the Treasury Department in the Office of 

Legislative Affairs before finally moving on to the IRS. 

Floyd, if you ever miss your old job and want a letter from the 

committee requesting information, let me know. [Laughter.] I 

would be glad to oblige. I greatly appreciate your service, and I 

wish you well. 

Mr. Chairman, thank you again, and thank you to the witnesses 

who are appearing today. We appreciate your willingness to serve 

our government, and we have every confidence that you will be 

able to serve well. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. Thank you, Senator. 

A couple of points before I begin. Number one, any request of 

yours to Treasury, any request you make as ranking member, is 

also a request of mine. 

Senator HATCH. I appreciate it. 

The CHAIRMAN. So I would like the Treasury to know that, if 

Senator Hatch makes a legitimate request, I fully support it and 

would like it to be answered timely. I think that is only appropriate 

that it be answered timely. 

Senator HATCH. Well, thank you, Mr. Chairman. 

The CHAIRMAN. Second, you are certainly right about Floyd. He 

has been such a tremendous person. We value him very much, and 

we regret that Floyd is retiring as Director of Legislative Affairs 

with the Internal Revenue Service. 

You have just been terrific, Floyd, and you have just been serving in the true spirit of public service, and it means a lot to us and 

it means a lot to Americans, as I am sure it does to the IRS. 

Thank you. You will be missed. 

Senator GRASSLEY. Mr. Chairman, could I say something about 

Mr. Williams? 

The CHAIRMAN. Absolutely. 

Senator GRASSLEY. Because during a good part of his time in 

that position with IRS, you and I traded back and forth being 

chairman, and I wanted to thank him for his cooperation with me 

while I was chairman and ranking member. 

Particularly, he is a good example of people who start at lower 

levels and work their way up to a very important position, because 

he has been a Senate page and in other jobs for the Senate before 

he went to the IRS. 

The CHAIRMAN. You bet. You have a lot of fans here. 

Now, I would like to introduce the panel. Our first witness is 

Mark Mazur, who has been nominated to be the Assistant Secretary of Treasury for Tax Policy. 

The second witness is Matt Rutherford, nominated to be Assistant Secretary of the Treasury for Financial Markets. 

5 

And our third witness, who has been nominated for the International Trade Commission, will be introduced by her former colleague, Congressman Bill Archer. 

Why don’t you come on up, Bill, and why don’t you make your 

introduction right now? 

STATEMENT OF HON. BILL ARCHER, 

FORMER U.S. REPRESENTATIVE FROM TEXAS 

Representative ARCHER. Thank you, Mr. Chairman. Thank you 

for giving me the honor to introduce Meredith Broadbent. I know 

that this is normally reserved for a member of the Senate, and so 

I am honored to be given this opportunity. 

And, as a former chairman of the Ways and Means Committee 

in the other body, I have a lot of fond memories of working with 

each and every one of you Senators who is in attendance today, although I must say that I am not eager to get back up here. 

But I am pleased to be able to introduce Meredith Broadbent, 

who has been nominated, as you said, by the President to be a 

member of the International Trade Commission. I cannot think of 

anybody who is more qualified to hold this position, more knowledgeable about the law, and more respectful of the prerogatives of 

the Congress. 

Meredith worked for the Ways and Means Committee trade staff 

for 20 years—I find it hard to believe that it really was that many 

years, Meredith—until the year 2002, and I worked very closely 

with her on all the major trade agreements that came up during 

that time. 

She earned a reputation for integrity, wisdom, professionalism, 

and bipartisan cooperation. And she learned firsthand the importance of the legislative process, congressional intent, and the legislative history of trade statutes. 

She originally had responsibility for organizing the committee’s 

consideration of miscellaneous tariff bills, and I remember well the 

work she did for me on a bill I sponsored to establish the Trade 

Remedy Assistance Office of the ITC, which offers assistance to 

workers, farmers, and small businesses to navigate the complexities of petitioning for relief under the trade remedy statutes administered by the ITC. 

I could go into a lot of details of the work that she did, and I 

am going to spare you that, but I do want to tell you that she drafted the Ways and Means Committee bill and the report which normalized trade relations with China, and that was a big, big thing. 

She did an excellent job, and, of course, the proof of that is that 

the Senate adopted our bill without amendment and without any 

single change, and that is very unusual. 

In 2002, Ambassador Zoellick asked her to join his team as Assistant USTR for Industry, and she did outstanding work there, 

and she led the U.S. negotiating team on industrial tariffs for the 

Doha round. And I am sorry to say, Meredith, you did not succeed 

in bringing that negotiation to an ultimate conclusion, but maybe 

one day it will happen. 

She is someone who has earned my trust and the trust associated with the position to which she has been nominated. The judgments she will be called on to make will be technical and factVerDate Nov 24 2008 20:16 May 16, 2013 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 R:\DOCS\80697.000 TIMD
6 

intensive, and I know she will apply hard work, sensitivity to the 

industry under consideration, and the experience she has gained 

here on Capitol Hill to compose thoughtful and well-reasoned determinations. 

She, I know, will implement the law as it is written, and she will 

be responsive to your needs for data and analysis, and imaginative 

in her approach in assisting Congress at the ITC. 

Meredith has my highest endorsement, and I urge approval of 

her nomination. 

The CHAIRMAN. Thank you, Congressman Archer, very much. I 

deeply appreciate that endorsement. Clearly, you have good experience. She has worked so well and so long, Meredith has, in this. 

Thank you very much for that statement. 

Before we proceed, I would like to—Mr. Mazur, why don’t you go 

ahead? You know our customary practice here is that each person 

summarizes his statement, and the full statement will be automatically included in the record. 

So just tell us what you want us to hear. Thanks. Go ahead. 

STATEMENT OF MARK J. MAZUR, NOMINATED TO BE ASSISTANT SECRETARY FOR TAX POLICY, DEPARTMENT OF THE 

TREASURY, WASHINGTON, DC 

Mr. MAZUR. Thank you, Chairman Baucus, Ranking Member 

Hatch, and members of the Senate Finance Committee. 

I am honored to have been nominated by President Obama to 

serve as the Treasury Department’s Assistant Secretary for Tax 

Policy, and I am grateful for the confidence that Secretary Geithner 

has shown in my abilities in recommending me to the President. 

I also want to thank Senators and their staffs for the opportunity 

to meet with them over the past few weeks to discuss a wide range 

of tax issues. 

The possibility that I could serve the Nation in the capacity of 

Assistant Secretary for Tax Policy is the result of a long journey 

that has provided me with numerous learning opportunities, plus 

a wide variety of disciplines. 

My parents instilled in me the notion that giving back to society 

is important. For instance, my father served as commissioner for 

our local Babe Ruth League, and my mother was active in the PTA 

and very supportive of education in general. And I would not be 

here today without a strong public education system, of which I 

was a beneficiary from elementary school all the way through. 

The opportunity to repay this support through public service has 

been a major motivation for my choice of career. I have been interested in working with the tax system for many years. When I was 

a kid, I used to sit with my dad at the kitchen table helping him 

organize his tax records, making sure that he would check his 

arithmetic on his tax return, because, frankly, he did not want to 

make a mistake filing his tax return. That is one of the more important things that they did, and it is one of the opportunities that 

every American has to interact with their government every year. 

I believe my background has prepared me well for this opportunity. I received a degree in financial administration from Michigan State University, then worked as a tax accountant for General 

7 

Motors. At Stanford University I pursued a Ph.D. in business, 

where I was introduced to the serious study of economics. 

I spent 4 years as an assistant professor at Carnegie Mellon University, where I specialized in public finance issues, and obtained 

an appreciation for interdisciplinary analysis of important policy 

questions. 

I next worked for the Joint Committee on Taxation, where I got 

an education in the legislative process and also was part of a tremendously talented team that produced high quality work under 

tight deadlines. 

I then spent 2 years as a senior economist specializing in public 

finance at the President’s Council of Economic Advisors, followed 

that with a similar period of service at the President’s National 

Economic Council, and then 4 years at the Department of Energy. 

My next position was with the Internal Revenue Service, where 

I was director for research, analysis, and statistics, which gave me 

an appreciation for the administrative issues that are faced by the 

Internal Revenue Service in administering the tax code. 

In all these positions, I learned important lessons on how to approach complex problems, how to work as part of a team, and how 

and when to rely on staff experts, and these are lessons that I will 

apply to my work as Assistant Secretary for Tax Policy, should I 

have the privilege of being approved by this committee and confirmed by the Senate. 

This, indeed, is an auspicious time to be working in tax policy. 

We are facing momentous decisions in the design of tax policy in 

our medium- and long-term fiscal policy. Our Nation needs a tax 

system that is simple, fair, and raises adequate revenue for funding important activities of government. Right now our tax system 

falls short in all three dimensions. 

The tax system is extraordinarily complex. Virtually everyone 

agrees it needs to be simpler. Having a complex system breeds a 

perception that there are two sets of rules, one for the well-advised 

and one for everyone else, and that perception of unfairness can 

erode the foundation of voluntary compliance on which our system 

depends. 

Our system needs to raise adequate revenue to fund the important goods and services provided by the Federal Government. At 

this point, chronic Federal budget deficits characterize our fiscal 

policy. That needs to change in the medium and long term. 

Finally, the tax system needs to have a higher degree of permanence so taxpayers can make informed judgments about long-term 

investments in human, physical, and financial capital. The effect of 

tax incentives is blunted when taxpayers are unsure what the rules 

of the tax system will be when they make these investments and 

when they file their tax returns. 

These are a few of the items that, if confirmed, I look forward 

to working with you to address. Having served in administrations 

led by both political parties, I think I have demonstrated a nonpartisan approach to public policymaking throughout my public 

service career. And, really, having a good tax system is something 

that affects every American household, and that should reflect the 

goodwill we all share as Americans. 

8 

In closing, I would like to take the opportunity to acknowledge 

the true professionals who staff the Office of Tax Policy at Treasury. These lawyers, economists, accountants, and other professionals are an incredibly talented team of dedicated public servants. As a taxpayer, I know I am well-served by this group, and 

I am honored by the ability to call them colleagues. 

Finally, let me close by noting I am humbled by the possibility 

of serving the Nation in this new capacity. If you and your colleagues in the Senate give me the opportunity to serve as Assistant 

Secretary for Tax Policy, I promise to do all I can to justify your 

confidence in my abilities. 

Thank you for the opportunity to appear here today. I would be 

pleased to answer any questions you may have. 

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

The CHAIRMAN. Thank you, Mr. Mazur. 

Next, Mr. Rutherford? 

Before we begin, though, Mr. Rutherford, I will give you an opportunity to introduce your family. 

By the way, stand up so we can all see and recognize you. 

STATEMENT OF MATTHEW S. RUTHERFORD, NOMINATED TO 

BE ASSISTANT SECRETARY FOR FINANCIAL MARKETS, DEPARTMENT OF THE TREASURY, WASHINGTON, DC 

Mr. RUTHERFORD. This is my daughter, Nora, who is 18 months 

old; my wife, Bridget, who is about 34 weeks pregnant; my mother, 

Cathy; and my father, Tom. 

The CHAIRMAN. That is wonderful. Let us give them all a round 

of applause. Thank you for your service. [Applause.] 

Why don’t you begin? 

Mr. RUTHERFORD. Thank you, Chairman Baucus, Ranking Member Hatch, and members of the committee, for allowing me to testify before you today. 

I am humbled to sit before you, and I am also honored to share 

this panel with Mark Mazur and Meredith Broadbent. Having 

worked with Secretary Geithner both at the Treasury Department 

and the Federal Reserve Bank of New York, I want to thank him 

for recommending me for the position of Assistant Secretary of the 

Treasury for Financial Markets. His service throughout the financial crisis has been remarkable, and I believe the United States has 

benefitted from his leadership and service during this difficult economic period. 

I would also like to thank President Obama for nominating me 

for this position. It is an incredible honor. And I am deeply appreciative to staff at Treasury and the Senate Finance Committee who 

have worked with me throughout this entire process. 

Again, I would like to thank my wife, Bridget, my daughter, 

Nora, and my parents for being with me today. I am very fortunate 

to have a very caring and wonderful family. Unfortunately, my sister cannot be here today, but she has served as a constant source 

of support throughout my entire life. 

For the past 3 years, I have served as the Deputy Assistant Secretary of the Treasury for Federal Finance. In this capacity, my 

primary responsibility has been to manage the Office of Debt Management, which is responsible for making policy decisions on how 

9 

Treasury finances the government’s borrowing needs. This has 

been a very busy time period in government finance, but I think 

we have achieved our objective, which is to finance the government’s budget at the lowest cost over time to taxpayers. 

Prior to my time at Treasury, I spent 4 years at the Federal Reserve Bank of New York in the markets group. My time there was 

very instructive, because, in many ways, the New York Fed is the 

government’s closest point of contact to the financial markets. I focused on a number of different areas in the fixed income space and 

learned a great deal about financial markets generally. 

Between my time at Treasury and the New York Fed, I feel that 

I am uniquely positioned to take on this new role. So, if confirmed, 

I would be honored to continue my career in public service, particularly during this important moment in our Nation’s history. 

Far too many Americans are out of work and struggling to pay 

their bills, and it is critically important that we work together, 

given the challenges that we face. 

I will conclude by saying that, if I am confirmed, I look forward 

to working with members of the Senate Finance Committee to address these important challenges. 

Thank you again for your time, and I would be happy to answer 

any questions that you have. 

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

The CHAIRMAN. Ms. Broadbent? 

STATEMENT OF MEREDITH M. BROADBENT, NOMINATED TO 

BE A MEMBER OF THE UNITED STATES INTERNATIONAL 

TRADE COMMISSION, WASHINGTON, DC 

Ms. BROADBENT. Chairman Baucus, Ranking Member Hatch, and 

members of the Committee on Finance, thank you for the opportunity to appear before you today. 

I am grateful to the President for nominating me, and to Minority Leader McConnell and Senator Portman for supporting my 

nomination. 

If confirmed, I believe my broad experience in international 

trade, including my service as a staff member in Congress and as 

a trade negotiator at USTR, has prepared me to assume a leadership position at the U.S. International Trade Commission. To me, 

this is an exciting time to be considered for an assignment at the 

ITC. 

Congress has just cleared the decks of the pending free trade 

agreements, and a new template for the next generation of agreements is being developed. As you work through novel issues and 

hone new negotiating objectives, the ITC can provide data and analytical support to inform your policy deliberations. Congress and 

the administration are working hard to enhance the rules-based 

trading system and its ability to address unfair import competition 

and increasingly complex trade and non-tariff barriers. 

A record of fair and objective import injury investigations and 

import-based intellectual property determinations will be an element in helping you and your colleagues build bipartisan support 

for a new trade agenda among U.S. workers, farmers, and businesses. 

10 

Serving as a professional staff member for the Committee on 

Ways and Means during the development of the Omnibus Trade 

and Competitiveness Act and the implementing bills for the Uruguay Round trade agreements has given me a deep appreciation for 

the role that Congress intends the Commission to play in unfair 

trade remedy investigations and reviews. I understand the importance of objectivity in rendering injury determinations and the legislative intent behind the countervailing duty and anti-dumping 

laws. 

My experience in administering the U.S. trade laws and as a key 

requestor and recipient of the ITC’s analytical work while serving 

as a trade negotiator at USTR make me well-qualified to help direct the Commission in the production of relevant studies that will 

be useful to Congress and the Executive Branch. 

I have seen how support for the rules-based trading system is 

built one industry, one worker, one farmer, one rancher at a time. 

Every constituent who interfaces with the ITC must receive fair 

and objective treatment under the trade laws. 

It is on that basis, if confirmed, I would be honored to serve as 

a member of the U.S. International Trade Commission. Thank you 

for the privilege of being considered for this position. 

I want to express appreciation to my husband, Chuck Riedel, and 

our two sons, Jess and William, for their support in my interest in 

serving at the ITC. 

With that, I am pleased to respond to any questions. 

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

The CHAIRMAN. Thank you, Ms. Broadbent. 

I now have three questions, and I will ask each of the three of 

you, and I will just go down the line here. 

First, is there anything 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. Mazur? 

Mr. MAZUR. No. 

The CHAIRMAN. Mr. Rutherford? 

Mr. RUTHERFORD. No. 

The CHAIRMAN. Ms. Broadbent? 

Ms. BROADBENT. No. 

The CHAIRMAN. 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. MAZUR. No. 

Mr. RUTHERFORD. No. 

Ms. BROADBENT. No. 

The CHAIRMAN. Thank you. 

Do you agree, without reservation, to respond to any reasonable 

summons to appear and testify before any duly constituted committee of the Congress, if you are confirmed? 

Mr. MAZUR. Yes. 

Mr. RUTHERFORD. Yes. 

Ms. BROADBENT. Yes. 

The CHAIRMAN. Thank you. 

11 

I will start with you, Mr. Mazur. We have a heck of a chore 

ahead of us this year and the next in reforming the tax code, both 

corporate and individual. I am going to ask you the open-ended 

question of how you think we should proceed; that is, not so much 

process, but substantively? 

You have lots of expertise. You have been around a lot. You have 

analyzed these issues backwards and forwards. How do we do it? 

What direction do you think this country should proceed, recognizing that the world has changed so much since we reformed the 

code in 1986? 

Mr. MAZUR. Thank you, Mr. Chairman. 

First, let me say I appreciate your leadership on holding hearings on tax reform and kind of moving the ball along here in the 

Senate. I think that is an important set of foundation work that 

needs to happen in order to build public support and momentum 

for tax reform. 

You pointed to the 1986 Tax Act as an example of past tax reforms, and, there, we spent several years both at Treasury and in 

the Congress developing proposals, testing them out, building momentum, finding areas for compromise where we could—a broadened tax base and lowered tax rates. And really that is what we 

are trying to do with tax reform here. 

If we look at the tax code today, we see it is incredibly complex. 

The CHAIRMAN. But back then, there was Treasury I and there 

was Treasury II. Do you think that something like that is necessary this time around? 

Mr. MAZUR. I do not think it is necessary, but I think the President’s framework for business tax reform is a step in that direction, 

and it lays out some of the important issues that need to be addressed, points in the direction of broadening the tax base, giving 

a serious look at the various tax expenditures, various parts of the 

code which provide special preferences, and then using whatever 

revenue is raised to lower rates. 

And really that should lead to a tax code that is simpler, easier 

to navigate for taxpayers—one that rewards economic decisions and 

not necessarily tax planning decisions—and that would support 

economic growth in the long term. 

The CHAIRMAN. How much work has the Treasury done thus far? 

The Treasury published its corporate framework, which was just 

that, only a framework. Everyone agrees the Is were not dotted and 

the Ts not crossed, and I expect that nothing is going to be forthcoming from the administration at least until after the election; 

that is, the Is not dotted and the Ts crossed. 

In the same vein, there is no proposed individual tax reform proposal, I suspect for the same reasons. Nevertheless, to what degree 

is Treasury working on developing a comprehensive tax reform proposal idea, a proposal construct, for both corporate and individual? 

Mr. MAZUR. There are several steps in that direction, Senator 

Baucus. One, as you noted, the President’s framework for business 

tax reform does lay out some steps in the direction of a reformed 

tax system and really provides an opportunity for dialogue with 

policymakers and stakeholders to fill in the blanks. 

12 

The CHAIRMAN. Right. But is Treasury developing its own proposal that, should the President get reelected, it is going to propose 

next year—I assume next year? 

Mr. MAZUR. So, we would be negligent if we were not doing 

foundational work on a variety of modeling issues and analytical 

issues. But at this point, there is no plan that has been developed, 

and we will see how this plays out. 

I think right now we have an opportunity to take some steps forward on business tax reform, to look at the framework and find six 

or eight or ten areas of common ground, use that as a way to move 

forward and build some momentum toward comprehensive reform, 

which, frankly, as Secretary Geithner acknowledged when he was 

here, the goal is to look at the tax system as a whole and wind up 

with a reformed system that is simpler, that raises adequate revenue to fund the Federal Government, and that provides support 

for long-term economic growth in the United States. 

The CHAIRMAN. Will the President make a proposal subsequent 

to the election? 

Mr. MAZUR. I really cannot promise that, sir. 

The CHAIRMAN. I do not have much time left. The tax gap—what 

is the cause of this growing tax gap; that is, the gap between income owed, but not collected? 

Mr. MAZUR. Well, Mr. Chairman, you and Mr. Grassley have certainly put the tax gap front and center over the last decade or so. 

At the IRS, one of the things that we learned from looking at the 

tax gap is, where there is information reporting, compliance is 

much better. And so, Congress has taken some steps to reduce the 

tax gap which have not yet shown up in the data by enacting debit 

and credit card reporting and reporting of basis on publicly traded 

securities. 

Those should help reduce the tax gap in coming years. It is not 

something that you can do just with enforcement. Really it needs 

probably comprehensive tax reform to simplify the system and provide fewer opportunities for tax avoidance. 

The CHAIRMAN. But is it primarily information reporting? 

Mr. MAZUR. Information reporting is probably the one thing that 

could be done to have the biggest bang for the buck, yes. 

The CHAIRMAN. Thank you. 

Senator Hatch? 

Senator HATCH. Thank you. 

Mr. Mazur, President Obama frequently talks about closing loopholes to raise revenue. Now, I am concerned that it sounds like the 

administration’s definition of a loophole may be different from how 

the term is generally understood. 

Now, I think of a tax loophole as the use of a tax provision in 

a way not intended by Congress when enacted. I would like to 

know how you define the term ‘‘loophole.’’ And do you have general 

criteria for determining what a loophole is or does your definition 

depend solely on who or what industry is utilizing a given tax provision? 

Mr. MAZUR. Thank you, Senator Hatch, for that question. 

I think you raise important issues as to how we are going to look 

at the overall tax system, and that we have a number of special 

13 

interest provisions in the tax code, preferences in lower rates, special deductions, and so on. 

Whether we call them tax expenditures, tax preferences, or loopholes does not really matter. Each of these should be held up and 

analyzed, the goal being to determine whether this special provision provides larger benefits to the economy as a whole, not just 

a tax benefit claimed by that individual or that taxpayer, but a 

much larger benefit. If it passes that test, it should be part of the 

tax code. If it does not pass that test, it would not be desirable tax 

policy. 

So it really does not come down to a definition of what a loophole 

is, really. It is a more broad or holistic view of it. 

Senator HATCH. Ms. Broadbent, as you are aware, intellectual 

property is an increasingly important part of our U.S. economy. In 

my State of Utah, IP is the lifeblood of many of our industries, 

from information technology to the life sciences. 

The ITC provides a vital tool for U.S. companies that face unfair 

competition from foreign imports that infringe their intellectual 

property interests. 

Now, can you share with us some of the relevant experience you 

will bring to the ITC that will assist you in dealing with cases involving IP? And let us have the benefit of your knowledge on that. 

Ms. BROADBENT. I appreciate that, Senator Hatch. 

My experience in administering the trade statutes with respect 

to intellectual property focuses probably the most under the Generalized System of Preferences. I administered that at the U.S. Trade 

Representative’s office, and we reviewed countries for consistency 

with the eligibility criteria and GSP, which related to intellectual 

property. 

It is a very important area, and it is something where the U.S. 

law has to be enforced very strictly, and I will pay very close attention to enforcing the intellectual property responsibilities of the 

International Trade Commission. 

Senator HATCH. Well, thank you. That is really important, as far 

as I am concerned. 

Now, Mr. Rutherford, as you may be aware, during the debt limit 

impasse last year, I requested specific information from Treasury 

concerning available cash, taxpayer cash, held at Treasury and its 

projections of cash inflows and outflows, along with plans in the 

event that the debt limit was breached. 

Now, the information was critical, as Congress was relying on 

guesses by local think tanks. And I asked how much cash Treasury 

had in its till and how much it expected to have over the short 

term, and I asked about Treasury’s contingency plans as well. 

To date, I have received only limited responses, which I find unacceptable. Now, it baffles me that even the ranking member of the 

Senate Finance Committee cannot obtain timely information from 

the Treasury about how much taxpayer money is in the till of the 

Federal Government. 

Will you, Mr. Rutherford, agree to provide to us and to me, in 

particular, if I request it, information about how much money the 

Treasury has and how much it expects to have on a contemporaneous basis? 

14 

That is, if I ask Treasury how much money is in the till and how 

much it expects to have over the next couple days or weeks, will 

you provide such information? 

Mr. RUTHERFORD. Thank you, Senator Hatch. I think that I 

would personally commit to working with you and your staff. I 

think it is critically important that we have a good working relationship on this front. 

Now, I understand this has been an area of great interest to you, 

and I would point out that—a couple things. One is that we do publish on a daily basis the cash that we hold every single day in the 

daily Treasury statement. So that gets released to the public the 

following day. 

In terms of the projections, I know that in some of the questions 

that you have sent over to Secretary Geithner, we have responded 

on a couple of different dates. 

I think going forward, there is a balance that we need to strike 

between being responsive to you, as well as preserving some potentially market-sensitive information, because those forecasts determine some of our borrowing needs, which influence asset prices 

once we do make decisions on that front. 

But I can personally commit to you that I will be as responsible 

as possible. 

Senator HATCH. Thank you so much. 

Mr. Chairman, my time is up. 

The CHAIRMAN. Thank you, Senator. 

Senator Grassley? 

Senator GRASSLEY. Mr. Mazur, I want to commend you for your 

23 years of government service, and I think you bring an important 

perspective to your job because of your work with the Joint Committee on Taxation and IRS research and statistics work that you 

have done. 

I do not have a beef with you, but I do have a beef with the 

Treasury Department. So do not take anything personally. 

And as a background to why I raise questions about whistleblowers, it is because you want to remember that I got the False 

Claims Act passed in 1986, and the Department of Justice says 

that has brought $30 billion back in to the Federal Treasury. So 

I have great respect for most whistle-blowers who come to me with 

information or come to you with information. 

And this is following up on something that Senator Baucus 

brought up, because he and I have worked together on the tax gap 

during the 10 years that he and I were chairman and ranking 

member of this committee, everything from shutting down corporate inversions and abusive deductions to improving the IRS 

whistle-blower program. 

It has been over 5 years since the IRS whistle-blower statute was 

updated. The updates were intended to incentivize whistle-blowers 

to come forward regarding large-dollar tax cheating. And by all accounts, as reported by the IRS and the Government Accountability 

Office, the updates are a success. Whistle-blowers have filed thousands of claims under this new statute. 

However, the IRS and Treasury response is very disappointing. 

I wrote to Secretary Geithner and Commissioner Shulman last 

15 

week to express my disappointment. That happens to be the third 

letter on the topic. 

Mr. Chairman, if I could please have those letters inserted in the 

record, I would appreciate it. 

The CHAIRMAN. Without objection. 

[The letters appear in the appendix on p. 40.] 

Senator GRASSLEY. These letters clearly state my concerns. More 

than 5 years after the statute was enacted, the necessary regulations are not finalized. The annual report has always been late. 

Communications with whistle-blowers are essentially nonexistent, 

and, as far as we know, only one award has been issued. But just think of this one award. We had a net recovery of $20 

million to the Treasury just from one whistle-blower. My primary 

concern is that the foot-dragging by the Treasury and IRS will demoralize whistle-blowers so much that they will just stop blowing 

the whistle, and, of course, this means the tax gap gets bigger instead of smaller, and you probably are going to have more scams, 

like I think they found this one that I reported. 

It is important that the IRS and Treasury work together to collect every dollar that is currently owed before taxes are raised, and 

this President continues to push for more tax increases. 

So, after 5 years, whistle-blowers deserve to know at least the 

month and hopefully the year when they can expect guidance. If 

you are not able to say right now, I would give you the opportunity 

to give me an answer in writing. 

I would like to know when I can expect to see the whistle-blower 

report for last fiscal year, which ended September 30, 2011, and 

when I can expect complete responses to my letters. 

Mr. MAZUR. Thank you, Senator Grassley. First, I have certainly 

admired your work on the tax gap over the years and think that 

you and the chairman have come up with a number of approaches 

to address this, which has been helpful—some legislative approaches, some other approaches. 

The whistle-blower program is a part of an overall approach that 

you have sketched out. I personally have not been involved in the 

regulatory guidance of the whistle-blower program, so I have to get 

back to you with an answer on that. 

But I can tell you that, if I am fortunate enough to be confirmed, 

I would be very happy to work with you and your staff to understand this program and to see that it becomes a successful program. 

Senator GRASSLEY. I do not think you have to work with me. I 

think you have to work with the Commissioner of IRS and the Secretary of Treasury, just to meet and make these awards. It is that 

simple. Just meet and make the awards so we do not discourage 

further whistle-blowing. 

And why would we—when we have one example of $20 million 

coming in to the Federal Treasury, and, according to Senator Baucus, we have well over $300 billion that is in the tax gap, this is 

a perfect place to go. 

But you know what? I kind of suspect, and I suspect this from 

the reluctance from 1986 until about 1993 to get the Department 

of Justice to enforce the False Claims Act, that there were professionals within the departments who did not want the public to 

16 

know they were not doing their job and were not following up on 

the fraudulent use of taxpayer money. 

And I wonder if we do not have the same problem in the IRS, 

that these people—if they admit that whistle-blowers are bringing 

them in $20 million—that somebody is not doing their job, and I 

think that that is a big problem. 

Now, my time is up. But if I could ask one more question. 

The CHAIRMAN. Go ahead. 

Senator GRASSLEY. Also, to you, sir, I have conducted vigorous 

oversight of various executive branch agencies during my almost 40 

years in the Congress. I view oversight as my constitutional duty. 

I consider myself an equal opportunity overseer, because I do not 

care whether we have Republican or Democratic Presidents. 

The primary way I conduct oversight activities is to write letters. 

Why? Because holding these hearings, you have to get a little bit 

of information out of the bureaucracy. It takes staff weeks to get 

ready for hearings. 

If you get a simple answer through a letter, that is what I try 

to do before you subpoena a bunch of stuff. So I ask detailed questions and request departments for certain documents. Responses to 

my letters and document requests are critical to conducting oversight. 

So I ask this question of every nominee of every committee I 

serve on. 

Do you agree to respond to my letters in full and in a timely 

manner? And when I say in full, in the first letter, not the second 

or third letter that you follow up to get the information you should 

have gotten in the first letter. 

Mr. MAZUR. Mr. Grassley, if confirmed to this job, to the best of 

my ability, I will respond in a timely way. 

Senator GRASSLEY. Well, as competent as you are, you have the 

ability to do it. Thank you. 

The CHAIRMAN. And I might say, Senator Grassley and I help, 

frankly, back each other up whenever each makes a request. Some 

years he has been chairman, some years I have been chairman. We 

just feel it is best the committee members work together and help 

each other out. 

So, again, as I mentioned earlier in the hearing, if Treasury receives a letter from the ranking member, that is, Senator Hatch— 

that includes Senator Grassley, who is honorary ranking member— 

that is a letter from me, as well, and I urge you to respond timely. 

Senator GRASSLEY. He has always backed us up, too, and I thank 

you very much for doing that. 

