U.S. GOVERNMENT PUBLISHING OFFICE

30–294 PDF WASHINGTON : 2018

ONGOING MANAGEMENT CHALLENGES AT IRS 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON 

GOVERNMENT OPERATIONS 

AND THE

SUBCOMMITTEE ON HEALTHCARE, 

BENEFITS, AND ADMINISTRATIVE RULES 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

OCTOBER 25, 2017 

Serial No. 115–63 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://oversight.house.gov 


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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

Trey Gowdy, South Carolina, Chairman 

John J. Duncan, Jr., Tennessee 

Darrell E. Issa, California 

Jim Jordan, Ohio 

Mark Sanford, South Carolina 

Justin Amash, Michigan 

Paul A. Gosar, Arizona 

Scott DesJarlais, Tennessee 

Blake Farenthold, Texas 

Virginia Foxx, North Carolina 

Thomas Massie, Kentucky 

Mark Meadows, North Carolina 

Ron DeSantis, Florida 

Dennis A. Ross, Florida 

Mark Walker, North Carolina 

Rod Blum, Iowa 

Jody B. Hice, Georgia 

Steve Russell, Oklahoma 

Glenn Grothman, Wisconsin 

Will Hurd, Texas 

Gary J. Palmer, Alabama 

James Comer, Kentucky 

Paul Mitchell, Michigan 

Greg Gianforte, Montana 

Elijah E. Cummings, Maryland, Ranking 

Minority Member 

Carolyn B. Maloney, New York 

Eleanor Holmes Norton, District of Columbia 

Wm. Lacy Clay, Missouri 

Stephen F. Lynch, Massachusetts 

Jim Cooper, Tennessee 

Gerald E. Connolly, Virginia 

Robin L. Kelly, Illinois 

Brenda L. Lawrence, Michigan 

Bonnie Watson Coleman, New Jersey 

Stacey E. Plaskett, Virgin Islands 

Val Butler Demings, Florida 

Raja Krishnamoorthi, Illinois 

Jamie Raskin, Maryland 

Peter Welch, Vermont 

Matt Cartwright, Pennsylvania 

Mark DeSaulnier, California 

Jimmy Gomez,California 

SHERIA CLARKE, Staff Director 

WILLIAM MCKENNA, General Counsel 

JACK THORLIN, Government Operations Subcommittee Deputy Staff Director 

SHARON CASEY, Deputy Chief Clerk 

DAVID RAPALLO, Minority Staff Director 


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SUBCOMMITTEE ON GOVERNMENT OPERATIONS

Mark Meadows, North Carolina, Chairman 

Jody B. Hice, Georgia, Vice Chair 

Jim Jordan, Ohio 

Mark Sanford, South Carolina 

Thomas Massie, Kentucky 

Ron DeSantis, Florida 

Dennis A. Ross, Florida 

Rod Blum, Iowa 

Gerald E. Connolly, Virginia, Ranking 

Minority Member 

Carolyn B. Maloney, New York 

Eleanor Holmes Norton, District of Columbia 

Wm. Lacy Clay, Missouri 

Brenda L. Lawrence, Michigan 

Bonnie Watson Coleman, New Jersey 

SUBCOMMITTEE ON HEALTHCARE, BENEFITS, AND ADMINISTRATIVE RULES

Jim Jordan, Ohio, Chairman 

Mark Walker, North Carolina, Vice Chair 

Darrell E. Issa, California 

Mark Sanford, South Carolina 

Scott DesJarlais, Tennessee 

Mark Meadows, North Carolina 

Glenn Grothman, Wisconsin 

Paul Mitchell, Michigan 

Raja Krishnamoorthi, Illinois, Ranking 

Minority Member 

Jim Cooper, Tennessee 

Eleanor Holmes Norton, District of Columbia 

Robin L. Kelly, Illinois 

Bonnie Watson Coleman, New Jersey 

Stacey E. Plaskett, Virgin Islands 


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C O N T E N T S 

Page 

Hearing held on October 25, 2017 .......................................................................... 1 

WITNESSES 

Mr. Jeffrey Tribiano, Deputy Commissioner for Operations Support, Internal 

Revenue Service and Ms. Gina Garza, Chief Information Officer, Internal 

Revenue Service 

Oral Statement ................................................................................................. 4 

Written Joint Statement of Mr. Tribiano and Ms. Garza ............................. 7 

The Honorable J. Russell George, Treasury Inspector General for Tax Administration 

Oral Statement ................................................................................................. 17 

Written Statement ............................................................................................ 19 

Mr. Greg Kutz, Assistant Inspector General for Audit, Treasury Inspector 

General for Tax Administration 

Oral Statement ................................................................................................. 43 

APPENDIX 

Response from Mr. Tribiano, IRS, to Questions for the Record ........................... 66 


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ONGOING MANAGEMENT CHALLENGES AT 

IRS 

Wednesday, October 25, 2017 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT OPERATIONS, JOINT

WITH SUBCOMMITTEE ON HEALTHCARE, BENEFITS, AND

ADMINISTRATIVE RULES

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. 

The subcommittee met, pursuant to call, at 2:22 p.m., in Room 

2154, Rayburn House Office Building, Hon. Jim Jordan [chairman 

of the Subcommittee on Healthcare, Benefits, and Administrative 

Rules] presiding. 

Present: Representatives Meadows, Jordan, Hice, Sanford, 

Massie, DeSantis, Grothman, Blum, Connolly, Krishnamoorthi, 

Maloney, Norton, Kelly, Watson Coleman, and Lawrence. 

Mr. JORDAN. The joint subcommittee hearing will come to order. 

And we’ll start by recognizing the chairman of the Government Operations Subcommittee, Mr. Meadows, for his opening statement. 

Mr. MEADOWS. Thank you, Mr. Chairman, for continuing your 

leadership on this particular issue. 

As we look at that, many of you, this is not your first rodeo. 

You’ve been here before. And, sadly, we’re having to still address 

some of the major concerns that have been raised a number of 

times. Obviously, we will end up with a new IRS commissioner in 

the coming days. And as we look at that, it is critically important 

that we set the stage for making sure that we address these issues. 

There are issues that TIGTA continues to identify as problem 

areas. 

Most of my concern, I can tell you, are the things that continue 

to make headlines. You know, why do we go in and we rehire employees when we have specifically in there, do not rehire? You 

know, the IRS is held to a higher standard primarily because you 

hold the American taxpayer to a higher standard. If some of the 

excuses that we use as taxpayers were tried out in an IRS audit, 

they wouldn’t pass the smell test. And I guess what I’m here to say 

is some of the things that I am still seeing happening within the 

IRS does not pass the smell test. 

Now, I’ve been one of the few Members of Congress who have 

had the opportunity to come and meet with some of the IRS employees. And I would be remiss to not acknowledge that the vast 

majority of them are excellent workers and truly are doing a very, 

very good job for the American public. However, when we start to 

see that we’ve got 213 employees who were fired—who left the IRS 


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while under investigation for an issue of conduct or performance, 

that really was—was something that should have been addressed. 

We’ve got four of those employees who willfully failed to file even 

a tax return. Now, I think the message needs to be clear. It’s time 

to clean house. It’s time to get it right. We’re not going to continue 

to have hearing after hearing after hearing with no accountability. 

Additionally, I’m very concerned with the number of IT recommendations that continue to not be fulfilled. And so I look forward to hearing your testimony. Because as we look at that, IT security at the IRS should be priority number one. And yet what we 

have found over and over again is, is that we’ve got legacy systems, 

we’ve got out-of-date systems. And everything wants to come running back to the financial concerns. But I’ve looked at the appropriations. I’ve looked at the numbers where they are. And there is 

not a linear correlation between the amount of money that you get 

funded and addressing those problems. 

So what I want to hear today is: How are we going to address 

the things that TIGTA has brought up? We continue to see some 

of these mismanagement areas. And, again, if we’re not going to do 

it, I would rather hear under sworn testimony today that we’re just 

not going to do it. I’m tired of excuses. At this point, let’s get something on there. 

And, again, it’s very easy to become critical and have all the IRS 

employees think that this is about every one of them. I want to be 

clear. This is not about every one of them. This is about management. This is about the failure to put in safeguards to address 

things that are important to the American people. 

So, Mr. Chairman, I appreciate your leadership, and I yield back. 

Mr. JORDAN. I thank the gentleman. 

Mr. Krishnamoorthi, the ranking member, is recognized. And 

we’ll recognize Mr. Connolly, when he arrives, as well. 

You are recognized for 5 minutes. 

Mr. KRISHNAMOORTHI. Thank you, Chairman Jordan, thank you 

Chairman Meadows and Ranking Member Connolly, for convening 

today’s hearing. And thank you for participating in today’s hearing. 

A 2013 GAO study found that there were 8,400 people with secu- rity clearances who owed a combined total of $85 million in unpaid 

Federal taxes. Only half of this group already had a repayment 

plan with the IRS when their clearance was approved. Over 4,200 

of these individuals were eligible for a top secret clearance. 

Although it may not be readily apparent, the IRS plays an important role in our national security apparatus. This is why the 

GAO recommended implementing additional security checks, including rigorous background checks, providing proof of past tax returns, and working more closely with the Internal Revenue Service 

to weed out potential security vulnerabilities in our government. 

As I’m sure everyone here is aware, financial pressure is one of 

the easiest ways for adversarial intelligence agents to recruit 

sources who will betray our country. Outstanding debts are an 

overwhelming counterintelligence vulnerability that make the debtor liable to pressure, seduction, blackmail, or any of the other tools 

in a spy’s recruitment handbook. In general, substantial financial 

debts could be used against an individual, particularly—particularly if those debts are owed to foreign entities or individuals. 


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We must do everything we can to ensure that those entrusted 

with access to our Nation’s secrets are not vulnerable to any sort 

of blackmail. And we would be abdicating this responsibility if we 

did not use Congress’ power of the purse to ensure that every agency, including the IRS, support our country’s counterintelligence operations and has the means necessary to succeed. 

Given all the unknowns surrounding the President’s tax returns 

and the overleveraged real estate holdings of his senior staff, we 

have an obligation to make sure the IRS is able to fully cooperate 

with the national security and intelligence communities to make 

sure they are able to assess and respond to counterintelligence 

vulnerabilities within our own government. 

I look forward to further exploring this GAO report and how the 

IRS works with other agencies to track these vulnerabilities and 

ensure that they are properly addressed. 

Thank you, Mr. Chairman. 

Mr. JORDAN. I thank the gentleman. 

Today’s hearing is entitled, ‘‘Ongoing Management Challenges at 

the Internal Revenue Service.’’ That is a nice way of saying the IRS 

has been a mess and remains a mess. Rehiring employees who 

were under investigation, rehiring employees who were engaged in 

fraud, rehiring employees who were violating 6103, looking at confidential taxpayer information, awarding a contract to Equifax in 

light of the massive data breach, 143 million Americans’ data 

breached potentially. 

And never forget the backdrop. Never forget the backdrop here. 

Russell George became well known as the inspector of TIGTA back 

in 2013 when we asked him to look into the fact that we thought 

maybe the IRS was targeting conservative groups. And, lo and behold, they were. And never forget what happened when the IRS got 

caught with their hand in the cookie jar targeting conservative 

groups. They first denied it. Doug Shulman told the Ways and 

Means Committee way back then, no, it’s not going on. Guarantee 

it’s not happening. 

Lois Lerner sat in our office, met with oversight staff, said, oh, 

not happening. Then they did what everyone else does when they 

get caught doing something wrong: They tried to spin it. Inspector 

General George remembers this. He was going to release his report 

on Monday. On the Friday before, Lois Lerner went to a bar association speech here in town—right, Mr. George? 

Mr. GEORGE. That’s correct. 

Mr. JORDAN. —went to a bar association speech here in town and 

had a friend ask her a question, planted question. And what did 

she say? She does what everyone does when they get caught. Said, 

it wasn’t me. Nope, it was those folks in Cincinnati. Remember 

this? Blame someone else. First you deny it. Then you try to spin 

it and get in front of the story, which she did. Then you blame 

someone else, say, oh, rogue agents in Cincinnati. And then when 

that didn’t hold up, they even attacked Mr. George and TIGTA for 

doing their hard work, for just presenting us the truth. They 

blamed the messenger. They attacked the messenger. 

And, finally, they resorted to the worst of it all, in my judgment: 

They destroyed the evidence. The IRS 422 backup tapes containing 

potentially 24,000 emails that could have answered a lot of quesVerDate Nov 24 2008 10:25 Aug 15, 2018 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 H:\30294.TXT APRIL

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tions. After Lois Lerner’s hard drive crashed and it came up missing, even though it was under subpoena, even though it was under 

a preservation order, they destroyed the evidence. 

And now here we sit, again, the IRS continues to rehire folks 

who violate 6103, look at confidential taxpayer information, rehire 

folks under investigation, rehire folks engaged in fraud, award a 

no-bid contract to Equifax in light of the fact that 143 million taxpayers’ information was breached. 

But here’s the good news. At least there’s one element of good 

news. The long, sad chapter of John Koskinen as IRS commissioner 

comes to an end in 2–1/2 weeks, and thank the Lord for that. 

So I look forward to our witnesses and what they have to say, 

and particularly the work that Mr. George and his team have done 

on a number of issues related to the targeting and the issues that 

we’re also going to be asking questions and discussing today. 

Mr. JORDAN. And, with that, since Mr. Connolly is not here, I 

think we’ll swear our witnesses in and proceed with their testimony and get right to questions. 