The CHAIRMAN. You bet. 

Senator GRASSLEY. Not just recently, ever since 2001, as far as 

I know. 

The CHAIRMAN. Thank you. 

Senator Wyden? 

Senator WYDEN. Thank you very much, Mr. Chairman. 

I want to follow up on Chairman Baucus’s question with you, Mr. 

Mazur. 

In the 2 years after the last major tax reform bill in 1986, when 

a big group of progressive Democrats and Ronald Reagan got together, the country created 6.3 million new jobs—a big boost to the 

17 

economy. I do not think anybody can conclude that every one of 

those jobs was due to tax reform, but it certainly helped. And my 

view is, it would be a big shot in the arm again to pass tax reform. 

And I was out of the room, so I did not get the full flavor of your 

response to Chairman Baucus. But my question to you is, where is 

the sense of urgency in terms of moving to put together a bipartisan tax reform proposal? What I got out of the earlier response 

was, well, there is not much going on. There is not an effort to pull 

together a comprehensive plan. 

So let me ask, again, picking up on Chairman Baucus’s question, 

where is this, and where is the sense of urgency to pursue it? This 

is something that has been done before. It has been done before, 

and it showed to have a very positive economic effect, and I think 

it will again. 

So where is this, and where is the sense of urgency? 

Mr. MAZUR. Thank you, Senator Wyden, for the question on tax 

reform, and thanks for your work in highlighting the importance 

of tax reform. 

As you noted, in 1986, there was a major effort to reform the tax 

code. That effort spanned several years, basically starting in the 

early 1980s, culminating in the 1986 Tax Act. 

I think we are in the early stages of developing public support, 

stakeholder support, congressional support for tax reform, and, 

frankly, I think this attempt is going to be more difficult than in 

1986. 

In 1986, we were able to, overall, do a revenue-neutral tax reform, and, frankly, with the medium- and long-term fiscal challenges we are facing, we are going to need to modestly increase revenues over the medium and long term, with modestly constrained 

spending. It will just be more difficult to do revenue-raising tax reform than revenue-neutral tax reform. 

Now, that said, the administration has taken a first step toward 

this by laying out the President’s framework on business tax reform. It does provide a frame for looking at tax reform on the business side of the ledger. 

As Secretary Geithner has pointed out, the ultimate goal is to do 

comprehensive reform, but we thought that having a framework for 

business tax reform would at least allow there to be opportunities 

to find six or eight or ten areas of common ground where we could 

move forward and build some momentum for taking on the more 

difficult task of comprehensive reform. 

Senator WYDEN. I would only say, respectfully, that to characterize this as being in the early stages—when you look at all that 

has been done, we have had one report after another, whether it 

is the Bowles-Simpson report, whether it is Dominici-Rivlin. Chairman Baucus has been having excellent hearings on this topic for 

quite some time. And the administration, even through Paul 

Volcker, had an excellent group. 

So to say that this is in the kind of early stages, I think, number 

one, is not substantively accurate. And I surely would like to see 

you particularly in this position. You are a good man. I plan to support you. I would like to see a sense of urgency, particularly because this is so directly related to job creation, as we saw the last 

time it was done. 

18 

Now, one question on the corporate tax issue. The Joint Committee on Taxation last year released an analysis estimating that 

the lowest possible corporate income tax rate that could be enacted 

through legislation that is revenue-neutral under a territorial system is 28 percent. 

Now, I would like to see us, particularly by closing some of the 

loopholes in the system, get lower than that. And Senator Coats 

and I and others have had ideas on how to do it. Now, there are 

some in the House who have said that they were told by Joint Tax 

that it is possible to lower the top corporate rate to 25 percent, 

while also moving the United States to a territorial tax system. 

In your view, what would be required to lower the top corporate 

rate to 25 percent, transition to a territorial system, and still be 

revenue-neutral? 

Mr. MAZUR. Thank you, Senator, for the opportunity to answer 

that question. 

In the President’s framework on business tax reform, we were 

able to pull together a roughly revenue-neutral plan—roughly 

revenue-neutral in the budget window and in the next decade— 

that got the corporate rate down to 28 percent. And, frankly, the 

arithmetic on getting to 28 percent is very difficult. 

In my judgment, I think if you are looking at the corporate tax 

system by itself, you cannot get, in a revenue-neutral way, to 25 

percent and have a territorial system. You may be able to find additional revenue outside the corporate tax system, maybe on the individual side, but in the corporate system, it would be very, very 

difficult to get there. 

Senator WYDEN. My time is up, Mr. Chairman. If we have a second round, I might ask some more questions. Thank you. 

The CHAIRMAN. You bet. 

Senator Thune? 

Senator THUNE. Thank you, Mr. Chairman. And thank you all 

for coming today and responding to our questions, and for your 

willingness to serve. 

I would like to direct a question, if I might, to Mr. Mazur, and 

that has to do with what many are starting to call ‘‘taxmageddon,’’ 

and that is the end of this year when the 2001 and 2003 rates expire, which would trigger a huge tax increase on our economy. 

And, given the high stakes surrounding a bipartisan agreement 

on the issue of taxes, what advice might you give, if confirmed, to 

Secretary Geithner as to how to reach an agreement that will prevent this massive tax increase from taking effect, and which could 

very easily, I would argue, easily lapse us back into a recession. 

So what are your thoughts with regard to the big train wreck 

that is ahead of us at the end of the year when these tax rates expire, and how might you advise Secretary Geithner with regard to 

how to deal with this and come to an agreement? 

Mr. MAZUR. Thank you, Senator Thune. 

If I was confirmed to this job, what I would advise the Secretary 

to do is to methodically look at the issues that are being raised 

item by item through the course of the year. 

Right now we have a number of tax provisions that expired at 

the end of 2011 that really should be addressed in the short term 

19 

so taxpayers have some certainty as to what their tax situation is 

going to be for tax year 2012. That would be first on the list. 

Then we have the 2001 and 2003 tax cuts. The President has 

been pretty clear in his budget what he would like to see happen, 

which would be to allow the tax rates for those with incomes above 

$250,000 to revert back to where they were in the 1990s, but to retain the 2001 and 2003 tax cuts for the bulk of the population, 98 

percent of the population. 

There are also a couple of non-tax issues that need to be addressed, as well, at the end of the year. And so I guess my advice 

to Secretary Geithner on this would be to work with the Congress 

to tee up as many of these issues early on and build some—do 

some foundational work so that we are not pushed into a situation 

of having just a few weeks at the end of the year to make incredibly consequential decisions. 

Senator THUNE. Do you think the agreement that was reached 

in 2010, the extension at that time, was a good thing? It was a 2- 

year extension of the existing rates. 

Mr. MAZUR. Given the state of the economy at that time, I think 

there was need for some additional fiscal stimulus, and the extension of the tax cuts, along with the payroll tax reduction that was 

in place, provided that and provided additional support for the 

economy through 2011 and 2012. Yes. 

Senator THUNE. So that was a good policy move, in your view. 

Mr. MAZUR. Given the state of the economy at the time, yes. I 

think as we move forward, we are pivoting to a situation where we 

need to address the medium- and long-term budget deficits, and 

the economy is not quite so fragile. 

Senator THUNE. Thank you. 

Mr. Rutherford, the debt ceiling, the limit, is at $16.394 trillion, 

which, at the time the Budget Control Act was passed, was expected to keep the government funded through November of this 

year. The President’s 2013 budget points out the government will 

be just $60 billion below the debt limit ceiling at the end of fiscal 

year 2012, which would be September 30 of this year. 

Does the Treasury plan to institute extraordinary measures to 

avoid the debt limit being reached prior to the November elections; 

and, if so, what are those measures that you might intend to use? 

Mr. RUTHERFORD. I appreciate the question, Senator. I think our 

best estimate now is that the tax ceiling will be reached sometime 

in the last couple months of the year after the election. And, at 

that point, we still have those same extraordinary measures that 

we used during previous impasses. 

So I think that that would be something that we would absolutely use to continue to allow us to borrow. 

Senator THUNE. But you do not anticipate hitting that before the 

election or triggering—— 

Mr. RUTHERFORD. No. 

Senator THUNE [continuing]. I should ask, triggering those extraordinary measures prior to the November election? 

Mr. RUTHERFORD. No. Our best estimate is that this will happen 

after the election. I think that some of the forecasts are obviously 

volatile. It is difficult to forecast with much precision 6 months out 

about exactly the date on which we would actually hit it. 

20 

But, obviously, we will be watching revenues and see how they 

are trending, as well as outlays. But we think it will be safely after 

the election. 

Senator THUNE. And just a quick follow-up: if you have to use extraordinary measures, what might those be, what you would intend 

to use in order to—— 

Mr. RUTHERFORD. We typically redeem non-marketable Treasury 

securities, for example, in the G fund, which is something that Federal employees put money into. There are some authorities around 

the CSRDF, which is another retirement system. And we can also 

disinvest the exchange stabilization fund. And all three of those 

things we did in the last impasse last summer, as well. 

Senator THUNE. I see my time is up. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

I see Senator Portman has joined us. Senator, welcome. I believe 

you have a statement to make in support of one of the witnesses. 

STATEMENT OF HON. ROB PORTMAN, 

A U.S. SENATOR FROM OHIO 

Senator PORTMAN. Thank you, Mr. Chairman. I have always 

wanted to be in the Finance Committee, and I finally got here on 

this side of the table. [Laughter.] 

I was really enjoying hearing that dialogue, and I do not want 

to interrupt you for long, except to say that we do have a great candidate here. She is a native Ohioan, and I have had the opportunity to work with Meredith in various different posts. 

She has been nominated to serve as a Commissioner on the ITC. 

I think she has the intellect and the qualifications and the experience to be an excellent Commissioner. She happens to be a proud 

Ohioan. 

In addition to my working with her, we share deep roots in the 

Buckeye State, and I think our country would benefit from that 

perspective. 

She was on the Ways and Means Committee with me, as some 

of you know, a senior professional staffer there. And as a member 

of the Trade Subcommittee, I relied on her judgment and expertise. 

She provided all the good questions for me that I asked in that subcommittee. And she was involved in some very difficult issues that 

addressed unfair trade barriers that were blocking manufacturing 

exports and agriculture exports. 

I know, Mr. Chairman, you and others have worked closely with 

her over the years in that regard. And then a couple of years later, 

I had the opportunity to work closely with her when she was at the 

Office of the U.S. Trade Representative. 

She served on my team as the assistant U.S. trade rep for industry, market access, and telecommunications, a tough job, and, 

again, she was responsible for developing some very important U.S. 

policy initiatives in the area of industrial goods, telecom, e-commerce, as lead negotiator on Doha. So she has that experience and 

has been very involved with looking at the plurilateral agreements 

on services, including with the EU, Japan, Korea, Taiwan, high 

technology and other issues that I know that you, Senator Hatch, 

are very interested in. 

21 

So she has a wealth of experience, and I think she will do a terrific job, and I hope that her willingness to serve her country in 

this post will be confirmed by the Senate quickly. 

Thank you very much for allowing me to come and speak on 

Meredith’s behalf. 

The CHAIRMAN. You bet. Thank you, Senator. 

I think a couple of Senators have a few more questions. I want 

to ask you one, Mr. Rutherford. 

When S&P downgraded the U.S. credit rating, it created quite a 

stir. Some thought that the agency was not objective. I think it 

was, what was it, a $2-trillion error at the time, pointed out by 

Treasury. S&P went back and changed their methodology. And the 

rating agencies have been involved with rating the debt of various 

countries, not just the U.S. 

With our debt ceiling approaching and the fiscal cliff approaching, your thoughts, under what circumstances the agencies might 

downgrade U.S. debt. 

Mr. RUTHERFORD. I appreciate the question. I think that I share, 

I think, your frustration to some extent about the methodological 

reasons for why they ended up downgrading the United States. 

I think the initial justification that came over, as you pointed 

out, had a $2-trillion error in it. When we found that, we pointed 

out the flaw and they came back to us with a very different reason 

for downgrading the United States. And that was really a political 

judgment about the capacity and willingness of policymakers to 

forge a bipartisan solution to our long-term debt problems, and I 

fundamentally disagree with that. I think that this country has 

made difficult decisions in the past, and we will make difficult decisions in the future. 

So I think that they are independent companies that make unsolicited ratings on the United States. We do not pay for this rating. 

We do not provide them with any nonpublic information. 

So I think they will probably be watching some of the issues we 

have been talking about today toward the end of the year and how 

some of those issues are resolved, but ultimately that is going to 

be a decision that they are going to make, and it is difficult for me 

to forecast exactly what their intentions will be. 

The CHAIRMAN. How much are the markets influenced by their 

ratings? 

Mr. RUTHERFORD. Well, as you know, the treasury market actually rallied. We had a significant decline in rates after the downgrade, and I think that really reflects investors’ confidence in the 

U.S. Government’s ability to meet its obligations. 

So I think that that was sort of a counterintuitive response to 

many people, but I do think that investors continue to have full 

confidence in our ability to meet our long-term debt issues. 

The CHAIRMAN. It is almost impossible to find, but where is the 

tipping point? 

Mr. RUTHERFORD. I think that—— 

The CHAIRMAN. We are so lucky that investors worldwide have 

confidence in the U.S. treasuries. The rates are so low. 

Mr. RUTHERFORD. Right. So that is going to be something 

that—— 

22 

The CHAIRMAN. My expectation is that things are not always permanent. Sometimes things change. Rates might go up. 

Mr. RUTHERFORD. Right. 

The CHAIRMAN. So, to go back to my question, what are some of 

the things that may create a kind of a tipping point? 

Mr. RUTHERFORD. Well, I think we just ultimately need to maintain the confidence in the markets, and we clearly have that today. 

I think that what is priced into the treasury market today is that 

we are going to put together a long-term solution to our debt 

issues, and I think we need to deliver on that. 

Forecasting the tipping point is very difficult, as you said, and 

I think that the important thing that we need to do is just continue 

to work together and make sure that we come up with a long-term 

plan to maintain that confidence. 

The CHAIRMAN. What is the effect of Europe or, precisely, French 

elections and, even more precisely, Greece? 

Mr. RUTHERFORD. Well, I think the markets have been very focused on some of the political issues that have occurred in Europe 

recently. I think taking a step back, though, the European policymakers need to be given some credit for what they have achieved 

so far. This is a very difficult situation, and I think, as the Secretary of the Treasury has pointed out on a number of occasions, 

Europe has really taken off the table the risk of a cataclysmic outcome. 

And I think that the banking system, through the ECB’s actions, 

has more liquidity, and sovereign debt spreads have come down 

quite a bit. 

So it is going to remain a focus of investors, that is for sure, and 

they have a difficult path ahead, but I do think they have the resources to get to the right place. 

The CHAIRMAN. What happens if Greece goes off the euro? 

Mr. RUTHERFORD. That is a decision that the Greek voters will 

have to—— 

The CHAIRMAN. What effect will it have in the U.S.? 

Mr. RUTHERFORD. I am sorry? 

The CHAIRMAN. What effect will it have on the United States 

economy? 

Mr. RUTHERFORD. Well, it will depend. I think that one of the 

things that we have seen is that the United States continues to be 

a safe haven, and we continue to see flows into our markets when 

there are stresses overseas. 

So, again, that is maintaining that investor confidence, because 

we have some of the deepest and most liquid capital markets in the 

world. And so I would expect something like that to continue to 

occur. 

The CHAIRMAN. Thank you. 

Senator Hatch? 

Senator HATCH. Thank you, Mr. Chairman. 

Mr. Mazur, if we are to discuss the issues of fairness, using facts 

as you propose, what would be your preferred metric to measure 

fairness and equality? And given that metric, what would you propose as the objective? 

23 

For example, given your favorite measure, can you give me a particular year in the past where you feel the economy was closest to 

what you feel is optimal equality? 

Mr. MAZUR. Thank you, Senator Hatch, for raising an important 

issue. As an economist looking at the tax system, fairness is just 

one of the issues that you care about. You care about efficiency, 

and you care about equity. 

And in designing a tax system, there are tradeoffs that occur all 

the time. One of the things that has been a characteristic of the 

U.S. tax system since the early days is a notion that the amount 

of tax individuals pay or taxpayers pay is based on some sense of 

their ability to pay. 

That is reflected in the notion of progressivity, that effective tax 

rates should be higher for those with greater incomes. And so that 

would be one of the characteristics of a fair tax system; that is, as 

you move along the income scale going toward higher and higher 

incomes, on average, effective rates would rise. 

I do not think you can point to a particular time in history and 

say, that was the optimal tax system, that was the optimal situation we have had. 

We have had our Federal Government grow and shrink over 

time. Really what you want to do with a tax system is raise adequate amount of revenue to pay for the goods and services demanded by taxpayers from the Federal Government, do it in a way 

that is efficient, and do it in a way that is perceived as fair. 

Senator HATCH. As my friends on the other side of the aisle are 

repeatedly discovering, there just is not enough revenue available 

from taxing the so-called rich to pay for the size of government that 

the President desires. 

What maximum upper-income tax rate would you propose to confront inequality, and how much revenue do you think that would 

generate? Just give us some ballpark figure, if you can. 

Mr. MAZUR. Again, I think the idea of looking for a maximum tax 

rate is one that misses the entire point. Really what we are looking 

at is designing an overall tax system—part of which is individual 

income tax, part of which is corporate income tax, part of which is 

payroll tax, part of which is excise taxes, part of which is estate 

and gift taxes—and having that entire tax system raise an adequate amount of revenue for the Federal Government—for the 

goods and services that taxpayers demand from the Federal Government. 

So I do not think you can just say, here is a maximum tax rate, 

and hold to that as a simple matter. One of the goals of comprehensive tax reform is to say, let us broaden the tax base and lower 

rates. 

If we are successful at doing that, we would lower rates below 

where their current levels would be. But at this point, I cannot give 

you an overall estimate and say a 20-percent rate is the maximum 

rate or a 50-percent or 70-percent rate is the maximum rate. 

If we look over the course of history in the United States, we 

have had maximum individual tax rates that ranged from probably 

90 percent, at the most, to probably 28 percent after the 1986 Tax 

Reform Act. The economy has performed well in a wide variety of 

those situations. So I do not think you can say, here is a maximum 

24 

rate, and kind of use that as a single guidepost. It is really more 

of a balance. 

Senator HATCH. In your testimony, you note that, ‘‘Complexity 

breeds the perception that the tax system has two sets of rules— 

one for ordinary Americans and one for those who have access to 

lobbyists and tax engineers.’’ 

Now, in January of this year, Politico noted that 36 White House 

staffers owed $833,970 in back taxes. Now, do you think there also 

might be a perception that there are different rules for those in 

power or who are close to power? And how important is it to ensure 

the laws are perceived as applying to everyone equally, and how 

can we accomplish this in tax reform? 

Mr. MAZUR. Well, clearly, everyone who is in public service 

should pay the taxes that they owe, whether it is in the executive 

branch or another branch of government. Any noncompliance is too 

much noncompliance. So you would really want to reduce that. 

Having a reformed system, one where it was simpler for taxpayers to navigate the system, one where there is a degree of permanence—the taxpayers could rely on the tax rules that would 

apply to them in the future, they would know what those were and 

they would be reliable—that would help improve perceptions of 

fairness. 

Taxpayers would see that they were treated similarly to their 

neighbors who are similarly situated, an important characteristic of 

fairness. 

Senator HATCH. Mr. Chairman, I will submit the rest of my questions in writing, and hopefully we can get a quick response. 

The CHAIRMAN. Thank you. 

Senator Wyden? 

Senator WYDEN. Thank you, Mr. Chairman. 

Just a couple of other areas I want to get into. 

Mr. Rutherford, you and I talked, particularly in the office, about 

tax credit bonds for transportation. And, as you know, the central 

question is that the gas tax simply is not something that is palatable to Americans at a time of all this economic hardship and skyrocketing gasoline prices. It is not palatable in terms of looking 

there for additional revenue given the fact that we have all this 

work to do in terms of infrastructure. 

So what we have done on this committee is to focus particularly 

on trying to generate more revenue in a fashion that would be acceptable to the American people and would pencil out—in other 

words, it would add up, from a revenue standpoint. 

And we came up with something known as Build America Bonds. 

We talked about it in the stimulus. I remember the afternoon 

Chairman Baucus asked me what I thought was going to happen 

with all of this. I said, Mr. Chairman, we might generate $6 billion/ 

$8 billion worth of projects, and the chairman and colleagues on 

both sides said, well, it is worth a try. As you know, this came in at more than $180 billion worth of investments. So, clearly, it was attractive to the private sector, which 

is key, of course, to generating more revenues. So, when the administration said, let us make Build America Bonds permanent, we 

thought that was terrific. But, of course, that cannot pass, particularly in the House. 

25 

So we have gone back to the drawing board, and Senator Hoeven 

and I, in particular, have come up with a new concept, which really 

focuses on sort of a State version of these tax credit bonds. 

Once again, the private sector has been very supportive, very interested. We have talked to Chairman Baucus and Senator Hatch 

and have had a lot of discussion here on a bipartisan basis, and 

we need new revenue that can be generated in a fashion that 

would be acceptable to the public. 

What are your thoughts on that kind of approach? 

Mr. RUTHERFORD. I appreciate the question, Senator. I think that 

improving infrastructure in this country is something that the administration has been very focused on, as you know. And I think 

in the recent budget, the support dedicated to an infrastructure 

bank was important in this respect, as well as the administration’s 

belief that we should continue to extend those Build America 

Bonds, which I know you were so important in engineering. 

And I think that, as you pointed out, they were incredibly successful. And, from a market perspective, I think the investors that 

I speak with, they were very receptive to this market, and a market was basically generated overnight, a very deep and liquid market. 

So I think that this is the area that the administration has focused on, because it was our belief that this was an area that was 

incredibly successful. 

But upon reflecting upon our conversation, I do think that the 

spirit of what you are trying to achieve with these TRIP bonds is 

something that is definitely worthy of consideration, and, if confirmed, I would be happy to continue to work with you on this 

topic, because I share your desire to improve infrastructure in this 

country. 

Senator WYDEN. Well, thank you. And I think that is very constructive. You may know, with Chairman Baucus’s support and 

Senator Hatch’s, we were able to get a placeholder for these TRIPs 

in the transportation bill. Senator Hoeven and I are continuing to 

work with colleagues on both sides of the aisle in the House and 

Senate in a bipartisan way in hopes that this can be part of the 

effort, again, to shore up the opportunity to finance the desperately 

needed infrastructure. 

We all know you cannot have big league economic growth with 

little league transportation systems. So your positive reaction and 

being willing to look at other approaches, I think, is very helpful, 

very constructive. I appreciate it. 

And having been the author of the Build America Bonds the first 

time, with lots of other colleagues, I wish we could go there. It is 

just that we are going to have to look at some other approaches. 

The last point that I would make is this. Ms. Broadbent, we did 

not have a chance to talk in the office. So I am not going to throw 

lots of difficult questions at you. I just simply want to convey that, 

particularly with the significant transformation in our economy, 

and particularly the digital economy—digital goods, digital services—we have been spending a lot of time looking at those issues 

here, and there are a whole host of questions that apply to the 

international arena: unfair digital imports, for example, those that 

infringe on copyrights. 

26 

And for all practical purposes, these are unfair trade practices, 

and there has been lots of bipartisan interest in looking at that in 

terms of a trade issue and responding in the trade arena so that 

we can do two things: we can protect American jobs and protect our 

key industries, whether they are fake Nikes or movies people do 

not own or somebody selling tainted Viagra. 

It is not right to let people be ripped off. We have to do it in a 

way that does not harm the Internet and does not harm the prospects for more digital goods and services. 

I am going to be supporting you when you come up for a vote 

here, and I would like to have a chance to talk with you about that 

down the road. And I guess you are spared any questions, because 

we did not have a chance to talk about it. But I just wanted to put 

that on your radar. 

And, Mr. Chairman, I think it has been a valuable hearing. We 

have gotten a lot of important issues aired, and I thank you for this 

extra time. 

The CHAIRMAN. Thank you, Senator. Thank you all. I wish you 

all very, very good luck. You will be working extraordinarily hard 

and will not be spending as much time as you would like with your 

families. Thank your families, too, for the joint effort here. 

We have a lot of work to do, and I urge you, too, to not blindside 

this committee. That is, when something is coming up that is relevant to this committee, give us advance notice. Give us a telephone call, because the goal is to work together. The goal is not, 

from our side, to be adversarial, antagonistic, competitive. The goal 

is to be cooperative and constructive, and I know you will do the 

same. I just urge you to approach your work generally in that regard, but more specifically with respect to this committee. 

Thank you very much. The hearing is adjourned. 

[Whereupon, at 11:25 a.m., the hearing was concluded.] 

(27) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD


80697001.eps
28 


80697.002

While at USTR, I supported Ambassador Portman in successfully concluding a $3.4 billion 

plurilateral trade agreement which eliminated duties on approximately $1 billion of U.S. exports 

in the high technology sector. This little known, non-controversial agreement, which made use 

of now expired proclamation authority, helped establish more favorable conditions of global 

competition for a cutting edge U.S. industry. 

My experience in administering U.S. trade laws, and as a key requestor and recipient of the 

lTC's analytical work while serving as a trade negotiator at USTR, make me well qualified to 

help direct the Commission in the production of relevant studies that will be useful to Congress 

and the executive branch. 

Having worked as congressional staff. I have seen how support for the rules-based trading 

system is built one industry, one worker, one farmer and one rancher at a time. Every constituent 

that interfaces with the ITC must receive fair and objective treatment under the trade laws. 

It is on that basis that, if confirmed, I would be honored to serve as a member of the U.S. 

International Trade Commission. 

Thank you for the privilege of being considered for this position. I want to express appreciation 

to my husband, Chuck Riedel, and to our two sons, Jess and William, for their support of my 

interest in serving at the ITC. 

With that, I am pleased to respond to any questions. 
29 


80697.003

SENATE FINANCE COMMITTEE 

STATEMENT OF INFORMATION REQUESTED OF NOMINEE 

January 19, 2011 

A. BIOGRAPHICAL INFORMATION 

1. Name: (Include any former names used.) Meredith Mathews Broadbent 

2. Position to which nominated: International Trade Commission (lTC) 

3. Date of nomination: November 8, 2011 

4. Address: (List current residence, office, and mailing addresses.) 

5. Date and place of birth: 01/01/1959; Cleveland, Ohio 

6. Marital status: (Include maiden name of wife or husband's name.) 

7. Names and ages of children: 

8. Education: (List secondary and higher education institutions, dates 

attended, degree received, and date degree granted.) 

Western Reserve Academy, Hudson, Ohio (1974-1977) diploma 1977 

Middlebury College, Middlebury, Vermont (1977-1981) BA, European 

History; Minor in Economics awarded 1981 

George Washington University (1984-1998), School of Business and 

Public Management, MBA, International Business awarded 1998 
30 


80697.004

9. Employment record: (List all jobs held since college, including the title or 

description of job, name of employer, location of work, and dates of 

employment.) 

Georgetown Center for Strategic and International Studies, African 

Studies Program 

• Research Assistant (1981-82) 

• 1800 K Street NoW. 

Washington, DC 20006 

Committee on Ways and Means, Subcommittee on Trade, U.S. House of 

Representatives 

• Senior Professional Staff Member, Republican/Majority Staff 

( 1994-2003) 

• Professional Staff Member and Trade Assistant, 

Republican/Minority Staff (1982-1994) 

• Washington, DC 20515 

Office of the United States Trade Representative 

• Assistant U.S. Trade Representative for Industry, Market Access 

and Telecommunications (2003-2008) 

• 600 17th Street NW 

Washington, DC 20508 

The Global Business Dialogue, Inc. 

• Trade Advisor (3/2009-10/2010) 

• 1140 Connecticut Ave. NW Suite 950 

Washington, DC 20036 

Center for Strategic and International Studies 

• Senior Advisor and William M. Scholl Chair in International 

Business (10/201 O-current) 

1800 K Street NoW. 

Washington, DC 20006 

10. Government experience: (List any advisory, consultative, honorary, or 

other part-time service or positions with Federal, State or local 

governments, other than those listed above.) 

None. 

11. Business relationships: (List all positions held as an officer, director, trustee, 

partner, proprietor, agent, representative, or consultant of any corporation, 
31 


80697.005

company, firm, partnership, other business enterprise, or educational or 

other institution.) 

The Technology CEO Council, Consultant (2009) 

12. Memberships: (List all memberships and offices held in professional, 

fraternal, scholarly, civic, business, charitable, and other organizations.) 

Member of Board of Visitors (2008-current), Member of Waring Prize 

Committee (2001-2008); Western Reserve Academy, Hudson, Ohio 

Member, Business Relations Committee (2000-2004) and Parent 

Volunteer, Capital Campaign Committee (2010-current); Thomas 

Jefferson High School for Science and Technology, Annandale, Virginia 

Member of Board of Directors, Trade Policy Forum (1995-2004) 

Member of Steering Committee, the CongreSSional Staff Forum, Center 

for International Business, School of Business, Georgetown University 

(1997-2003) 

Member of Board of Directors, Women in International Trade (1989-1993) 

Member of Board of Directors, House of Representatives Child Care 

Center (1990-1994) 

13. Political affiliations and activities: 

a. List all public offices for which you have been a candidate. 

None 

b. List all memberships and offices held in and services rendered to all 

political parties or election committees during the last 10 years. 

Manager, Deployed RNC Volunteers and Member of Trade Advisory 

Committee, John McCain for President Campaign (Volunteer); Sept-Nov. 

2008. 

c. Itemize all political contributions to any individual, campaign 

organization, political party, political action committee, or similar 

entity of $50 or more for the past 10 years. 

(Jointly with spouse) 
32 


80697.006

2002 Republican National Committee $500.00 

2004 Bush-Cheney '04 $2000.00 

2006 Nancy Johnson (R-Conn) for Congress $ 200.00 

2006 Mike Dewine (R-Oh) for Senate $200.00 

2008 Phil English (R-Pa) for Congress $250.00 

2008 McCain Victory and McCain-Palin Victory $3550.00 

2008 Barbara Comstock (R) for VA House of Del. $700.00 estimate 

2010 Mark Kirk (R-II) for Senate $175.00 

2010 Rob Portman (R-OH) for Senate $900.00 

2010 Barbara Comstock for VA House of Del. $400.00 

2010 Paul Ryan (R-WI) for Congress $250.00 

2011 Paul Ryan (R-WI) for Congress $100.00 

2011 Barbara Comstock for VA House of Delegates $100.00 

2011 Promoting our Republican Team PAC $500.00 possible 

14. Honors and Awards: (List all scholarships, fellowships, honorary degrees, 

honorary society memberships, military medals, and any other special 

recognitions for outstanding service or achievement.) 

Award from the Semiconductor Industry Association recognizing my work 

in negotiating a trade agreement governing trade in high tech products. 

(2007) 

Award from the Caribbean/American textile and apparel industry for work 

on the Caribbean Basin Trade Partnership Act (2008) 

15. Published writings: (List the titles, publishers, and dates of a" books, 

articles, reports, or other published materials you have written.) 

"The Role of FTA Negotiations in the Future of U.S.-Egypt Relations." 

Publisher: CSIS. December 13, 2011. 

"Time to Exchange Andean Preferences for Reciprocal Free Trade 

Agreements." Publisher: CSIS. February 23, 2011. 

"The Global Trade Picture from Washington." Part of the "Global Forecast 

2011." Publisher: CSIS. June 15, 2011. 

16. Speeches: (List all formal speeches you have delivered during the past five 

years which are on topics relevant to the position for which you have been 

nominated. Provide the Committee with two copies of each formal speech.) 

Statement before the Senate Finance Committee, Subcommittee on 

International Trade, Rock Springs, Wyoming April 15, 2004. Hearing on 
33 


80697.007

International Trade and the Impact on the U.S. Soda Ash Industry 

Statement before the Senate Finance Committee, May 16, 2007, Hearing 

on the Operation of Trade Preference Programs 

Statement before the House Ways and Means Committee Hearing on the 

Operation, Impact and Future of U.S. Preference Programs, Nov. 17,2009 

Speech on U.S.-High Technology Trade Agenda, Canada-United States 

Law Institute, Case Western Reserve University, April 2007 

17. Qualifications: (State what, in your opinion, qualifies you to serve in the 

position to which you have been nominated.) 

If appointed, I would bring to the position over 26 years of combined public 

service in the executive branch and Congress handling complex trade 

policy issues. 

From 2003-2008, I served as Assistant United States Trade 

Representative for Industry, Market Access and Telecommunications. In 

this position, lied negotiations in the World Trade Organization aimed at 

liberalizing trade in industrial goods and represented USTR in 

consultations with Congress on recent reforms to the Generalized System 

of Preferences program. While at USTR, I successfully concluded a 

plurilateral trade agreement which eliminated duties on $1 billion of U.S. 

exports in the high technology sector. 

My experience in administering U.S. trade laws, and as a key requestor 

and recipient of the lTC's analytical work while working as a trade 

negotiator at USTR, make me well qualified to help direct the Commission 

in the production of relevant and timely studies that will be useful to 

Congress and the Executive Branch. 

Serving as a professional staff member for the Committee on Ways and 

Means during the development of the Omnibus Trade and 

Competitiveness Act of 1988 and the implementing bills for the North 

American Free Trade Agreement and the Uruguay Round Trade 

Agreements gave me a deep appreciation for the role that Congress 

intends the Commission to play in unfair trade remedy investigations and 

reviews. I understand the importance of objectivity in rendering injury 

determinations and the legislative intent behind the countervailing duty 

and anti dumping laws. 

This experience, together with my work on legislation granting normal 

trade relations treatment to China, has given me a clear grasp the difficult 
34 


80697.008

market access barriers facing U.S. exporters of agricultural and 

manufactured goods and the essential role that these constituencies play 

in advancing U.S. trade agreements. 

I believe my broad experience in international trade has prepared me well 

to assume a leadership position at the ITC. 

B. FUTURE EMPLOYMENT RELATIONSHIPS 

1. Will you sever all connections with your present employers, business 

firms, associations, or organizations if you are confirmed by the Senate? If 

not, provide details. 

Yes 

2. Do you have any plans, commitments, or agreements to pursue outside 

employment, with or without compensation, during your service with the 

government? If so, provide details. 

No 

3. Has any person or entity made a commitment or agreement to employ your 

services in any capacity after you leave government service? If so, provide 

details. 

No 

4. If you are confirmed by the Senate, do you expect to serve out your full 

term or until the next Presidential election, whichever is applicable? If not, 

explain. 

Yes 

C. POTENTIAL CONFLICTS OF INTEREST 

1. Indicate any investments, obligations, liabilities, or other relationships 

which could involve potential conflicts of interest in the position to which 

you have been nominated. 

In connection with the nomination process, I have consulted with the 

Office of Government Ethics and the U.S. International Trade 

Commission's designated ethics official to identify potential conflicts of 

interest. Any potential conflicts of interest will be resolved in accordance 

with the terms of an ethics agreement that I have entered into with the 
35 


80697.009

Commission's ethics official and that has been provided to this Committee. 

I am not aware of any potential conflicts of interest. 

2. Describe any business relationship, dealing or financial transaction which 

you have had during the last 10 years, whether for yourself, on behalf of a 

client, or acting as an agent, that could in any way constitute or result in a 

possible conflict of interest in the position to which you have been 

nominated. 

In connection with the nomination process, I have consulted with the 

Office of Government Ethics and the U.S. International Trade 

Commission's designated ethics official to identify potential conflicts of 

interest. Any potential conflicts of interest will be resolved in accordance 

with the terms of an ethics agreement that I have entered into with the 

Commission's ethics official and that has been provided to this Committee. 

I am not aware of any potential conflicts of interest. 

3. Describe any activity during the past 10 years in which you have engaged 

for the purpose of directly or indirectly influencing the passage, defeat, or 

modification of any legislation or affecting the administration and 

execution of law or public policy. Activities performed as an employee of 

the Federal government need not be listed. 

None 

4. Explain how you will resolve any potential conflict of interest, including any 

that may be disclosed by your responses to the above items. (Provide the 

Committee with two copies of any trust or other agreements.) 

In connection with the nomination process, I have consulted with the 

Office of Government Ethics and the U.S. International Trade 

Commission's designated ethics official to identify potential conflicts of 

interest. Any potential conflicts of interest will be resolved in accordance 

with the terms of an ethics agreement that I have entered into with the 

Commission's ethics official and that has been provided to this Committee. 

I am not aware of any potential conflicts of interest. 

5. Two copies of written opinions should be provided directly to the 

Committee by the designated agency ethics officer of the agency to which 

you have been nominated and by the Office of Government Ethics 

concerning potential conflicts of interest or any legal impediments to your 

serving in this position. 
36 


80697.010

D. LEGAL AND OTHER MATTERS 

1. Have you ever been the subject of a complaint or been investigated, 

disciplined, or otherwise cited for a breach of ethics for unprofessional 

conduct before any court, administrative agency, professional association, 

disciplinary committee, or other professional group? If so, provide details. 

No 

2. Have you ever been investigated, arrested, charged, or held by any Federal, 

State, or other law enforcement authority for a violation. of any Federal, 

State, county or municipal law, regulation, or ordinance, other than a minor 

traffic offense? If so, provide details. 

On May 9,1998, I received a ticket in the form of Virginia Uniform 

Summons #85541 to appear in General District Court (Traffic) for being in 

possession of an empty/open container which was on the floor of my car. 

This charge was dismissed and later vacated on May 4, 2001 by Judge 

Thomas Kelly in Arlington County District Court. (Documents attached). 

3. Have you ever been involved as a party in interest in any administrative 

agency proceeding or civil litigation? If so, provide details. 

During the time I was a hiring manager at USTR (2006), a job applicant 

filed an Equal Opportunity complaint against USTR alleging that he was 

not hired to administer the Generalized System of Preferences (GSP) 

Program because he was a minority. My involvement was to give a 

statement explaining my role in the hiring decision and that I was directed 

by my supervisor to hire from an internal applicant pool due to budget 

constraints. David Apol,Office of General Counsel, Office of the U.S. 

Trade Representative (202 395 9633) handled this proceeding for USTR. 

4. Have you ever been convicted (including pleas of guilty or nolo 

contendere) of any criminal violation other than a minor traffic offense? If 

so, provide details. 

Please see answer to questi6n #D. 2 above. 

5. Please advise the Committee of any additional information, favorable or 

unfavorable, which you feel should be considered in connection with your 

nomination. 

None 
37 


80697.011

E. TESTIFYING BEFORE CONGRESS 

1. If you are confirmed by the Senate, are you willing to appear and testify 

before any duly constituted committee of the Congress on such occasions 

as you may be reasonably requested to do so? 

Yes 

2. If you are confirmed by the Senate, are you willing to provide such 

information as is requested by such committees? 

Yes 
38 


80697.012

Senate Finance Committee Hearing 

May 8, 2012 

Questions for Meredith M. Broadbent, 

Nominee to the U.S. International Trade Commission 

Submitted by Chairman Baucus 

1) Ms. Broadbent, the Chinese Government has in recent years made it a practice to retaliate 

against legitimate u.s. trade remedy cases. For instance, the official Chinese press announced 

that in response to U.S. duties on Chinese tire imports, China was going to apply antidumping 

duties to U.s. chicken and auto imports. Needless to say, 1 am very concerned that China would 

arbitrarily retaliate against the legitimate use of U.s. trade laws. And I would note that the 

WTO ruled that the U.s. tariffs on imports of tires from China were appropriate. 

Are you concerned about reports of such Chinese retaliation? What should the U.s. government 

be doing about it? 

I am concerned that a member of the WTO, like China, might be imposing antidumping 

(AD) or countervailing (CVD) duties against U.S. imports in retaliation for a decision by 

the United States to impose safeguard, AD, or CVD duties on imports from China. 

Under the WTO Agreements, China may only impose AD and CVD duties when the 

facts and circumstances warrant and if China has complied fully with the appropriate 

WTO requirements. No provision ofthe AD or Subsidies Agreements allows China to 

impose AD or CVD duties on a country's imports as a means to retaliate against that 

member for imposing AD, CVD, or safeguard duties on its imports from China. 

A decision to seek to enforce U.S. rights under the WTO against China in such a case 

would be the responsibility and decision of the President and the USTR. Nonetheless, if 

the President and the USTR seek advice from the Commission, I would, along with my 

colleagues, make sure that the ITC and its staff undertake the analytical work and 

research necessary to support the efforts of the President and the USTR in enforcement 

actions under the WTO and other trade agreements. 
39 


80697.013

Senate Finance Committee Hearing 

May 8, 2012 

Questions for Meredith M. Broadbent, 

Nominee to the U.S. International Trade Commission 

Submitted by Senator Stabenow 

1) Ifwe want to get our economy back on track, we need to stand upfor American businesses 

and workers to help them compete globally. When a company decides to relocate production 

back to the United States and create new domestic jobs, the long-term success of this decision 

depends largely on the company's ability to defend itself against unfairly traded imports. An 

expansion of u.s. production should not adversely impact the Commission's determination for 

finding injury to a domestic industry, particularly when the u.s. Department of Commerce finds 

dumping of imported goods and subsidized foreign competition. How would you consider the 

impact of increased investment in U.S. production on determining whether a domestic industry is 

truly being injured? 

The Commission's analysis of injury involves a number of statutory factors, which relate 

to the volume of the subject imports, their pricing and their effect on domestic prices, and 

their impact on the condition of the industry. When considering the impact of subject 

imports on the condition of the industry, for example, the statute directs the Commission 

to consider the domestic industry's production levels and its capital investments in the 

United States, amongst a number of other factors. Under the statute, none of these factors 

is dispositive of the issues of injury or causation, which means that an industry's decision 

to relocate production facilities back in the United States would only be one of many 

economic factors which would need to be considered as part of the Commission's injury 

analysis. 
40 


80697.014

SUBMITTED BY SENATOR GRASS LEY 

MAX fjl\lICUS, MONlANA, CHAIRMAN 

JOliN I), HOCKUEll(R IV, \"'.:>1 \'ff141NIA CHUCK Glh\SSIf.V. tmVA 

KENl CONRAD, NORTH OAKOlA OflfUN G.IIA1CH, UTAH 

}Hf 8!N(lAMAN, Mw Mf:X!CO at YMPIA J. SNO'NE, /,lAINt: 

JOHN f. KEfiRY. MASSACHUSeHS JON K,(I, ARIZONA 

rRAI~c.tIf: t.lINCOLN, At1XA~/SAS JIM nUNI\l/,'G, KENWCKY 

flO:J'.'o'YOfN,ORHlON t,IIKt' CRAPO, IDAHO 

CHAFllfS r..sCHUM~H, NtWYOf<1{ PAlIIQllEftlS, K"~$AS 

D.UBIESfA£lf.NOW, !,\1C.HWAtJ JOHN ENSIGN, Nf.VADIt 

MAI{IAt~AN1W"-'{l, WASHINGTON M1CH/lU 6. EN:.'., WYOMiNG 

alll NHSO:-J,flORIDA JOttNCOftNYN, n,XAS R()ilillT MWf.NOtY, NF.W,J~RSf.Y 

wm,lAS R ('AIl{'f.H, m:lAWAfli:: 

n\JSSHt Sl)lllVAN, srM~1)lRfC10R 

KOLAN PAV,S, RFPUfHJCAH STAfF O:RECTCR AND CfllloF COUNSEL 

The Honorable Timothy Geithner 

Secretary of the Treasury 

Department ofthe Treasury 

1500 Pennsylvania Avenue NW 

Washington, DC 20220 

Dear Secretary Geithner: 

tinitcd ~tatcs ~cnatc COMMITTEE ON FINANCE 

WASHINGTON, DC 20510-6200 

June 21, 2010 

It has been almost three and a half years since the whistleblower program revisions I 

authored were enacted in the Extension of Tax Relief Act of2006, r shepherded this legislation 

through despite strong opposition from some at the Treasury and the Inte1'l1al Revenue Service 

(IRS). Last year the Treasury Inspector General for Tax Administration (TIGTA) published a 

report (Report No. 2009-30-114) titled "Deficiencies Exist in the Conlrol and Timely Resolulion 

ofWhislleblower Claims." This report highlights how successful the revisions have been in 

encouraging whistleblowers to come forward. According to this rep0l1, almost 2,000 claims had 

been filed in calendar years 2007 and 2008 alleging over $70 billion of under reported income. 

However, 1 am wOl1'ied that the naysayers at Treasury and the IRS who opposed the 

provision in 2006 are effectively undermining the whistleblower statute. Soon after the bill was 

signed into law in 2006, I wrote to then-Treasury Secretary Paulson requesting to be apprised of 

guidance issued by the Internal Revenue Service (IRS) and the Department of the Treasury 

regarding the program. I am enclosing a copy of that letter and then- IRS Commissioner 

Everson's response. 

Given this agreement, I am writing to express Illy concern and disappointment about tlle 

lack of notice regarding the changes to the whistleblower provisions in the Intel'llal Revenue 

Manual (IRM) dated June 18, 20 10, as posted on IRS.gov. I am particularly fmstrated that tills 

guidance was issued while my staff's requests dmillg the past few weeks for the most recent 

annual whistleblower report to Congress have gone unanswered, 

I was recently provided a copy of a PowerPoint presentation that the Director of the IRS 

Whistleblower Office used at the Apl'i127, 2010, conference hosted by Taxpayers Against Fraud 

titled, "IRS Whistleblower Boot Camp." Based upon this presentation, I gather that these IRM 

changes have been contemplated for some time. Yet, neither I nor my staff, were apprised ofthe 

IRM changes nor does it appeal' that public comment was sought. 
41 


80697.015

After reviewing the new IRM provisions, I have serious concems that the new IRM 

provisions will deter whistleblowers from filing claims. I ask that implementation of the new 

IRM provisions be delayed effective immediately until the following questions are answered and 

documents provided. 

1) Provide copies of all Office of Chief Counsel (OCC) memoranda, advice and 

correspondence regarding these changes. 

2) Provide copies of minutes, Ot' other documentation, of meetings and discussions, both 

internal and external, regarding the IRM changes. 

3) Explain why the IRM changes were not released for public comment. 

In addition to the IRS posting the new IRM provisions without public comment, there are 

many substantive concel'l1s within the IRM. For example, the new definition of "collected 

proceeds" is pat1icularly troubling because it seems to limit the payment of awards to 

whistleblowers only in those instances where the IRS receives cash payment from a taxpayer. 

An IRS spokesperson, in response to an inqniry from the media, stated that the IRS is bound by 

the written statute. Yet, this was never raised with me 01' my staff. The denial ofa 

whistleblower award where the whistleblower's information leads to the denial of a claim for 

refund seems to create a perverse incentive for the whistleblower to wait until the IRS has paid 

an improper refund. In addition, the IRM says that satisfaction of a taxpayer's liabilities by 

reducing a credit balance is not within the scope of collected proceeds so the whistleblower 

would receive no award. 

4) For all years for which data is available, provide the number of whistle blower claims 

that were denied because the IRS action, resulting from whistleblowel' information, 

did not result in actual cash collected. 

5) IfwhistIeblower awards were previously awarded for refund claims or other action 

resulting in elimination of the liability without payment, explain why this policy was 

changed now. 

6) Ifwhistleblower awards were previously awarded for tax liabilities that were satisfied 

from a taxpayer's credit balance, or other action resulting in elimination of the 

liability without payment, explain why this policy was changed now. 

7) Compare the standard for collected proceeds to the basis for awards under the False 

Claims Act. 

8) Provide documentation of discussions and decisions, including memoranda, advice 

and correspondence regarding these changes. 

Further, section 25.2.2.g of the new IRM related to the administrative proceeding for 

whistleblower rewards contains a troubling provision requiring a whistleblower to sign a 

confidentiality agreement before receiving access to the preliminary award report package. I 

have long been an advocate for open and transparent gover1l1l1ent and have questioned the use of 

contidentiality agreements because of the potential for misuse and abuse of these agreements. 

As a result, the individual would have no recourse to publicly question the award detel'mination 

made by the IRS. Absent proper internal controls, this requirement of a confidentiality 

agreement has the potential to hush whistleblowers and provides the IRS a strong tool to force 
42 


80697.016

whistleblowers to accept a reduced award, This confidentiality appears to be in direct 

contradiction to the spirit and intent of the whistleblower provision I authored, The goal ofthls 

law was to bring information on tax fraud and tax cheats IN from the cold, not to bring it into an 

agency to be placed under lock and key, 

9) What is the purpose of the confidentiality provision required in section 25.2.2.8 of the 

newIRM? 

10) Provide the names of all individuals at the IRS that proposed and drafted this 

provision, 

11) Provide copies of all memorandums, legal research, and legal analysis related to this 

provision. 

12) Provide a detailed explanation outlining the IRS's past, present, and proposed use of 

confidentiality agreements in whistleblower cases. This response should include a list 

of all whistleblower cases where the IRS required the whistleblower to sign a 

confidentiality agreement, what the terms of that confidentiality agreement were, and 

how often whlstleblowers have objected to signing that confidentiidity agreement. 

13) In the opinion of the IRS, would the confidentiality agreement preclude a 

whistleblower fi'om providing information about the preliminary award package to 

Congress? 

14) Would the IRS consider it a "negative factor in determining the specific award 

percentage" if a whistleblower provided information on the preliminary award 

package to Congress, even if they signed the confidentiality agreement? 

I am also troubled by the facts laid forth in the attached letter that was forwarded to my 

office in March of this year. The IRM clearly states that the authority to determine the amount 

of whistle blower awards rests with the Director of the IRS Whistleblower Office. Yet, the letter 

indicates that the then Deputy Conunissionel' for Services and Enforcement ovenuled the 

decisions of both the whistleblower Director and ad hoc committee comprised of other senior 

executives with respect to the amount to be awarded to Mr. XYZ. 

I have learned from my almost tlu'ee decades of experience with whistleblowers that 

government agencies will often seek to undermine or undercut the whistleblower. Prior to the 

2006 changes, there was a culture of hostility towards and intimidation ofwhlstleblowers at the 

IRS. That is why I created an independent Whistleblower Office at the IRS and delegated 

authority for reviewing claims and determining awards with that office. The actions of the then 

Deputy Commissioner for Services and Enforcement, and the existence of the ad hoc committee, 

arc contrary to law. 

(5) Explain how and why the Deputy Commissioner for Services and Enforcement was 

permitted to override both the Director of the IRS Whistleblower Office and the ad 

hoc Governance Board. 

16) Provide copies of any memos and reports prepared by the Whistleblower Office 

regarding Mr. XYZ's claim. 
43 


80697.017

17) Indicate when the ad hoc committee was created, how many claims it has reviewed 

and the result of each review. 

18) Provide documentation for any claim where the ad hoc committee overruled the 

Director of the Whistleblower Office. 

The statement made by the Director of the IRS Whistleblowel' Office, in his May 

interview with The Washington Post, that the IRS has yet to issue an award under the 7623(b) of 

the Internal Revenue Code, is also worrisome .. The TIGTA report, referenced above, revealed 

that as of March 30, 2009, 700 of 1 ,973 claims, over 35 percent of the claims processed by the 

Whistleblowel' office, were still awaiting action. The Report also noted that only 69 of the 1,973 

claims, around 3 percent, had been sent to an examination office for action by an agent. See 

Report, Figure I, page 3. 

r understand the Fiscal Year 2009 Whistleblower Office Alillual Report to Congress has 

been provided to Treasury for review and is expected to be released shortly. Given that no 

awards have been issued under the new law, when this report is provided to Congress, please 

also provide the following. 

19) Provide an update of the information contained in the chart at Figure I of the 2009 

TIGTA Report (attached). 

20) Provide the highest, lowest and average number of days whistleblowel' claims sit in 

each of the offices listed in that chart. 

21) Indicate whether any whistleblower claims have been 01' will be denied because of the 

statute of limitations and explain what IRS is doing to prevent the statute of 

limitations interfering with recovery of taxpayer dollars. 

Finally, I would like to remind you that I asked for a response to my June 8, 2010, letter 

(attached) regarding the IRS's use of whistleblower information in the UBS case. I ask that you 

immediately contact me or my staff regarding that response as well as my request above to delay 

the effective date of the IRM changes released June 18. 

The Treasury and IRS moved very quickly to appoint the Director of the Whistleblower 

Office - within two months of when the statute was enacted. Despite this early commitment to 

the Whistleblower Office, I am very worried that this office is not getting the support it needs 

and that the program is being undermined by the old guard who would like to see it fail. The 

potential success of the whistleblower program is indisputable. The question is whether the 

program will thrive and succeed, or, because of the lack of leadership at the highest levels at 

Treasury and the IRS, if it will fail. Failure, of course, comes at the expense of the honest 

taxpayer. 
44 


80697.018

I look forward to your prompt attention to this matter, including a quick decision on my 

request to delay implementation of the IRM changes until my questions have been answered. 

Further, I also request that your staff provide a briefing to my staff as soon as possible to discuss 

your responses and many other concerns and reservations about the IRM that were not raised in 

this letter that I continue to have. Please contact me or my staff at (202) 224-4515 with any 

questions. 

Sincerely, 

~,)J~ Ranking Member c1' 

Enclosures 

cc: The Honorable Douglas H. Shulman 

The Honorable William J. Wilkins 
45 


80697.019

Rl:P\Y'Tn: 

LJ 135 HART St;NAn: Ol'flCE BUn..WN(, 

WA",HINf;T(']N, DC 20510-1501 

{202) 224·-3.J44 (t·ma;l: grQSstey.senate,yov;;.:CH\taet.Cfm 

LJ 721 FEO€RAI. 9UILOINQ 

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(3191363-6832 

tinitrd ~tat£s ~rnQt£ CHARLES E. GRASS LEY 

WASHINGTON, DC 20511}-1501 

September 13, 2011 

The Honorable Douglas L. Shulman 

Commissioner 

Internal Revenue Service 

1111 Constitution Avenue NW 

Washington, DC 20224 

Dear Commissioner Shulman: 

Aff'IV Tl,)' 

L 103 FEDERAL COURTHOUSE 8UI\..DINCl 

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p12f 233 .1800 

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OAVENPOfIT. 'A 52!101-T419 

(563) 322"-4331 

, 1 ~7 FmF.RAt 8l!l\.OIN('; 

8 SouTH 5-r,.. STREET 

CO\INQt SIl.JFF~, IA 51501-4204 

{712)322-7103 

I am writing to express my concerns about several issues raised by the report on the 

whistleblower program released last week by the Government Accountability Office (GAO). I 

also continue to have concerns about the Internal Revenue Manual (IRM) provisions regarding 

whistleblower claims. 

Before I address my concerns, I want to first express my appreciation for the progress in 

managing whistleblower claims since the 2006 refomlS I authored were enacted. I am thankful 

that leadership at the Internal Revenue Service (IRS) is making good faith efforts to embrace 

whistleblowers instead of reverting to the old culture of treating them like skunks at a picnic. 

These actions stand in stark contrast to the sky-is-falling attitude initially taken by the leaders at 

the Securities and Exchange Commission (SEC) in implementing the whistleblower provisions 

that were included in the Dodd-Frank legislation. Those provisions, like the IRS whistleblower 

provisions, are based on the False Claims Act (PCA) updates, which I also authored. I hope that 

the IRS will take an active role, along with the Department of Justice (DOJ), in advising the SEC 

on its implementation of the new SEC whistleblower rules. I believe taxpayers will benefit from 

having a strong, coordinated, multi-agency approach to combating fraud and protecting taxpayer 

dollars. 

While the IRS has made great progress, there is still room for improvement. The GAO 

report makes clear that the whistleblower program has been successful in providing good 

information to the IRS about big-dollar tax cheating. The data shows that IRS has received tips 

on more than 9,500 taxpayers from 1,400 whistleblowers in just five years while only rejecting 

1,300 claims so far during that time. I remain concerned, however, about the time needed to 

process these claims and whether the long timeframes, combined with a lack of communication 

with whistleblowers, discourages current and future whistleblowers, As you know, 

whistleblowers often come forward at great risk, both personal and financial. With the nation 

facing massive deficits, both Department of Treasury (freasury) and IRS officials need to do all 

they can to ensure the success of what's clearly one of the best tools available to go after tax 

fraud, 

The next whistleblower report to Congress is due for the flSCaI year (PY) 2011, which 

ends September 30, 2011 - just three weeks away. The GAO makes excellent recommendations 

RANKING MEMBER, 

JUDICIARY 

Committee Assignments: 

AGRICULTURE 

BUDGET 

FINANCE 

CO-CHAIRMAN, 

INTERNATIONAL NARCOTICS CONTROL CAUCUS 
46 


80697.020

for the IRS to consider implementing for this annual report. I am disappointed that the IRS has 

indicated that adopting these changes is contingent upon limited resources. We know that just 

one tax whistleblower netted the government $20 million. This recovery alone indicates that the 

money collected from whistleblower tips should more than pay for improvements needed to 

effectively manage whistleblower claims. I understand that recoveries are not dedicated to the 

IRS. However, the Treasury Secretary and IRS leadership have the authority to allocate IRS 

resources as needed. Improved monitoring of ilie program and tracking of claims will comfort 

current and future whistleblowers, which would, in turn, ensure the continued receipt of valuable 

whistleblower claims. As a result, I ask that you consider the benefits of making these changes a 

priority. 

I am also very concerned about the timeframe for addressing whistleblower claims. The 

Treasury Inspector General for Tax Administration (TIGTA) noted in its 2009 report iliat ilie 

effectiveness of the IRS Whistleblower Program could be diminished without an effective 

control over, and timely processing of. claims. In my June 21, 2010. letter to Secretary Geithner, 

I asked for an update ofilie infonnation contained in Figure 1 ofilie 2009 TIGTA report. I did 

not receive this in your November, 2010, response to me. I did not pursue it at the time because 

the GAO had started work on its report in September, 2010. The GAOs report contains ilie most 

comprehensive and infonnative data on the status of whistle blower claims. As a result, I ask that 

the FY2011 annuai whistleblower report to Congress. and all subsequent reports, FY20 11, 

contain the Tables 3 and 4 from the GAO report. 

It is not clear from the GAO report how much time is lost because of consultations with, 

or delays in response, from the office of Chief Counsel. Providing independent counsel to 

TIGT A and ilie Taxpayer Advocate has been beneficial to ensuring the success of those offices 

As a result, please consider reassigning an attorney from another IRS office or the Office of 

Chief Counsel to the Whistleblower Office to help speed the resolution of anY legal questions 

that arise. 

The GAO report indicates that each operating division has different time guidelines for 

subject matter expert (SME) review. I am very concerned iliat Table 3 of the report indicates 

that there are over 1,000 claims listed in 8ME review through FY2010, which ended September 

30,2010, and almost 200 of those were received before September 30, 2009. This indicates 

years of languishing in a review to determine whether a taxpayer should be even audited. The 

numbers in audit for these years are more troubling. According to Table 3 of the report there are 

almost 500 cases from fiscal year 2007 in the examination stage and almost 300 from fiscal year 

2008. Given that FY2007 ended September 30, 2007, we're coming up on over four years in the 

audit phase. This is very worrisome. Please explain why these Cases are still open, what tax 

years they represent and how many of these claims will wind up rejected for no assessment 

because of the expiration of the statute oflimitations (SOL). 

Please note that, in my June 21,2010, letter I asked whether the SOL was an issue for 

pending whistleblower claims. The IRS's November 26, 2010, response states the following: 
47 


80697.021

"In some cases, the applicable limitations periods have expired before the information is 

submitted and the IRS is unable to act. Generally, in cases where statute of limitations 

dates are imminent, the IRS has little practical opportunity to act; however, some actions 

may be possible on an expedited basis. In some cases, the IRS may take an issue raised 

by the whistleblower regarding a closed year and consider it for a year that is still open. 

The IRS bas taken steps to reduce the time required for administrative processing of 

section 7623 submissions, and continues to explore additional ways to reduce this time." 

When I received the November 26, 2010, response, I was not aware of the number of 

cases outstanding for previous years. The IRS response also does not indicate bow many 

whistleblower claims provide information about substantial errors that may result in an extended 

SOL or whether the IRS deems that the SOL may not apply at all because of fraud 

considerations. As a result, I ask that the FY2011 annual whistleblower report to Congress.. and 

all subsequent r!WOrts, FY2011 contain the following information: 

- the average time per step listed in Table 2 of the report; 

- the number of cases rejected because of the expiration of the SOL; 

- the number of cases for which the extended SOL applies; 

- the number of SOL extensions requested by the IRS and the number of such requests 

denied by taxpayers; and, 

- the number of cases for which the SOL may not apply. 

From my understanding of various IRS compliance initiatives. it seems that audits tend to 

move more quickly wben IRS management prioritizes an issue. I understand that the IRS has 

decided that audits from whistleblower claims should not be prioritized over other audits. Given 

the large dollar claims the IRS is receiving as a result of the 2006 law changes and the problems 

presented by the expiration of the SOL for these claims, I ask for this decision to be reconsidered 

and an explanation for this policy. Please also inform me what steps have been. or will be taken, 

to educate IRS employees about the importance of the whistieblower program. whether and bow 

employees that review whistleblowers claims are considered and rewarded for working with 

whistleblowers as part of the annual employee performance evaluation process. 

The GAO report highlights that the whistleblower office does not have a process to check 

in with the operating divisions concerning the time in each step listed in Table 2. I am 

concerned that the Wbistleblower Office is viewed as a delivery service - responsible only for 

delivering whistleblower claims to IRS offices. 

Tbe Wbistleblower Office was intended to be an advocate for the whistleblower and 

should be raising the alarm if meritorious whistleblower claims are being ignored or overlooked 

by an IRS office. This larger role - of ensuring that good whistleblower claims receive 

appropriate attention - is one of the reasons why the Whistleblower Office consults as an equal 

with other IRS offices. 