It’s my honor to welcome today Mr. Jeffrey Tribiano, deputy commissioner for Operations Support at the IRS; Ms. Gina Garza, the 

chief information officer at the Internal Revenue Service; and, of 

course, the Honorable Russell George, Treasury Inspector General 

for Tax Administration; and Mr. Kutz, the assistant inspector general for Audit at the Treasury Inspector General for Tax Administration. 

Welcome to all of you. I know, Mr. George, we appreciate you 

being here. You and I have talked on the phone, and we appreciate 

you making the effort to be here today. 

The custom of this committee is to swear people in. So if you’ll 

stand up, raise your right hand. 

Do you solemnly swear or affirm the testimony you’re about to 

give is the truth, the whole truth, and nothing but the truth, so 

help you God? 

Let the record show each witness answered in the affirmative. 

And we will move right down the line there. So, Mr. Tribiano, 

you are up first. And you know how it works. You got 5 minutes. 

Fire away. 

WITNESS TESTIMONIES 

TESTIMONY OF JEFFREY TRIBIANO 

Mr. TRIBIANO. Yes, sir. Well, Chairman Jordan, Chairman Meadows, Ranking Member Krishnamoorthi, and members of the subcommittee, my name is Jeffrey Tribiano, and I’m the deputy commissioner of Operations Support at the IRS. Joining me at the witness table is Ms. Gina Garza, the IRS’ chief information officer. 

And we appreciate this opportunity to testify. 

Each year, the IRS collects more than $3 trillion, processes more 

than 200 million electronic tax returns, and answers more than 60 

million calls from taxpayers as part of its mission. These and many 

other activities are accomplished through detailed planning and coordination across the Service. This includes critical support provided by the IRS’ Information Technology organization. In allocating resources for these efforts, our highest priorities are the deVerDate Nov 24 2008 10:25 Aug 15, 2018 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 H:\30294.TXT APRIL

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livery of filing season, implementing congressional mandates, and 

protecting taxpayer data. At the same time, to the extent resources 

are available, we continue to invest in modernization of our tax administration systems and applications. 

To continue delivering on our priorities and modernization efforts, it is critical that the agency’s IT infrastructure components 

be up to date. We continue to make investments in modernization 

of critical infrastructure, using managed services and cloud technology to the extent possible. While we have seen some progress 

over the last year, additional investments are needed. We are concerned that the risk of a catastrophic system failure is increasing 

as our infrastructure continues to age. Replacing the aging IT infrastructure is a high priority for the IRS, but we are challenged 

by our budget situation. Our budget is now $900 million below 

what it was in 2010, and modernization at a faster pace requires 

significant additional resources for IT. 

We were also asked today to address the sole-source contract 

award to Equifax in late September after the company announced 

a major data breach. At the beginning of this year, we recognized 

the risk of using only one vendor, Equifax, to provide the IRS critical identity verification and validation services. In February 2017, 

we publicly announced our strategy to issue two competitive solicitations, one for a short-term 12-month single-award vehicle, under 

GSA schedule, followed by a long-term 5-year, multiple-award vehicle. In July, we awarded a 12-month contract to Experian to provide these services. Equifax then filed a protest to the Government 

Accountability Office, which had up to a hundred days to render a 

decision. 

The protest triggered an automatic stay of contract performance 

on the awardee to preserve the status quo until GAO issued its ruling. At this point, overriding the statutory stay was not warranted 

under the circumstances. Equifax was satisfactorily providing services on the contract. There is no suggestion or evidence of any 

issues that would have caused the IRS to question Equifax’s performance or whether Equifax’s continued performance on the contract represented a risk to the government. We filed a motion at 

that time to dismiss the protest, but GAO denied our motion on 

August 2nd. 

Since the GAO decision was not expected until October 16th, and 

the contract with Equifax was ending on September 30th, we were 

facing a lapse in identity verification services. This had the potential to negatively impact up to a million taxpayers. We believed it 

was critically important to maintain the ability for taxpayers to authenticate their identity to receive certain online services, particularly electronic requests for prior year’s tax returns. This was specifically significant for taxpayers preparing to file returns before 

their extensions ran out on October 16th, and for the taxpayers in 

the federally declared disaster areas. 

Several factors were considered prior to awarding the short-term 

bridge contract to Equifax on September 29, to include the GAO 

protest period, the time needed to transition to Experian, and the 

impact on taxpayers, and the results of our initial onsite security 

assessment conducted by the IRS team and the TIGTA special 

agents. However, on October 12, after reviewing new information 


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on Equifax’s situation, we took the precautionary step of temporary 

suspending the short-term bridge contract with Equifax. Now that 

GAO has denied the protest, we are moving forward with Experian. 

Lastly, we have also been asked to address the procedures for rehiring former employees. The IRS is committed to properly evaluating prior performance and conduct issues. We have in place procedures, which we continue to refine, to consider prior performance 

and conduct in the hiring process to the extent permissible by law, 

and this includes implementing all of TIGTA’s recommendations by 

October 31st of 2017. 

This concludes mine and Ms. Garza’s opening statement, and we 

are happy to take your questions. 

[Prepared joint statement of Mr. Tribiano and Ms. Garza follows:] 


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WRITTEN TESTIMONY OF 

JEFFREY J. TRIBIANO 

DEPUTY COMMISSIONER FOR OPERATIONS SUPPORT 

AND 

SILVANA GINA GARZA 

CHIEF INFORMATION OFFICER 

INTERNAL REVENUE SERVICE 

BEFORE THE 

HOUSE OVERSIGHT AND GOVERNMENT REFORM COMMITTEE 

SUBCOMMITTEE ON HEAL THCARE, BENEFITS AND ADMINISTRATIVE 

RULES AND 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS 

ON IRS MANAGEMENT CHALLENGES 

OCTOBER 25,2017 

I. INTRODUCTION 

Chairmen Jordan and Meadows, Ranking Members Krishnamoorthi and Connolly 

and members of the Subcommittees, thank you for the opportunity to appear 

before you today to testify on recent IRS management challenges. 

Before discussing the three specific areas we have been asked to address, we 

wanted to provide the Subcommittees with an overview of the IRS's current 

approach to managing risks within our operations. 

The IRS has been working for several years to ensure risks are managed more 

effectively throughout the organization. In 2014, we established an agency-wide 

enterprise risk management program, creating risk management liaisons in each 

area of our operations, and providing for the regular identification and analysis of 

risks to be eliminated or managed across the agency. 

We are aware that actions the IRS takes have the potential to affect millions of 

taxpayers. So, for the IRS, a risk management program provides a framework for 

regularly reviewing existing risks and identifying new ones, so that problems can 

be dealt with in a timely manner. The goal of our program is to stay ahead of the 

curve and anticipate risks whenever possible, to identify and fix problems when 

they arise quickly, and to be transparent about the entire process. 

We are working to create a culture where employees are encouraged to think of 

themselves as risk managers and to report any issues or problems that occur. 

We are encouraging the further flow of information from front-line employees up 

through the organization as well as out to the front line from senior managers. As 

part of this program, each of the IRS business divisions established a Risk 

Management Process to enable certain issues to be elevated to the executive 
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leadership for review and discussion. This new and expansive process reduces 

the risk of overlooking sensitive issues. 

II. MODERNIZING IRS INFORMATION TECHNOLOGY SYSTEMS 

One issue we have been asked to address is the need to modernize our 

information technology (IT) systems. 

The IRS's Information Technology Division provides critical support to the 

agency's dual mission of providing taxpayer service and enforcing the tax laws. 

In allocating resources for these efforts, our highest priorities are delivering the 

filing season, implementing congressional mandates and ensuring that our 

computer systems and the taxpayer data they hold remain protected. 

At the same time, we continue to invest in modernizing our tax administration 

applications in several areas, including the Return Review Program, the 

Customer Account Data Engine (CADE2) and Enterprise Case Management 

(ECM) -which are discussed in more detail later in this testimony- and Web 

Apps. This also includes investments in modernizing critical infrastructure such 

as our Portal Operations and Enterprise Storage Service, both of which take 

advantage of managed services. 

To continue delivering on our priorities and modernization efforts, it is critical that 

the agency's IT infrastructure components be up-to-date. But while we have 

consistently delivered successful filing seasons and implemented legislative 

mandates, the risk posed by our aged infrastructure is threatening this success. 

Approximately 64 percent of IRS hardware is aged, and 32 percent of supporting 

software is two or more releases behind the industry standard, with 15 percent 

more than four releases behind. 

While we have taken steps to maintain our most critical systems, the IRS needs 

to upgrade its IT infrastructure, not only to help ensure reliable and modern 

taxpayer services, but also to mitigate risks to the system. We are concerned that 

the potential for a catastrophic system failure is increasing as our infrastructure 

continues to age. Thus, replacing this aging IT infrastructure is a high priority for 

the IRS. 

The IRS remains very appreciative of Treasury Secretary Mnuchin's support for 

the IRS to have the appropriate resources available to upgrade our IT systems. 

In fact, a priority in the President's Fiscal Year (FY) 2018 Budget is helping the 

IRS improve information services by addressing its aged infrastructure. 

The President's budget request includes $3.9 billion for operations support. 

Within that total, $2.07 billion is allocated for information services, which is 

$216.1 million, or 11.6 percent, above the FY 2017 enacted level. This funding 

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will allow the IRS to take the initial steps needed to bring our IT infrastructure up 

to date. 

Taxpayer Services Supported by IT Systems 

Delivering the Tax Filing Season 

The most visible taxpayer service the IRS provides is the delivery of a smooth, 

problem-free tax filing season, so that people can file their returns and receive 

their refunds as quickly and easily as possible. Our IT systems process 

approximately 150 million individual income tax returns and more than $300 

billion in refunds to individuals each year. 

Our ability to effectively manage the IRS's IT systems, despite our aged 

infrastructure, is evidenced by the fact that the IRS continues to deliver smooth 

filing seasons, amid steady growth both in the number of returns filed and the 

percentage of electronically filed returns over the past decade, and a number of 

complex tax law changes. 

Today, nearly 90 percent of individual income tax returns are filed electronically. 

Return processing has gone smoothly, even in years where passage of tax 

legislation late in the year has required the IRS to move quickly to update our 

systems to accommodate tax changes enacted by Congress. 

During the filing season and throughout the year, the IRS provides taxpayer 

services through a variety of delivery channels to help taxpayers file their tax 

returns accurately and on time. Here too, our IT systems are an essential 

component of our service efforts. For example, IT supports our call center 

operation, which is one of the largest in the country, and which answered more 

than 64 million taxpayer calls in FY 2016, including automated calls and those 

using a live assistor. 

Our IT systems also support our ability to offer online services, which we 

continue to expand in response to increasing taxpayer demand. We provide a 

wealth of tax information on our website, IRS.gov, which was visited more than 

500 million times during FY 2016, and more than 490 million times in FY 2017. 

The IRS recently completed a revamp of IRS.gov to make the site more userfriendly and to make it easier for taxpayers to view site content on their mobile 

devices. 

Protecting Taxpayer Data 

Providing outstanding taxpayer service also involves ensuring that the 

information taxpayers provide to the IRS will be kept secure. The IRS continues 

to work to protect our main computer systems from cyber incidents, intrusions 

and attacks, with our primary focus being on preventing criminals from accessing 

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taxpayer information stored in our databases, as well as identifying fraud. Our 

core tax processing systems remain secure, and currently withstand more than 

one million attempts to maliciously access them each day. 

We realize the solutions we have in place today may be insufficient in the future, 

as criminal enterprises continue to invest to find ways to try to penetrate our 

systems. They are persistent and have demonstrated their ability to adapt. Their 

tactics are ever-changing, and so our protections must keep changing as well. 

We therefore must continue to invest in cybersecurity and find ways to 

collaborate across government. The supplemental funds that Congress provided 

over the last two years helped us make great progress, but continued 

investments are needed. 

Protecting Taxpayers against Identity Theft and Refund Fraud 

Along with protecting the taxpayer data we have, the IRS is also focused on 

protecting taxpayers who may have had their personal information stolen from 

outside the tax system by identity thieves, who use this information to file false 

returns and claim fraudulent refunds. In recent years, we have made steady 

progress in protecting against identity thieves, by employing information 

technology to assist in fraud detection. 

An important advance that has helped us in the fight against identity theft has 

been the implementation of the Return Review Program (RRP). RRP is an 

integrated and unified system that enhances our ability to detect and potentially 

prevent tax non-compliance. During the 2016 filing season, RRP replaced the 

legacy Electronic Fraud Detection System (EFDS) in the tax system pipeline as 

the government's primary line of defense against the perpetration of tax-related 

identity theft, along with other tax fraud and noncompliance associated with 

individual tax returns. Continued investment in RRP will allow the IRS to address 

more sophisticated instances of identity theft more quickly and expand RRP's 

use to business returns. 

Over the past two years, our progress against stolen identity refund fraud has 

accelerated, thanks to implementation of RRP and the collaborative efforts of the 

Security Summit, a unique partnership launched in March 2015 that includes the 

IRS, industry leaders and state tax commissioners. Our collaborative efforts have 

put in place many new safeguards beginning in the 2016 filing season that 

produced real results. 

Since 2015 we have had fewer fraudulent returns entering our systems, fewer 

bad refunds going out the door, and fewer tax-related identity theft victims than in 

previous years. To illustrate, the number of people who reported to the IRS that 

they were victims of identity theft declined from 698,700 in Calendar Year (CY) 

2015 to 376,500 in 2016- a drop of nearly half. 