The independence of the Wbistleblower Office was made clear in the statute because of 

the historic treatment of whistleblowers by the IRS, which was similar to that at other 
48 


80697.022

government agencies. The IRS previously often had little to no understanding, sympathy or 

interest in whistleblowers. As is well known, the IRS whlstleblower program was severely 

underutilized and extremely ineffective prior to the 2006 reform. Whistleblower claims were 

lost, ignored, relegated to the backroom or forgotten by the responsible divisions at the IRS. On 

those rare occasions when claims were considered, the IRS would form a committee made up of 

senior IRS managers to review these whistleblower cases and consider possible awards. In 

practice this intemal committee was the place where whistleblower claims went to die. That is 

why the 2006 statute gave sole authority to the Whistleblower Office to decide awards for 

whistleblowers. The Congress recognized that the independence of the Whistleblower Office is 

vital to the success of the program. 

The director of the Whistleblower Office reports directly to the IRS Commissioner, has 

the authority to contract or establish working relationships with whlstleblowers and their 

advisors, and, most importantly, has the authority to either investigate whlstleblower claims itself 

or assign them to the appropriate IRS office. There should be no doubt the Whistleblower Office 

has the authority to investigate whlstleblower claims even if those claims fall within the 

jurisdiction of another division at the IRS. 

The requirement of consultation and coordination is to ensure that the Whistleblower 

Office is not isolated; that all IRS offices benefit from information provided by whlstleblowers 

and that the Whistleblower Office benefits from the expertise of all the IRS offices. It is likely 

that an operating division may be more efficient at conducting the actual examination. However, 

it is the responsibility of the Director of the Whistleblower Office to ensure that each claim is 

being decided on the merits. For the whistleblower program to succeed, whistleblowers need to 

have confidence that the IRS Whistleblower Office will ensure that a well-grounded claim will 

receive objective and timely consideration. 

Please inform me what stej)s you will take to ensure that the Whistleblower Office is 

operating under its full authority, including making clear to mllDagers the role of the Office. 

Plesse also explain how conflicts between the Whistleblower Office and other IRS offices are 

resolved. If they do not already exist, I ask that you develop procedures outlining the when. 

what, why, and how for investigations conducted by the Whistleblower Office. For example, 

consider sending back to the Whistleblower Office those claims that are languishing in one of the 

steps identified in Table 2, such as those FY2007 claims still in SME review. 

I also ask that the FY2011 annual whlstleblower report to Congress. and all subsequent 

reports, contain the fullowing information: 

the number of investigations conducted directly by the Whistleblower Office; and, 

- the number of claims in which there is a disagreement between the Whistleblower 

Office and other IRS offices. 

The GAO report indicates that communications with whlstleblowers regarding the status 

of their claims remains an issue. As I stated above, the IRS should be very concerned that 

current and future whistleblowers will become disheartened by the snail's pace for processing 

claims. The IRS should develop communication guidelines that fit within the privacy restrictions 

to communicate with whistleblowers at every step. At each of these stages the whistleblower 
49 


80697.023

should be given an estimate of the time to the next step and also provided periodic updates as 

appropriate. Such basic information will do much to assure whistleblowers of the IRS's 

commitment to processing their claim. At a minimum. the Whistleblower Office should widely 

disseminate the information in Table 2 of the GAO reJlOrt with average expected time per step. 

Further, every effort should be made to provide whistleblowers who have submitted 

substantive claims an opportunity to meet and discuss with IRS officials responsible about the 

claim and its problems and merits. I am very disappointed to learn from the GAO report that the 

IRS has not used the authority provided to it under Internal Revenue Code (IRC) section 61 03(n) 

to enter into contracts when processing whistleblower claims. 

When first considering updates to the IRS whistleblower statute, I had drafted an 

amendment to IRC section 6103 to permit communications with a whistleblower. However, my 

Finance Committee staff' was informed by the IRS directly that such statutory changes were 

unnecessary because the IRS would use its contract authority under 6103 to communicate with 

whistleblowers. The IRS has failed to date to meet its commitment to me. This is especially 

troubling after learning about the number of claims outstanding from FY201 0 and before. 

It is the utilization of outside attorneys and advisors of whistleblowers that has been a key 

to the success of Department of Justice with FCA claims. The Committee report language for 

the updated IRS wbistleblower law was intended to replicate the success of the FCA. 

Sec. 406(b) of the statue reads as follows: 

"(b) Whistleblower office. 

"(C) in its sole discretion. may ask for additional assistance from such individual or any 

legal representative of such individual. 

"(2) Request for assistance. The guidance "issued under paragraph (1) shall specify that 

any assistance requested under paragraph (1)(C) shall be under the direction and control 

of the Whistleblower Office or the office assigned to investigate the matter under 

paragraph (1)(A). No individual or legal representative whose assistance is so requested 

may by reason of such request represent himself or herself as an employee of the Federal 

Govemment." 

The Committee Report placed additional emphasis on the IRS benefitting from outside 

assistance: 

"Under the provision, the Whistleblower Office may seek assistance from the individual 

providing information or from his or her legal representative, and may reimburse the 

costs incurred by any legal representative out of the amount of the reward. To the extent 

the disclosure of returns or return information is required to render such assistance, the 

disclosure must be pursuant to an IRS tax administration contract." 
50 


80697.024

The IRM section 25.2.2.7(10) assumes a very narrow view of permissible assistance from 

whistleblowers and their advisors: 

"The law requires the WhistJeblower Office to analyze 7623(b} claims, and authorizes the 

Whistleblower Office to request assistance from the whistleblower or their counsel. In 

most cases, the IRS should be able to receive infonnation from a whistleblower, conduct 

a debriefing to ensure the infonnation provided is fully understood and that the IRS has 

all relevant infonnation the whistleblower can offer, and then proceed with an 

investigation or examination without further assistance from the whistleblower. In some 

cases, there may be a need to pose additional questions to the whistleblower." 

The intent of the law, contrary to the position taken in the IRM, was not to simply ensure 

that all relevant infonnation is provided by the whistleblower. Rather, the statute envisions 

having whistleblowers and their advisors helping to pull the oars in the examination and 

investigation - as is the successful practice for years with the FCA. For example, the IRS could 

bring in experts on a difficult valuation question. 

The IRS should be using all tools available to it to speed up the processing of 

whistleblower claims. Such dialogue will also improve the qnality of infonnation that the IRS 

receives from whistleblowers and their attorneys. As a result. in order to speed up the processing 

of whistle blower claims, I ask you to reconsider the IRS's position on when to seek outside 

assistance. 

Just as I am concerned that the IRS Whistleblower Office makes its award decisions 

independently and without interference from IRS offices, I am similarly concerned that other 

government agencies not be allowed to interfere with the decisions of the Whistleblower Office. 

Please explain the procedures for documenting contacts with other government agencies related 

to specific whistJeblower claims. 

Table 3 of the GAO report highlights another very troubling data set - the number of 

claims for FY2007 through FY2009 sitting at Whistleblower Office in final review, award 

evaluation or snspended status. I would expect that the SOL for taxpayers to request refunds has 

expired for many if not all of these. It is important that the Whistleblower Office lead by 

example and quickly dispose of claims. Please explain why there are so many cases in these 

statuses for these years. the process for these cases including the expected timeline for making a 

determination and a final award and the expected timeline to make decisions for these cases in 

~ In addition, please provide the following information: 

- the number of claims for which IRS has received payment from the taxpayer and for 

which the SOL for a taxpayer to file a refund request has expired; and, 

the number of weeks, for each case, that a claim case has been awaiting determination 

by the IRS Wbistleblower Office and whether the whistleblower has been notified of 

an award determination. 

I ask that you provide me a monthly update until these claims are closed. I also ask that 

you inform me of the coIllllllIDication that IRS provides to whistleblowers and their advisors 

during this time, particularly when the SOL for refund filings has expired. 
51 


80697.025

On a similar note, the IRS should make it a priority to have a fmal detennination on any 

issues brought forward by a whistleblower. For example, if a whistleblower has brought forward 

infonnation on issue X and it is subject to exam and resolved - the matter should be SUbject to a 

closing agreement and payment made to the whistleblower. The IRS already has a fonn for this 

Fonn 906, Closing Agreement on Final Determination Covering Specific Matters, or a Fonn 

870-AD in Appeals. Currently, it appears whistleblowers must wait for all issues related to a 

taxpayer to be resolved and all rights of appeal exhausted before receiving a payment, even if a 

closing agreement is an effect. Please explain why. when a closing agreement is in effect. it is 

still necessary for the SOL on taxpayer refund requests to expire before a whistleblower award is 

paid. 

In addition to concerns raised by the GAO report, I wanted to take this opportunity to 

express my concerns about other provisions in the IRM. In my June 21, 2010, letter, I expressed 

concerns about the IRS's decision, through the IRM, to limit the type of transactions eligible for 

whistleblower awards. I appreciate the IRS's decision to reconsider these provisions and to issue 

regulations in this area. 

I understand a number of considered comments about the proposed regulations have been 

submitted by practitioners and organizations. These comments raise important points about what 

payments and fines should be encompassed by the awards that Treasury needs to consider given 

its inappropriately narrow reading of the legislation. It is important for whistleblower confidence 

- and tax administration - that whistleblowers be rewarded for providing information about 

income being reduced by net operating losses (NOLs). I understand that this is a difficult issue 

as IRS does not collect payments of tax in such cases and so a whistleblower award likely could 

not be made until a taxpayer's NOLs are fully utilized and pays taxes. Please provide an update 

on the status of these regulatiQns. 

Separately, I am in receipt of the letter from several advocacy organizations, a copy of 

which is attached. I ask that you give serious consideration to the points raised in their letter. As 

they note, there is a long and established history regarding the meaning of "planned and 

initiated." The IRS should consider this history and practice at other federal agencies and not 

attempt to create its own policy that could conflict with this longstanding practice. 

On a related matter, in IRM section 25.2.2.9.2.13.C, the IRS attempts to categorize a 

"whistleblower's role as a planner and initiator as significant, moderate, or minimal." As stated 

in the letter from the three organizations, limitations for planners and initiators was intended to 

apply to the chief architect or the chief wrongdoer. I ask that you take into consideration the 

established law in this area with re§pect to FCA claims. 

Finally,l wanted to express my disappointment with the content of the annual 

whistleblower report to Congress and with the extreme delays in issuing the report. I have 

provided my comments on the content above. In addition, given the minimal content of the 

reports to date, there is no reason for the report to be issued several months after the close of the 

fiscal year. I ask that the report be provided to Congress by November 30 each year - 60 days 

from the end of the fiscal year should be more than sufficient to provide the requested data. 
52 


80697.026

Separately, the discussion of "Legislative and Administrative Issues" in the latest report 

is vague and unclear. Keeping in mind the independence of the Whistleblower Office, ~ 

the FY2011 whistleblower report. and all subsequent am\ual reports, include the Director of the 

Whistleblower Office's recommendations for legislative and administrative fixes. 

The GAO has done a good service by providing a road map for how the IRS can improve 

the IRS whistleblower program and go after big-dollar tax cheating. Now the challenge is for the 

IRS and Treasury to make the changes needed to provide assurance to existing and future 

whistleblowers so they're not discouraged by the time needed to process their claims or by the 

issuance of rules that contradict well-established rules for compensation of non-tax 

whistleblowers. The vast majority of taxpayers are honest. They're the ones who benefit from a 

successful whistleblower program. More tax compliance means more fairness for hardworking 

families who pay what they owe. 

I appreciate your prompt response to the questions raised above. If you have any 

questions, please contact my staff at (202) 224-3744. 

cc: The Honorable Max Baucus 

The Honorable Orrin Hatch 

The Honorable Dave Camp 

The Honorable Sander Levin 

Sincerely, 

Ranking 

~M Member 
53 


80697.027

..... ~,... 0-RI!\.!rTos. __ _ 

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April.;w. 2012 

_ 11._,_' 

1J1l11_"""'_ ---- -... 1_-- -.'*'-~ .. 0"'-- =:::-''''T--.- rmJm-ms 

The Hononib!e Timothy F. Oeithner 

Secre~ 

The Honorable Douglas L, Shulman 

Cammissioner 

U.S. pepa:rttnent of the Treasuty 

1500 Pennsylvania Avenue NW 

Washington, DC 20220 

Internal Revenue Service 

1111 Constitution Avenue NW 

Wash.ington. DC 20224 

Dear Secretary Oeithner and Collllllissioner Shulman: 

It has been seven IllDnths since J last wrote to Commissioner Shulman regarding the 

implementation of the wbistleblower prognun at the Internal Revenue Service (IRS). While I 

was encouraged by the IRS's plodding but, steady progress, lam now writing to convey my 

extreme disappointment in the management of U1e pwgram. It was brought to my attention that 

the Director of the IRS Wbistleblower program is cummtly participating in tbeOffshore Alert 

Confereru:o (Conference) at the Ritz-CaritGn in Miami Beacll. 

It is not clear to me how:his attentia!'l.ce at the Conference fUrthers the administration of 

the IRS whistleblower program. The panel in wbich he is participating is titled "Emicing the 

Top Echelon: How the IRS, SEC and CFTC Attract High-Level Wbist1eblowers". Yet, the 

conference itself does not seem to attract wbist1eblowers. Under the "Who Attends" section of 

the conference's website, the foUowing are listed: Global Financial Blqlerts and teadw.g 

OftShore Finns and under "WbG Should Attend" the following are listed; Off'sbore Providers, 

OffshOre Clients, and Investigators". 

The Whlstleblower Director is not an.investigator. In fact. IRS Deputy Commissioner 

Miller, in his response to 8 question about the Director's ability to pursue investigations in my 

Septeml>er 13. 2011, letter to Commissioner Shulman, states the following: "At this time, the 

Whistleblower Office does not use this authority as the basis for independently conducting audits 

and investigations of taxpayers. T.bis decision. i$ based on our evaluation of Ii number of factors 

and is driven by efficiency, cansi.stenQy and quality concerns .discussed. below". Both my letter 

to Commissioner Shulman and Deputy Commissioner Miller's response are attached. 

Separately. the Conference agenda lists at least two other IRS employees as "featured 

speakers", one a special advisorto the Offshore Compliance Initiativ.f; (OCl) and another who is 

a Special Trial Attoroeyto theOCI. The IRS'sOJlshore Volun~ DiscloS1.ll1llnitiative (OVDl) 

and its corresponding successes; with combating offshore tax evasion are the result of 

whistleblowers co:rni.ng forward following the improved IRS wbistleblower incettlives I authored 

RANKING MEMBER, 

JUDICIARY 

Committee Assignments: 

AGRICULTURE 

BUDGET 

FINANCE 

Co-CHAJRMAN. 

INTERNATIONAL NARCOTICS 

CONTROL CAUCUS 
54 


80697.028

in 2006. Assuming that these two individuals are involved with the OVDr program, I 

would expect that they could speak on behalf of the lRS Whistleblower Office. 

However, I am skeptical that it is even appropriate for these two individuals to attend. 

There is certainly DO reason for nineteen IRS employees to attend the conference as was 

reported to me just this morning. Again, the target audience for the conference is not 

whistleblowers, and, in a challenging fiscal time, this is not the best use ofIRS resources. As a 

result, I ask that you provide the foUowing information. 

• Provide a detailed list, by position title, of each lRS and lRS Chief Counsel employee 

that attended the Conference. 

• For each, explain who authorized attendance for this travel and what the justification 

was for tbeir attendance. 

• Provide an itemized list of expenses for each employee that separately lists the 

following costs: conference fees, travel, accommodations, per diem expenses, and any 

other expenses. 

Moreover, as I indicated in my September, 2011, letter, data from the lRS's own annual 

whistleblower report to Congress, as well as reports from the Government Accountability Office 

(GAO), make clear that the lRS does not have a problem attracting whistleblowers. The lRS's 

current problem is processing and compensating whistleblowers in a timely manner. 

Since last writing to Commissioner Shulman, I have received even more correspondence 

from whistleblowers whose claims are not progressing at the IRS. Such correspondence, along 

with recent cases filed in the Tax Court and corresponding press coverage, indicate that my worst 

fears are coming true. The lack of progress is demoralizing whistleblowers so that I am now 

concerned that whistleblowers will stop coming forward. In my September, 2011, letter, I asked 

for monthly updates about the number of claims sitting in the Whistleblower Office for review. 

The IRS has completely ignored this reguest and I now ask that you provide an update 

immediately. 

It is my understanding that the Whistleblower Office is now the source of significant 

delays in issuing awards. The lRS Whistleblower Director is supposed to be an advocate for 

whistleblowers - not those who are promoting offshore tax evasion. The Whistleblower 

Director's time would be better served by shepherding existing claims through the IRS 

bureaucracy. As a result, I request a detailed list of the Wbistleblower Director's travel for 

the past three years, including iustifications and exoense summaries. Also. I request that 

the Whistleblower Director's travel be curtailed immediate!,y. with Commissioner Shulman 

personally approving travel. if appropriate. 

Similarly, I remain concerned that IRS Senior Management, through creation of the 

Whistleblower Executive Board in July, 2008, may also now be a significant source of delay. I 

first inquired about this board in my letter to Secretary Geithner dated June 21, 2010. ~ain, 

Deputy Commissioner Miller responded on bebalf of the Secretary and this was his response: 
55 


80697.029

"The Whistleblower Executive Board was created in July 2008 and meets periodically to 

address matters pertinent to administration of the Whistleblower Program within the IRS. 

The Board has not yet reviewed an award claim recommendation or determination." 

The IRS Internal Revenue Manual (IRM), section 25.2.2.8.2 states the following: "Prior 

to communicating the preliminary recommendation to the Whistleblower, the Director will share 

the preliminary recommendation with the Whistleblower Executive Board for concurrence." 

However, it is not clear how often this board meets. Provide a detailed list of aU such 

meetings for the past three years and indicate when the next one will occur. 

In my September, 2011, letter to Commissioner Shulman, I requested that the IRS 

implement the GAO's recommendations as well as a few others before the IRS submitted its next 

wbistlebJower report to Congress. The IRS response to the GAO indicated that IRS did not have 

the resources to implement those recommendations. As I stated in my letter, the money 

recovered from whistleblowers should more than cover the costs of implementing those 

recommendations. 

In addition, Deputy Commissioner Miller repeatedly stated in his response that there was 

not enough time to implement those recommendations before that report was iSSUed. I note that 

seven months after the end of the fiscal year, the IRS still has not provided the fiscal year 20 II 

whistleblower report to Congress. Given the delay in issuing this report, I expect that the 

recommendations have been adopted. As I stated in my last letter, there is no reason why this 

report should not be provided to Congress by November 301h each year. If the Whlstleblower 

Office is doing its job of tracking claims, it should not take more than 60 days to prepare the 

report. 

With respect to another area of concern, the two year refund statute of limitations, the 

Deputy Commissioner responded that there are cases "in which awards can be paid before the 

running of the two year refund statute. The Whistleblower Office practice is to look at the two 

year refund statute on a case by case basis and to move forward with payment when the facts of 

the particular case warrant against doing so". Please provide the number of claims for which 

the Whistleblower Office has proceeded before the two year statute of limitations has 

expired. 

In addition, it has come to my attention that the Whistleblower Office does not even 

begin to consider whether a whistleblower can receive an award before the taxpayer has 

exhausted all appeal rights. Given the procedure outlined in the IRM, including the requirement 

of review by the Executive Board, this seems like another way to delay issuing awards to 

whistleblowers. Please explain this policy and the amount of time it takes the 

Whistleblower Office to calculate and recommend an award. 

Another issue I raised in my September, 20 II, letter was how the IRS was educating 

employees about the whistlebJower program. Deputy Commissioner Miller responded: 

"In the future, the IRS pJans to communicate with employees highlighting some of the 

successes of the Whistleblower Program and encouraging the use of whistIeblower 
56 


80697.030

information in audits and investigations. The Whistleblower Office will re-double its 

internal communication efforts, reaching out through our communications and training 

channels to these employees." 

Unfortunately, this response appears to bejust lip service. The IRS's January 9, 20]2, 

press release and subsequent speeches by IRS officials, including Commissioner Shulman 

himself at the National Press Club earlier this month, fail to recognize the role of whistleblowers 

in the OVDI program. Please provide a list of aU internal cOmmunication efforts in which 

IRS employees, including IRS Chief Counsel employees, were educated and trained on the 

whistleblower prOl!ram and its successes. In addition. I ask that you provide data regarding 

the IRS's offshore compliance initiatives prior to the first OVDI program in 2009. 

including the number of taxpayers and dollars collected. 

Finally, I would like an update on the regulations regarding the whistleblower awards for 

whistleblowers who may also be planners and initiators. Please include in your response a list of 

meetings IRS officials have had with officials at the Department of Justice and the Securities and 

Exchange Commission. As I have said before, there is no reason for the IRS to recreate the 

wheel in this area. Five years after the 2006 improvements were enacted, it is irresponsible that 

the Treasury Department and IRS have not issued final regulations for this program. 

On a similar note, the regulations regarding the definition of"coUected proceeds" are 

incomplete. As my staff indicated to the Treasury Department staff, the regulations do not 

address how a whistleblower's claims are protected and advanced in the future when the 

disallowance of a net operating loss, for example, reduces a furure refund claim. Please explain 

how this issue will be addressed. 

To date, the Deputy Commissioner has responded to my letters to each of you. Given my 

concerns that the IRS Whistleblower program does not have your support, I ask that any 

response to this letter be under your signatures. I appreciate your prompt response. If you have 

any questions, please do not hesitate to contact me or my staff. 

cc: The Honorable J. Russell George 

The Honorable Gene 1. Dodaro 
57 


80697.031

STATEMENT OF HON. ORRIN G. HATCH, RANKING MEMBER 

U.S. SENATE COMMITTEE ON FINANCE HEARING OF MAY 8,2012 

NOMINATIONS OF MARK J. MAZUR, MATTHEW S. RUTHERFORD, 

AND MEREDITH M. BROADBENT 

WASHINGTON - U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance 

Committee, today delivered the following remarks during a Senate Finance Committee hearing 

considering the nominations of Mark Mazur to serve as Assistant Secretary of the Treasury for 

tax policy, Matthew Rutherford to serve as Assistant Secretary of the Treasury for financial 

markets, and Meredith Broadbent to be a member of the u.s. International Trade Commission: 

Mr. Chairman, thank you for scheduling this hearing, and thank you for helping to 

ensure that we could make it as easy as possible for our Members to participate. I also want to 

thank our witnesses for your willingness to step into the arena, and to your families for their 

support. 

First, I have a few matters to address to Dr. Mazur and Mr. Rutherford. On February 14 

of this year, Secretary Geithner appeared before this Committee to discuss President Obama's 

FY 2013 budget. I, along with other members of this Committee, submitted written questions 

for the record. Responses to those questions were due on April 30, and I specifically requested 

that those responses be provided by that deadline so I would have adequate time to review 

them in preparation for this hearing today. 

Those responses were not provided to me until yesterday. I have agreed with the 

Chairman to hold this hearing, but I must say that the Treasury Department's pattern of either 

refusing to respond to Senators' questions, or only strategically responding the night before it 

wants something from this Committee, is getting old. Treasury, unfortunately, seems to think 

that the Senate's questions come with an option to blow past deadlines and respond, if at all, 

whenever it chooses. This failure to respond to the Senate is neither fruitful nor acceptable. 

Dr. Mazur, I have seen from your questionnaire that you have worked on tax and 

economic policy for many years, at the IRS, Joint Committee on Taxation, and the Council of 

Economic Advisors, among other places. If we are actually going to tackle tax reform, and I 

mean real tax reform, we will need all of the expertise and seriousness of purpose that we can 

get. 

Unfortunately, unlike in 1986, the administration does not seem interested in leading 

the way and helping to forge a serious proposal for fundamental tax reform. 

And that is being charitable. In fact, the President seems content to ignore our bloated 

tax code, which burdens the entire economy, and the looming tax hikes that are creating 

economic uncertainty and undoubtedly holding back the recovery and job creation. Instead, 

the Senate is spinning its wheels on show votes designed to generate campaign talking points 

rather than meaningful tax reform. Dr. Mazur, it would be good to hear from you an actual 

comprehensive vision for reform. 
58 


80697.032

Mr. Rutherford, your position would entail advising senior Treasury leadership on many 

matters, including the financing of the federal debt. Though fiscal policy is generally decided by 

Congress, in your position you could be especially effective in providing transparency about the 

government's ability to meet its obligations. Treasury's failure to provide adequate information 

to the Senate about our nation's fiscal situation during last year's debt limit impasse was a 

serious shortcoming. Congress will be in a better position to make sound fiscal policy if we 

have sound information from the Treasury Department on our fiscal position. I hope that you 

share my expectation that when members of Congress ask basic questions of Treasury - like 

how much cash is in the federal till - the result should not be stonewalling by Treasury. 

I now want to welcome Meredith Broadbent who is nominated to be a member of the 

United States International Trade Commission. Ms. Broadbent's distinguished career includes 

work as a key policy advisor and counsel to the House Ways and Means Committee. She also 

worked within the executive branch, coordinating the work of the Office of Industry, Market 

Access and Telecommunications at the Office of the U.S. Trade Representative. Most recently, 

she served as senior advisor and the Scholl Chair in international Business at the Center for 

Strategic and International Studies. While anyone of these accomplishments standing alone is 

enough to be considered successful, Ms. Broadbent served admirably in each role. She should 

be justly proud of her work. 

Finally, I want to take a minute to recognize Floyd Williams, whom I understand is in 

attendance today, and will soon be retiring from federal service. Floyd has served as National 

Director for Legislative Affairs at the Internal Revenue Service since 1996, and could share with 

today's Treasury nominees what it is like to be on the receiving end of urgent requests for 

information from this Committee. Originally from Fayetteville, Arkansas, Floyd worked at the 

Tax Foundation before working for the Treasury Department in the Office of Legislative Affairs, 

and before finally moving on to the IRS. 

Floyd, if you ever miss your old job and want a letter from the Committee requesting 

information, let me know. I would be glad to oblige. I greatly appreciate your service, and wish 

you well. Mr. Chairman, thank you again, and thank you to the witnesses for appearing today. 

### 
59 


80697.033

Opening Statement of Mark J. Mazur 

Nominee for Assistant Secretary of the Treasury for Tax Policy 

United States Senate Committee on Finance 

May 8, 2012 

Thank you [Chairman Baucus, Ranking Member Hatch, and members of the Senate Finance 

Committee]. I am honored to have been nominated by President Obama to serve as the Treasury 

Department's Assistant Secretary for Tax Policy and I am grateful for the confidence that 

Secretary Geithner has shown in my abilities by recommending me to the President. I also want 

to thank the Senators and the various staff members for the opportunity to meet with them over 

the past few weeks to discuss a wide range of tax policy issues, 

The possibility that I could serve the nation in the capacity of Assistant Secretary for Tax Policy 

is the result of a long journey which has provided me with numerous learning opportunities 

across a wide variety of disciplines. My parents instilled in me the notion that giving back to 

society is important. In addition to working fuII time as a printing supplies salesman, my father 

served as Commissioner of our local Babe Ruth Baseball League and my mother was active in 

the PTA and very supportive of education in genera!. I would not be here today without a strong 

public education system, of which I was the beneficiary from elementary through graduate 

schoo!. The opportunity to repay this support through public service has been a major 

motivation for my choice of career. 

I have been interested in the workings of the tax system for many years. I can recall sitting with 

my father at the kitchen table helping organize his tax records and double and triple-checking the 

arithmetic on the tax return because he took so seriously one of the fundamental obligations of a 

citizen paying taxes to ensure adequate resources for the funding of public goods and services. 

I believe my background has prepared me well for this opportunity. I received a degree in 

Financial Administration from Michigan State University and then worked as a tax accountant 

for General Motors. At Stanford University, I pursued a PhD in Business and was introduced to 

the serious study of economics. I spent four years as an Assistant Professor at Carnegie Mellon 

University, where I specialized in public finance issues and obtained an appreciation for rigorous 

inter-disciplinary approaches. I next worked for the Joint Committee on Taxation, where I got 

an education in the legislative process and in being part of a team that produced high-quality 

work under tight deadlines. I then spent two years as a Senior Economist specializing in public 

finance at the President's Council of Economic Advisers, followed by a similar period at the 

President's National Economic Council, and four years at the Department of Energy, with two 

years as the Department's Chief Economist. My next position was Director of Research, 

Analysis and Statistics at the Internal Revenue Service, which gave me an appreciation for the 

issues faced by the IRS in administering our tax system. In all these positions, I learned 

important lessons on how to approach complex problems and how and when to rely on staff 

experts. These are lessons I will apply to my work as the Assistant Secretary for Tax Policy 

should I have the privilege of being approved by this Committee and confirmed by the Senate. 
60 


80697.034

This is an auspicious time to be working in the area of tax policy. We are facing some 

momentous decisions in the design oftax policy and in our medium- and long-term fiscal policy. 

Our nation needs a tax system that is simple, fair, and that raises adequate revenue for funding 

the important activities of government. Right now, our tax system falls short on all three 

dimensions. 

The tax system is extraordinarily complex, with exceptions to exceptions to general rules 

characterizing much of the Tax Code. Complexity makes it hard for taxpayers who are trying to 

meet their obligations and provides opportunities for those who seek to avoid or evade their 

responsibilities. And complexity breeds the perception that the tax system has two sets of rules -

one for ordinary Americans and one for those who have access to lobbyists and tax engineers. 

This perception of basic unfairness can erode the foundation of voluntary compliance upon 

which our tax system depends. 

The tax system needs to raise adequate revenue to support the important goods and services 

provided by the Federal government. At this moment, chronic Federal budget deficits 

characterize our fiscal policy. This was necessary when the economy was in recession, but now 

that the economic recovery has begun to take hold, the Administration and Congress will need to 

work together to find ways to reduce on deficits. Part of this will occur naturally as economic 

growth leads to increased revenues, but part of this must be the result oflegislative actions that 

put our nation's finances on a more sustainable course. 

In addition to reforming the current tax system, we need to make sure that taxes owed are 

actually collected, to the maximum extent possible. That is, we need to shrink the size of the 

"tax gap," - defined as the amount of taxes legally owed that are not paid in a timely manner. 

This effort is not the responsibility of just the Internal Revenue Service, since both the laws 

passed by Congress and the guidance issued by Treasury are important determinants of the 

ability of the Internal Revenue Service to administer the tax law. A large and growing problem 

with non-compliance undermines confidence in the tax system overall and can lead to even less 

compliance. It is incumbent on all of us to undertake efforts to address the causes of tax noncompliance and reduce the overall size of the tax gap. 

Finally, the tax system needs to have a higher degree of permanence, so that taxpayers can make 

informed judgments about long-term investments in human, physical and financial capital. The 

effect of tax incentives is blunted when taxpayers are unsure whether they will be able to claim a 

particular item when they file their tax return. A reformed tax system that is premised on 

permanent tax rules would go a long way toward improving incentives and toward reducing 

unnecessary complexity. 

These are a few of the items that, if confirmed, I look forward to working with you to address. 

Having served in Administrations led by both political parties, I have demonstrated a nonpartisan approach to public policy making throughout my public service career. Our tax policy 

decisions affect every American household, and they should reflect the goodwill that we share as 

Americans. 
61 


80697.035

In closing, I would like to take the opportunity to acknowledge the true professionals who staff 

the Office of Tax Policy at Treasury. These lawyers, economists, accountants, and other 

professionals are an incredibly talented team of dedicated public servants. As a taxpayer, I know 

I am well-served by this group and I am honored to be able to call them colleagues. 

Finally, let me close by noting that I am humbled by the possibility of serving the Nation in this 

new capacity. If you and your colleagues in the Senate give me the opportunity to serve as 

Assistant Secretary for Tax Policy, I promise to do all I can to justifY your confidence in my 

abilities. 

Thank you for the opportunity to appear before you today. I would be pleased to answer any 

questions you may have. 
62 


80697.036

SENATE FINANCE COMMITTEE 

STATEMENT OF INFORMATION REQUESTED OF NOMINEE 

A. BIOGRAPHICAL INFORMATION 

1. Name: (Include any former names used.) Mark J. Mazur 

2. Position to which nominated: Assistant Secretary for Tax Policy 

3. Date of nomination: November 15, 2011 

4. Address: (List current residence, office, and mailing addresses.) 

Home: 

Work: 

5. Date and place of birth: June 16, 1956; Jersey City, NJ 

6. Marital status: (Include maiden name of wife or husband's name.) 

7. Names and ages of children: 

8. Education: (List secondary and higher education institutions, dates attended, 

degree received, and date degree granted.) 

Madison Township High School 

Old Bridge, NJ -- Attended 1970-74; received high school diploma (1974) 

Michigan State University 

East Lansing, MI- Attended 1974-78; BA Financial Administration (1978) 

Stanford University 

Stanford, CA - Attended 1980-85; MA Economics awarded 1983, 

PhD Business awarded 1985 
63 


80697.037

9. Employment record: (List all jobs held since college, including the title or 

description of job, name of employer, location of work, and dates of 

employment.) 

General Motors Corporation (1978-80) 

Detroit, MI 

Tax Accountant 

School of Urban and Public Affairs (1985-89) 

Carnegie Mellon University 

Pittsburgh, PA 

Assistant Professor 

Joint Committee on Taxation (1989-93) 

U.S. Congress 

Washington, DC 

Staff Economist 

Council of Economic Advisers (1993-95) 

Executive Office of the President 

Washington, DC 

Senior Economist 

National Economic Council (1995-97) 

White House Office of Policy Development 

Washington, DC 

Senior Director 

Council of Economic Advisers (1997) 

Executive Office of the President 

Washington, DC 

Senior Economist 

U.S. Department of Energy (1997-99) 

Washington, DC 

Senior Policy Advisor and Chief Economist 

U.S. Department of Energy (1999 - 2000) 

Washington, DC 

Director, Office of Policy 

U.S. Department of Energy (2000-2001) 

Washington, DC 

Acting Administrator, Energy Information Administration 
64 


80697.038

Internal Revenue Service (2001-2009) 

Washington, DC 

Director, Research, Analysis, and Statistics 

U.S. Department of Treasury (2009-present) 

Washington, DC 

Deputy Assistant Secretary of Tax Analysis 

10. Government experience: (List any advisory, consultative, honorary, or other parttime service or positions with Federal, State or local governments, other than 

those listed above.) 

None. 

11. Business relationships: (List all positions held as an officer, director, trustee, 

partner, proprietor, agent, representative, or consultant of any corporation, 

company, firm, partnership, other business enterprise, or educational or other 

institution. ) 

Member of the Board of Directors, National Tax Association, 2008-

present. 

12. Memberships: (List all memberships and offices held in professional, fraternal, 

scholarly, civic, business, charitable, and other organizations.) 

National Tax Association - Member (1990 - present); Director (2008-

2011) 

American Economic Association - Member (1985 - present) 

American Finance Association - Member (1988 - present) 

Tax Economists Forum - Member (1989 - present) 

Senior Executive Association - Member (2001 - present) 

Michigan State Alumni Association - Member (1987 - present) 

Stanford Alumni Association - Member (2001 - present) 

American Civil Liberties Union - Member (1998 - present) 

Smithsonian Institution - Member (2000 - present) 

WPFW-FM - Member (2000 - present) 

WXPN-FM - Member (2005 - present) 

Our Lady of Sorrows Catholic Church - Member (1989-2008) 

Stanford Progressive Alliance - Member (1980-1985) 

Associated Students of Stanford University - Representative (1983-1984) 

13. Political affiliations and activities: 

a. List all public offices for which you have been a candidate. 

I was nominated on October 17, 2000 to be Administrator of the Energy 
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Information Administration at the Department of Energy. My nomination 

was returned shortly thereafter, in December 2000, at the end of the 

Clinton Administration. 

b. List all memberships and offices held in and services rendered to all 

political parties or election committees during the last 10 years. 

None. 

c. Itemize all political contributions to any individual, campaign organization, 

political party, political action committee, or similar entity of $50 or more 

for the past 10 years. 

2002: Bill Richardson for Governor $250 

Winning Margins PAC $ 70 

Anne Kaiser for Delegate $ 80 

Strickland for Colorado $ 50 

2003: Winning Margins PAC $105 

John Kerry for President $ 80 

Howard Dean for America $130 

2004: John Kerry for President $250 

Kerry/Edwards Victory Fund $150 

Erskine Bowles for Senate $ 50 

2005: Bill Richardson for Governor $100 

Anne Kaiser for Delegate $ 75 

2006: Anne Kaiser for Delegate $105 

Bill Richardson for Governor $100 

Jose Cerda for Clerk $ 75 

2007: Bill Richardson for President $ 75 

Bill Richardson for President $250 

Bill Richardson for President $100 

Bill Richardson for President $ 75 

Anne Kfliser for Delegate $ 75 

Hillary Clinton for President $ 50 

Barack Obama for America $ 50 

2008: Hillary Clinton for President $ 50 

Barack Obama for America $ 75 

Barack Obama for America $ 75 

Barack Obama for America $200 
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Anne Kaiser for Delegate $ 75 

2010: Anne Kaiser for Delegate $ 50 

2011: Anne Kaiser for Delegate $ 75 

Chicago for Rahm Emanuel $ 82 

14. Honors and Awards: (List all scholarships, fellowships, honorary degrees, 

honorary society memberships, military medals, and any other special 

recognitions for outstanding service or achievement.) 

Various fellowships and research assistantships while in graduate school at 

Stanford University. 

Emil Linbach Teaching Award, School of Urban and Public Affairs, Camegie 

Mellon University, 1988 

Presidential Rank Award, Meritorious Executive, 2008. 

15. Published writings: (List the titles, publishers, and dates of all books, articles, 

reports, or other published materials you have written.) 

"Do Products Offering Expedited Refunds Increase Income Tax Noncompliance?" (co-authored 

with Karen Masken, Joann Meikle, and Roy Nord), Proceedings of 2008 National Tax 

Association Annual Research Conference, 2009. 

"Understanding the Tax Gap" (co-authored with Alan Plumley), National Tax Journal, 

September 2007. 

"IRS Data, Data Users, and Data Sharing" (co-authored with Nick Greenia), in Improving 

Business Statistics through Interagency Data Sharing: Summary of a Workshop, National 

Academies Press, 2006. 

"The National Rescarch Program: Mcasurmg Taxpayer Compliance Comprehensively" (coauthored with Robert E. Brown), University of Kansas Law Review, December 2003. 

"IRS's Comprehensive Approach to Compliance Measurement" (co-authored with Robert E. 

Brown), National Tax Journal, September 2003. 

"Taxation of Energy" (co-authored with Thomas Barthold), entry in MacMillan Encyclopedia of 

Energy, McGraw-Hill Publishing, 2001. 

"Evaluating the Relative Efficiency of Baseball Players," in Data Envelopment Analysis: Theory, 
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Methodology, and Application, edited by A. Chames, W.W. Cooper, A. Lewin, and L. Seiford, 

Kluwer Academic Publishers, 1995. 

"Improving the Delivery of Benefits to the Working Poor: Proposals to Reform the Earned 

Income Tax Credit Program" (co-authored with George Yin, John Karl Scholz, and Jonathan 

Forman), American Journal of Tax Policy, Fall 1994. 

"Designing Tax Policy to Meet Enviromnental Goals," published as remarks in U.S. 

Environmental Policy and Economic Growth, American Council on Capital Formation 

Monograph, 1992. 

"Expert Intermediaries and Legal Compliance: The Case of Tax Preparers" (co-authored with 

Steven Klepper and Daniel Nagin), Journal of Law and Economics, April 1991. 

"Testing the Optimality of a Performance Evaluation Measure for a Gainsharing Contract" (coauthored with Rajiv Banker and Srikant Datar), Contemporary Accounting Research, Spring 

1990. 

"Optimal Linear Taxation with Stochastic Incomes," Public Finance/Finances Publiques, 

Winter, 1989. 

"The Rich, the Poor, and the Taxes They Pay: An Update" (co-authored with Joseph Pechman), 

The Public Interest, Fall 1984. 

16. Speeches: (List all formal speeches you have delivered during the past five 

years which are on topics relevant to the position for which you have been 

nominated. Provide the Committee with two copies of each formal speech.) 

Testimony before the Senate finance Committee in December 2010, "On Tax 

Reform: Historical Trends in Income and Revenue". 

Testimony before the Subcommittee on Energy, Natural Resources, and 

Infrastructure, Senate Finance Committee, in May 2010, "Clean Technology 

Manufacturing Competitiveness: The Role of Tax Incentives." 

Note that this listing does not include presentations or remarks over the past five 

years where there was no formal prepared text. 

17. Qualifications: (State what, in your opinion, qualifies you to serve in the position 

to which you have been nominated.) 

I have worked for over twenty years in positions focusing on fiscal policy, taxation, and 

public finance. During this time, I have served as an Assistant Professor at the School 

of Urban and Public Affairs at Carnegie Mellon University (4 years), as a Staff 
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Economist at the Joint Committee on Taxation in the U.S. Congress (4 years), as a 

Senior Economist at the Council of Economic Advisor (2 years) and as Senior Director 

at the National Economic Council (2 years) within the Executive Office of the President. 

I also worked as Senior Policy Advisor to the Secretary (2 years) and as the Director of 

Policy and Acting Administrator of the Energy Information Administration at the U.S. 

Department of Energy (2 years). 

For the past decade, I have served as a career member of the Senior Executive Service 

within the United States Department of the Treasury. During this time, I served as the 

Director of Research, Analysis, and Statistics at the Internal Revenue Service (8 years) 

and as Deputy Assistant Secretary of the Treasury for Tax Analysis (2 years). 

Prior to beginning my career in the public sector, I studied finance, economics and 

business at Michigan State University (BA, Financial Administration, 1978) and 

Stanford University (MA, Economics, 1983; Ph.D., Business, 1985). 

B. FUTURE EMPLOYMENT RELATIONSHIPS 

1. Will you sever all connections with your present employers, business firms, 

associations, or organizations if you are confirmed by the Senate? If not, provide 

details. 

Not applicable. 

2. Do you have any plans, commitments, or agreements to pursue outside 

employment, with or without compensation, during your service with the 

government? If so, provide details. 

No. 

3. Has any person or entity made a commitment or agreement to employ your 

services in any capacity after you leave government service? If so, provide 

details. 

No. 

4. If you are confirmed by the. Senate, do you expect to serve out your full term or 

until the next Presidential election, whichever is applicable? If not, explain. 

Yes. 

C. POTENTIAL CONFLICTS OF INTEREST 

1. Indicate any investments, obligations, liabilities, or other relationships which 

could involve potential conflicts of interest in the position to which you have been 

nominated. 
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In connection with the nomination process, I have consulted with the Office of 

Government Ethics and the Treasury Department's designated agency ethics 

official to identify potential conflicts of interest. Any potential conflicts of interest 

will be resolved in accordance with the terms of an ethics agreement that I have 

entered into with the Department's designated agency ethics official and that has 

been provided to this Committee. I am not aware of any other potential conflicts 

of interest. 

2. Describe any business relationship, dealing or financial transaction which you 

have had during the last 10 years, whether for yourself, on behalf of a client, or 

acting as an agent, that could in any way constitute or result in a possible conflict 

of interest in the position to which you have been nominated. 

In connection with the nomination process, I have consulted with the Office of 

Government Ethics and the Treasury Department's designated agency ethics 

official to identify potential conflicts of interest. Any potential conflicts of interest 

will be resolved in accordance with the terms of an ethics agreement that I have 

entered into with the Department's designated agency ethics official and that has 

been provided to this Committee. I am not aware of any other potential conflicts 

of interest. 

3. Describe any activity during the past 10 years in which you have engaged for the 

purpose of directly or indirectly influencing the passage, defeat, or modification 

of any legislation or affecting the administration and execution of law or public 

policy. Activities performed as an employee of the Federal government need not 

be listed. 

None. 

4. Explain how you will resolve any potential conflict of interest, including any that 

may be disclosed by your responses to the above items. (Provide the Committee 

with two copies of any trust or other agreements.) 

In connection with the nomination process, I have consulted with the Office of 

Government Ethics and the Treasury Department's designated agency ethics 

official to identify potential conflicts of interest. Any potential conflicts of interest 

will be resolved in accordance with the terms of an ethics agreement that I have 

entered into with the Department's designated agency ethics official and that has 

been provided to this Committee. I am not aware of any other potential conflicts 

of interest. 

5. Two copies of written opinions should be provided directly to the Committee by 

the designated agency ethics officer of the agency to which you have been 

nominated and by the Office of Government Ethics concerning potential conflicts 
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of interest or any legal impediments to your serving in this position. 

6. The following information is to be provided only by nominees to the positions of 

United States Trade Representative and Deputy United States Trade 

Representative: 

Have you ever represented, advised, or otherwise aided a foreign government or 

a foreign pOlitical organization with respect to any international trade matter? If 

so, provide the name of the foreign entity, a description of the work performed 

(including any work you supervised), the time frame of the work (e.g., March to 

December 1995), and the number of hours spent on the representation. 

Not applicable. 

D. LEGAL AND OTHER MATTERS 

1. Have you ever been the subject of a complaint or been investigated, disciplined, 

or otherwise cited for a breach of ethics for unprofessional conduct before any 

court, administrative agency, professional association, disciplinary committee, or 

other professional group? If so, provide details. 

No. 

2. Have you ever been investigated, arrested, charged, or held by any Federal, 

State, or other law enforcement authority for a violation of any Federal, State, 

county or municipal law, regulation, or ordinance, other than a minor traffic 

offense? If so, provide details. 

No. 

3. Have you ever been involved as a party in interest in any administrative agency 

proceeding or civil litigation? If so, provide details. 

Defendant in uncontested divorce. Divorce granted October 2010. 

4. Have you ever been convicted (including pleas of guilty or nolo contendere) of 

any criminal violation other than a minor traffic offense? If so, provide details. 

No. 
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5. Please advise the Committee of any additional information, favorable or 

unfavorable, which you feel should be considered in connection with your 

nomination. 

None. 

E. TESTIFYING BEFORE CONGRESS 

1. If you are confirmed by the Senate, are you willing to appear and testify before 

any duly constituted committee of the Congress on such occasions as you may 

be reasonably requested to do so? 

Yes. 

2. If you are confirmed by the Senate, are you willing to provide such information as 

is requested by such committees? 

Yes. 
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us. Senate Committee on Finance 

Nominations Hearing held May 8, 2012 

Questions for the Record for Mark Mazur 

ReceivedMay 10-11,2012 and Submitted May 14,2012 

SENATOR MAX BAUCUS (D-MT): 

Ouestion 1: 

Mr. Mazur, the Administration issued a framework for business tax reform earlier this 

year. However, we have not heard much on the individual front. What are Treasury's 

plans for individual tax reform? Will there be a framework for individual tax 

reform? 

Answer: 

As stated in the Budget, the Administration supports comprehensive tax reform, including 

reform of the individual income tax. In this regard, the President has articulated principles 

that should guide such reform: (1) simplifY the tax code and lower tax rates; (2) reform 

inefficient and unfair tax breaks; (3) decrease the deficits by $1.5 trillion over ten years while 

preserving progressivity; (4) increase job growth and creation in the United States; and (5) 

observe the Buffett rule so that those making over $1 million pay an effective tax rate at least 

as large as middle class families. The Treasury Department, and the rest of the 

Administration, looks forward to working with Congress and other interested stakeholders in 

developing a tax reform plan that meets these goals. However, if confirmed, I will work with 

the Committee on Finance to implement the President's goals for tax reform. 
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SENATOR ORRIN G. HATCH (R-UT): 

Question 1: 

The Chairman of the Senate Budget Committee introduced a mark in April called the 

Fiscal Commission Budget Plan, modeled largely on a plan developed by the President's 

Fiscal Commission, which the President chose not to endorse. Included in the Senate 

Budget Committee Chairman's mark were recommended changes to Social Security, 

including alteration to the price index to be used in CQLA adjustments for Social 

Security beneficiaries and increasing the maximum taxable wages. Those tax increases 

would, of course, hit people with wages below $250,000 which runs counter to the 

President's pledge not to raise taxes, including payroll taxes, on such earners. The 

Fiscal Commission plan also calls for increases in retirement ages. 

In 2008, then candidate Obama offered a so-called "donut whole" scheme to increase 

payroll taxes on those earning above $250,000. Since then, we have heard little from the 

administration, including Treasury, concerning reform of Social Security, including the 

Disability Insurance program which faces exhaustion of its trust fund in 2016. 

I have questions related to Social Security. Note that we can all acknowledge that there 

are various instruments available to help guide Social Security to a sustainable fiscal 

position, and those elements of whatever might be a full reform package can vary 

between possible packages. My questions are not whether you support individual 

elements in the context of a general reform package. My questions are whether you 

support individual elements on a stand-alone basis. I will take a response along the 

lines that "it depends on the entire package being considered" as a nonresponsive 

hedge. Note, also, that I am aware of the President's "principles" that he has said will 

guide him in any Social Security reforms, and my questions are not about those 

principles. 

Do you support use of the so-called "chained" consumer price index as a replacement 

for the current price index used to compute cost of living adjustments in Social Security 

benefit payments? If not, why not? If so, why? 

Do you support increases in eligibility ages (e.g. the "normal retirement age") related to 

the receipt of Social Security benefit payments? If not, why not? If so, why? 

Do you support increasing in the payroll tax rate-either OASI or DI or both? If not, 

why not? If so, why? 

Do you support increasing the maximum level of maximum taxable earnings for Social 

Security (QASDI) taxes? If not, why not? If so, why? 
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Answer: 

As the Secretary has stated, it is important to improve the overall long-term solvency of our 

Social Security system. Outside experts and observers would note that it is difficult to 

meaningfully assess in isolation anyone measure to improve long-term solvency. In my 

capacity as Deputy Assistant Secretary for Tax Analysis, I am not responsible for 

formulating policy stances for the Administration on specific details of the Social Security 

program, particularly those related to benefits. However, if confirmed, I look forward to 

working with you and the rest of the Committee on this important issue. 
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Question 2: 

If confirmed, will you recommend that the payroll tax holiday be extended in the event 

that the state of the economy is unchanged from the current state? If not, using the 

unemployment rate and quarterly GDP growth as state variables, where would those 

variables have to be in order for you to change your assessment? 

Answer: 

The Administration has no plan to extend the current payroll tax holiday. Forecasts indicate 

continued moderate growth in our economy and employment through the end of the year and 

beyond. In the Administration's FY13 Budget and subsequently, the President proposed 

measures to foster economic growth. Should economic conditions markedly worsen; 

consideration of additional options to help the economy may be warranted. 
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Question 3: 

You testified before the Senate Committee on Finance that Treasury's so-called 

"framework for business tax reform" opens an opportunity for dialogue. However, as 

the Committee Chairman aptly noted, the framework is one in which the i's are not 

dotted and the t's are not crossed. Another mem ber of the Committee asked about 

Treasury's sense of urgency regarding tax reform. 

You identified in your testimony that Treasury would be negligent if it were not doing 

foundational work on tax reform. Yet you also identified that "we'll see how this plays 

out." As President Obama recently stated: "Now, I know this is an election year. But 

it's not an excuse for inaction." His statement was in the context of job creation, and I 

believe that fundamental tax reform is precisely one area in which we can work, 

beginning today, and arrive at specific proposals to provide fruitful ground for job 

creation and economic growth, if done properly and carefully. 

In the spirit ofthe President's words, will you, if confirmed, be opening and continuing 

dialogue on fundamental tax reform as soon as you take on your new role? There are, 

as the President has pointed out, six pre-election months and an upcoming election is no 

excuse for inaction. Inaction on tax reform would seem to be wasteful of potentially 

productive time. 

Will you, if confirmed, work with members of the Committee on Finance to move 

beyond frameworks and principles and into specific policy reform ideas and proposals 

beginning immediately without waiting until after the upcoming election? If so, how do 

you expect to proceed? 

Answer: 

If confinned, I will work with Congress on the important subject of tax reform. I will make 

myself available to discuss with interested Members and their tax staffs ideas for and 

approaches to fundamental tax refonn. I would be happy to work with members of the 

Committee on Finance to develop and analyze specific policy proposals that would meet the 

President's goals for tax reform. 
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Question 4: 

I asked you a question during your confirmation hearing regarding income equality 

and fairness. I inquired about, given whatever might be your favorite measure of 

income equality, what target you would propose that we hit. For example, given your 

favorite measure, I asked whether you give me a particular time period in the past 

where you feel the economy was closest to what you feel is optimal equality. As I 

understood your responses: you identified tbat you do not think that we can point to a 

particular period in tbe past and say it was optimal in terms of a tax system or 

inequality; and you suggested that issues of inequality are addressed in taxation, in 

part, through progressivity of the tax code. 

I understand tbat inequality and fairness are not the sole objective in considering taxes. 

Equity and efficiency and perceived fairness are all important elements of structuring a 

tax code, as you noted. Indeed, you noted tbat we sbould seek to raise revenues 

efficiently and "do it in a way tbat is perceived as fair." Wbat I wonder about, 

especially in light of recent proposals in tbe Senate for a Buffet tax or tax surcharges on 

upper income earners or capital income, is how "fair" is to be measured and, given 

whatever is tbe measure, what is the precise objective. 

It is dangerous to use introspective views of politicians about what they regard as "fair" 

or "fairer" as the appropriate way to set policy. Loose rules based on casual 

observations such as, say, a comparison of an effective income tax rate of someone witb 

billions ofwealtb relative to their employee's effective income tax rate do not appear to 

offer any specific target or objective aside, perhaps, from raising revenue. You seem to 

agree. You wrote, in a 1984 publication, that: "Relying primarily on introspection and 

casual investigations, people are forever arguing whether tbe rich or tbe poor are 

getting richer. Such arguments cannot be resolved without hard facts, however. 

Income inequality is a serious issue and those who make policy decisions on tbe basis of 

intuition or dogma can do considerable damage." 

a. How, given the facts, how will we know what is the amount of alteration in tbe 

progressivity of the tax code tbat would be desirable to attain fairness or 

perceptions of fairness? If the answer is, we will never know but just need to do 

better, then wben will we cease getting better and begin becoming worse, based on 

facts? 

Answer: 

Fairness is a normative concept on which reasonable people can disagree. That said, widely 

held principles suggest that taxpayers in similar economic circumstances should pay about 

the same amount of tax (horizontal equity) and that taxpayers who are better-off should pay a 

larger proportion in taxes than paid by less well-off taxpayers (vertical equity). While there 
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are legitimate arguments about measuring the well-being of taxpayers and about the extent to 

which taxes should rise more than proportionately with income to achieve vertical equity, 

careful systematic analysis is required to begin to address the basic questions. 

The Joint Committee on Taxation, the Congressional Budget Office, and the Office of Tax 

Analysis all maintain state-of-the-art models of the distribution ofincome and federal tax 

burdens, which can be used to examine average tax rates and share of taxes paid across and 

within income classes, under current law and policy proposals. These are the types of 

models that should be used to evaluate the fairness of the tax code. 

As to my own views of vertical equity, the Secretary has stated, and I agree, that we should 

strive to have a tax code that is at least as progressive as the Administration's FY 2013 

Budget Policy. Moreover, high-income families should not experience effective tax rates 

that are lower than those faced by middle-income families. 

b. Do you agree with conclusions ofthe Chairman ofthe Council of Economic 

Advisors that "we can't go back to tax policies that didn't generate faster economic 

growth or jobs, but rather increased inequality?" If so, could you identify what you 

think those tax policies were that did not generate faster economic growth or jobs 

but, instead, increased inequality along with empirical evidence on causality 

(causality in a statistical sense, such as Granger causality, and not mere 

correlations)? 

Answer: 

The tax law changes of the last Administration reduced tax rates and expanded preferential 

tax rates for capital income in a way that did little to broaden the tax base or simplifY the tax 

system. This contributed to large budget deficits and increasing debt levels. We can do 

better for all Americans, by designing a tax system that is simple, fair, and raises adequate 

revenue for funding the important activities of the Federal government. IfI am confirmed, I 

look forward to working with the Committee on this important effort. 

c. Do you agree with the conclusions reached by Northwestern University economist 

Robert J. Gordon in "Has the Rise in American Inequality Been Exaggerated" 

(National Bureau of Economic Research Working Paper 15351; 

http://,,,ww.nber.org/papers/wI5351 ) that " ... the increase in inequality is not a 

steady ongoing process; after widening most rapidly between 1981 and 1993, the 

growth of inequality reversed itself and became negative during 2000-2007" and 

that "The rise of American inequality has been exaggerated in magnitude, and its 

impact is now largely in the past."? If not, what do you disagree with in Gordon's 

analysis? 
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I do not agree that the impact of increases in inequality is largely in the past. For example, 

according to the Congressional Budget Office, between 2000 and 2007, the share of pre-tax 

income of the top fifth offamilies grew from 54.8 percent to 55.9 percent. The share of 

income accruing to the top I percent of families grew from 17.8 percent to 19.4 percent. The 

share of after-tax income received by the highest income families also grew during this 

period. Thus, while the rate of increase in income inequality may have slowed in recent 

years, the trend toward growing income inequality does not appear to have been reversed. 
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Question 5: 

The blogosphere has been abuzz with a recent editorial that appeared in the Wall Street 

Journal, and possibly elsewhere, where Peter Diamond and Emmanuel Saez explain 

that "According to our analysis of current tax rates and their elasticity, the revenuemaximizing top federal marginal income tax rate would be in or near the range of 50%-

70% ." 

Do you or the administration support a top marginal rate of between 50% and 70%, 

and if so, could you narrow down the specific top rate that your prefer? 

How important is the factor of revenue maximization as a factor in determining what 

marginal rates ought to be? 

Should it be the objective of government to maximize revenue in this manner? 

Do you think there is a connection between how high marginal tax rates are and 

economic growth? 

Why would someone choose to live someplace with a 70% rate when they could move 

someplace else? 

The Administration has proposed a top statutory individual income tax rate of 39.6 percent. 

It is our belief that this top statutory rate, combined with other tax policy changes, will raise 

sufficient revenue to fund the necessary operations of the Federal government, consistent 

with achieving desirable levels of economic activity and growth. 

Revenue generation is the main function of the tax system, but revenue maximization should 

not be the goal of the tax system. The proper objective of government is to provide the 

essential goods and services desired by its citizens. The tax rates and other parameters of the 

tax system, including the tax base, should be chosen to generate the revenue needed to pay 

for those important services in a way that is fair and efficient and that provides adequate 

incentives for economic growth. 

There is a connection between high marginal tax rates and economic growth. Very high tax 

rates - well beyond the rates proposed by President Obama - have the potential to dampen 

incentives for labor supply and investment and to impede economic growth. Thus, we must 

consider economic growth and efficiency, as wel1 as simplicity and fairness, when designing 

a tax system. 
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Question 6: 

After Francois Hollande prevailed in the recent presidential election in France, it was 

reported that President Obama invited him to the White House later this month and 

White House spokesman Jay Carney is quoted as saying that Obama "indicated that he 

looks forward to working closely with Mr. Hollande and his government on a range of 

shared economic and security challenges." According to a February 29, 2012 article in 

The Wall Street Journal, then-candidate Hollande said that taxpayers earning more 

than one million euros a year should be in a 75% tax bracket." 

Do you or the administration support a tax rate of 75% for any taxpayer? 

How does tax reform figure in the "range of shared economic and security challenges" 

that President Obama and Mr. Hollande will discuss? Will assistance be sought from 

the new French president on tax reform? 

Answer: 

The Administration has proposed a top statutory individual income tax rate of 39.6 percent 

for the highest earning families. We do not support a tax rate of 75%. 

The Administration will make its own determination of the merits oftax reform proposals, 

including setting appropriate marginal tax rates, a determination based on what is best for the 

United States. 
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SENATOR MICHAEL B. ENZI (R-WY): 

Question 1: 

Regarding tax extenders, many expired in December 2011, and some are about to 

expire, causing various industries significant uncertainty and, in many cases, significant 

job losses. It would appear that Administration leadership at this time is necessary to 

move a tax extenders package forward. Would you explain why the Administration has 

not been more actively involved? May we expect increased involvement in the near 

future? If confirmed, would you recommend that the Administration actively pushes 

for an extension of expired and currently expiring tax provisions? 

The Administration's FY2013 Budget includes approximately fifty expiring tax provisions 

that we propose extending through 2013. In addition, the President's Frameworkfor 

Business Tax Reform discusses the problems created by expiring tax provisions. If 

confirmed, I would be pleased to work with Congress towards resolving the uncertainty 

created by continually expiring tax provisions. 
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Question 2: 

As you may know, I have been opposed to the Administration's proposal to repeal 

LIFQ inventory accounting for federal income tax purposes. A major concern 

regarding the proposal relates to the degree of retroactivity that would be associated 

with its enactment. It's my understanding that the proposal would effectively repeal 

deductions that were taken as many as 60 or 70 years ago when LIFO was first 

authorized. This element of retroactivity distinguishes LIFO repeal from the repeal of 

other taxpayer-favorable provisions that have appeared in various base-broadening tax 

reform proposals. 

The Administration's response to this concern (which was included in the 

Administration's FY2013 budget proposal) has focused on the proposal's transition 

provision, which allows the taxpayer to recapture the taxpayer's LIFO reserve over a 

period of 10 years, rather than requiring immediate recapture. Because I have focused 

considerable attention on transition rules as they relate to tax reform, I have two 

questions regarding this particular transition provision. 

a. Is a to-year recapture period sufficient to soften the blow to a taxpayer that has 

been building up its LIFO reserve for decades and is now directed to recapture all 

of it? What analysis was conducted to arrive at the proposed 10-year recapture 

period? Has the Administration had discussions with the Small Business 

Administration to determine whether and to what extent enactment of such a 

proposal might force small companies out of business entirely? 