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The decline has continued during 2017. In the first eight months of this year, 

about 189,000 taxpayers reported they were victims of identity theft, which is a 

drop of about 40 percent from the same period last year. Taken together, the 

number of taxpayers over the last two years who reported being victims of taxrelated identity theft has dropped by nearly two-thirds. 

Providing for the Future of Taxpayer Service 

In addition to ensuring that the basic taxpayer experience with the IRS is safe, 

secure and functional, the agency has been working for several years on longerterm improvements to the taxpayer experience and tax administration. In this 

effort, the IRS relies heavily on our information technology systems to help carry 

out these improvements. 

Our goal is to have a more proactive and interactive relationship with taxpayers 

and tax professionals by offering them the services, tools and support they want, 

in ways that are both innovative and secure. We are working to catch up with the 

kinds of online and virtual interactions people already use in their daily lives to 

communicate with banks, retailers, medical providers and many others. 

A major part of our initiative is developing an online account where taxpayers, or 

their representatives, can log in securely, get information about their account, 

and interact with the IRS as needed, including self-correcting some issues. 

In December 2016, we took the first step toward this with the launch of an 

application on IRS.gov that provides information to taxpayers who have 

straightforward balance inquiries. Since its launch, this new tool has been used 

by taxpayers more than 1.7 million times. We recently added another feature that 

lets taxpayers see recent payments posted to their account. These balance-due 

and recent-payment features, when paired with existing online payment options, 

have increased the availability of secure, self-service interactions with the IRS 

through IRS.gov. 

These are important steps, and over time, we will be looking to add other 

features to this platform as they are developed and tested with taxpayers and tax 

professionals. One of these features which is now in testing is Taxpayer Digital 

Communications. Taxpayer Digital Communications is intended to provide a 

secure online messaging capability so that taxpayers, their authorized 

representatives and IRS employees can correspond electronically and resolve 

issues more quickly than through traditional mail while maintaining security. 

Providing the Taxpayer an Effective Point of Contact 

Along the way, the IRS has come to realize that our efforts to move toward the 

future need to involve more than just online interactions between the IRS and 

taxpayers and their representatives. Therefore, our efforts to use technology 

more efficiently has evolved to cover the entire scope of the taxpayer experience, 

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whether on-line or in person, and poses considerable opportunities for us and for 

taxpayers. 

Our present case management system treats each issue involving a taxpayer as 

a separate case. And those cases are handled throughout the agency by more 

than 60 aging case management systems that often don't communicate with 

each other. So, when taxpayers with more than one pending issue call the IRS, 

they must be transferred from one area to another to get the assistance they 

need. 

We are in the process of developing an Enterprise Case Management (ECM) 

system that will modernize, upgrade and consolidate our existing separate case 

management systems and give authorized IRS employees the ability to see 

information relevant to the taxpayer's range of issues, including prior 

communication with the taxpayer. 

Another initiative that will help the IRS improve the taxpayer experience is the 

Event Driven Architecture (EDA) framework, which will allow us to process tax 

returns in near-real time. Once in place, the EDA framework will allow the IRS to, 

for example, notify taxpayers of potential errors on a return as soon as it is filed, 

and let taxpayers quickly correct certain return errors online - a major advance 

over the current system, in which the IRS corresponds with taxpayers by mail 

regarding potential problems in their returns. 

These and other improvements depend upon our continued development of the 

Customer Account Data Engine (CADE 2), which is our centralized database for 

all individual taxpayer accounts and allows an IRS employee who is helping 

resolve a taxpayer's issue to easily access the taxpayer's information. 

When fully implemented, CADE2 will replace the legacy Individual Master File 

(IMF), which historically has been the primary data source for individual taxpayer 

accounts. CADE2 is replacing the IMF in three major steps. It is important to note 

that this is a complex, multistep process- not a single, easily accomplished 

action. The steps we have undertaken thus far have already provided important 

improvements to our ability to interact with taxpayers efficiently and effectively. 

Challenges to Modernizing IT Systems 

In recent years, Congress has tasked the IRS with implementing several 

legislative requirements. Satisfying these requirements has involved significant IT 

investments, diverting staff and resources that otherwise could have been used 

to continue modernizing our major IT systems and aging IT infrastructure. 

These legislative requirements include those stemming from: The Affordable 

Care Act (ACA); the Foreign Account Tax Compliance Act (FATCA); the 

Achieving a Better Life Experience (ABLE) Act, which includes a new certification 

requirement for professional employer organizations; reauthorization of the 

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Health Coverage Tax Credit (HCTC); a private debt-collection program; and a 

registration requirement for newly created 501 (c)(4) organizations. 

Changes in tax law also often require significant IT resources to ensure proper 

implementation, especially when they are made retroactive. Recently, for 

example, Congress passed tax relief for victims of the hurricanes that struck the 

U.S. mainland and Puerto Rico. We are still evaluating the time it will take to 

implement these changes 

The IRS also needs to be able to attract individuals from the private sector with 

highly specialized IT skills and expertise, particularly for our leadership positions 

in IT. In the past, the IRS successfully recruited such individuals using 

streamlined critical pay authority that was first enacted in 1998 and subsequently 

reauthorized by Congress in 2007 and 2013. 

In fact, TIGTA has noted the IRS had appropriately used this authority by 

adequately justifying the positions, demonstrating the need to recruit or retain 

exceptionally well-qualified individuals, and adhering to pay limitations. This 

authority expired at the end of FY 2013 and has not yet been renewed. 

The loss of streamlined critical pay authority has created major challenges to our 

ability to retain employees with the necessary high-caliber expertise in IT and 

other specialized areas. In fact, there are no longer any executives under 

streamlined critical pay authority at the IRS. The President's FY 2018 Budget 

proposes reinstating this authority, and we urge Congress to approve this 

proposal. 

Ill. SHORT-TERM INTERIM CONTRACT WITH EQUIFAX 

Another subject the Subcommittees have asked us to address involves a sole 

source contract awarded to Equifax in late September after the company 

announced a major data breach. 

The IRS had a contract with Equifax to offer credit monitoring services and 

another separate contract to provide identity authentication services. During 2017 

the IRS re-competed the contract for credit monitoring and the contract was 

awarded to a new vendor effective October 1, 2017. In addition, the IRS recompeted the contract for identity authentication and the contract was awarded 

to a new vendor in July 2017. 

But Equifax protested our decision on the identity authentication services 

contract to the Government Accountability Office (GAO). This required us to hold 

the contract with the new vendor in abeyance until the GAO issued its ruling, 

which it did on October 16. That ruling upheld our decision to award the contract 

to a different vendor, and we are now transitioning to that new vendor. 

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While the GAO decision was still pending, we were faced with the possibility of a 

lapse in service, because the original contract with Equifax expired on 

September 30. Thus, on September 29, we entered into a short-term interim 

contract with Equifax. As the incumbent, Equifax was the only vendor that we 

could contract with to provide identity authentication services to the IRS until the 

GAO issued its ruling. 

We only took this step after reviewing and determining that there was no 

indication that the limited data shared under the IRS contract had been 

compromised. We made this decision to maintain our ability to provide certain 

online services to taxpayers requiring them to authenticate their identity, 

particularly online requests for a prior year tax return, "tax transcript." We 

believed it was important to keep these services available to taxpayers, 

especially those who were preparing to file tax returns before their extensions ran 

out on October 16. 

Meanwhile, the IRS continued its ongoing review of Equifax's systems and 

security. On October 12, after receiving new information on Equifax's situation, 

we took the precautionary step of temporarily suspending this short-term 

contract. 

We took steps to understand and evaluate the impact of the Equifax data breach 

on IRS systems before we made the decision to enter into the interim contract. 

Immediately upon hearing of the Equifax data breach on September 7, the Chief 

Privacy Officer established an Incident Response Team (comprised of personnel 

from Wage & Investment, Procurement, IT, Cybersecurity, General Counsel, 

Risk, Research and Analytics, and Online Service's Identity Assurance) to 

ascertain the extent of the breach and surrounding issues as well as to keep all 

stakeholders informed. Furthermore, IT collaborated with the Treasury Inspector 

General for Tax Administration (TIGTA) Criminal Investigations and IRS Criminal 

Investigations to form a Security Review Team (SRT). The SRT held several 

conversations with Equifax and conducted an initial on-site inspection at its 

headquarters, all of which confirmed no IRS data was compromised and the 

services provided by Equifax under the contract were not affected. 

The suggestion has been made that we had the option to ignore the protest and 

proceed directly with the new vendor. Such action is available to an agency if 

there are "urgent and compelling circumstances that significantly affect the 

interests of the United States," or if performance of the contract is in the best 

interests of the United States. Since there was no indication that any IRS data 

was accessed during the Equifax breach, and Equifax had been successfully 

providing the service in the past, we determined this option was not available. 

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More generally, the IRS has taken significant steps in recent years to strengthen 

our tax processing systems to further protect against identity theft and refund 

fraud. These efforts are part of our Security Summit partnership with state tax 

administrators and the private-sector tax community. 

Our work in this area added new protections for tax returns being filed, including 

greater authentication measures in our processing systems to verify legitimate 

tax filers and protect against identity thieves submitting fraudulent tax returns. 

These additional fraud filters and cross-checks make it harder for identity thieves 

who have only basic taxpayer information to obtain false refunds. We specifically 

designed these safety measures to protect against many of the recent largescale data breaches, such as at Equifax, where criminals obtained such basic 

information as names and Social Security numbers. 

IV. PROCEDURES FOR RE-HIRING FORMER IRS EMPLOYEES 

Another issue the subcommittees have asked us to address involves the 

procedures we use to rehire former employees. 

The IRS is committed to properly evaluating prior performance and conduct 

issues. We have in place procedures- which we continue to refine- to consider 

prior performance and conduct in the hiring process to the extent permissible by 

law, rule and regulation. The IRS hiring process requires our human capital 

professionals to fully evaluate conduct issues in accordance with 5 CFR 731.202 

and the Office of Personnel Management's Suitability Adjudication Handbook. 

During the selection process, prior performance issues must also be considered 

before we make final hiring decisions. 

To strengthen this process, we have updated our policies and practices, and are 

continuing to explore additional methods to ensure that we meet hiring needs 

while considering all prior performance and conduct issues. This includes taking 

corrective actions in response to the recommendations made in a TIGTA report 

issued in July. We are on track to complete those actions by the end of October 

2017. 

Our updated process will allow us to review and document derogatory 

performance and conduct information on former IRS employees, regardless of 

the age of that information. Substantiated derogatory information on former 

employees will be forwarded to the selecting official before a selection is made. 

The selecting official will document any decision to rehire former employees with 

prior conduct or performance issues, and our Human Capital Office will maintain 

the documentation. 

Along with these changes, the IRS has also assembled a team to explore 

additional steps, such as developing a process that will eliminate former IRS 

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employees with a documented history of misconduct or performance problems 

from the hiring process. 

It is important to note that most of the rehired employees identified in the TIGTA 

report were seasonal employees who had been hired to support the 2017 filing 

season. Because our corrective actions will be completed by the end of October 

2017, they will be in place before we begin onboarding new employees for the 

2018 filing season. After the 2018 filing season, we will review our hiring to 

gauge the effectiveness of our policy changes. 

Chairmen Jordan and Meadows, Ranking Members Krishnamoorthi and 

Connolly, and Members of the Subcommittees, this concludes our statement, 

and we would be happy to take your questions. 

10 
17 

Mr. JORDAN. Thank you, Mr. Tribiano. 

Ms. Garza, is that accurate? You’re good? 

Ms. GARZA. [Nonverbal response.] 

Mr. JORDAN. Okay. Mr. George, you’re up. Thank you. 

TESTIMONY OF J. RUSSELL GEORGE 

Mr. GEORGE. Thank you, Chairman Jordan, Chairman Meadows, 

Ranking Member Krishnamoorthi, and members of the subcommittee. I thank you for the opportunity to discuss IRS hiring 

practices and information technology challenges. As noted earlier, 

joining me is Greg Kutz, assistant inspector general for Audit. 

TIGTA first reported in December of 2014 that the IRS had rehired 824 former employees with substantiated conduct and performance issues. For example, the IRS hired 141 former employees 

with substantiated tax issues, including five that willfully failed to 

file their Federal tax returns. Other prior issues for rehired employees included unauthorized access to taxpayer information, 

leave abuse, falsification of official forms, and misuse of government property. 

In response to our 2014 report, the IRS said its current process 

was more than adequate to mitigate risks to the American taxpayer. In our followup July 2017 report, we found that the IRS continued to rehire former employees with conduct and performance 

issues. IRS rehired more than 200 former employees who were previously terminated from the IRS who had separated while under 

investigation for conduct or performance issues. In response to our 

report, IRS management agreed with the intent of our recommendations and cited plans to update current practices. Bringing in employees with a history of problems increases the internal 

threat to taxpayer data. 

This leads to my second point: Information technology challenges 

facing the IRS. Recent cyber events show that bad actors are continually seeking ways to exploit IRS systems and access taxpayer 

information. The recent breach at Equifax could further increase 

the risk of identity theft. IRS continues to take steps in response 

to our recommendations, including implementation of two-factor 

authentication. 

The IRS has also faced significant challenges in modernizing its 

legacy systems and hardware infrastructure. For example, CADE 

2, which is the planned replacement of the Individual Master File, 

has been under development since 2009. The previous CADE initiative dates back to the late 1990s. Currently, there is no planned 

completion date for CADE 2. The IRS has a large and increasing 

amount of aged hardware infrastructure, some of which is three to 

four times older than industry standards. The percentage of aged 

hardware has steadily increased from 40 percent at the beginning 

of fiscal year 2013 to 64 percent at the beginning of fiscal year 

2017. This increases the security risks to critical taxpayer data the 

IRS must protect. 