The repeal of the last-in, first-out (LIFO) method would eliminate a tax deferral opportunity 

to taxpayers that hold inventories, the costs of which increase over time. In addition, LIFO 

repeal would simplifY the Internal Revenue Code by removing a complex and burdensome 

accounting method that has been the source of controversy between taxpayers and the IRS. 

Eliminating LIFO prospectively without requiring taxpayers to write-up their beginning 

LIFO inventory to its first-in, first-out (FIFO) value would result in a permanent exclusion of 

taxable income. A more appropriate approach is to require this write-up, which would be 

similar to the effect of most tax accounting method changes. Generally, taxpayers are 

required to recognize the difference in taxable income as if they had always been using the 

new method of accounting, whether that cumulative result is a reduction to income or an 

increase. The cumulative difference is generally recognized over one to four tax years for 

most accounting method changes. The Administration' s proposal to repeal the LIFO 

inventory method would allow taxpayers to recognize the income over a period often tax 

years to minimize the impact of additional tax liability. 
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We expect the impact on small businesses to be small due to the complexity of the LIFO 

inventory method. This proposal has been included in the President's Budget Proposal for 

the past three years, but we would be pleased to consult with the SBA regarding its impact on 

small business jobs creation. 

b. Given recent focus on "fairness" in tax policy, please explain how this proposal is 

fair to a taxpayer who has been playing by the rules and would now be told that the 

rules had changed so that the taxpayer would be treated as having never been on 

LIFO? 

The issue of fairness generally relates to how the burden of paying for the goods and services 

desired by Americans and provided by the Federal government is shared. The majority of 

current LIFO reserves are concentrated in a small number of large corporations, shifting the 

burden of the forgone tax revenue to all other taxpayers, including small businesses and 

individuals. 

Asking LIFO taxpayers to pay an appropriate share of tax related to income from inventory 

sales reflects the Administration's goals of tax fairness and simplification. That said, in some 

cases, transition relief is appropriate. In this case, the long, 10-year recognition of the LIFO 

reserve is intended to provide significant relief, precisely because recognizing large amounts 

of income over a short period might create liquidity concerns for some taxpayers. 
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Question 3: 

Pursuant to The President's Frameworkfor Business Tax Reform (February 2012) (the 

Framework), the Administration proposes to lower the corporate income tax rate to 28 

percent. A lower 25 percent rate would apply to manufacturing income, with an even 

lower rate applying to income from advanced manufacturing activities. Separately, the 

Administration has called for increasing the top individual income tax rate to nearly 40 

percent. What concerns has the Treasury Department identified with such a large 

disparity between the top individual and corporate income tax rates? 

When the top individual income tax rates exceed corporate income tax rates, it is necessary to 

have appropriate safeguards in order to prevent tax avoidance opportunities. For example, a 

corporation could be used to hold a portion of an individual's investment assets so that 

investment income would be taxed at the lower corporate rate. As another example, an 

individual could use a corporation as a business entity to provide services to third parties. In 

these cases, a tax benefit might be obtained if the benefit of deferring current taxation at the 

higher individual tax rate exceeds the additional tax liability when profits are distributed to 

the individual. 

Under certain circumstances, the existing accumulated earnings tax and the existing personal 

holding company tax impose an additional corporate level tax, at the tax rate applicable to 

dividends, which prevents realization of a rate differential benefit. These taxes would 

provide a basis for limiting tax avoidance motivated by the differential between the corporate 

and individual income tax rates. In a post business tax reform environment, it might be 

necessary to modify theses taxes. 

However, comprehensive tax reform might make it easier to deal with these potential 

problems, because it would be possible to adjust individual and corporate income tax rates, 

while still achieving other important goals. 
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Question 4: 

Also included in the Framework is a provision that would require companies to pay a 

minimum tax on overseas profits. The Framework is light on details regarding the 

minimum tax proposal. Would you please elaborate on the mechanics of the proposal? 

Please provide specific examples of the application ofthis provision. 

As part of the Framework for Business Tax Reform, the President has established the 

principle of a minimum tax on the foreign income that U.S. corporations earn abroad. This is 

a matter of fairness and a way to help prevent the global race to the bottom on corporate tax 

rates. 

Under the President's proposed Framework, U.S. corporations operating abroad would pay a 

minimum tax on their foreign income. There are numerous ways to structure this proposal. 

To provide one example, if a U.S. parent corporation owns a foreign subsidiary that pays tax 

in a particular country at a rate equal to the minimum tax rate, no additional tax would be 

due. If on the other hand, a U.S. parent corporation owns a foreign subsidiary that pays tax 

in a particular country at a rate below the minimum tax rate, the income from that subsidiary 

could immediately be subject to tax in the United States (though a foreign tax credit for some 

or all of the taxes paid to the host country could be available). In effect, the tax imposed on 

this income would be at the minimum tax rate, with a portion paid to the host country and the 

difference paid to the United States. 

If confirmed, I hope to work with Congress and other stakeholders on the details of how to fit 

this proposal into the rest of the reformed international tax system. 
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Question 5: 

Is the Administration more concerned with the perceived problem that U.S. 

multinational companies are shipping jobs offshore or shifting income offshore? Does 

the Administration view these as one in the same? How would the Administration's 

proposal to tax currently the excess profits associated with shifting intangibles to lowtax jurisdictions impact jobs and income shifting? 

The Administration is concerned with the movement of investment and jobs offshore and the 

shifting of income offshore. Although these problems may arise in similar situations, they 

present different concerns and require different responses. 

The Administration is concerned with shifting jobs offshore because that represents a 

potential loss to American families. The Administration is concerned with shifting income 

offshore because that represents an inappropriate reduction in the U.S. tax base, which 

requires that higher taxes be imposed on other taxpayers. 

The Administration has proposed to address the inappropriate shifting of profits offshore, 

specifically focused on the transfers of intangibles. One of these proposals in the 

Administration's budget and also included in the Framework for Business Tax Reform, is to 

tax excess returns associated with the transfer of intangibles offshore. Increased 

globalization and technological advances have resulted in an economy where intangible 

assets play an increasingly important role. Valuable intangible property can be easily moved 

across borders, but transactions that involve the transfer of intangibles are very difficult to 

price accurately in the absence of similar transactions between unrelated parties. Recent 

empirical analyses raise concerns that income shifting through transfers of intangibles to lowtaxed affiliates has resulted in a significant erosion of the U.S. tax base. Accordingly, the 

excess returns proposal is designed to reduce the U.S. tax benefits of multinational 

companies from transferring intangibles and the related profits to offshore affiliates. 
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Question 6: 

In the Framework, the Administration opposed adoption of a "pure territorial" tax 

regime. Currently, most international tax experts refer to the existing U.S. 

international tax regime as a hybrid that combines features of a traditional worldwide 

system oftaxation and a territorial approach to taxing foreign earnings of U.S. 

companies. I have the following questions regarding the possible reforms to this hybrid 

system. 

a. Under what circumstances would the Administration support the consideration of a 

dividend exemption regime as a replacement for the existing rules that permit 

deferral of U.S. tax on the foreign earnings of U.S. companies? 

The Administration believes that a pure territorial system, under which all active foreign 

income of U.S. companies would either be taxed little or not at all in the United States could 

aggravate, rather than ameliorate, many of the problems of the current U.S. tax system. A 

system that does not subject foreign earnings of U.S. companies to any tax would only 

provide greater incentives to locate operations abroad or shift profits out of the United States. 

Further, such a system could exacerbate the global race to the bottom on corporate tax rates. 

The Administration's minimum tax proposal reduces incentives for companies to shift profits 

and investment to low-tax countries and helps address the global race to the bottom in 

corporate tax rates. 

The Administration believes that tax reform should encourage investment, growth and highquality jobs in the United States. It should reduce tax incentives for U.S. companies to locate 

profits overseas while ensuring that these companies are able to compete overseas. The 

Framework is intended to lay the foundation for a dialogue with Congress and stakeholders 

on tax reform measures that will achieve these goals. 

b. Does the Administration believe international tax reform should be revenue neutral 

or should international tax reform raise net revenues either to offset the cost, in the 

context of broader business tax reform, of paying for a reduction in the corporate 

tax rate or to provide for net deficit reduction? 

The current U.S. international tax system creates incentives for U.S. companies to locate 

their operations and profits abroad, which leads to a loss of jobs here at home and an erosion 

of the U.S. tax base. The Administration has set forth several proposals for international tax 

reform in the Budget and in the Framework, including a global minimum tax, to address 
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these concerns. The Framework would raise revenue from reforming the international tax 

system and addressing weaknesses in the current system, with that revenue used to lower the 

statutory corporate income tax rate in a revenue neutral manner. 

We believe that there is common ground on the subject of business tax reform which could 

advance efforts to reform the current U.S. tax system. If confirmed, I look forward to 

engaging in a dialogue with Congress and stakeholders on the specifics of tax reform. 

c. Legislation I introduced in February, S. 2091 - the United States Job Creation and 

International Tax Reform Act of 2012, would create a dividend exemption 

system. However, it would generally only apply to foreign earnings that are taxed 

above 50 percent of the U.S. corporate tax rate unless the foreign subsidiary of the 

U.S. company could demonstrate that it met requirements for being a sufficiently 

active business in a particular jurisdiction, and only to the extent its earnings did 

not relate to intellectual property. Would the Administration support this type of 

"anti-base erosion" measure as part of the adoption ofsuch a dividend exemption 

system? If not, please explain why such a measure would be viewed as insufficient, 

and outline other alternative or additional measures that the Administration would 

support. 

The Administration believes that international tax reform is an important component of 

overall business tax reform. International tax reform should encourage investment, growth, 

and high-quality jobs in the United States, and it should reduce tax incentives for U.S. 

companies to locate profits overseas while ensuring that these companies are able to compete 

abroad. 

The global minimum tax contained in the framework would reduce the incentive to shift 

profits and investment to low-tax countries and helps address the global race to the bottom in 

corporate income tax rates. The Framework is intended to lay the foundation for a dialogue 

with Congress and stakeholders on tax reform. While there is considerable debate as to how 

to reform the international tax system, I believe there is substantial common ground on this 

subject, including a shared concern about preserving the U.S. tax base by reducing incentives 

that encourage the shifting of investment and income overseas. This common ground could 

advance efforts to reform the current U.S. international tax rules, and I am committed to 

working with Congress and stakeholders to enact tax reform. 
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Question 7: 

Does the Administration have a position on any of the bills currently before Congress 

that would impact state and local collection of income and sales and use taxes? These 

bills include the Marketplace Fairness Act, which would permit states to require remote 

sellers that lack physical presence in a state to collect sales or use tax on taxable 

transactions with in-state residences; the Business Activity Tax Simplification Act, 

which would create a bright-line test for determining wben states can impose income 

tax on businesses tbat do not bave a physical presence in tbeir state; and tbe Mobile 

Workforce State Income Tax Simplification Act, which creates a safe barbor test for 

determining wben states can impose income tax on nonresident employees traveling 

into the state for business purposes. If the Administration does have a position on tbese 

bills, please explain that position. Iftbe Administration does not currently have a 

position, please explain wby tbis is tbe case. 

The Administration has not taken a position on the various bills you mention that would 

affect how state and local governments collect income and sales and use taxes. However, I 

agree with one of the primary premises underlying these bills-that the system of collecting 

income, sales, and use taxes by State and local governments should be made simpler and 

provide clear, bright line rules for state and local governments and taxpayers to follow. 

SimplifYing the tax system and clarifYing the rules will increase fairness and tax compliance, 

while reducing the burdens on the sellers and employers that would collect and remit such 

taxes. If confirmed, I would seek to work with Congress on these important issues. 
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Question 8: 

The Administration's tax policies are hostile toward traditional energy sources like oil, 

coal and natural gas. In seeking to eliminate all tax provisions related to traditional 

energy, I am concerned that the Administration fundamentally misunderstands the 

importance of these policies to the production of energy and the jobs that come with 

that production. If confirmed, will you commit to working with me to better 

understand the reasons those provisions exist in the tax code and the impact ofthe 

Administration's proposals on the industry? 

If confirmed, one of my primary goals will be to work with Congress to understand concerns 

on matters of tax policy. In that connection, I will, of course, work with you and your staff to 

review and analyze tax expenditures to determine those that have compelling rationales for 

their continuance and those which should be repealed. 
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Question 9: 

I am concerned that the Administration's tax proposals related to traditional energy 

sources will lead to job losses and less domestic energy production. Has the 

Administration conducted an analysis ofthe impact ofthese policies that shows higher 

taxes will lead to more jobs and more domestic energy production? 

When considering the elimination offossil fuel subsidies, the Administration carefully 

considered the impact their elimination would have on the overall economy. Our analysis 

indicates that changes in domestic fossil fuel production costs resulting from loss of these 

subsidies would have little effect on U.S. energy prices. Regarding oil, the domestic price of 

oil is determined by global supply and demand because oil is an intemationally traded 

commodity. The U.S. contribution to the world oil supply is relatively small, and thus any 

changes likely will not significantly affect the world oil price. Accordingly, U.S. consumers 

would see little impact from the removal of oil tax preferences. In 2009, Treasury's Office of 

Economic Policy estimated that the enactment of similar proposals would increase total oil 

finding and lifting costs by less than two percent and would decrease domestic production by 

less than one-half of one percent. Similar findings have been reported by the Congressional 

Budget Office. The subsidies for the coal and natural gas industries amount to about one 

percent of average total revenues in these industries. As a result, the final market impact on 

consumption and production is likely to be very small. 
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SENATOR RON WYDEN (D-OR): 

Question 1: 

Section 1603 of the American Recovery and Reinvestment Act of 2009 provides grants 

for investments in certain energy production property in lieu of tax credits available 

under sections 45 and 48 ofthe Internal Revenue Code. As you know, the Department 

of Treasury administers the 1603 program. 

Information gathered by Treasury from applicants wishing to finance a solar project 

with 1603 grants include information about the solar module manufacturer from which 

the applicants will source and the price they will pay for the modules. 

To date, how much money from 1603 grants were used to procure solar modules 

produced by Chinese-headquartered firms? 

Answer: 

While applicants for section 1603 grants with respect to solar projects are required to provide 

cost information, which may include a separate statement of the price paid for solar modules, 

they are not required to identity the manufacturer of the modules. 
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SENATOR BILL NELSON (D-FL): 

Ouestion 1: 

In 1986, Congress enacted section 382 of the tax code to prevent companies from 

evading taxes by buying other companies that carried significant tax losses on their 

books. The provision limits the ability of an acquiring company to use the net 

operating losses (NOLs) ofa target company to offset its own revenues for tax 

purposes. During the financial crisis, the government's purchase and sale of private 

stock in distressed companies could have triggered section 382. Beginning in late 2008, 

the Treasury Department issued a series of notices clarifying that section 382 did not 

apply to the government's investments. Treasury officials have since justified these 

notices on the grounds that they were consistent with the purpose of section 382, made 

the companies stronger and attracted private capital, and helped stabilize the overall 

financial system. 

During the financial crisis, some community banks facing similar circumstances raised 

capital from private investors rather than the government. These institutions do not 

qualify for the favorable treatment described above, and thus face higher tax liabilities 

because of limitations on their NOLs. Legislation introduced in the House (H.R. 1697) 

would, among other provisions, temporarily extend the rules set forth in Notice 2010-2 

to a qualifying investment in a small bank issuer. What are your thoughts on this tax 

parity proposal? 

Congress enacted section 382 to prevent taxpayers from making investments in corporations 

with significant losses and essentially trafficking in tax losses. Notice 20 I 0-2 generally 

provides that section 382 does not apply to investments in private corporations made by the 

Federal government pursuant to one of several programs created under the Emergency 

Economic Stabilization Act of2008, Public Law 110-343. The rationale for not applying 

section 382 to the Federal government's investments in private corporations - both its 

purchase and, within strict limitations, its subsequent sale of such investments - is that the 

Federal government is not a taxpayer, and therefore its investments in private corporations do 

not raise the same tax evasion concerns that enactment of section 382. 

Section 402 of H.R. 1697, if enacted, would attempt to apply the principles of Notice 2010-2 

to private investments in small issuer banks. This proposal raises much different policy 

concerns than those addressed by Notice 2010-2. However, if confirmed, I would be happy 

to discuss this proposal with you and your staff. 
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SENATOR CHARLES GRASSLEY (R-IA): 

Ouestion 1: 

Last year, I wrote to the President and asked him to define a loophole. I received a 

response from the Acting Assistant Treasury Secretary for Tax Policy Emily McMahon 

that stated the following, and I quote: 

"We agree with you that tax expenditures are, in many cases, incentives that reflect 

intentional government policy. In this respect, they differ from pure tax loopholes, 

which are unintentional benefits derived by taxpayers who may have found a way to 

game the system." 

Yet, one section ofthe Treasury Greenbook is titled "Other Revenue Changes and 

Loophole Closers" without distinguishing which are loopholes. Using the definition 

provided by Ms. McMahon, please indicate which of the following items from this 

section are loopholes. 

Increase Oil Spill Liability Trust Fund Financing Rate by One Cent and Update 

the Law to Include Other Sources of Crudes 

Reinstate and Extend Superfund Excise Taxes 

Reinstate Superfund Environmental Income Tax 

Make Unemployment Insurance Surtax Permanent 

Provide Short-Term Tax Relief to Employers and Expand Federal 

Unemployment Tax Act (FUTA) Base 

Repeal Last-In, First-Out (LIFO) Method of Accounting for Inventories 

Repeal Lower-Of- Cost-or-Market (LCM) Inventory Accounting Method 

Eliminate Special Depreciation Rules for Purchases of General Aviation 

Passenger Aircraft 

Tax Carried (profits) Interests as Ordinary Income 

Deny Deduction for Punitive Damages 

Eliminate the Deduction for Contributions of Conservation Easements on Golf 

Courses 

Answer: 

A tax system should be fair, simple, and efficient. This means that any special tax benefits 

should be clearly identified and justified on the basis of spillover benefits or fairness or 

economic efficiency. What matters is whether a tax provision is justified, and there can be 

substantial disagreement over what is an intended, as opposed to an unintended, tax benefit. 
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In the Budget, the entire category of these items was labeled "Other Revenue Changes and 

Loophole Closers", as you noted. I would classifY many of the items on this list as "other 

revenue changes", specifically the first seven items and the tenth item. While there could be 

disagreement on the remaining three items (corporate aircraft depreciation, carried interests, 

and conservation easements for golf courses), I would characterize them as loophole closers. 
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Ouestion 2: 

In contrast to provisions for accelerated depreciation and inventory accounting 

methods, the exploitation ofthe supporting organization status by charities is for 

certain a loophole. Upon receiving Ms. McMahon's response last October, I wrote to 

Secretary Geithner and Commissioner Shulman about the George Kaiser Family 

Foundation's exploitation of this loophole to fund Solyndra. 

I asked for a status update on the report and regulations that were mandated by the 

Pension Protection Act of 2006. Soon after, the report was issued but it failed to 

address substantively the key questions, including whether additional reforms were 

needed. Do you agree that supporting organization provisions continue to be abused? 

In addition, there is still no sign of the pay-out regulations for the most abusive 

supporting organizations. As with the regulations for the whistleblower program, I 

expect these regulations to be issued this year and that I receive an update on the status 

ofthese regulations, including the decisions made by the Treasury Department. 

Answer: 

The Pension Protection Act of2006 (PPA) made significant progress in curbing the abuses 

that led to the passage of the legislation. We have been working diligently to complete the 

implementation of the provisions in the PPA, and we hope to have the regulations issued 

shortly. In my position as Deputy Assistant Secretary of Tax Analysis, I have not been 

directly involved in these regulatory matters. However, if confirmed, I would be happy to 

work with you and your staff on these issues and to keep you updated on the status of the 

regulations. 
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Question 3: 

The President has promoted tax increases, including the Buffett Tax, as a means to 

achieve "fairness" in the tax code. This sentiment has been echoed by various 

Democratic leaders. Just last week, former Treasury Secretary Larry Summers, during 

a discussion on tax reform sponsored by the Brookings Institution, stated that, in 

addition to raising revenue, tax reform should result in more progressivity but that 

economic efficiency and simplification are essentially not important. 

What do you think the goals of tax reform should be? 

If fairness is one of those goals, how would you define fair and how would you 

incorporate that concept into the tax code? 

How can the tax code be made more progressive? 

Do you share Mr. Summers' view that economic efficiency and simplification are 

not important? 

Answer: 

I agree with the President's goals for fundamental tax reform as outlined in the FY 2013 

Budget: (I) simplifY the tax code and lower tax rates; (2) reform inefficient and unfair tax 

breaks; (3) decrease the deficit by $1.5 trillion over ten years while preserving progressivity; 

(4) increase job growth and creation in the United States; and (5) observe the Buffett rule so 

that those making over $1 million pay no less than 30 percent of their income in taxes. 

I think that fairness is an important policy consideration in tax policy design. However, 

fairness is a normative concept on which reasonable people can disagree. That said, widely 

held principles suggest that taxpayers in similar economic circumstances should pay about 

the same amount of tax (horizontal equity) and that taxpayers who are better-off should pay a 

larger proportion of income in taxes than paid by less well-off taxpayers (vertical equity). 

Much ofthe discussion about fairness focuses on vertical equity and the notion that a welldesigned tax system would be progressive; that is, characterized by effective tax rates rising 

with income. As the Secretary has stated, we should strive to have a reformed tax system 

that is at least as progressive at the Administration's FY 2013 Budget Policy. Moreover, 

high-income families should not experience effective tax rates that are lower than those faced 

by middle-income families. 

There are a number of tax parameters that can affect the fairness of the tax system. For the 

individual income tax, these include the tax rate schedule, standard deduction and personal 

exemption amounts, itemized deductions, exclusions, and tax credits. 

As stated in my response to Question 1 (above), I think that efficiency and simplicity, as well 

as fairness are important features of a well-designed tax system. 
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Question 4: 

Key findings from a 2007 report from the Department of Treasury titled "Income 

Mobility in the U.S. from 1996 to 2005" (available on http://www.treasurv.gov) include 

the following. 

• There was considerable income mobility ofindividuals in the U.S. economy 

during the 1996 through 2005 period as over half of taxpayers moved to a 

different income quintile over this period. 

• Roughly half of taxpayers who began in the bottom income quintile in 1996 

moved up to a higher income group by 2005. 

• Among those with the very highest incomes in 1996 - the top 11100 of 1 percentonly 25 percent remained in this group in 2005. Moreover, the median real 

income ofthese taxpayers declined over this period. 

• The degree of mobility among income groups is unchanged from the prior 

decade (1987 through 1996). 

• Economic growth resulted in rising incomes for most taxpayers over the period 

from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent 

after adjusting for inflation. The real incomes of two-thirds of all taxpayers 

increased over this period. In addition, the median incomes of those initially in 

the lower income groups increased more than the median incomes ofthose 

initially in the higher income groups. 

When this report was issued, you were the Director of Research, Analysis and Statistics 

at the Internal Revenue Service. Please state your contributions to this report. Please 

also provide your thoughts on whether the degree of income mobility has changed since 

2006. 

Answer: 

The report you refer to was prepared by the staff ofthe Office of Tax Analysis during the 

Bush Administration, prior to my tenure at Treasury. At the time the report was prepared, I 

was Director of Research, Analysis and Statistics at the Internal Revenue Service, and I was 

not involved in this research. This report has not been updated and I have not examined 

whether income mobility has changed dramatically since 2006. 
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Question 5: 

An IRS Statistics of Income report, which also appears to have been issued under your 

watch, on the 400 tax returns with highest income reported over 14 years shows that in 

any given year, on average, about 40 percent of the returns that were filed were not in 

the top 400 in any ofthe other 14 years. 

Similarly, Tax Foundation calculations based on IRS data indicate that millionaire 

status is fleeting. In a review of millionaires from 1999 through 2007, the Tax 

Foundation found that only 6% percent of millionaires were millionaires for all nine of 

those years. In contrast, 50% were only millionaires for one year and only 15% for two 

years. Ironically, President Obama himselffalls into this category as his tax returns 

indicate that he was a millionaire last year but not this year. 

Tbese analyses would indicate that the United States has a dynamic economy and that 

wealth is not static. Given that, is it reasonable to expect that a tax code that raises 

revenue based on annual income can ever achieve fairness? 

For many reasons, no real-world tax system will ever perfectly measure ability to pay. Yearto-year fluctuations in income reported on tax returns, differing family situations, and 

different levels of wealth all are factors which complicate notions of ability to pay and hence 

considerations offairness over time (both vertical and horizontal equity). That said, I believe 

that a tax system based on annual income, which is administrable, can meet reasonable 

standards for fairness. 
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Question 6: 

History also shows that higher tax rates do not lead to increased revenues. We've had a 

93-percent marginal tax rate -- then 70 percent, 50 percent, 28 percent, and now a 35-

percent marginal tax rate. However, regardless of how high the tax rate is, the 

government gets about the same amount of revenue and it works out to be about 18 

percent of gross domestic product. In your opinion, if the goal oftax increases, 

including the Buffett tax, is to raise revenue, how would you ensure that tax increases 

actually result in increased revenue? What is an appropriate percentage of GDP for 

revenues? 

Answer: 

The desired level of revenue depends on the demand for goods and services provided by the 

Federal government, and it is not possible to discuss these issues in isolation. The tax 

provisions in the Administration's FY2013 Budget would raise about 20 percent ofGDP 

toward the end of the ten-year budget window. That level of revenue together with spending 

reductions proposed by the Administration is responsible, in that it eliminates the primary 

deficit and stabilizes the debt-to-GDP ratio by 2016. The primary goal of the Buffett Rule is 

to improve the fairness of the tax system. 
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Question 7: 

The predecessor to the Alternative Minimum Tax (AMT) was enacted in 1969 in 

reaction to concerns that 155 high income taxpayers paid no tax. The AMT, which was 

originally only intended to impact those 155 taxpayers, now impacts 34 million 

taxpayers every year. The majority ofthese taxpayers are middle-class families who 

find themselves subject to this onerous tax because, under the AMT, their deductions 

for children or high state income taxes are significantly reduced or even 

eliminated. The Buffett tax would create a new alternative minimum tax but the 

President hasn't indicated how he would fix the existing AMT. Do you support the 

concept of a Buffett tax? If yes, how would you avoid the problems that arose as a 

result of the current AMT? 

I agree that the current AMT has design flaws that must be addressed. A large part ofthe 

problem with the current AMT is that its parameters have not been indexed for inflation, 

causing the tax to apply to larger and larger numbers of families every year. Congress has 

addressed this concern with a series of temporary fixes, commonly called "patches" that 

essentially adjust exemption amounts for past inflation. As you know, the AMT "patch" that 

was in effect through December of 20 II has now expired. leaving millions of taxpayers 

uncertain about their income tax liabilities this year. The President's Budget would address 

both of these problems by permanently extending the AMT relief enacted in the Tax Relief, 

Unemployment Insurance Reauthorization, and Job Creation Act of 20 1 0, and indexing those 

provisions for inflation in 2012 and beyond. 

I support the concept of a Buffett rule. The Buffett rule is not a specific tax in itself, but 

rather a principle of tax fairness, which says that no high-income family should experience a 

lower effective tax rate than what middle-class families pay. 

This principle could be achieved in many ways, but perhaps the best approach would be 

through a fundamental reform of the tax system, which would avoid many of the problems 

with the current law AMT. If confirmed, I look forward to working with the Committee to 

develop a sensible tax system that promotes grow1h, is simple, is fair, and raises enough 

revenue to pay for the important functions of the Federal government. 
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u.s. Senate Committee on Finance 

Nominations Hearing held May 8, 2012 

F ollow-Up Questions for the Record for Mark Mazur 

Received May 16-21,2012 and Submitted May 22,2012 

SENATOR MICHAEL B. ENZI (R-WY): 

Ouestion l: 

Regarding Question #2 on LIFO repeal, tbe Administration bas proposed to repeal 

LIFO, but based on your responses, no work bas been conducted by tbe Administration 

to understand tbe impact of sucb a proposal on small businesses. Your response was 

tbat "we would be pleased to consult witb tbe SBA regarding its impact on small 

business jobs creation," suggesting tbat sucb consultation bas not occurred. 

a. If confirmed, would you recommend to tbe Administration tbat sucb consultation 

sbould occur prior to any movement on a LIFO repeal proposal? 

ANSWER: 

We believe the overall impact on small businesses and small business jobs creation would be 

limited, since relatively few small businesses maintain significant LIFO inventory reserves, 

Nonetheless, should I be confirmed as Assistant Secretary for Tax Policy, I would consult 

with the SBA on this proposal. 

b. You also commented in Question #2 tbat "tbe majority of current LIFO reserves are 

concentrated in a small number of large corporations." Would you please identify 

and comment on tbe analysis and data supporting tbis statement? 

ANSWER: 

There are two main sources of data on LIFO inventory reserves: financial data and tax data, 

They provide somewhat different views of the use of LIFO, though if a taxpayer uses LIFO 

for tax purposes, the taxpayer is obligated to also use LIFO for financial reporting purposes, 

However, both perspectives provide ample support for the conclusion that relatively few 

firms account for the vast majority of LIFO inventory reserves, 

To start with financial data, fewer than 100 of the S&P 500 firms use LIFO inventory to 

value any part of their inventories, The majority of total LIFO reserves for these firms are 

accounted for by less than 10 firms (mostly in the petroleum sector), 

According to tax data, about 10 percent of all corporations use LIFO to value any portion of 

their inventories, The largest inventories are held by the relatively small number of 

corporations over $500 million in assets (0,2 percent of the total number of corporations), so 

we can expect that LIFO reserves would be concentrated in these larger firms as well. One 

study using tax data (Knittel, 2009) to examine the use of LIFO inventory showed that fewer 

than 3 percent of the firms in a representative sample of corporate taxpayers accounted for 

over 2/3 of the total LIFO amounts in ending inventories, 
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Question 2: 

Regarding Question #3 on the potential large disparity between corporate and 

individual income tax rates, you suggest that it might be necessary to modify the 

accumulated earnings tax and the personal holding company tax "in a post business tax 

reform environment." However, you then go on to state that "comprehensive tax 

reform might make it easier to deal with these potential problems, because it would be 

possible to adjust individual and corporate income tax rates (emphasis added)." If 

confirmed, would you recommend that the Administration work with Congress on 

comprehensive income tax reform that deals with both the individual and corporate 

income tax systems rather than focusing solely on "business" tax reform? 

ANSWER: 

The Administration has called for comprehensive tax reform, and I certainly support this 

goal. I believe. as does the President and Secretary Geithner, that significant improvements 

to the u.S. tax system and to U.S. economic performance can be made by addressing 

problems in the business tax system in the short term. even ifmore comprehensive reform 

may have to be addressed later. Many of the changes that would be desirable as part of a 

business tax reform effort would also be part of a desirable comprehensive tax reform 

approach that would modifY the individual income tax as well as the business tax systems. 