The IRS has also been challenged in responding to some high 

profile requests from Congress, the public, and the courts. The loss 

or destruction of information resulted from a combination of inadequate systems and policies, along with human error. For example, 

systems and record retention policies have not ensured that email 


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records are automatically archived and could be retrieved for as 

long as needed. 

We reported last year that the IRS’ previous attempt to implement a new email system was unsuccessful at a cost of at least $12 

million. According to the IRS, its future-state email system was to 

be implemented by September 30, 2017. Until a solution is effectively implemented, IRS emails will remain difficult to retain or 

search. 

In conclusion, providing increased online access to taxpayers, 

while protecting their identity and their information from internal 

and external threats, is a substantial challenge for the IRS. In addition, modernizing systems would result in lower operating costs, 

increased security of taxpayer data, and improved customer service 

for taxpayers. TIGTA will continue to prioritize overseeing IRS hiring practices and efforts to address its information technology challenges. 

Thank you for the opportunity to share my views. 

[Prepared statement of Mr. George follows:] 


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TESTIMONY 

OF 

THE HONORABLE J. RUSSELL GEORGE 

TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION 

before the 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM. 

SUBCOMMITTEE ON HEALTH CARE, BENEFITS 

AND ADMINISTRATIVE RULES. AND 

SUBCOMMITTEE ON GOVERNMENT OPERATIONS. 

U.S. HOUSE OF REPRESENTATIVES 

"Ongoing Management Challenges at IRS" 

October 25, 2017 

Chairman Jordan. Chairman Meadows. Ranking Member Krishnamoorthi, 

Ranking Member Connolly. and Members of the Subcommittees. thank you for the 

opportunity to testify on some of the ongoing challenges facing the Internal Revenue 

Service (IRS). Specifically. my testimony today will focus on the results of our recent 

audit work related to the IRS's process of rehiring former employees. the challenges of 

information security and modernizing information technology infrastructure at the IRS. 

and the IRS's use of critical pay authority to hire employees. 

The Treasury Inspector General for Tax Administration (TIGTA) was created by 

Congress in 1998 to ensure integrity in America's tax system. It provides independent 

audit and investigative services to improve the economy, efficiency, and effectiveness of 

IRS operations. TIGTA's oversight activities are designed to identify high-risk systemic 

inefficiencies in IRS operations and to investigate exploited weaknesses in tax 

administration. TIGTA plays the key role of ensuring that the approximately 85,000 IRS 

employees1 who collected more than $3.3 trillion in tax revenue. processed more than 

244 million tax returns, and issued more than $400 billion in tax refunds during Fiscal 

Year2 (FY) 2016, 3 have done so in an effective and efficient manner while minimizing 

the risk of waste, fraud, and abuse. 

1 In FY 2016. the IRS employed, on average, approximately 85,000 people, including more than 16,000 

temporary and seasonal staff. 2 The Federal Government's fiscal year begins on October 1 and ends on September 30. 3 IRS, Management's Discussion & Analysis, Fiscal Year 2016. 
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FOLLOW-UP REVIEW OF THE IRS'S PROCESS TO REHIRE FORMER 

EMPLOYEES 

In December 2014, TIGTA reported that, although the IRS appropriately applied 

Office of Personnel Management (OPM) suitability standards, 824 ( 11.5 percent) of 

7,168 former IRS employees rehired between January 1, 2010, and 

September 30, 2013, had prior substantiated conduct or performance issues. 4 

IRS officials stated that prior conduct and performance issues did not play a significant 

role in deciding which candidates were best qualified for hiring, and TIGTA found 

nothing in the IRS hiring process beyond the suitability standards where prior conduct 

and performance issues were being considered. In addition, we reported that the IRS 

had prior IRS employment information that could help inform its decisions on hiring. 

However, the IRS was concerned that it might violate existing Federal regulations if it 

fully considered prior conduct and performance issues. 

As a result, we recommended that the IRS Human Capital Officer work with 

General Legal Services and the OPM to determine whether, and during what part of the 

hiring process, the IRS could fully consider prior conduct and performance issues. The 

IRS agreed with this recommendation. In its response, the IRS stated that a review of 

conduct and performance issues could be accomplished earlier in the process; 

however, the Department of the Treasury, the OPM, and the IRS believed that it was 

not feasible to move the review of these issues to earlier in the hiring process. They 

concluded that this action would greatly increase the cost of hiring, likely increase cycle 

time beyond the Presidential mandate of 80 calendar days, require additional resources, 

and not likely yield a reasonable return on investment. 

Since the time of our prior report, Congress has enacted the Consolidated 

Appropriations Act of 2016, 5 which prohibited the IRS from rehiring former employees 

without taking their prior conduct into account. In addition, during testimony before the 

Senate Finance Committee in February 2016, the IRS Commissioner was questioned 

regarding the IRS's process for rehiring employees previously fired for cause. During 

this testimony, the Commissioner explained that the employees mentioned in the prior 

TIGTA report were rehired under old hiring procedures, and would not be rehired under 

the IRS's updated procedures. 

4 TIGTA, Ref No. 2015-10-006, Additional Consideration of Prior Conduct and Performance issues /s 

Needed When Hiring Former Employees (Dec. 2014). 5 Pub. L. No. 114-113, 129 Stat 2242. 

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Given the substantial threat of identity theft and the magnitude of sensitive 

information that the IRS holds, hiring employees of high integrity is essential to 

maintaining public trust in tax administration and safeguarding taxpayer information. 

This is especially important in light of recent cyber events against the IRS intended to 

access tax information for the purposes of identity theft and filing fraudulent tax refunds. 

The IRS must ensure its systems and data are protected against both external and 

internal threats. 

However, in a follow-up audit, TIGTA found that the IRS has not effectively 

updated or implemented hiring policies to fully consider past IRS conduct and 

performance issues prior to making a tentative decision to hire former employees, 

including those who were terminated or separated during an investigation of a 

substantiated conduct or performance issue.6 

From January 1, 2015, through March 31,2016, the IRS hired nearly 7,500 

employees, of which more than 2,000 had been previously employed by the IRS. 

Although most employees who were rehired did not have prior conduct or performance 

issues, TIGTA found that more than 200 (approximately 10 percent) of the more than 

2,000 rehired IRS employees were previously terminated from the IRS or separated 

while under investigation for a substantiated conduct or performance issue. More than 

150 of these employees (approximately 75 percent) were seasonal. Four of the more 

than 200 employees had been terminated or resigned for willful failure to properly file 

their Federal tax returns; four separated while under investigation for unauthorized 

accesses to taxpayer information; and 86 separated while under investigation for 

absences and leave, workplace disruption, or failure to follow instructions. Some of 

these employees held positions with access to sensitive taxpayer information, such as 

contact representative positions. 

Some rehired employees had past performance issues. For example, two 

rehired employees were previously terminated for failure to maintain a successful level 

of performance in multiple critical job elements as tax examining technicians. However, 

both of these employees were rehired as tax examining technicians less than six 

months later. In addition, 60 of the 824 employees we identified in our prior report as 

having been rehired with prior substantiated employment issues between 

January 1, 2010, and September 30,2013, were rehired again between 

January 1, 2015, and March 31, 2016. Of these 60 employees, five had additional 

documented conduct or performance issues substantiated within nine days to 19 

6 TIGTA, Ref. No. 2017-10-035, The Internal Revenue Service Continues to Rehire Former Employees 

With Conduct and Performance Issues (July 2017). 

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months after being rehired. Three of the employees had the same issue in their prior 

employment. 

Although the IRS follows specific criteria to disqualify applicants for employment, 

past IRS employment history is not provided to the selecting official for consideration 

when making a tentative hiring decision. IRS officials stated that it would be cost 

prohibitive to review prior issues before a hiring decision and tentative offer has been 

made. However, the IRS was unable to provide documented support for this position. 

In addition, TIGTA could not verify that the IRS always considered prior issues because 

reviews are not always documented. TIGT A also found that 27 former employees failed 

to disclose a prior termination or conviction on their application as required, but were 

still rehired by the IRS. 

Although the IRS may have had a valid basis to rehire some of the more than 

200 former employees with prior conduct or performance issues, TIGT A has serious 

concerns about the IRS's decision to rehire certain employees, such as those who 

willfully failed to meet their Federal tax responsibilities. 

TIGTA recommended that the IRS Human Capital Officer provide the selecting 

official with access to records of former employee conduct and performance issues, and 

require that the basis for rehiring employees with prior employment issues be clearly 

documented. In their response, IRS management agreed with the intent of the 

recommendations and plans to update current practices and policies to ensure that data 

reflecting prior performance and misconduct are utilized in the hiring process. 

INFORMATION SECURITY OVER TAXPAYER DATA 

The IRS relies extensively on its computer systems to support both its financial 

and mission-related operations. These computer systems collect and process large 

amounts of taxpayer data. Recent cyber events against the IRS have illustrated that 

bad actors are continually seeking new ways to attack and exploit these IRS systems 

and processes in order to access tax information for the purposes of identity theft and 

filing fraudulent tax refunds. From the exploitation of IRS's Get Transcript application to 

that of the Data Retrieval Tool, the IRS has found that with each systemic weakness it 

closes criminals have discovered another means to access tax information from the 

IRS. In addition, the recent breach at Equifax that exposed sensitive personal 

information, including Social Security Numbers (SSN), could increase the risk of identity 

theft. As the threat landscape continues to evolve, we believe that protecting the 

confidentiality of taxpayer information will continue to be a top concern for the IRS. 

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TIGTA has assessed the IRS's electronic authentication platforms and made 

recommendations to develop a Service-wide strategy that establishes consistent 

oversight of all authentication needs across the IRS's functions and programs, ensures 

that the level of authentication risk for all current and future online applications 

accurately reflects the risk to the IRS and taxpayers should an authentication error 

occur, and ensures that the authentication processes meet Government Information 

Security Standards. 7 The IRS continues to take steps in response to TIGTA's 

recommendations to provide more secure authentication, including the implementation 

of two-factor authentication and the strengthening of application and network controls. 8 

However, we remain concerned about the IRS's logging and monitoring capabilities 

over all connections to IRS online services. TIGTA is currently assessing the IRS's 

efforts to improve its authentication processes and has identified areas in which the IRS 

still needs improvement. 9 Specifically, the IRS has still not fully implemented network 

monitoring tools designed to improve prevention and detection of automated attacks 

and is not effectively monitoring audit logs for suspicious activity. Due to the importance 

of secure authentication of individuals' identities, we are planning to conduct additional 

reviews in this area. 

The risk of unauthorized access to tax accounts will continue to be significant as 

the IRS proceeds with its Future State initiative, 10 which includes expansion of online 

tools it makes available to taxpayers. The IRS's goal is to eventually provide taxpayers 

with dynamic online tax account access that includes viewing their recent payments, 

making minor changes and adjustments to their tax accounts, and corresponding 

digitally with the IRS. Increased online access will increase the risk of unauthorized 

disclosure of tax data. As such, the IRS's processes for authenticating individuals' 

identities must promote a high level of confidence that tax information and services are 

provided only to individuals who are entitled to receive them. 

7 TIGTA, Ref. No. 2016-40-007, Improved Tax Return Filing and Tax Account Access Authentication 

Processes and Procedures Are Needed (Nov. 2015). 8 TIGTA, Ref. No. 2016-20-082, Improvements Are Needed to Strengthen Electronic Authentication 

Process Controls (Sept. 2016). 9 TIGTA, Audit No. 201720004, Review of E-Authentication to IRS Online Services, report planned for 

December 2017. 10 Preparing the IRS to adapt to the changing needs of taxpayers is described generally as the IRS Future 

State initiative. A key part of this effort is for taxpayers to have a more complete online experience for 

their IRS interactions. 

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MODERNIZATION EFFORTS TO REPLACE LEGACY SYSTEMS 

Successful modernization of IRS systems and the development and 

implementation of new information technology applications are critical to meeting the 

IRS's evolving business needs and to enhancing services provided to taxpayers. The 

IRS's reliance on legacy (i.e., older) systems, aged hardware, and outdated 

programming languages pose significant risks to the IRS's ability to deliver its mission. 

Modernizing the IRS's computer systems has been a persistent challenge for several 

decades and will likely remain a challenge for the foreseeable future. 

One of the IRS's top-priority information technology investments is the Customer 

Account Data Engine 2 (CADE 2). The IRS has been using the Individual Master File 

(IMF), which uses an outdated assembly language code, for more than 50 years. The 

IMF is the source for individual taxpayer accounts. Within the IMF, accounts are 

updated, taxes are assessed, and refunds are generated. Most of the IRS's information 

systems and processes depend, directly or indirectly, on the IMF. 

In 2009, the IRS began developing CADE 2 to address the issues regarding tax 

processing and to eventually replace the IMF. According to the IRS, CADE 2 is the 

data-driven foundation for future state-of-the-art individual taxpayer account processing 

and data-centric technologies designed to improve service to taxpayers, enhance IRS 

tax administration, and ensure fiscal responsibility. 

In September 2013, TIGTA reported that the CADE 2 database could not be 

used as a trusted source for downstream systems because of the 2.4 million data 

corrections that had to be applied to the database and the IRS's inability to evaluate 431 

CADE 2 database columns of data for accuracy. 11 To address these issues, the IRS 

developed additional tools and implemented a new data validation testing methodology 

intended to ensure CADE 2's timeliness, accuracy, integrity, validity, reasonableness, 

completeness, and uniqueness. The IRS requested that TIGTA evaluate the new data 

validation testing methodology. 

In a September 2014 follow-up audit, TIGTA reported that the IRS had 

appropriately completed its data validation efforts. 12 According to the IRS, the CADE 2 

release plan is currently being adjusted to reflect impacts of staffing challenges and 

11 TIGTA, Ref. No. 2013-20-125, Customer Account Data Engine 2 Database Deployment Is 

Experiencing Delays and Increased Costs (Sept. 2013). 12 TIGTA, Ref. No. 2014-20-063, Customer Account Data Engine 2 Database Validation Is Progressing; 

However, Data Coverage, Data Defect Reporting, and Documentation Need Improvement (Sept. 2014). 

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various possible budget scenarios. The loss of key IMF expertise is causing the 

reprioritization of CADE 2 goals to focus on IMF reengineering, the suspension of 

projects, and the potential deferral of planned functionality to be delivered. There are 

several reasons for the delays in implementing CADE 2, including other organizational 

priorities such as the annual filing season, other major information technology 

investments, contracting delays, aging architecture, lack of key subject matter experts 

on institutionalized processes, and outdated programming languages. There is no 

scheduled or planned completion date for CADE 2 development. 

In FY 2018, TIGTA will be initiating an audit to assess the effect of legacy 

systems on the IRS's ability to deliver modernized tax administration. TIGTA also plans 

to conduct an audit to determine the progress made on completing the CADE 2 project, 

including the IRS's retirement strategy for the IMF and a comparison of estimated costs 

to actual expenditures. 

INFORMATION TECHNOLOGY INITIATIVES TO MODERNIZE THE E-MAIL SYSTEM 

In addition to modernization efforts to replace legacy systems, the IRS is 

developing and implementing new information technology to modernize its operations, 

applications, and e-mail system to provide more sophisticated tools to taxpayers and 

IRS employees. TIGTA has identified several areas where the IRS can improve its 

efforts to upgrade or enhance its information technology systems. 

For example, TIGTA has evaluated the IRS's efforts to establish information 

technology capabilities to manage temporary and permanent e-mail records. TIGTA 

determined that the IRS purchased subscriptions for an enterprise e-mail system it 

could not use. 13 The purchase was made without first determining project infrastructure 

needs, integration requirements, business requirements, security and portal bandwidth, 

and whether the subscriptions were technologically feasible on the IRS enterprise. IRS 

executives made a management decision to consider the enterprise e-mail project an 

upgrade to existing software instead of a new development project or program. As a 

result, the IRS did not follow its Enterprise Life Cycle guidance. The IRS authorized the 

$12 million purchase of subscriptions over a two-year period; however, the software to 

be used via the purchased subscriptions was never deployed. The IRS violated Federal 

Acquisition Regulation requirements by not using full and open competition to purchase 

the subscriptions. 

13 TIGTA, Ref. No. 2016-20-080, Review of the Enterprise E-mail System Acquisition (Sept. 2016). 

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In an audit requested by the Chairman of the House Committee on Ways and 

Means and the Chairman of the Senate Committee on Finance, TIGTA determined that 

IRS policies are not in compliance with Federal electronic records requirements and 

regulations. 14 At the time of that report, TIGTA found that the IRS's current e-mail 

system and record retention policies did not ensure that e-mail records were 

automatically archived for all employees and could be searched and retrieved for as 

long as needed. The e-mail system in place at that time required users to take manual 

actions to archive e-mail and resulted in e-mail records that were stored in multiple 

locations, such as mailbox folder, Exchange server, network shared drive, hard drive, 

removable media, or backup tape. 

According to the IRS, its Future State e-mail system, which was planned to be 

implemented by September 30, 2017, was developed to potentially allow records to be 

available and searchable while automatically applying a retention policy. However, until 

a solution is effectively implemented, IRS e-mails remain difficult, if not impossible, to 

retain and search. 

TIGTA has also evaluated the readiness of the IRS to establish an upgraded 

e-mail solution with the information technology capabilities to manage e-mail records in 

compliance with the directive of the Office of Management and Budget (OMB) and the 

National Archives and Records Administration (NARA), which requires that agencies 

eliminate paper records and use electronic record keeping to the fullest extent 

possible. 15 TIGTA found that more effort is needed by the IRS to meet the NARA e-mail 

management success criteria prior to the deployment of the enterprise e-mail solution. 

Specifically, TIGTA determined that as of January 31, 2017, 13 of the 32 (41 percent) 

requirements related to the e-mail management success criteria remained under 

development. The requirements need to be fully developed and implemented before 

the IRS can successfully deploy its enterprise e-mail solution. Due to delays in 

developing and deploying the enterprise e-mail solution, the IRS will most likely not 

begin receiving any of the expected benefits of Federal records reform until the end of 

Calendar Year 2017, nearly a year after the initially mandated deployment date. 

14 TIGTA, Ref. No. 2017-10-034, Electronic Record Retention Policies Do Not Consistently Ensure That 

Records Are Retained and Produced When Requested (July 2017). 15 TIGT A, Ref. No. 2017-20-039, Additional Efforts Are Needed to Ensure the Enterprise E-Mail Records 

Management Solution Meets All Requirements Before Deployment (Aug. 2017). 

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HARDWARE MODERNIZATION 

The IRS has a large and increasing amount of aged hardware, some of which is 

three to four times older than industry standards. In its FY 2016 President's Budget 

Request, the IRS noted that its information technology infrastructure poses significant 

risk of failures, although it is unknown when these failures will occur, how severe they 

will be, or whether they will have material impacts on tax administration during the filing 

season. 

TIGTA conducted an audit to determine and measure the impact of inefficiencies 

of the IRS's aged information technology hardware. Specifically, TIGTA analyzed all 

FY 2016 incident tickets16 from the Knowledge lncidenUProblem Service Asset 

Management system17 categorized as either "critical" or "high" for all aged information 

technology hardware (e.g., desktop and laptop computers, servers, and telephone call 

routers). The aggregate length oftime to resolve these incident tickets was 4,541 

hours. Aged information technology hardware still in use could result in excessive 

system downtime due to hardware failures. As information technology hardware ages, 

it becomes more difficult to obtain adequate support. Aged hardware failures have a 

negative impact on IRS employee productivity, the security of taxpayer information, and 

customer service. 

Additionally, TIGTA reported that the IRS has not yet achieved its stated 

objective of reducing the percentage of its aged information technology hardware to an 

acceptable level of 20 to 25 percent. In fact, the IRS's percentage of aged information 

technology hardware has steadily increased from 40 percent at the beginning of 

FY 2013 to 64 percent at the beginning of FY 2017. 18 Aged information technology 

hardware, when combined with the fact that components of the infrastructure and 

systems are interrelated and interdependent, make outages and failures unpredictable 

and may also introduce security risks to critical taxpayer data that IRS systems must 

protect. 

16 Incident tickets are created as part of the IRS's Information Technology Incident Management Process 

that defines the process and procedures for recording, categorizing, prioritizing, investigating, diagnosing, 

resolving, dispatching, monitoring, and closing out the incidents. 17 This system maintains the complete inventory of information technology and non-information 

technology organization assets, computer hardware, and software. It is also the reporting tool for 

problem management with all IRS-developed applications and shares information with the Enterprise 

Service Desk. 18 TIGTA, Ref. No. 2017-20-051, Sixty-Four Percent of the Internal Revenue Service's Information 

Technology Hardware Infrastructure Is Beyond Its Useful Life (Sept. 2017). 

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IRS USE OF CRITICAL PAY AUTHORITY 

Over the course of the last three years, some Federal Government agencies 

have suffered significant cyber data breaches. Both the OPM and the IRS were 

included in the list of Network World's "Biggest Data Breaches of 2015."19 Efforts to 

exploit cyber systems by various means have highlighted the need for agencies to seek 

the capacity to improve existing systems or build new ones. One element associated 

with building that capacity is hiring individuals with proven skills, knowledge, and 

abilities related to systems design and cybersecurity. The same skills are also highly 

desired in the private sector. Federal agencies generally have fewer hiring 

compensation flexibilities than the private sector when seeking well-qualified 

employees. 

This issue is not new, and in 1990 the Critical Position Pay Authority (CPPA) was 

codified in 5 U.S.C. § 5377. This authority allows agencies to seek the approval ofthe 

OPM and the OMB to pay annual salaries up to the Executive Schedule Level I of 

$207,800 (in 2017) for approved staff members versus $187,000 for employees of the 

Senior Executive Service (SES). 20 

For an employee to receive critical position pay, he or she must be considered 

well-qualified for the position. In addition, critical pay positions require an extremely 

high level of expertise in a scientific, technical, professional, or administrative field and 

must be critical to the successful accomplishment of the agency's mission. 

In 1998, Congress provided the IRS its own Streamlined Critical Pay (SCP) 

authority. 21 Similar to the CPPA, the IRS would be allowed to pay salaries higher than 

the limit applied to employees in the SES and those in the Executive Schedule Level I. 

The SCP authority allowed the IRS to quickly hire and retain employees and 

compensate these employees up to the salary level of the United States Vice President, 

which in 2017 is $240,100. The IRS was limited to a maximum of 40 SCP employees 

on roll at any one time. Significantly, the IRS was not required to seek approval from 

the OPM and the OMB to hire and determine the salary for individuals hired for SCP 

positions. For this reason, the authority was considered streamlined. 

19 Tim Greene, Year in Review 2015: Biggest data breaches of 2015, Network World (Dec. 2, 2015, 

10:12 AM), https:llwww.networkworld.comlarticle/30111 031securitylbiggest-data-breaches-of-2015.html. 20 As of January 2017, for employees of Federal agencies with a certified SES performance appraisal 

system, the maximum salary is $187,000. 21 IRS Restructuring and Reform Act of 1998 (RRA 98), Pub. L. No. 105-206, 112 Stat. 685. 

10 
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Congress extended the IRS's SCP authority on two occasions, and it eventually 

expired on September 30, 2013. On several occasions in 2015 and 2016, the IRS 

Commissioner remarked about the loss of SCP authority, and in an April 2016 

congressional hearing noted the loss "has made it very difficult, if not impossible, to 

recruit and retain employees with expertise in highly technical areas such as information 

technology."22 The IRS stated that no individuals remained employed with the IRS 

under the SCP authority. However, IRS management advised that 7 employees 

previously hired under SCP are currently employed with the IRS after being selected 

from competitive job vacancy announcements. 

However, TIGTA reported that the IRS has not used the CPPA to hire 

employees. 23 IRS officials have not pursued use of the CPPA because they believed 

that the expired SCP authority would be restored. Compared to the SCP, the CPPA 

process requires additional layers of approval and offers substantially less pay flexibility. 

The SCP authority was delegated to the IRS Commissioner in 2009 and did not need 

Department of the Treasury, OPM, and OMB approval. While SCP authority is 

unavailable, use of the CPPA can provide the IRS an enhanced capability in its 

recruitment efforts. Specifically, the $207,800 salary available under the CPPA exceeds 

the $187,000 maximum that can be offered to career-level Federal executives. 

TIGTA further found that the CPPA is not widely used among other Federal 

Government agencies. Within the Federal Government, a maximum of 800 employees 

can receive critical pay at any one time, but per the latest annual report from the OPM, 

in calendar year 2015 only four individuals were hired as CPPA employees. Our 

research showed that some of the reasons the CPPA was not widely used include the 

availability of other agency-specific pay authorities, the lengthy approval process, and 

cultural issues such as paying individuals more than their manager. In their response to 

our report, IRS management indicated that they will be seeking approval from the OPM 

and the OMB to use the CPPA to hire three Information Technology executives in the 

fields of data management, engineering, and architecture. 

We at TIGTA take seriously our mandate to provide independent oversight of the 

IRS in its administration of our Nation's tax system. As such, we plan to provide 

continuing audit coverage of the IRS's efforts to operate efficiently and effectively and to 

22 Can the IRS Protect Taxpayers' Persona/Information, Hearing Before the House Science, Space and 

Technology Committee, Subcommittee on Research and Technology, 114th Cong. 22 (2016) (statement 

of John Koskinen, IRS Commissioner). 23 TIGTA, Ref. No. 2017-IE-R007, The Internal Revenue Service Has Not Used Critical Position Pay 

Authority to Hire Employees (July 2017). 

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investigate any instances of IRS employee misconduct or other threats to tax 

administration. 

Chairman Jordan, Chairman Meadows, Ranking Member Krishnamoorthi, 

Ranking Member Connolly, and Members of the Subcommittees, thank you for the 

opportunity to share my views. 

12 
32 

Mr. JORDAN. Thank you, Mr. George. 

Mr. Kutz? 

Mr. KUTZ. [Nonverbal response.] 

Mr. JORDAN. You’re good? That’s what I thought. 

The gentleman from Georgia is recognized for 5 minutes. 

Mr. HICE. Thank you, very much, Mr. Chairman. 

It seems like dealing with the numerous challenges and crises at 

the IRS is a pretty regular thing around here. We’ve been through 

hearing after hearing in this committee. And some issues, such as 

the technology, rehiring of the employees, these things are ongoing. 

We talk about them often and rightly so. But sometimes there are 

new issues, even to the IRS, such as this recent debacle with 

Equifax, that has a lot of us crawling in our skin. 

The common thread in all of these issues, regardless of what 

they may be, is mismanagement. And it’s not a management problem. It is a mismanagement problem that has been taking place for 

years. And, you know, it filters down from the top to the bottom 

and infects everywhere it goes. And as the chairman stated a while 

ago, I join in celebrating the fact that finally Commissioner 

Koskinen is leaving in a few days, and it is my hope that the tarnished agency that he leaves behind will finally get leadership that 

can correct the problems of mismanagement that are so abundant. 