So, in my view. business tax reform and comprehensive tax reform are complements, rather 

than substitutes. 
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Question 3: 

Regarding Question #4 on the Administration's proposal to impose a minimum tax on 

overseas profits, I want to thank you for providing an example of how this proposal 

might be implemented. However, I am unclear as to whether any residual U.S. tax 

would be due when the overseas earnings are ultimately repatriated to the United States 

in the example. Please comment on whether any residual U.S. tax (i.e., the difference 

between the full U.S. corporate income tax rate and the "minimum tax rate" multiplied 

by the distributed earnings) would be due when the overseas earnings are repatriated to 

the United States. 

ANSWER: 

There are many ways that the global minimum tax concept could be incorporated into a 

reformed international tax system. In the example I provided, a residual U.S. tax would be 

due when the overseas earnings that were subject to the minimum tax are ultimately 

repatriated to the United States (as in the case of the minimum tax, this residual tax could be 

offset by any unused foreign tax credits associated with these earnings). 

This example is just one possible approach to the complex issue of reforming the 

international tax system and, if confirmed, I would be happy to work with you and your staff 

to understand your thoughts and concerns on this important issue. 
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SENATOR ORRIN HATCH (R-UT) 

Questions for Dr. Mark Mazur from Seuator Hatch: I have the following questions 

related to your responses to my earlier questions for the record that I posed following 

the May 8, 2012 hearing to consider your nomination. My questions are posed to 

gather answers from you, and not primarily to learn about the administration's policy 

positions. Your thorough responses to all of my questions, as well as those of other 

members of Congress, are important in helping arrive at informed decisions. 

Question 1: 

In response to my earlier question (labeled Question 1 in your response), you identified 

that: "Outside experts and observers would note that it is difficult to meaningfully 

assess in isolation anyone measure to improve long-term solvency." However, my 

question was to you and did not seek sentiments of outside experts and observers about 

difficulty levels. Individual reform measures in isolation, with respect to their likely 

contribution to long-term solvency, have been assessed by, for example, the Social 

Security Administration's actuaries. And many experts and observers have identified 

tradeoffs of individual possible reform elements and, upon having weighed those 

tradeoffs, have arrived at their policy preferences. 

I do not believe that you answered my question, unless your identification that you are 

not responsible for Social Security policy stances or details of the program in your 

current capacity should be taken to mean that you feel unqualified at this time to 

provide the answers. 

ANSWER: 

If confinned as Assistant Secretary for Tax Policy, I will not be making decisions on behalf 

of the Administration on Social Security policy. I would also note that the lessons of 

previous tax refoml and Social Security reform efforts suggest that in order to be successful, 

it is necessary to build consensus on a package ofrefonns that, taken together, represent 

good policy and are able to attract broad bipartisan support from the public and their elected 

representatives. Attempting to evaluate individual refonn proposals in isolation, outside of 

the context of a broader reform package, may be counterproductive to the compromises 

necessary to future reform efforts. 
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Questiou 2: 

In response to my earlier question (labeled Question 2 in your response); you did not 

answer the following: "If confirmed, will you recommend that the payroll tax holiday 

be extended in the event that the state of the economy is unchanged from the current 

state?" Your response described the administration's plans and budget, but did uot 

indicate what your recommendation would be if the state of the economy is unchanged 

from the current state. 

My identification of the current state of the economy allows us to abstract from 

forecasts and allows me to gauge what your policy recommendation might be. This 

would be particularly useful information for me, as your response did not seriously 

address the second question I asked about where the unemployment rate and quarterly 

GDP growth would have to be in order for you to change your assessment, aside from 

identifying, vaguely, that you "may" do so if conditions "markedly worsen." 

Answer: 

As Secretary Geithner said during his February 16 testimony before the House Budget 

Committee, "I would not recommend extending the payroll tax cut because there are things 

you have to do to come out of a crisis you will only want to do on a temporary basis. This is 

one of them." I agree with Secretary Geithner. Were economic conditions to change, one 

would want to consider a number of factors, including but not limited to output, employment, 

and income, before making a final decision on whether or not to extend the payroll tax cut at 

a later date. 
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Ouestion 3: 

In response to my earlier question (labeled Question 4: a), you discussed vague ideas 

about "fairness" and "equity" but did not, in my view, provide a very firm answer to 

my question of" ... how will we know what is the amount of alteration in the 

progressivity of the tax code that would be desirable to attain fairness or perceptions of 

fairness?" 

You did, however, give me a cIue by stating that in your view" ..• we should strive to 

have a tax code that is at least as progressive as the Administration's FY 2013 Budget 

Policy." I am not sure what "Budget Policy" means, but presume your reference was to 

the proposals contained in the President's Fiscal Year 2013 Budget of the U.S. 

Government. If so, please provide summary statistics that you believe are sufficient to 

identify progressivity in that budget, which can then provide me with a benchmark and 

sense of what you view as some measure(s) of progressivity that we should "at least" 

attain. 

ANSWER: 

We should strive to have a Tax Code that balances efficiency and equity concerns. In that 

regard, I believe that fairness concerns would be met by a tax system that incorporates a 

similar degree ofprogressivity to that in the President's Fiscal Year 2013 Budget of the U.S. 

Government, and more specifically, the totality of the revenue proposals included in the 

President's budget proposal. 

The FY 2013 Budget Proposal improves progressivity of the tax code by, for example, 

allowing the top two individual income tax rates to go back to the levels of the 19905 for 

taxpayers with incomes over $250,000 Goint filers), taxing dividends as ordinary income, 

taxing carried interest as ordinary income, making the American Opportunity Tax Credit 

permanent, and expanding the Earned Income Tax Credit for larger families. 
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Question 4: 

In response to my earlier question (labeled Question 4: b.), you indicated that" ... tax 

law changes of the last Administration ... " were the policies that you identity with the 

President's Chairman of the Council of Economic Advisors identification of past 

policies that "didn't gcnerate faster economic growth or jobs, but rather increased 

inequality." 

I asked you to also identity any statistical evidence of causality to support such a casual 

assertion. You did not provide any such evidence and therefore did not answer the 

question. 

ANSWER: 

I recognize that there are differences of opinion on these questions. However, the data on 

incomes reported over the 2000-20 I 0 period strongly suggests that the tax cuts enacted 

during this period of time did little to promote overall economic growth. Both employment 

growth and output growth were slower than during the mid-to-Iate 1990s, despite 

substantially lower individual income tax rates. There also is a substantial body of empirical 

evidence and economic theory that would seem to predict such an outcome for deficitfinanced tax cuts, like those enacted during the Bush Administration. For example, William 

Gale and Samara Potter published an analysis that predicted such an outcome for the 200 I 

tax cuts. In addition, several economic studies (e.g., by Alan Auerbach and Joel Slemrod) 

suggest that cuts in the top marginal individual income rates will do little to promote overall 

economic growth and instead lead to timing shifts and tax planning. 
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Question 5: 

In response to my earlier question (labeled Question 4: c.), you did not answer the 

question of" •.. what do you disagree with in Gordon's analysis?" You disagree with 

some of his conclusions, but did not identify what analytical disagreement you have 

with Gordon's work. Did he commit analytical errors? Did he not use appropriate 

data or methods? 

ANSWER: 

In many areas of economics, data is imperfect and definitive conclusions can be difficult to 

reach. Different approaches to analyzing an issue can lead to different conclusions and only 

over time, if at all, will a consensus be reached. 

The Gordon paper is a provocative analysis that rightly raises questions about some aspects 

of conventional wisdom. This paper does not provide a definitive analysis, and taken as a 

whole, the paper certainly does not show that income inequality is not a concern or even that 

the growth in income inequality has clearly reversed. 

The primary contributions ofthe Gordon paper are adjustments and corrections to a standard 

measure of inequality based on the difference between the growth rate of median income and 

the growth rate of productivity (the income-productivity gap). This type of analysis typically 

attributes changes in the income-productivity gap to changes in the degree of skewness in the 

income distribution: the bigger the gap, the more skewness there is in the distribution and, 

therefore the more inequality that exists. 

After making a series of adjustments, Gordon concludes that for the 1979-2007 period, the 

increase in income inequality as measured by the income-productivity gap has been 

overstated. He further argues that skewness in the income distribution (measured as the 

difference between the growth of mean and median incomes) contributed very little to the 

income-productivity gap over this period, which contradicts the assumption that the bulk of 

the change in the income-productivity gap is caused by increases in income inequality. For 

the period from 2000 to 2007, Gordon's analysis has the income-productivity gap increasing, 

but he does not attribute this increase to income inequality because his measure of income 

skewness declined. 

There are several limitations to the analysis in the Gordon paper. One is its aggregate and 

indirect approach to measuring changes in inequality. The aggregate, summary approach 

used in this paper is far removed from a detailed, micro study of income earned by 

households at different income levels, an approach that seems to me to provide the best 

evidence of changes in inequality. Studies conducted by the non-partisan Congressional 

Budget Office (CBO), on the other hand, take the more direct approach of measuring income 

for households at various income levels and do not have the limitations imposed by more 

indirect measures. 
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A second limitation ofthe Gordon paper is that some of his adjustments are not shared by all 

economists working in this area. For example, a portion of his results comes from changing 

the measure of inflation used in the analysis, and there is unlikely to be consensus that his 

modifications are appropriate. Another portion of his result comes from using median perperson income, rather than the more traditionally-used median household income, in order to 

conform to the productivity measure, which is computed on a per-person basis. This 

adjustment seems appropriate in some instances, but it does not account for a change in the 

number of earners per household that also could affect incomes over the period. 

A third limitation is that Gordon's primary analysis is based on Census measures of income 

that are widely acknowledged to be flawed. One problem is top coding, in that the highest 

earners are assigned an income value that does not represent the true income of the 

household (this is done to prevent possible identification of the household). Another is that 

the Census measure of income is self-reported and incomplete. Particularly relevant is that 

the income measure excludes capital gains, an important component of income for higher 

income families and one that has changed a lot over the period analyzed. 

Gordon acknowledges these problems, and correctly notes that Census data generally cannot 

be used to examine the rapid increase in income earned by those at the top end of the income 

distribution. Tax data can be used for this purpose, and those data clearly show the 

increasing shares of pre-tax and after-tax income received by the most affluent families 

through 2007. 

While no measure is perfect for examining the dynamics of income inequality, I continue to 

think that the gold standard for measuring changes in income inequality remains the time 

series published by the CBO. This time series suggests that recent increases in income 

inequality are real and continued through 2007. 
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Question 6: 

I am concerned about the Treasury Department's long-standing practice, across 

administrations, of not snbmitting IRS rnles to the OMB Office oflnformation and 

Regnlatory Affairs ("OIRA") for determination as to whether snch rules are "major" 

under the Congressional Review Act ("CRA"). 

According to Secretary Geithner, "IRS rules generally have not been submitted to 

OIRA for a determination of whether they are 'major' under the CRA, becanse ... IRS 

rules generally are not 'major' within the meaning ofthe CRA." This reasoning seems 

circnlar, at best. 

a. What is the role of the Assistant Secretary of the Treasury (Tax Policy) in 

submitting, or not submitting, an IRS rule to OIRA for a determiuation of whether 

it is "major" under the CRA? 

My understanding is that of the literally thousands of rules the Treasury/IRS have 

promulgated since the Congressional Review Act was signed into law by President 

Clinton, only seven have been submitted to OIRA for a determination of whether 

they are 'major' under the CRA. All seven were found to be "major." 

My understanding is that all seven rules that were submitted to OIRA were jointly 

promulgated with the Department of Labor. This suggests to me that the 

Department of Labor has a history of greater compliance with the CRA than does 

the Department of the Treasury. 

ANSWER: 

For each regulation that we promulgate, the Treasury Department fully complies with the 

Congressional Review Act (CRA). IfI am confirmed, I will remain committed to ensuring 

that we continue to follow both the letter, and the spirit, of the CRA. 

The CRA provides for the Office of Management and Budget (OMB) to determine whether a 

rule is a "major" rule, meaning that the regulation results in, or is likely to result in, (1) an 

annual effect on the economy of$IOO million or more, (2) a major increase in costs or prices 

for consumers, individual industries, Federal, State or local government agencies. or 

geographic regions, or (3) significant adverse effects on competition, employment. 

investment, productivity, innovation, or on the ability of United States-based enterprises to 

compete with foreign-based enterprises in domestic and export markets. 

Most tax regulations do not meet this standard because the effects on the economy derive 

from the taxpayer obligations imposed by the statute itself rather than by the regulation, 

which generally provides needed guidance to taxpayers on how to comply with their 

statutory obligations. 
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In addition, the Treasury Department and IRS engage in a process to ensure that guidance 

issued is fair and minimally burdensome. For example, Treasury and the IRS solicit input 

from the public regarding its rulemakings, including through notice and comment periods 

prior to the issuance of final rules. These comments are carefully considered and help shape 

the final rules that are promulgated. In addition, Treasury and IRS staff members regularly 

conduct extensive outreach, meet with stakeholders, and hold public hearing seeking 

feedback and input from taxpayers. After incorporating taxpayer feedback, each regulation 

goes through a revicw process both at the IRS and the Treasury Department during which 

staff experts ensure that the regulation fairly and reasonably implements the Internal Revenue 

Code. 

The Office of Tax Policy takes seriously our obligation to promulgate rules that are fair and 

minimally burdensome, and we are mindful of the importance of adhering faithfully to the 

CRA. 

b. Why does the Department of Labor apparently routinely submit rules for OIRA 

determination of whether the rules are major or not, but the Treasury Department 

does not? Does the eRA have different requirements for the Department of Labor 

than it has for the Department of Treasury? Would the eRA somehow apply 

differently to the Department of Labor than it does to the Department of Treasury? 

ANSWER: 

While I cannot speak to Department of Labor practices, I am not aware of any legal 

requirements under the CRA that apply differently to the Department of Labor and the 

Department of the Treasury. Treasury fully complies with the requirements of the CRA. 

c. If confirmed as Assistant Secretary will you work to assure that TreasurylIRS rules 

are submitted to OIRA for a determination of whether such rules are "major" 

within the meaning of the eRA? 

ANSWER: 

If confirmed, I am fully committed to ensuring that the Treasury Department complies with 

the CRA with respect to guidance interpreting tax statutes. 
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SENATOR CHARLES GRASSLEY (R-IA) 

Ouestion 1: 

You indicated in your response that changing the tax depreciation life for generation 

aviation passenger aircraft would be a loophole closer. For financial statement 

purposes, generally aecepted acconnting principles require that companies expense the 

cost of a capital asset over its useful life. The goal of financial acconnting is to properly 

match revenue and expenses so that third parties, including investors, have an accurate 

picture of a company's finances. 

Do you agree that this goal conflicts with the goal of tax reporting, which is to minimize 

taxable income? 

ANSWER: 

It is true that tax accounting rules and financial accounting rules have differing objectives, 

and so might not perfectly overlap. Under an income tax, the goal of tax accounting is to 

accurately portray the net income of the entity subject to tax. Setting aside explicit tax 

incentives, tax accounting rules would seek to neither overstate nor understate net income 

subject to tax. In contrast, a primary goal of financial accounting is to protect shareholders 

and other interested parties from being misled by excessively high reported income. Hence, 

financial accounting has at its foundation the principle of conservatism, with a preference for 

understating rather than overstating income. Given these differing objectives, it is not 

surprising that tax accounting rules often differ from financial accounting rules. 
115 


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Question 2: 

Since depreciation deductions will always exist for financial accounting purposes, it 

seems a tax deduction should also always exist. 

Do you agree that, regardless of the life of the asset, a depreciation deduction is just a 

timing difference and the cost will ultimately be deducted from income to calculate 

what is taxable? Do you consider the entire accelerated depreciation system a 

loophole? Do you believe that bonus depreciation and expensing provisions are 

loopholes? 

ANSWER: 

Recovering the cost of an investment is essential for proper measurement of periodic income 

for both tax accounting and financial accounting purposes. Depreciation deductions are 

appropriate and necessary under an income tax and under financial accounting rules. 

I do not consider the entire accelerated depreciation system a loophole, nor do I believe that 

bonus depreciation and section 179 expensing are loopholes. However, they all are tax 

preferences to the extent that the deductions exceed or accelerate those available under 

economic depreciation. 
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Question 3: 

The question to consider in the context of tax reform is whether a deduction should 

match financial accounting deductions, whether the deduction should be accelerated as 

it is currently, or whether we should allow full expensing. 

What are your views? Do you believe that the tax code should incentivize capital 

investment and domestic manufacturing? 

ANSWER: 

In the context of business tax reform, it is not necessary for deductions for tax purposes to be 

the same amounts as allowed for financial reporting purposes. In the context of deficitneutral business tax reform, trade-offs are made between the tax base and the tax rate. Some 

proposals to broaden the tax base, such as slowing accelerated depreciation deductions, will 

raise revenue that can be used to cut the corporate income tax rates, thus improving economic 

incentives for investment and grov.1h. If done in a careful manner, such a shift can provide 

for more uniform taxation of alternative investments, and can represent a net improvement 

over our current system of taxing business income. 

As for specific tax incentives, I agree with Secretary Geithner that such incentives should be 

focused on situations where there are significant spillover benefits to the economy at large, 

such as for research and domestic manufacturing. 
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Question 4: 

The listing of asset lives in the tax code stands in stark contrast to financial accounting 

practices. There is no master list that dictates the useful life of an asset. Companies 

make judgment calls which are reviewed by independent auditors. In the 1986 tax 

reform act, the Treasury Department was authorized to determine asset lives. This 

authority was repealed in 1988. 

If accelerated depreciation is retained should Congress continue to be responsible for 

this? Or would it make sense to reauthorize the Treasury Department or possibly look 

to an independent panel of experts to periodically review asset lives? 

ANSWER: 

Congress is responsible for determining tax law, including the schedule for depreciation 

deductions. Congress can delegate its authority to promulgate deduction schedules, as was 

done in the 1986 Tax Reform Act. And Congress may rescind that authority, as was done in 

the case of depreciation deductions. 

A periodic review of asset lives and other depreciation parameters, perhaps by some neutral 

body, has some appeal on a technical level, because economic realities, including actual 

economic depreciation, may change over time. That review could be used to inform 

legislative changes. If confirmed, I would be pleased to work with you and your staff to 

examine the merits of reinstating the 1986 provision cited in your question. 
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us. Senate Committee on Finance 

Nominations Hearing held May 8, 2012 

Additional Questions for the Record (Round 3) for Mark Mazur 

Received May 30,2012 and Submitted June 5,2012 

SENATOR ORRIN G. HATCH (R-UT) 

Ouestion I: 

"Tbe term 'major rule' means any rule tbat tbe Administrator oftbe Office ofInformation 

and Regulatory Affairs •.. finds bas resulted in or is likely to result in" A, B, or C.! 

In your answer to me on May 22, 2012, you wrote: "Most tax regulations do not meet tbis 

standard [of resulting in A, B, or C of 5 U.S.C. § 804(2») ••. " 

a. Under tbe CRA, is tbe determination ofwbetber tbe regulation results in A, B, or C 

to be made by tbe Administrator of OIRA? 

ANSWER: 

The Congressional Review Act (CRA) defines the tenn "major rule" to mean any rule that the 

Administrator of the Office ofInfonnation and Regulatory Affairs (OIRA) finds has resulted (or 

is likely to result) in one of three specified criteria being satisfied. The CRA does not require 

that agencies submit every rule to OIRA for this detennination, and it has not been the practice 

ofthe IRS and the Treasury Department to do so. 

b. Can another agency, sucb as the Treasury Department or tbe IRS, make the finding 

called for in section 804(2) tbat satisfies tbe requirement that tbe "agency 

promulgating [tbe] rule sball submit to each House of tbe Congress ... a report 

containing .•• a concise general statement relating to tbe rule, including whether it is 

a major rule,,?2 

ANSWER: 

Prior to issuing each final rule, the IRS submits reports to Congress and GAO in compliance 

with section 80 1 (a)(l)(A) of the CRA. As noted above, however, the CRA does not require that 

agencies submit every rule to OIRA for a detennination regarding whether that rule is a major 

rule, and it has not been the practice of the IRS and the Treasury Department to do so. 

c. Tbat is, wbile an informal determination as to whether a rule results in A, B, or C of 

section 804(2) may be made by Treasury, or IRS, or anyone, presumably the only 

determination ofwbetber a rule results in A, B, or C of section 804(2) tbat satisfies 

tbe requirement ofsection 801(a)(I)(A)(ii) is such a determination by tbe 

Administrator ofOIRA, rigbt? 

I 5 U.S.C. § 804(2). 

2 5 U.S.C. § 801(a)(1)(A). 
119 


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ANSWER: 

The CRA defines the tenn "major rule" to mean any rule that the Administrator ofOlRA finds 

has resulted (or is likely to result) in one of three specified criteria being satisfied. The CRA, 

however, does not require that agencies submit every rule to OIRA for this detennination, and 

imposes obligations on agencies, not OIRA, to submit rules to Congress. Pursuant to a 

longstanding agreement between the Office of Management and Budget (OMB) and Treasury, 

Treasury is responsible for alerting OMB to any ruling document that reasonably could be 

expected to have a significant economic impact, which also would enable OMB to detennine 

whether the ruling document is "major" within the meaning ofthe CRA. 
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Question 2: 

In your May 22 response, you wrote: "Most tax regulations do not meet this standard [of 

resulting in A, 8, or C of 5 U.S.C. § 804(2») ... because the effects on the economy derive 

from the taxpayer obligations imposed by the statute itself rather than by the regulation, 

which generally provides needed guidance to taxpayers on how to comply with their 

statutory obligations." 

a. Couldn't a statute have more than one permissible interpretation? And thus, 

couldn't a regulation interpreting a statute have an effect on the economy that 

another possible interpretation wouldn't have had? And thus, couldn't a regulation 

have effects on tbe economy that wouldn't necessarily derive from the statute itself? 

ANSWER: 

It is certainly possible that a statute may have more than one permissible interpretation. The IRS 

and Treasury believe, however, that tax regulations generally do not have a significant effect on 

the economy, because any such impact typically derives from the statute itself. In most 

circumstances, the Internal Revenue Code and the legislative history are sufficiently clear for the 

IRS and the Treasury Department to understand Congressional intent and to promulgate rules 

implementing the intent ofthe statutory language. Nonetheless, I recognize there may be 

instances where the effects on the economy derive from the regulation itself. 

b. Do you agree with the 8th Circuit that Treasury's interpretation of the section 

3121(b)(10) student exception from employment subject to FICA, as contained in 

Treas. Reg. § 31.3121(b)(10)-2(d)(3)(iii)(2005), was "not the only permissible 

interpretation"? See Mayo Found. for Med. Educ. & Research v. United States, 568 

F.3d 675, 683 (8th Cir. 2009). 

ANSWER: 

I am not an attorney and, thus, am not well equipped to comment on specific cases. However, I 

agree with the general point that there may be more than one permissible interpretation of a 

statute. 

c. Do you believe that T.D. 8930 (Dec. 27, 2000) was the only permissible 

interpretation of the section 41 research credit in general, and, in particular, the 

only permissible interpretation ofthe section 41(d)(I)(8) requirement? 

ANSWER: 

As I note above, I am not an attorney, and I am therefore not well equipped to comment on this 

specific issue. Moreover, these regulations were promulgated well before I came to the Treasury 

Department. Nonetheless, it is clear to me that there may be more than one permissible 

interpretation of a statute. In this case, it is my understanding that these final regulations were 

one permissible interpretation and that subsequent guidance revised the interpretation. 
121 


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Opening Statement of Matthew Starbuck Rutherford 

Nominee for Assistant Secretary of the Treasury for Financial Markets 

United States Senate Committee on Finance 

May 8, 2012 

Thank you [Chairman Baucus, Ranking Member Hatch and membcrs of the Committee 1 for 

allowing me to testify before you today. 

T am humbled to sit before you, the members of the Senate Finance Committee, today. I am also 

honored to share this panel with Mark Mazur and Meredith Broadbent. 

Having worked with Secretary Geithner both at the Treasury Department and the Federal 

Reserve Bank of New York, I want to thank him for recommending me for the position of 

Assistant Secretary of the Treasury for Financial Markets. His service throughout the financial 

crisis has been remarkable, and I believe the United States has benefitted from his leadership and 

service during this difficult economic period. 

I would also like to thank President Obama for nominating me for this position. It is an 

incredible honor, and I am deeply appreciative to staff at Treasury and the Senate Finance 

Committee who have worked with me through this process. 

Thank you for recognizing my family a few minutes ago. I would like to thank my wife, Bridget 

Rutherford, my daughter Nora, and my parents for being here with me today. I am so fortunate 

to have such a caring, wonderful family. Unfortunately, my sister could not be here, but she has 

served as a constant source of support throughout my life, informing my worldview and molding 

me into the person I am today. 

For the past three years, T have served as the Deputy Assistant Secretary of the Treasury for 

Federal Finance. In this capacity, my primary responsibility has been to manage the Office of 

Debt Management, which is responsible for making policy decisions on how Treasury finances 

the country's borrowing needs. This has been a very busy time period in government finance, 

but I think that we have achieved our objective, which is to finance the government's budget at 

the lowest cost over time to taxpayers. 

Prior to my time at Treasury, I spent four years at the Federal Reserve Bank of New York in the 

Markets Group. My time there was very instructive because in many ways the New York Fed is 

the government's closest point of contact to the financial markets. I focused on a number of 

different areas in the fixed income space, and learned a great deal about financial markets 

generally. Between my time at Treasury and the New York Fed, I feel that I am uniquely 

positioned to take on this new role. 

If confirmed, I would be honored to continue my career in public service, particularly during this 

very important moment in our nation's history. Far too many Americans are out of work and 
122 


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struggling to pay their bills. It is critically important that we work together given the challenges 

that we face. I will conclude by saying that if! am confirmed, I look forward to working with 

members of the Senate Finance Committee to address these important challenges. 

Thank you again for your time and I would be happy to answer any questions that you have. 
123 


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SENATE FINANCE COMMITTEE 

STATEMENT OF INFORMATION REQUESTED OF NOMINEE 

A. BIOGRAPHICAL INFORMATION 

1. Name: (Include any former names used.) 

Matthew Starbuck Rutherford 

2. Position to which nominated: 

Assistant Secretary for Financial Markets, U.S. Treasury 

3. Date of nomination: 

September 23, 2011 

4. Address: (List current residence, office, and mailing addresses.) 

5. Date and place of birth: 

Atlanta, Georgia 

8/7178 

6. Marital status: (Include maiden name of wife or husband's name.) 

7. Names and ages of children: 

8. Education: (List secondary and higher education institutions, dates attended, 

degree received, and date degree granted.) 
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Lafayette College 

BA Economics - May 2001 

Dates Attended (8/97-5/01) 

University of Chicago 

MPP - June 2004 

Dates Attended (9/02-6/04) 

9, Employment record: (List all jobs held since college, including the title or 

description of job, name of employer, location of work, and dates of 

employment) 

Department of the Treasury (2009-Present) 

Deputy Assistant Secretary for Federal Finance 

Washington, DC 

Federal Reserve Bank of New York (2005-2009) 

Liaison to the Treasury 

New York, NY 

Export-Import Bank of the United States (2004-2005) 

Banking Analyst 

Washington, DC 

Oil-Dri Corporation of America (2001-2002) 

Communications Analyst 

Chicago,lL 

Anheuser Busch (September 2001) 

Sales Associate 

Arlington Heights, IL 

Santa Barbara Parking Company (Summer 2001) 

Parking Services 

Santa Barbara, CA 

10, Government experience: (List any advisory, consultative, honorary, or other parttime service or positions with Federal, State or local governments, other than 

those listed above,) 

None 
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11. Business relationships: (List all positions held as an officer, director, trustee, 

partner, proprietor, agent, representative, or consultant of any corporation, 

company, firm, partnership, other business enterprise, or educational or other 

institution.) 

None 

12. Memberships: (List all memberships and offices held in professional, fraternal, 

scholarly, civic, business, charitable, and other organizations.) 

Phi Beta Kappa. Member since 2001. 

13. Political affiliations and activities: 

a. List all public offices for which you have been a candidate. 

None 

b. List all memberships and offices held in and services rendered to all 

political parties or election committees during the last 10 years. 

None 

c. Itemize all political contributions to any individual, campaign organization, 

political party, political action committee, or similar entity of $50 or more 

for the past 10 years. 

$50 - Obama Campaign (2008) 

14. Honors and Awards: (List all scholarships, fellowships, honorary degrees, 

honorary society memberships, military medals, and any other special 

recognitions for outstanding service or achievement.) 

Phi Beta Kappa (2001) 

University of Chicago, McCormick Fellowship (2003) 

15. Published writings: (List the titles, publishers, and dates of all books, articles, 

reports, or other published materials you have written.) 

Buybacks in Treasury Cash and Debt Management, Federal Reserve Bank of 

New York Staff Reports, October 2007. Authors: Kenneth Garbade and Matthew 

Rutherford 

16. Speeches: (List all formal speeches you have delivered during the past five years 

which are on topics relevant to the position for which you have been nominated. 
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Provide the Committee with two copies of each formal speech.) 

The speeches I have given include: 

Barclay's Inflation-Linked Conference - 9/17/09 

Money Fund Forum -10119/09 

Fixed Income Forum - 11105109 

SIFMA Government Borrower's Forum 11/6109 

RBS Investor Conference -12116/09 

IMN Conference - 3/1/10 

RBC Reserve Manager Conference 6/8/10 

Barclay's Rate Conference - 11/18/10 

IMF Financial Stability Conference - 3/18111 

Real Return Conference 9/27/11 

I have also participated on a number of panels, where I did not have prepared 

remarks. 

17. Qualifications: (State what, in your opinion, qualifies you to serve in the position 

to which you have been nominated.) 

I have been serving as Deputy Assistant Secretary for Federal Finance since 

May 2009. In that role I have been responsible for managing Treasury debt 

issuance, as well as all policy matters related to the Treasury market. I have also 

been involved in some of the other policy initiatives overseen by the Assistant 

Secretary for Financial Markets. 

Prior to my current role, I worked in the Markets Group at the Federal Reserve 

Bank of New York (FRBNY). I held several positions there, the last of which was 

the FRBNY liaison to the Treasury. 

If confirmed, I would look forward to continuing the important work of the 

Treasury Department. I believe my unique experience and knowledge of financial 

markets make me ideally suited for the position of Assistant Secretary for 

Financial Markets. 

B. FUTURE EMPLOYMENT RELATIONSHIPS 

1. Will you sever all connections with your present employers, business firms, 

associations, or organizations if you are confirmed by the Senate? If not, provide 

details. 
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Not applicable, as my current position and the position to which I have been 

nominated is within the Department of the Treasury. 

2. Do you have any plans, commitments, or agreements to pursue outside 

employment, with or without compensation, during your service with the 

government? If so, provide details. 

No. 

3. Has any person or entity made a commitment or agreement to employ your 

services in any capacity after you leave government service? If so, provide 

details. 

No. 

4. If you are confirmed by the Senate, do you expect to serve out your full term or 

until the next Presidential election, whichever is applicable? If not, explain. 

Yes. 

C. POTENTIAL CONFLICTS OF INTEREST 

1. Indicate any investments, obligations, liabilities, or other relationships which 

could involve potential conflicts of interest in the position to which you have been 

nominated. 

In connection with the nomination process, I have consulted with the Office of 

Government Ethics and the Department of the Treasury's designated ethics 

official to identify potential conflicts of interest. Any potential conflicts of interest 

will be resolved in accordance with the terms of an ethics agreement that I have 

entered into with the Department of the Treasury's ethics official and that has 

been provided to this Committee. I am not aware of any potential conflicts of 

interest. 

2. Describe any business relationship, dealing or financial transaction which you 

have had during the last 10 years, whether for yourself, on behalf of a client, or 

acting as an agent, that could in any way constitute or result in a possible conflict 

of interest in the position to which you have been nominated. 

In connection with the nomination process, I have consulted with the Office of 

Government Ethics and the Department of the Treasury's designated ethics 

official to identify potential conflicts of interest. Any potential conflicts of interest 

will be resolved in accordance with the terms of an ethics agreement that I have 

entered into with the Department of the Treasury's ethics official and that has 

been provided to this Committee. I am not aware of any potential conflicts of 

interest. 
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3. Describe any activity during the past 10 years in which you have engaged for the 

purpose of directly or indirectly influencing the passage, defeat, or modification of 

any legislation or affecting the administration and execution of law or public 

policy. Activities performed as an employee of the Federal government need not 

be listed. 

None. 

4. Explain how you will resolve any potential conflict of interest, including any that 

may be disclosed by your responses to the above items. (Provide the Committee 

with two copies of any trust or other agreements.) 

In connection with the nomination process, I have consulted with the Office of 

Government Ethics and the Department of the Treasury's designated ethics 

official to identify potential conflicts of interest. Any potential conflicts of interest 

will be resolved in accordance with the terms of an ethics agreement that I have 

entered into with the Department of the Treasury's ethics official and that has 

been provided to this Committee. I am not aware of any potential conflicts of 

interest. 

5. Two copies of written opinions should be provided directly to the Committee by 

the designated agency ethics officer of the agency to which you have been 

nominated and by the Office of Government Ethics concerning potential conflicts 

of interest or any legal impediments to your serving in this position. 

6. The following information is to be provided only by nominees to the pOSitions of 

United States Trade Representative and Deputy United States Trade 

Representative: 

Have you ever represented, advised, or otherwise aided a foreign government or 

a foreign political organization with respect to any international trade matter? If 

so, provide the name of the foreign entity, a description of the work performed 

(including any work you supervised), the time frame of the work (e.g., March to 

December 1995), and the number of hours spent on the representation. 

N/A 

D. LEGAL AND OTHER MATTERS 

1. Have you ever been the subject of a complaint or been investigated, disciplined, 

or otherwise cited for a breach of ethics for unprofessional conduct before any 
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court, administrative agency, professional association, disciplinary committee or 

other professional group? If so, provide details. 

No. 

2. Have you ever been investigated, arrested, charged, or held by any Federal, 

State, or other law enforcement authority for a violation of any Federal, State, 

county or municipal law, regulation, or ordinance, other than a minor traffic 

offense? If so, provide details. 

Yes, in 2003 I received a citation for an open container on a Chicago subway 

platform. The fine was $50. 

3. Have you ever been involved as a party in interest in any administrative agency 

proceeding or civil litigation? If so, provide details. 

No. 

4. Have you ever been convicted (including pleas of guilty or nolo contendere) of 

any criminal violation other than a minor traffic offense? If so, provide details. 

None other than the citation included in my response to question 2, above. 

5. Please advise the Committee of any additional information, favorable or 

unfavorable, which you feel should be considered in connection with your 

nomination. 

None. 

E. TESTIFYING BEFORE CONGRESS 

1. If you are confirmed by the Senate, are you willing to appear and testify before 

any duly constituted committee of the Congress on such occasions as you may 

be reasonably requested to do so? 

Yes. 

2. If you are confirmed by the Senate, are you willing to provide such information as 

is requested by such committees? 

Yes. 
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SENATOR MAX BAUCUS (D-MT): 

Ouestion 1: 

u.s. Senate Committee on Finance 

Nominations Hearing held May 8, 2012 

Questionsfor the Recordfor Matthew Rutherford 

Received May 10, 2012 and Submitted May 14,2012 

Please describe the policy implications being weighed by Treasury as regards the 

potential issuance of floating-rate Treasury bonds. How does it benefit the Treasury to 

issue floating-rate Treasury bonds at a time of historically low U.S. borrowing costs? 

Would floating-rate Treasury bonds lengthen the maturity period of U.S. borrowing, or 

shorten it? 

Answer: 

On May 2, Treasury indicated that a decision on the potential issuance of floating rate notes 

(FRNs) would occur after a thorough analysis was completed. 

Treasury is considering the issuance of floating rate notes for two reasons. First, we believe 

that it may be a useful tool to help us extend the average maturity of the debt. FRNs would 

allow Treasury to issue term debt, without paying the premium typically embedded in fixed 

rate securities. In other words, FRNs could allow us to extend the average maturity of the 

debt in a more cost effective manner throughout a range of interest rate cycles. 

As background, Treasury has extended the average maturity from 49 months in 2009 to its 

current level of 63 months today. Although Treasury does not have a target for the average 

maturity, the current issuance strategy would likely increase the average maturity to around 

70 months by 2015, the upper end of the historical range. Potential FRN issuance would not 

alter this path meaningfully in the near term, as the size of the program would likely be small 

relative to the overall stock of debt. However, it could prove a useful tool for this purpose 

overtime. 

Secondly, Treasury believes that FRNs could potentially broaden our investor base. FRNs 

are a widely traded instrument in the U.S. capital markets. Feedback from market 

participants has been positive, with many suggesting that corporate Treasurers and money 

funds would likely be drawn to the product. 
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Question 2: 

Please describe why Treasury has so far declined to issue negative-yield Treasury bond, 

despite the fact that short term bonds have at times traded at negative yields in the 

secondary bond market. 

In December 2011, Treasury bill rates at times traded at negative levels in the secondary 

market. This was due in part to ongoing flight-to-quality flows, as well as year-end financial 

reporting requirements. However, Treasury auction rules prohibited the submission of bids 

at negative rates. The disconnect between the auction process and the secondary Treasury 

markets led to several auctions with extremely high bid-to-cover ratios, as investors were 

incentivized to bid for a significant quantity of securities. 

In February 2012, Treasury indicated that it was considering changing the auction rules to 

allow for negative rate submissions in the auction process. At that time, Treasury suggested 

that such a rule would be beneficial to the taxpayer and overall market functioning. 

On May 2, Treasury announced that changing the auction rules was something that was still 

being considered. However, prior to making a final decision, Treasury must consider a 

significant number of operational issues, as well as the impact across different investor 

classes. For example, there are over 15 IT systems throughout the government that would be 

impacted by this decision, and we would also have to consider the treatment of retail 

investors. 

We anticipate that we will make a decision on this potential rule change in the near future. In 

the meantime, it is important to note that since December Treasury bill rates have remained 

above zero. 
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SENATOR ORRIN G. HATCH (R-UT): 

Question 1: 

According to the Federal Reserve, its "operation twist" program is intended to alter the 

term structure of federal debt, partly by reducing the supply of longer-term Treasury 

securities in the market. The Fed says that that "this action should put downward 

pressure on longer-term interest rates." The Fed goes on to say that "the reduction in 

longer-term interest rates, in turn, will contribute to a broad easing in financial market 

conditions that will provide additional stimulus to support the economic recovery." 

Since mid-2009, the Treasury has been extending the average maturity of federal debt. 

This means that Treasury has been acting to increase the supply of longer-term 

Treasury securities in the market-the exact opposite of what the Fed's operation twist 

is trying to accomplish in order to provide additional stimulus to support the economic 

recovery. 

Please note that I full understand that the Fed is, in principle, independent of the 

Treasury and that the two entities have different mandates and objectives. I also 

understand that at a given point in time, market participants form expectations of 

future policies which are incorporated into market prices. Of course, if the Fed or the 

Treasury takes an action that alters expectations, then prices adjust. This is part of the 

essence of, say, innovations in monetary policy involving changes in the amount of 

quantitative easing or twist-like operations-to manage expectations. Treasury could, 

similarly, manage expectations by changing its own policy regarding the maturity 

structure of Treasury debt. 

Do you agree that Treasury could, if it wanted, complement the Fed's action by 

shrinking the average maturity offederal debt, thereby providing additional stimulus 

to support the economic recovery as the Fed is seeking? If not, why not? If so, then has 

Treasury chosen to pursue, using debt management tools, extensions of the average 

maturity of Treasury debt in order to reduce future risks of rising rates (e.g., rollover 

risk) as opposed to pursuing an objective of helping support the economic recovery? 

Answer: 

The Federal Reserve's Large Scale Asset Purchases (LSAP) and Maturity Extension Program 

("Operation Twist") are both initiatives intended to lower long-term rates by purchasing 

securities and taking "duration," or interest rate risk, out of the marketplace. It is true that 

Treasury could reduce the amount of duration in the marketplace by reducing its issuance of 

longer-term debt. However, as the Department has stated publicly, we believe that extending 

the average maturity is the best debt management strategy at this time. 
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The Treasury Department's stated goal is to finance the government at the lowest cost over 

time. We do this by issuing securities in a regular and predictable manner. We issue across 

the entire yield curve, and do not time the markets. It's also important to note that we have 

not increased the size oflong-term bond auctions since they peaked in 2009, well before the 

Federal Reserve's actions to take duration out of the market. 
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Question 2: 

When the Fed buys securities, it typically does so using freshly created bank reserves on 

which the Fed pays interest. Thus, the Fed acquires resources from private market 

participants in the open market by issuing short-term, interest-bearing liabilities to 

private market participants. Those reserve balances are highly liquid and can be 

turned into cash upon demand of the (non-term) reserve account holder. The Fed's 

reserve liabilities are much like short-term Treasury securities-they earn near-zero 

nominal returns currently and are highly liquid. Because the Fed is engaging in 

operation twist and increasing the supply of short-term government liabilities in order 

to finance acquisitions of longer-term government liabilities to reduce the supply of 

those latter liabilities, is there any sense in which the Fed is taking on some ofthe 

interest rate risk that Treasury may be seeking to avoid by, on its own, extending the 

average maturity of Treasury debt? If not, why not? If so, what is the sense in which, 

on the basis of consolidating government liabilities of the Fed and the Treasury, 

Treasury's actions to extend the average maturity of its debt liabilities avoid future 

risks of rising interest rates? 

Answer: 

As you identified in your first question, the Treasury and the Federal Reserve are 

independent entities with different mandates. Treasury only has influence over its own 

issuance strategy. On that basis, our job is to finance the government at the lowest cost over 

time. 

Any fixed-income investor, including the Fed, takes on interest rate risk when they purchase 

longer-duration assets. This risk reflects the fact that interest rates and fixed income asset 

prices are inversely related. Interest rate risk is positively correlated with the duration of the 

asset purchased (i.e., longer maturity fixed-rate securities will experience greater price 

declines for a given increase in interest rates compared to shorter maturity fixed income 

securities). 

It is important to note that interest rate risk is a risk assumed by the investor in the security, 

regardless of whether that investor is the Fed, a pension fund, or a bank. The risk is not 

borne by the issuer. As a result, Treasury does not face this type of risk. 

With regards to motivation, Treasury has been very transparent since the height of the 

financial crisis about its desire to extend the average maturity of the debt. In early 2009, the 

average maturity fell to 49 months as Treasury issued substantial amounts of short-term debt 

to finance the emergency rescue programs. Since that time period, the debt management 

team has been increasing the average maturity. The average maturity of the debt currently 

stands at 63 months and is projected to increase to the upper end of the historical range by 

2015. 
135 


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Question 3: 

The position for which you are nominated coordinates the inter-agency President's 

Working Group on Financial Markets which is composed ofthe Treasury Secretary 

and the Chairs of the Fed, the SEC and the CFTC. That Working Group, initially 

established by President Reagan, was set up to evaluate the stock market crash of 

October 19, 1987-sometimes called Black Monday. More recently, the Dodd-Frank 

Act established a new Financial Stability Oversight Council (FSOC) composed partly of 

the Treasury Secretary and the Chairs ofthe Fed, the SEC and the CFTC. 

The FSOC bas been created and costs taxpayers over $10 million a year with costs 

expected to grow far further. 

a. Would you recommend that the President dissolve what has become a redundant 

Working Group on Financial Markets which, to my knowledge, absorbs taxpayer 

resources, can meet whenever it wants, and never produces meeting minutes that 

can be reviewed by the public? Will you provide to me, if confirmed, information 

concerning budgetary resources that have been devoted to work associated with the 

President's Working Group on Financial Markets? 

The President's Working Group on Financial Markets (PWG) published its report detailing a 

number of options for reforms related to money market funds on October 21, 20 I 0 as a 

continuation of work that had begun prior to the passage of the Dodd-Frank Act. The PWG 

has not met since that time. The PWG has continuing staff work through the Financial and 

Banking Information Infrastructure Committee (FBIIC), which was chartered under the PWG 

and is charged with improving coordination and communication among financial regulators, 

and enhancing the resiliency of the financial sector. Treasury's Assistant Secretary for 

Financial Institutions chairs the committee. In addition, the Terrorism Risk Insurance Act of 

2002, as amended, requires the PWG to submit a report to the Senate Banking Committee 

and the House Financial Services Committee in 2013 regarding the long-term availability and 

affordability of insurance for terrorism risk. 

Treasury does not employ any full time employees (FTEs) to work on PWG issues on a full 

time basis. Treasury administers the work of the PWG through existing staff within the 

offices of Domestic Finance and General Counsel on an ongoing basis. It's also important to 

note that going forward the FSOC will be funded by assessments on financial institutions, not 

tax revenues. 
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b. In October of2010, the President's Working Group on Financial Markets issued a 

report on money market funds, with reform options that the Working Group 

requested the FSOC consider. According to the Treasury Department, the report 

was" .•• one part in a series of steps that the regulatory community will be taking in 

the coming months to implement financial reform ... " It appears, therefore, that 

Treasury views the President's Working Group on Financial Markets as part of the 

"regulatory community." It is, of course, in the sense that the Group contains 

regulators. It seems confusing, however, that the Group, consisting of FSOC 

members makes recommendations to the FSOC as a whole through a vehicle (the 

report on money market funds) external to the FSOC. Will you explain to me, if 

confirmed, why the FSOC members in the Working Group do not simply pursue 

their policy prescriptions directly in the FSOC itself? Will you explain to me 

Treasury's intentions for future use of the President's Working Group on Financial 

Markets to make recommendations to other parts of the regulatory community? 

The October 2010 report issued by the President's Working Group on Financial Markets 

(PWG) was a result of work that had been underway prior to the enactment of the DoddFrank Act in July 2010. Since the enactment of the Dodd-Frank Act, the FSOC has 

considered the need for reforms to the money market fund industry. The topic has been 

discussed at several FSOC meetings and was one of the recommendations included in the 

FSOC's 2011 annual report. 

Treasury anticipates that the FSOC will continue to be a forum where potential money 

market fund reforms are discussed on an interagency basis. In addition, as required by the 

Dodd-Frank Act, each year the FSOC's annual report will include recommendations to 

enhance the integrity, efficiency, competitiveness and stability of the United States financial 

markets, to promote market discipline, and to maintain investor confidence. These 

recommendations may include recommendations for regulatory actions, as the FSOC 

considers appropriate. Treasury does not currently intend to make use of the PWG to make 

recommendations to other parts of the regulatory community in the future. 
137 


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Question 4: 

During your testimony before the Senate Committee on Finance, you provided only 

partial assurances to me that you would provide contemporaneous information, if I 

were to request it, concerning Treasury's cash positions and short-term forecasts of 

those positions. You seem to have hedged, in particular, concerning the forecasts by 

saying that some sort of balance would have to be struck regarding information sharing 

because some of the information that Treasury holds privately is labeled by Treasury to 

be "market sensitive." 

In the recent debt limit impasse, the President identified publicly that he could not offer 

assurance that Social Security payments could be made if the debt limit was breached. 

Military leaders in the field of battIe identified to our troops that assurance of payment 

for service could not be assured if the limit was breached. When I asked Treasury of its 

expectations regarding short-term cash flows, I was denied information out of concerns 

over market sensitivity. However, my Utah constituents were facing financial 

sensitivities and uncertainties. If a retired constituent from Sandy Utah asked me about 

the chances that the government would have enough cash in the till to pay his Social 

Security benefit payments, all I could say is: I don't know and Treasury won't tell me 

what to expect. If a soldier's family in Ogden Utah asked me about the chances that the 

soldier would receive her payments so that the family could pay their mortgage on time, 

all I could say is: I don't know and Treasury won't tell me what to expect. I do not 

believe that we have balance between concerns over release to Congress of market 

sensitive data and my constituents' concerns about their financial futures. 

Congress and the military community and the intelligence community have found ways 

to share sensitive information. Financial regulators and the private sector share 

sensitive information (e.g., I doubt whether the Office of the Comptroller of the 

Currency [OCC] would allow one ofthe banks it regulates to withhold information 

from the OCC on the basis of it being "market sensitive"). Yet we seem not to have 

found ways for Treasury and financial regulators to share whatever they label as 

"sensitive" information with Congress. I believe that this is a fruitful topic of continued 

dialogue. 

a. Will you, if confirmed, promise to work with me to help resolve the issue of 

Treasury withholding information from Congress that Treasury self-identifies to be 

"market sensitive?" 

Answer: 

If confinned, I will work with you to help resolve the issues you have identified relating to 

market-sensitive infonnation. 
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b. Will you, if confirmed, provide timely updates on Treasury's forecasts of when the 

debt limit will be attained, and information concerning Treasury's forecasts of how 

much "headroom" will be made available through Treasury's use of various 

"extraordinary measures" that have been used in the past to remain below the debt 

limit and any plans to use measures that have not been used in the past? 

Yes. 

c. Do you believe that past employees of the Treasury Department who worked with 

Treasury's cash inflow and outflow projection models possess nonpublic 

information derived from their previous work with the model contents which could 

be useful for constructing models in the private sector for personal benefit? If so, do 

they therefore possess market-sensitive information about the model, or is the 

market-sensitive information related solely to inputs into the model? If not, then 

will you inform me, if confirmed, whether Treasury will share its cash forecasting 

model with Congress? 

Answer: 

Employees of Treasury in many different capacities work with nonpublic information. 

Treasury employees, like all executive branch employees, are subject to ethics rules, 

including rules regarding the use of non public information and laws prohibiting insider 

trading. 

Treasury does not have a cash forecasting "modeL" Rather it has a detailed forecasting 

process. Treasury staff gathers public and nonpublic information, evaluates the data based 

on past monthly and daily trends, and makes informed judgments on near- and longer-term 

cash flows. It should be recognized that Treasury's cash projection process is inherently 

imprecise and subject to error. 

Treasury believes it is important to have a strong working relationship with Congress, and is 

committed to providing accurate, up-to-date information to Congress and to the public. 

d. Will you, if confirmed, assist me in determining what market sensitive information 

is shared between the Treasury and employees of the Federal Reserve who 

participate in the daily cash position management conference call, and why sharing 

such information with the Federal Reserve but not Congress provides proper 

balance? 
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Answer: 

Treasury's daily call with the Federal Reserve Board and the Federal Reserve Bank of New 

York (FRBNY) was established to provide the FRBNY with the information it needs to 

manage bank reserves and to assist Treasury in maintaining its targeted Reserve Bank 

balance. The specific information that is shared on the call can vary over time, depending 

upon cash managemel!t needs. I would be pleased to work with you to ensure a high degree 

of transparency regarding these matters. 
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Question 5: 

I have previously asked Treasury about information concerning the Treasury 

Borrowing Advisory Committee (TBAC); yet have not received responses to all 

questions that I put forward. Will you, if confirmed, assist me in answering the 

following questions that will be helpful to me in fulfilling my oversight responsibilities? 

a. Is there a schedule with dates of future TBAC meetings and, if so, where might I 

find the schedule? 

The Treasury Borrowing Advisory Committee (TBAC) meets regularly four times per year. 

The group typically meets on the Tuesday before the February, May, August and November 

quarterly refunding announcement. Treasury announces the exact date of the upcoming 

refunding one quarter in advance on the Treasury website at the following linle 

http://www.treasury.gov/resource-center/data-chart-center/guarterly-refunding/Pages/gtrrefunding-index.aspx 

The next quarterly refunding will be Wednesday, August 1,2012, meaning that the TBAC 

meeting will be held on Tuesday, July 31, 2012. In addition, consistent with provisions in 

the Federal Advisory Committee Act (F ACA), Treasury is required to publish a notice in the 

Federal Register, 14 days in advance, of any TBAC meeting. The meeting notice must 

include the date, time, and location of the upcoming meeting. 

b. When does Treasury send to TBAC members pre-meeting information, which often 

or perhaps always includes questions concerning whatever appears to market 

participants and Treasury to be timely and fruitful areas of inquiry for both sides of 

the Treasury securities market to discuss and analyze? Is there a fixed lead time? 

Treasury typically sends questions of interest to two committee members, on a rotating basis, 

approximately two weeks prior to our meetings in Washington. Committee members are 

required to sign a confidentiality agreement upon receipt of the question. They are 

prohibited from discussing the question with anyone who has not signed a confidentiality 

agreement. 
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c. Are there ever, say in a period of heightened financial market stress, Committee 

conference calls or other interchanges outside of the normal quarterly meetings? 

Answer: 

Treasury has not convened a TBAC conference call during the Obarna Administration. We 

know of at least one occasion in which TBAC members initiated a conference call to prepare 

for a TBAC meeting. Treasury has regular communications with investors, including 

individual members of the TBAC. 
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SENATOR JOHN KERRY (D-MA): 

Question 1: 

a) In 2010, the Securities and Exchange Commission altered Rule 2a-7 and enhanced 

liquidity and transparency requirements for money market mutual funds; however, 

the SEC is now planning to propose additional reform measures for the industry. 

Have you studied the impacts of the 2010 reforms? 

Money market funds (MMFs) contributed to instability during the financial crisis in 2008 and 

at the time, the previous Administration was forced to intervene to prevent a widespread run. 

In February 2010, the SEC took actions to reduce the risk of this industry by adopting new 

portfolio credit, maturity and liquidity requirements in rule 2a-7. In addition, the SEC also 

imposed requirements to disclose each fund's portfolio holdings and "shadow" net asset 

value. 

MMFs have become more resilient as a result of these new rules. For instance, MMFs 

currently hold liquidity in excess of new daily and weekly minimum liquidity requirements 

set by rule 2a-7. 

Although money market funds are more resilient today, further steps are needed to improve 

the stability of the industry and reduce money funds' susceptibility to runs. This was a 

recommendation of both the President's Working Group Report in 2010 and the Financial 

Stability Oversight Council's 2011 Annual Report. The SEC and other members of the 

FSOC are actively discussing reform proposals, while trying to maintain money funds' 

important role in the allocation of credit in the economy. 

b) Money market mutual funds are a large buyer of government debt at the local, state 

and federal level and several state and local officials have voiced concern that 

further reform could impact demand for their debt. How important are money 

market mutual funds as purchasers of Treasury Bills? 

Approximately one-third of the $2.9 trillion money market mutual fund industry is comprised 

of taxable government funds. Government funds' holdings of Treasury bills fluctuate over 

time, but are certainly an important asset held by these funds. The safety and liquidity of 

Treasury bills makes them a key component of many investors' portfolio. 
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c) Many money market fund industry participants have released recent data 

indicating that significant numbers of shareholders will exit money market funds if 

the SEC moves forward with its planned reforms. What impact could this have on 

the Treasury's borrowing costs? 

Demand for Treasury bills is extremely high, given that they are the safest and most liquid 

investment in the world. Money market mutual funds are an important investor in the bill 

market, but we have a very broad investor base for our securities. For example, in Treasury's 

bill auctions, we consistently see demand in excess of our security offerings. In the first 

quarter of 2012, our auction bid-to-cover ratios averaged approximately 5: 1. In other words, 

for every dollar of securities we offered, we attracted nearly 5 dollars of bids. 
144 


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u.s. Senate Committee on Finance 

Nominations Hearing held May 8, 2012 

Follow-Up Questionsfor the Recordfor Matthelv Rutherford 

Received May 16-21, 2012 and Submitted May 22,2012 

SENATOR ORRIN G. HATCH (R-UT): 

Questions for Mr. Matthew Rutherford from Senator Hatch: I have the following 

questions related to your responses to my earlier questions for the record that I posed 

following the May 8, 2012 hearing to consider your nomination. My questions are 

posed to gather answers from you, and not primarily to learn about the 

administration's policy positions. Your thorough responses to all of my questions, as 

well as those of other members of Congress, are important in helping arrive at 

informed decisions. 

Ouestion 1: 

In response to my earlier questiou (labeled Qnestion 1 in your response), I do not 

believe that you responded to the following inquiry: " ... has Treasury chosen to pursue, 

using debt management tools, extensions of the average maturity of Treasury debt in 

order to reduce future risks of rising rates (e.g., rollover risk) as opposed to pursuing an 

objective of helping support the economic recovery?" 

I understand, as you identify, that the Treasury Department's stated goal is to finance 

the government at the lowest cost over time. Finance costs could be lowered as a result 

of economic recovery. The question is whether, in pursuing the stated goal of Treasury 

in its financing of government, Treasury is choosing to forego an alternative possible 

goal of helping support the economic recovery. 

ANSWER: 

As you note, Treasury's stated goal has been to extend the average maturity of the debt. This 

was a policy that has been pursued since early 2009, when the average maturity fell to below 

50 months - a multi-decade low. We are pursuing this policy because we believe that it 

helps us achieve our goal of financing the government at the lowest cost over time. 

We do not believe that shortening our average maturity by issuing significant amounts of 

short-term debt would be a prudent debt management strategy. As Mary Miller, 

Undersecretary of the Treasury for Domestic Finance, said in a Letter to the Editor published 

on March 21,2012, in The Wall Street Journal, "We undcrstand the future risk of rising rates 

and are structuring our borrowing accordingly." Nonetheless, we are constantly assessing 

our strategy to make sure that we are striking the right balance of debt issuance. 

Although the economy is recovering more gradually than we would like, we have now seen 

II consecutive quarters of economic growth. We do not believe that our debt management 

strategy has caused us to "forego an alternative possible goal of helping support the 

economic recovery." In fact, interest rates are at historical lows. Last week the 10-year 

Treasury yield closed at 1.7 percent, the lowest level on record. 
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The Administration has advocated pro-growth policies since taking office in 2009. As we 

have stated on a number of occasions, we believe it is important to ensure that we continue to 

pursue policies that provide support to the economic recovery. 
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Question 2: 

In response to my earlier question (labeled Question 2 in your response); I believe that 

the risk to which I was referring is not the risk identified in your response. Perhaps my 

question was not clear or was misunderstood. I asked, in what you label as Question 2, 

" ... what is the sense in which, on the basis of consolidating government liabilities of the 

Fed and the Treasury, Treasury's actions to extend the average maturity of its debt 

liabilities avoid future risks of rising interest rates?" 

Your response, in part, was tliat interest rate risk is a risk assumed by the investor in 

the security; that the risk is not borne by the issuer; and that, consequently, Treasury 

does not face this type of risk. 

My question asked about risks to consolidated Federal Reserve and Treasury-issued 

government liabilities of rising interest rates. Of course, as issuer, Treasury does not 

face interest rate risk in the sense of potential losses from price changes on outstanding 

issues. Treasury and the Fed do face, however, what is sometimes called "rollover risk" 

associated with interest rate changes. Unless I am mistaken, avoidance of such risk can 

be a rationale for extending the average maturity of Treasury obligations-to avoid 

having to refinance short-term debt in a period of rising rates, for example. As the U.S. 

Government Accountability Office has written: " ... shorter-term securities generally 

carry lower interest rates but add uncertainty to the government's longer-term interest 

costs and require Treasury to conduct more frequent auctions to refinance them as they 

mature, which also poses rollover risk." And as a senior Treasury official wrote in a 

March letter to the editor ofthe Wall Street Journal: "We understand the future risk of 

rising rates and are structuring our borrowing accordingly." 

While Treasury extends the average maturity ofits debt, perhaps partly to avoid 

rollover risks, the question is whether such risks are being absorbed by the Federal 

Reserve given growth in its issuance of a massive stock of bank reserves, which are 

short-term, interest-bearing, liquid government obligations. Should interest rates 

normalize, for a given stock of reserves and a given inflation objective, the Fed would 

likely have to pay higher rates on reserve holdings. Of course, net income of the Fed 

after operating expenses and capital reserve alterations is remitted to the Treasury so 

that changes in that income, perhaps because of interest rate changes, influence the 

consolidated balance sheet of Treasury and the Fed. 

ANSWER: 

The Federal Reserve finances the purchase of assets in its Large-Scale Asset Purchase 

Program (LSAP) through the creation of bank reserves. These bank reserves earn the Federal 

Reserve's interest rate on excess reserves, which is currently set at 25 basis points. Currently 

there are approximately $1.5 trillion of excess reserves in the banking system. 
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Theoretically, if the Federal Reserve decides to increase interest rates, they will pay a higher 

amount on the excess reserves in the system. However, that is an independent policy 

decision to be made by the Federal Reserve. 

The Treasury and the Federal Reserve are independent entities with different mandates. 

Treasury only has influence over its O\\TI liability profile. On that basis, our job is to finance 

the government at the lowest cost over time. 
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Question 3: 

In response to my earlier question (labeled Question 3 in your response), I asked: 

"Would you recommend that the President dissolve what has become a redundant 

Working Group on Financial Markets which, to my knowledge, absorbs taxpayer 

resources, can meet whenever it wants, and never produces meeting minutes that can be 

reviewed by the public?" You did not answer that question adequately. 

The Treasury Department's website, in describing the position to which you have been 

nominated, states that the person in that position" ... coordinates the inter-agency 

President's Working Group on Financial Markets." Consequently, if confirmed and if 

Treasury's website contains accurate information, you would be coordinating the 

President's Working Group (PWG) on Financial Markets. 

The information you provided in your response to my question identified that the PWG 

is required to submit a report in 2013 regarding terrorism insurance according to the 

Terrorism Risk Insurance Act of 2002. While that is true, the so-called "Dodd-Frank 

Act," in Section 502, grants the recently established Federal Insurance Office (FlO) 

authority to assist the Secretary in administering the Terrorism Insurance Program 

established under the 2002 Act. While some may find it fruitful to have the FlO and 

PWG operating in the same area, unless there are other requirements of the PWG 

beyond the terrorism insurance report due in 2013, it appears to me that the PWG at 

the very least will then be redundant. My question therefore remains as to whether you 

would recommend dissolution of the PWG. 

ANSWER: 

Once the PWG has submitted the statutorily required report to Congress in 2013, Treasury 

would recommend retiring the PWG. 
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