I know there are good people, dedicated people, at the IRS. And I 

don’t intend or mean to throw all of them under the bus, or any 

of those who are dedicated. But the mismanagement has got to 

come to a stop. 

Now, I mention Equifax. This is certainly a word that, at least 

now, probably everyone in America is aware of, and with good reason. 143 to 145 million individuals who have had their personal information compromised, where it walked right out the front door of 

Equifax. And the report was widely reported, as we all know, of 

what happened. 

So, Mr. Tribiano, Ms. Garza, let me just begin with you. The end 

of September, September 29th, the IRS awarded a bridge contract 

to Equifax after the data breach occurred. I’m trying to wrap my 

mind around that. Did the IRS know about the data breach when 

they made this bridge contract? 

Mr. TRIBIANO. Yes, sir. 

Mr. HICE. Then why in the world did you make another contract? 

Mr. TRIBIANO. We heard about the data breach the same as everybody else, when Equifax announced it. I believe it was on September 7th, in the evening. On September 8th, our chief privacy officer convened our incident response team, which is made up of 

some of our senior leaderships, which is our CIO, our head of 

cybersecurity, the head of our business units, our chief contracting 

officer, and then we asked our TIGTA criminal investigators to join 

us on that day. And we made a call to Equifax to try to determine 

what exactly was going on down with Equifax. 

Later on in the month of September, we sent that same team, 

IRS cybersecurity, IRS criminal investigators, and TIGTA criminal 

investigators, down to Equifax for a 1-day visit to determine what 

happened, what was breached, how that activity happened, and 

what the impact was where the IRS did business. 

Mr. HICE. Are you getting to my question? 


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33 

Mr. TRIBIANO. I am, sir. I’m explaining the decisions that were 

made up to the point where we issued—— 

Mr. HICE. My question: With 145 million whose personal data 

was breached, why in the world would you go back and have another contract with them? 

Mr. TRIBIANO. Well, because they—at that point in time, the systems that housed where we did business was separate from the 

systems that were breached. And there was no indication and no 

security risk for where we did and exchanged information with 

Equifax. 

Mr. HICE. So you’re saying that there’s no fear for the IRS, with 

145 million people whose personal information has been breached, 

you have no concern whatsoever that that may impact the security 

of the IRS-type information—— 

Mr. TRIBIANO. No, sir. 

Mr. HICE. —of those individuals? 

Mr. TRIBIANO. No, sir, I’m not—I didn’t say that. What I was referring to was the information exchange where we exchange information with Equifax for our eAuthentication verification. Part of 

the process that was—we had gone through also at that point in 

time was to look at the impact of the breach, of the 143 million, 

the information—— 

Mr. HICE. Well, Commissioner Koskinen made it—paraphrasing 

him, he said: It’s no big deal for us to have another contract with 

Equifax because all these people’s IDs have been breached already. 

So if they come to us, they’re still breached. 

Mr. TRIBIANO. Sir, I can’t answer for Mr. Koskinen. What I 

can—— 

Mr. HICE. Well, you can answer for the IRS. This is another example of the mismanagement that is poisoning the entire agency, 

let alone the citizens of this country. 

And, Mr. Chairman, my time is running out. But this is inexcusable. And I yield back. 

Mr. JORDAN. I thank the gentleman. And it is inexcusable. 

Does the gentleman from Virginia wish to be recognized now? 

Because we can go down—— 

Mr. CONNOLLY. I thank the chair. And I note that he noted my 

absence. But—— 

Mr. JORDAN. I knew you’d be here, brother. 

Mr. CONNOLLY. Struggling a little bit to get here, but happy to 

be here. And I thank the chair. 

Mr. JORDAN. The gentleman is recognized. 

Mr. CONNOLLY. And I’m sorry I’m out of turn. 

The IRS has suffered severe and repeated budget cuts since 

2010. My colleague just talked about dysfunctionality at the IRS as 

if Congress had nothing to do with it. The current IRS budget is 

20 percent less than the fiscal year 2010 funding level when adjusted for inflation. The IRS continues to face additional proposed 

cuts amid heightened demand for services and additional unfunded 

mandates. These drastic budget cuts have severely weakened the 

ability of the IRS to fulfill its mission, to enforce our Nation’s tax 

laws, and have not sparred any corner of the agency. 

Most significantly, between 2010 and 2016, the IRS lost 13,000 

employees. The agency’s fiscal 2017 budget noted that every addiVerDate Nov 24 2008 10:25 Aug 15, 2018 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 H:\30294.TXT APRIL

KING-6430 with DISTILLER
34 

tional dollar invested in enforcement can produce $6 in revenue. 

That’s not a bad return on investment, if you had bothered to make 

it. But, of course, Congress has thought otherwise. And the additional and direct savings from deterring tax evasion can be three 

times that amount, an 18-to-1 return on investment. 

However, between 2010 and 2016, the IRS was forced to reduce 

its enforcement staff by 11,600 full-time employees. That’s a reduction of 23 percent. Even Secretary Mnuchin, at his confirmation 

hearing, expressed his concern about those staffing levels, saying, 

and I quote: I am concerned about the staffing at the IRS. That’s 

an important part of fixing the tax gap. And also noting: If we add 

people, we make money. That’s not Obama’s Secretary of Treasury. 

That’s Trump’s. 

IRS employees are not the only ones affected by those budget 

cuts. The American people have felt it as well through diminished 

customer service, quality, reliability, and, including, of course, 

longer call waiting times and delayed tax refunds. 

I’m most alarmed with the IRS budget constraints impeding the 

ability of the agency to update its outdated IT systems, delaying 

more than $200 million in investments. IRS has legacy IT systems 

that date back to the Johnson administration. And a September 

2017 report by the Treasury Inspector General for Tax Administration notes that 64 percent of the agency’s IT hardware infrastructure is beyond its useful life. I will say, parenthetically, I am informed that the good news might be that the Chinese don’t know 

how to hack into COBOL. It’s too old. 

So IRS software is also shockingly out of date. Thirty-two percent 

of supporting software are two or more releases behind the industry standard, and 15 percent more than four releases behind. The 

legacy systems are a catastrophe waiting to happen, and it’s critical 

they be upgraded in order to adequately protect taxpayer data and 

provide the modern services that taxpayers deserve. 

I understand we’re not going to have political agreement in this 

committee about the role of the IRS and its importance, centrality 

to a functioning government. But, surely, it seems to me we could 

agree that modernizing IRS’ IT infrastructure is necessary to prevent cyber hacks and will improve customer service, customers who 

are our constituents. 

I know our committee, Mr. Chairman, has led the way on IT 

modernization throughout the Federal Government. It’s time we 

did the same for the IRS. 

I yield back. 

Mr. JORDAN. I thank the gentleman. 

The gentleman from Illinois is recognized for his 5 minutes of 

questioning. Then we’ll go to the gentleman from South Carolina. 

Mr. SANFORD. I thank the gentleman. I guess I’d go to you, Mr. 

George. 

Mr. JORDAN. That’s all right. 

Mr. SANFORD. I’m sorry? 

Mr. JORDAN. That’s fine. We’ll go that way. 

Mr. SANFORD. No, no. Which way? 

Mr. JORDAN. I think we should probably go—because Mr. 

Connolly was doing his opening statement. 

Mr. SANFORD. Oh, please. 


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Mr. JORDAN. So next in line is the ranking member. He’s yielding. You can’t both yield. He’s yielding to you first, so you got to 

take it, man. 

Mr. KRISHNAMOORTHI. Okay. 

Mr. JORDAN. Then we’ll come to Mr. Sanford. 

Mr. KRISHNAMOORTHI. Thank you, Mr. Chairman. 

I wanted to focus a little bit more on this security clearance tax 

issue. And, you know, since 2010, as Ranking Member Connolly indicated, IRS funding has been cut. And, in fact, it’s seen its funding 

cut by 17 percent. And it is performing the lowest levels of individual and business audits in a decade. This is at the same time 

that the GAO has recommended increased coordination between 

the IRS and the Director of National Intelligence. 

Mr. Tribiano, how have these cuts impacted the IRS’ ability to 

effectively work on security issues and coordinate with other agencies? In its 2013 report, the GAO urged the Director of National Intelligence, the Office of Personnel Management, and the Department of Treasury, to evaluate the feasibility of Federal agencies obtaining data on Federal tax debt when evaluating security clearance applicants and monitoring current security clearance recipients. Could you illuminate this a little bit? 

Mr. TRIBIANO. Yes, sir. Yes, sir, I can. Any time there’s reduced 

resources within the IRS, our prioritization is always—is making 

sure that we can deliver a safe and successful filing season. It’s important to us to make sure that we can process the returns, get the 

refunds out the door, and complete that work. The second 

prioritization is always whatever legislative mandates that are out 

there that we have to implement. And third is obviously overriding 

cybersecurity and protecting the data that we have. 

Whatever resources we have after that then go into a 

prioritization for whatever projects we have to work on. The project 

that you’re referring to, being able to provide data, at least the status, as security agencies are doing suitability assessments on possible government employees, took us awhile to work the funds 

available to start that process. 

Now, I can tell you this. We are ready to provide that service. 

The—what we do is—we don’t provide taxpayer data. What we do 

is we get the name and the information from the projected candidate, and we tell the suitability agency whether or not there’s a 

outstanding liability, not a liability, or there’s an issue that you 

need to contact us about. But we can’t release taxpayer data to 

them. Because a lot of these agencies don’t have the built-in ability 

to protect taxpayer data. So we—— 

Mr. KRISHNAMOORTHI. Let me interrupt for a second. I’m going 

to lose all my time. One quick question, which is, you’re also—on 

those tax returns, you would know whether there’s income from 

foreign sources, right? 

Mr. TRIBIANO. Um—— 

Mr. KRISHNAMOORTHI. If they were disclosed to the IRS? 

Mr. TRIBIANO. If it’s disclosed to the IRS, we would know that. 

But that’s not part of the suitability—my understanding it’s not 

part of the suitability. Suitability is whether somebody has an outstanding liability to the government that the IRS has on record. 


KING-6430 with DISTILLER
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Mr. KRISHNAMOORTHI. And if they asked you to provide information about income owed, or debts owed, to foreign actors, or income 

received from foreign actors, you’d be able to provide that, right? 

Mr. TRIBIANO. We are not ready to provide that. And it’s a privacy issue, in a sense, that if we release data like that, there has 

to be protections in place on where it’s going and what’s being done 

with it. We just can’t release taxpayer data without having the 

proper authority to do so. So that’s why in our suitability we provide whether or not there’s an outstanding liability to the Federal 

Government that the IRS has on record, and that the suitability 

professional that’s working on security clearances takes that into 

account on whether or not that person would—you know, the information we provide would create an additional risk in their assessment of that individual’s background. 

Mr. KRISHNAMOORTHI. Okay. You know, make no mistake, in 

these situations, the IRS is as valuable an intelligence collecting 

agency as the FBI, in my opinion. I’m from Chicago, and it wasn’t 

the violence or the speakeasies that brought down Al Capone. It 

was the IRS that nailed him on tax fraud. I’m very concerned that 

we’re now impeding the ability of the IRS to protect us from 

threats much greater than bootleggers or gangsters. 

You know, Mr. Tribiano, has the IRS been cooperating with Special Prosecutor Mueller’s team as he seeks to unwind the extent to 

which Russia has been interfering in our elections? 

Mr. TRIBIANO. Sir, I would have no idea. That’s outside of my 

purview. And even if it was in my purview, I wouldn’t be allowed 

to discuss any ongoing investigations. 

Mr. KRISHNAMOORTHI. Are you aware of any political appointee, 

from any agency, seeking to exert pressure on the IRS to not cooperate with Mueller? 

Mr. TRIBIANO. Sir, again, I’m not subject to any of those activities 

within the IRS. You know, I can tell you the IRS has only two political appointees in our entire 80,000 structure. That’s the Commissioner of Internal Revenue and the Chief Counsel. That’s it. All 

other employees within the IRS are Federal employees. 

Mr. KRISHNAMOORTHI. I’m just really troubled by some of these 

answers. I just don’t think the IRS is doing enough to assess the 

financial liabilities of those who, you know, seek security clearances. We’ve heard repeatedly, repeatedly, about people on SF–86 

forms with all kinds of entanglements, financial entanglements, of 

which the IRS should be aware, if it’s not already, and I’m just 

troubled that this information is not being shared across the government. 

Thank you, Mr. Chairman. 

Mr. JORDAN. I thank the gentleman. 

The gentleman from South Carolina is recognized. 

Mr. SANFORD. I thank the gentleman. 

It seems to me in the back and forth that the—a fairly central 

question that’s emerged has been: Has the cut in funding in IRS 

resulted in its inability to do things? And so I guess my question 

to you, Mr. George, would be this: One could argue, I think fairly 

reasonable, that, you know, the number of agents would impact 

audit capacity. I don’t know that one could argue as reasonably 


KING-6430 with DISTILLER
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that some of the cuts in funding with IRS would affect essential 

management decisions. 

And, fundamentally, when you look at this notion of rehiring 

folks that have been dismissed for a variety of different reasons, 

fundamentally, you’re looking at a management decision rather 

than a capacity decision. I think that the cross-tabs are here especially interesting. Because you look, and you all had studied this 

issue back in 2014, and, at that point, roughly 11 percent of the 

employees that had been dismissed had been rehired. You studied 

it again in 2017, and 10 percent of the folks that had been dismissed had been rehired. In fact, with the cut in funding, actually, 

there had been a 1 percent, or almost a 2 percent, increase in lessening the impact of rehires of mismanaged folks. 

So it doesn’t seem to me that there’s any correlation between 

amount of money, and, again, one’s propensity to go out and rehire 

somebody that was dismissed. Could you give me a little bit further 

thinking on that? 

Mr. GEORGE. I agree with everything that you stated, Congressman. I guess the only thing that could be said in defense of the 

IRS’ actions is that a lot of the rehires are temporary IRS employees. During the filing season, in order to process the millions of tax 

returns that come in, they bring in people who have had experience 

doing that in the past. 

Mr. SANFORD. But they’ve had fundamentally bad experience. 

They have either done wrong, committed malfeasance, not filled 

out their own tax returns, a variety of different—or they’ve been 

dismissive to a superior, they’ve been insubordinate. Go down the 

litany of different possibilities. You fundamentally go back and hire 

somebody like that to increase, quote, capacity? It seems to me you 

would diminish capacity. 

Mr. GEORGE. And it is bad decision-making on their part. Whether it’s 400 or whether it’s 1, that rehire should not have occurred. 

We agree completely. We hope the new commissioner will be more 

proactive in avoiding this in the future. But we will, I can assure 

you, sir, be on top of this issue from day one. 

Mr. SANFORD. Again, Mr. Tribiano, again, you look again at the 

cross-tabs and the numbers, you got less money, but actually had 

fewer faulty management decisions by about 1.7 percent in, again, 

the difference between 2014 and 2017. Your thoughts on that? I 

mean, fundamentally, again, it speaks on not to money being the 

issue, but management being the issue. 

Mr. TRIBIANO. Yes, sir. So let me first start by making sure I 

make it clear. We have an incredibly dedicated and talented workforce. And I want to echo what Mr. Chairman was saying—— 

Mr. SANFORD. Again, that’s just saying what I think has been 

laid out by a variety of different members. I don’t think we’re 

questing the whole of many people who work there. We’re questioning the management process that goes out and rehires folks 

that have been found not worthy to be in the agency that does have 

capable people in it. 

Mr. TRIBIANO. So let me answer your question. 

Mr. SANFORD. Yeah. 

Mr. TRIBIANO. Because you’re associating that with funding. And 

there is a funding issue. You know, when—— 


KING-6430 with DISTILLER
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Mr. SANFORD. Wait, wait, wait. Again, the numbers speak for 

themselves. You had 1.7 percent less in the way of rehiring folks 

that had been dismissed after you had less money. 

Mr. TRIBIANO. Yes, sir. And I’m trying to get to your answer. 

There’s a lot of factors that go into that. When in 2014 TIGTA laid 

out the recommendations that they wanted the IRS to follow, they 

implemented those recommendations. It probably caused some of 

those numbers to drop down. But some of the issues are related to 

funding, and I don’t want to discount that. And I can get to that 

in a minute. But I can tell you the fundamental difference now between what TIGTA recommended this go-around and what we are 

going to do to stop this process from happening and what TIGTA 

called to light for us, is we do a suitability check. Right? So we go 

by OPM standards that states clearly if somebody had this disciplinary issue, concern, problem, after X number of years, OPM tells 

you whether or not they’re suitable or not suitable, whether you 

can take that into consideration or can’t take that into consideration. 

Mr. SANFORD. Wait. If, based on your own filings, you have the 

words do not rehire on there, and you still go out and rehire, that 

doesn’t seem to me to fit with anybody’s standard of common sense. 

Mr. TRIBIANO. If it fits within OPM’s guidelines about what’s 

suitable—— 

Mr. SANFORD. Would you define that as common sense? 

Mr. TRIBIANO. No, sir. So let me just—if I can just finish this 

statement so we’re all on the same page. 

Mr. Chair, can I have a few minutes or a few extra seconds, 

please, sir? 

Mr. JORDAN. Sure. Sure. 

Mr. TRIBIANO. Thank you. 

So, Mr. Sanford, so what we’re changing in that process is twofold. One is, we do the suitability check and we find that there’s 

an issue or concern or some type of problem with the employee. We 

now tag that when we send that to the hiring manager so the hiring manager knows there’s a suitability issue with that individual. 

That’s what TIGTA’s recommendation was. Because that allows us 

to still meet the requirements within OPM, but notify the hiring 

manager that there’s an issue. That’s number one. Number two—— 

Mr. SANFORD. Let me just let you finish the thought. But since 

we’ve already gone over, this is what makes people crazy. In other 

words, you have just defined this process as being outside the 

bounds of common sense, and yet you describe a circuitous process 

by which, supposedly, it checks somebody’s box as being okay. But 

it doesn’t pass the common sense test, which I think is the ultimate 

test. 

Mr. TRIBIANO. What I described is the rules that I have to follow 

in order to meet OPM’s requirements, all right, that I cannot operate or expect my people to operate outside of. But if I could just—— 

Mr. JORDAN. Mr. Tribiano, the point is, was it reduced resources 

that caused you to rehire someone you had said don’t rehire? Was 

it reduced resources that led to a decision to give Equifax a no-bid 

contract 30 days after they said 143 million Americans had their 

data compromised? That’s Mr. Sanford’s point. And, frankly, any 

American who looks at that says there’s no way reduced resources 


KING-6430 with DISTILLER
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caused the IRS to make those decisions. They just made those decisions. 

Mr. TRIBIANO. The reduced resources, it affects every part of the 

IRS. It’s not just our revenue agents or revenue officers. It affects 

our contracting folks. It affects our HR folks. So the last thing I 

would just like to say, we are seeking—— 

Mr. JORDAN. And it affects your ability to read. Do not rehire, 

and yet you rehired them. 

Mr. TRIBIANO. Sir, according to—— 

Mr. JORDAN. I’ve got to get to the other side here. Finish your 

thing, then we will get to—— 

Mr. TRIBIANO. Thank you. I appreciate some leeway there, Mr. 

Chair. 

The one thing that we are requesting to try to get to your common sense approach is we’re working with OPM on getting debarring authority to where if we can—for those items that reach that 

level that OPM will approve it, that we can debar those type of 

fractions from being part of the suitability and remove them from 

that. But that’s the context of what we have to work in on some 

of those rules that are out there. So that debarring authority can 

help prevent some of these activities. And, again, I’m sorry that I 

ran over. 

Mr. JORDAN. Gentleman from Virginia. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

I guess I’m not surprised Mr. George would say something like 

I agree with everything you said, when listening to my friend from 

South Carolina. My friend from South Carolina has executive experience. So do I. I helped run one of the largest counties in the 

United States. And I can tell you this. At some point, you do less 

with less. 

The idea that there’s no relationship—which I think I heard my 

colleague say—no relationship between resources and functionality, 

capacity, whatever, is an absurd proposition, and I don’t think any 

sensible American will buy into it. And so we have a smokescreen 

going on in terms of the dysfunctionality of IRS and decisions made 

or not made. But where Americans really care is where they intersect with the IRS. 

So, Mr. Tribiano, have the cuts that have ensued since Republicans took over the Congress, coincidentally, in the 2010 elections, 

have the cuts had a material effect on the quality of services by the 

IRS? 

Mr. TRIBIANO. Yes, sir. I would say any reduction in resources—— 

Mr. CONNOLLY. No, no, no. I’m asking specifically. I don’t want 

to hear general. That’s what Mr. Sanford was talking about. I want 

to hear specifically. Let’s test his theory. Has there been a deterioration in customer service at the IRS in the last 7 years? 

Mr. TRIBIANO. Yes, sir. 

Mr. CONNOLLY. Why? 

Mr. TRIBIANO. Because we don’t have the resources to perform all 

the compliance reviews that we need to have. We’re down revenue 

agents and revenue officers, which means we’re doing less compliance across the board in all areas. 


KING-6430 with DISTILLER
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Mr. CONNOLLY. So, for example, are there fewer audits of tax returns? 

Mr. TRIBIANO. Yes, sir. 

Mr. CONNOLLY. Why is that a bad thing? I mean, a lot of Americans might welcome the fact that you can’t audit me as easily as 

you once could. 

Mr. TRIBIANO. Well, our tax system is built on voluntary compliance. If people don’t feel that there’s any repercussions from compliance purposes, then there’s a tendency to move to—— 

Mr. CONNOLLY. Isn’t there also an equity issue? So people who 

are cheating don’t get caught because you don’t have the resources 

to do the audit to catch them, while law-abiding citizens are paying 

their fair share of taxes while someone else is getting away with 

not doing it. 

Mr. TRIBIANO. Yes, sir. We’ve had few criminal convictions from 

our criminal investigators. And it’s not because there’s less criminals out there; it’s because we have less resources. 

Mr. CONNOLLY. Do you remember what the estimate is every 

year of taxes owed but not collected? Because this committee’s had 

hearings on that subject. 

Mr. TRIBIANO. I don’t recall it right now, sir. 

Mr. CONNOLLY. Does the figure $350 billion ring a bill? 

Mr. TRIBIANO. That sounds—— 

Mr. CONNOLLY. Isn’t that amazing? 

Mr. KUTZ. It’s $450, actually. 

Mr. CONNOLLY. I’m sorry. Thank you. 450. So we’re testing Mr. 

Sanford’s theory here that resources have no relationship to capacity or functionality. $450 billion of taxes owed, left on the table 

every year. Now, I don’t know, I’m not that good at math, but times 

10, that’s $4.5 trillion. You want a down payment on the debt? 

There’s a good way to start without raising anyone’s taxes or without cutting vital investments for the United States. 

So what about, Mr. Tribiano, has it had a material effect on customer service? Have waiting times gone up when I call the IRS or 

do people pick up that phone right away on the first ring and whistle while they work? 

Mr. TRIBIANO. Waiting times have gone up. This last filing season, though, we allocated more resources that we had to that. So 

we did a better job in it. But if you talk to anybody that waits for 

any amount of time on the phone, it’s not good enough. 

Mr. CONNOLLY. Now, I talked about legacy systems and the lack 

of an investment. And, Ms. Garza, certainly pipe in if you’d like. 

What can go wrong with having legacy systems that are 50 years 

old and hardware and software that’s way beyond the industry average in terms of life span in an agency that keeps data on every 

American in terms of financial data, paying their taxes? 

Ms. GARZA. So the aged infrastructure, the risk, which is one of 

our biggest risks at the IRS, it creates instability in the systems. 

So you end up having—— 

Mr. CONNOLLY. But specifically, Ms. Garza—my time is running 

out—what’s the risk we worry about here? If I got—are these systems capable, all of them, uniformly, of being encrypted? Isn’t there 

a privacy concern for Americans that when you’re dealing with 

aging hardware and software, they’re more vulnerable? 


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Ms. GARZA. It depends on where you’re talking. We have a perimeter, a secure boundary around our systems, that is very—what 

we call a very hard shell that protects the systems that are inside. 

Mr. CONNOLLY. Yes. I think OPM thought it had one of those too. 

Mr. Tribiano, did you want to comment on that before my time 

ends? 

Mr. TRIBIANO. I agree with Ms. Garza. I can just tell you that 

I worry about system failure during filing season. That’s my number one concern, because if we can’t process returns, refunds aren’t 

going out the door. And that could have a large effect on this economy and taxpayers. So I worry about that, and I also worry about 

cyber. And everybody in government should be worrying about 

cyber. But those are my two biggest. 

Mr. CONNOLLY. Thank you. Thank you, Mr. Chairman. And I 

thank my colleague from South Carolina for being willing to test 

his theory. 

Mr. JORDAN. I thank the gentleman from Virginia. With the committee’s indulgence, I’m going to let Mr. Sanford respond just for 

a few minutes. And if the gentleman needs a few more minutes, 

I’ll do the same, and then we’ll get to our other questions. 

Mr. SANFORD. I appreciate so much my colleague’s lightning fast 

mind. Certain parts of his body may be not moving as fast as they 

have in the past, but his mind does certainly not fit into that description. I appreciate his intellect. 

And I’d just say two things. One is that hyperbole is often the 

way of politics. And there’s a little bit of hyperbole in what my dear 

colleague is suggesting. And I even seeded the point, which is to 

his point, I think that if you look at call times, wait times, audits, 

there are a number of things that could be legitimately impacted 

by cuts within the IRS. My point in the rehire question—and that’s 

why I differentiated—was to say that doesn’t seem to be the case 

on the rehire question, given the fact that if you look at the numbers in 2014—or rather—yeah, 2014, you had 11.7 percent, in essence, misfire there, and by 2017, it had gone down to 10.65 percent, a drop of a little over a point, even though there was less 

money. And there seemed to be reverse correlation there. There 

could be a variety of different factors that play there. But there 

seemed to be a difference in the cross-tab. 

So I’d say that the money begs otherwise. And I would certainly 

cede the larger point to my colleague with regard to audit and 

other. 

I would also make this point. This isn’t a South Carolina perspective. This is a perspective, and, therefore, I would ask you to 

take it up with Mr. George, that is held by the inspector general. 

My numbers are simply coming from them. I’m reading off the 

numbers that I see from the inspector general, and that’s why I 

think it was so instructive. When I walked through my numbers, 

he said, I could not agree more. 

With that, I’d yield back. 

Mr. CONNOLLY. Thank you, Mr. Chairman. And I thank my colleague for his clarification. And I didn’t have time to go into the 

rehire issue, and I take his point. I thought Mr. Tribiano was trying to tell us that there are OPM rules about rehiring that they 

have to go to first. I don’t know that Mr. Tribiano adequately adVerDate Nov 24 2008 10:25 Aug 15, 2018 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 H:\30294.TXT APRIL

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dressed the chairman’s point, and your point, Mr. Sanford, but if 

there was a note saying don’t rehire, does OPM still require you 

to do that? Because that doesn’t make sense to any of us. 

Mr. TRIBIANO. What OPM requires, sir, is a suitability. There’s 

lengths of time that, after you exceed that length of time, that violation, issue, whatever you want to call it, is no longer part of the 

suitability check, even though you have a record that says an individual was AWOL from work—or absent without leave, I’m sorry— 

from work. After a certain number of years, that is not part of the 

suitability—— 

Mr. CONNOLLY. My time is going to run out, but let me ask this. 

So do we need to change the OPM regs? Because it sounds like 

they are making you do something you would prefer not to do. 

Mr. TRIBIANO. I would leave that up to Congress. I would say it 

would allow me more flexibility to be able to manage the agency 

differently. And that is why we are seeking that debarment authority, because that would allow us, then, to block out major infractions and say, look, we can use this debarment authority and meet 

those commonsense standards that Mr. Sanford was referring to. 

Mr. CONNOLLY. I thank the Chair for his consideration. 

Mr. JORDAN. The gentlelady from the District is recognized. 

Ms. NORTON. Thank you, Mr. Chairman. I think it only fair to 

Mr. George to lay to rest notions that ran throughout this committee for a long time, the false narrative that the Obama White 

House had directed the IRS to target conservative groups for political reasons. One of my friends on the other side said it was, quote, 

basically an attempt to muscle anyone who is their political opponent and to use whatever power they have at their disposal to intimidate people they don’t agree with. So there was an accusation 

that’s from the top of the government, from the White House, that 

there was an attempt to, essentially, commit fraud, frankly, with 

the IRS. 

Now, in 2013, TIGTA—and you know that, of course, is the 

Treasury Inspector General—conducted an audit of the screening 

procedures used to process applications for tax exempt status, 

which is what this was all about. Is that not correct, Mr. George? 

Mr. GEORGE. That’s correct. 

Ms. NORTON. In that audit, that audit—and here I’m quoting 

from it directly—found ineffective management, allowed inappropriate criteria to be developed, resulted in substantial delays, and 

allowed unnecessary information requests to be issued.’’ 

As a result of that audit, therefore, Mr. George, there is no evidence of political motivation, is there? 

Mr. GEORGE. That is correct. And I’ve stated that from the outset. 

Ms. NORTON. Yes, you did. I just want to lay this on this record, 

given the hullabaloo that went on for at least 2 years on this question. 

And, Mr. George, you found absolutely zero evidence of White 

House direction. Is that not correct? 

Mr. GEORGE. That is correct. 

Ms. NORTON. On September 27, 2017, TIGTA released a followup 

report looking at additional material not included in the 2013 

audit. Is that not true, Mr. George? 


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Mr. GEORGE. We did. 

Ms. NORTON. This new report confirms that it was both progressive and conservative groups that received extra scrutiny in the application process and that there was no political targeting, that 

groups with progressive, with occupy, with green energy in their 

names were pulled for additional scrutiny. They too were subject 

to extended delays in the processing of their applications, and they 

too received unnecessary questions. 

Is that not true? That whatever was this faulty management 

sense applied to groups that consider themselves liberal or conservative and groups that consider themselves the opposite, and that 

both were victims of this management failure at the IRS. Is that 

not true? 

Mr. GEORGE. Yes. But I need to qualify something. As it relates 

to progressives, I will agree that what you stated was accurate. As 

it relates to the other groups, especially the ones that you deemed 

conservative, we, neither in 2013, nor in 2017, made that decision 

to determine the political leaning of any group. 

Ms. NORTON. I don’t understand what you’re saying. You understood the political leaning of the left-wing groups but not the rightwing groups? 

Mr. GEORGE. Well, only because progressive, and through the 

work of my chief auditor on that matter, who happens to be Mr. 

Kutz, who, with your permission, I’d like to defer to—— 

Ms. NORTON. I’d be pleased to hear from Mr. Kutz. 

Mr. GEORGE. —elaborate on that. 

Mr. KUTZ. Yeah. Congresswoman, we didn’t label anyone anything in either report. But the criteria—— 

Ms. NORTON. Well, you know, I’m using quotation marks here. 

I’m not labeling them. I’m using quotation marks on the report: 

progressive, occupy, green energy. 

Mr. KUTZ. Organizations with those terms in them did receive 

delays similar to the first report and did receive unnecessary questions. It wasn’t the same magnitude. But there was some that did. 

That is a fair statement. 

Ms. NORTON. In fact, none of the procedures in place at the time 

of the inappropriate criteria are still in place at the IRS today. Is 

that not correct? 

Mr. KUTZ. They stopped using the be-on-the-lookout listings in 

June of 2013. 

Ms. NORTON. My only reason for going over this again—and I 

thank you both for this audit—is that it did not seem conceivable 

to some of my friends on the other side that there was management disarray, that it had to be political. And I will say when you 

go so far as to say that the White House itself is directing civil 

servants to look into groups based on their political background, 

that is so serious that it needs to be laid to rest right here. And 

I very much appreciate your coming forward. I very much appreciate the second audit. I very much appreciate that. I believe the 

work you have done, which is objective, and always has been, as 

Mr. George has said—and he’s been before us at length on this 

matter, now with you, Mr. Kutz, also involved—I believe we can 

put this matter to rest, this shameful period in the history of this 

committee. 


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And I yield back. 

Mr. JORDAN. Mr. Kutz, the 2013 audit that reflected what was 

going with Tea Party groups had a BOLO list, right? 

Mr. KUTZ. That’s correct. 

Mr. JORDAN. And the BOLO list said this: 912 Tea Party conservatives. Those were the targeted terms. Is that correct? 

Mr. KUTZ. Only Tea Party was on a BOLO list, but the other 

ones, IRS confirmed, were being used to pull cases for that bucket. 

Mr. JORDAN. Those groups received extensive scrutiny. They 

were asked about what they were praying, what kind of prayers 

were given at those meetings. Isn’t that correct? 

Mr. KUTZ. There were seven unnecessary questions that we 

looked at. 

Mr. JORDAN. Very, very unnecessary privacy invading kind of 

questions. 

Mr. KUTZ. Right. Ninety-eight organizations in the first report 

received these unnecessary questions. 

Mr. JORDAN. And almost all of those were conservative groups, 

correct? 

Mr. KUTZ. We did not assess that. 

Mr. JORDAN. No, they were. I saw the list. They were almost all 

conservative groups. We’ve all seen the list. Everyone knows it was 

conservatives. 

The audit that the gentlelady’s referring to went clear back to 

2004, and some of those groups that received extra scrutiny deserved it. ACORN-leaning groups deserved it, right? Wasn’t that 

audit from 2004 to 2013? 

Mr. KUTZ. The second audit covered the period 2004 to 2006. 

Mr. JORDAN. Yeah. A completely different context. 

Mr. KUTZ. Correct. 

Mr. JORDAN. Some of those groups probably deserved scrutiny. 

And just the argument itself, oh, because liberal groups were also 

targeted, somehow it’s okay? Nobody should have been targeted by 

the IRS. But we know in 2010, 2011, and 2012, the inspector general, the investigation we asked Russell George and you guys to do 

in 2013 about that, that was totally focused on conservative groups. 

And now to say, oh, a second audit that went clear back to 2004 

somehow justifies that, oh, no, everyone got caught up in this is 

just complete baloney, and everyone understands that. 

Now, to the issue at hand today, four people at the IRS were rehired who had been terminated or resigned. Is that—four people 

who had had some kind of violation with 6103. Is that right? 

Mr. KUTZ. They willfully failed to file their Federal tax returns. 

That’s correct. 

Mr. JORDAN. Was there anything relative to looking at information regarding 6103—violating 6103, examining stuff that they 

shouldn’t have been able to look at? 

Mr. KUTZ. Yes. 

Mr. JORDAN. Wasn’t there four employees who had been involved 

in that? 

Mr. KUTZ. Those were additional employees that had unauthorized access to taxpayer records, yes. 


KING-6430 with DISTILLER
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Mr. JORDAN. And were those four people who had unauthorized 

access to taxpayer records, were they terminated or did they resign, or how were they let go from the IRS? 

Mr. KUTZ. One of the two, and then they were hired back. They 

either would have been terminated or they left before they got— 

you know, in the Federal Government—— 

Mr. JORDAN. So they were in the process of getting fired—— 

Mr. KUTZ. Right. That’s correct. 

Mr. JORDAN. —for fraud for looking at taxpayer information they 

weren’t supposed to look at, right? 

Mr. KUTZ. For substantiated unauthorized access to taxpayer 

records, yes, sir. 

Mr. JORDAN. So they were terminated and resigned, and they got 

rehired? 

Mr. KUTZ. Yes. 

Mr. JORDAN. Okay. Now, do we know anything about these people, these four people? 

Ms. NORTON. Mr. Chairman—— 

Mr. JORDAN. What division did they work in? 

Ms. NORTON. Mr. Chairman, are you using an additional 5 minutes? Because you used it both to try to refute what I said without 

giving me any ability to respond, and now you’ve gone on to the 

second issue. I mean, how is this subcommittee being run, sir? 

Mr. JORDAN. No. I have not taken my 5 minutes. I have not— 

I did my opening statement. I have not taken any 5 minutes of 

questions. 

Ms. NORTON. So you believe you’re within 5 minutes in what’s 

happening here now? 

Mr. JORDAN. This is my 5 minutes. 

Ms. NORMAN. Go ahead, Mr. Chairman. 

Mr. JORDAN. The last time I checked, every member was entitled 

to 5 minutes. I’ve not had 5 minutes. 

Ms. NORTON. Well, then be our guest, sir. 

Mr. JORDAN. Well, it’s not about being your guest. I happen to 

get the privilege—— 

Ms. NORTON. I made an inquiry. You say you’re taking 5 minutes 

you did not have. I was not aware of that. I was not aware of that, 

that you did not have—— 

Mr. JORDAN. Well, if we could stop this time now. The way it normally works is I gave Mr. Connolly an opening statement—— 

Ms. NORTON. I know how it works, sir. 

Mr. JORDAN. —Mr. Krishnamoorthi an opening statement, Mr. 

Meadows an opening statement, I took an opening statement. So 

we had four opening statements, ranking member and chairman. 

I have not taken 5 minutes of questioning. And now I’m taking my 

5 minutes of questioning, and somehow you say that’s wrong? 

That’s how it always works. 

Ms. NORTON. Go ahead. 

Mr. JORDAN. If you want the chairman of the committee not to 

have 5 minutes of questioning, then—— 

Ms. NORTON. I didn’t say that, Mr. Chairman, so don’t put that 

in my mouth. 

Mr. JORDAN. Well, then why the interruption? 


KING-6430 with DISTILLER
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Ms. NORTON. Because I didn’t—it seemed to me that you were 

over your 5 minutes. I did not realize you had not had 5. 

Mr. JORDAN. Well, before you talk—— 

Ms. NORTON. You have spoken often this afternoon, therefore I 

did not realize you had not had your 5 minutes. 

Mr. JORDAN. I’ve spoken to recognize the gentlelady for D.C. 

Ms. NORTON. Well, obviously, I’m not talking about that. 

Mr. JORDAN. Okay. 

So tell me about these four people. They were terminated and resigned. Do we know what area they worked in? 

Mr. KUTZ. Actually, all 213 that were rehired in the second report were in the Wage and Investment Division. And they were positions like data transcribers, contract representatives, tax exam 

technicians. So even though some were temps, they had access to 

taxpayer records and sometimes were dealing with taxpayers. 

Mr. JORDAN. And what was the timeframe when they were working and got terminated? What timeframe? 

Mr. KUTZ. They were rehired between January 2015 and March 

2016. They had been terminated before that period. 

Mr. JORDAN. And had they worked—the four that I’m concerned 

about who had access to unauthorized information, who accessed 

unauthorized information, were they here during the targeting 

time, during 2010, 2011, 2012, 2013? 

Mr. KUTZ. I’d have to get back to you for the record on that. 

Mr. JORDAN. Do we know if any of them had contact with Lois 

Lerner or anything like that? 

Mr. KUTZ. We don’t know that, no. 

Mr. JORDAN. You didn’t look at that? 

Mr. KUTZ. We did not look at that, no. 

Mr. JORDAN. It seems to me that’s something we should look at. 

Unfortunately, my time is out, even though I lost a minute in a 

debate about something that shouldn’t—we shouldn’t have debated, 

so I’ll come back and take a second round. 

But we will now go with the gentlelady from Illinois I think is 

recognized next. 

Ms. KELLY. Thank you, Mr. Chair. 

Under the IRS Restructuring and Reform Act of 1998, Congress 

granted IRS the authority to hire a limited number of individuals 

to staff critical, technical, and professional positions in the agency 

at salary levels greater than general schedule rates. Congress intended this critical pay authority to help the agency attract highly 

qualified individuals with advanced technical expertise who might 

otherwise be unavailable for government service at normal Federal 

salary levels. The IRS used its authority from Congress to fill a 

total of 168 positions from 1998 to 2013, many of which were positions in critically important areas such as information technology 

and cybersecurity. 

Mr. Tribiano and Ms. Garza, does critical pay play a role in making Federal Government jobs more appealing to highly qualified 

technical individuals who might be interested in public service but 

could be earning a much higher salary in the private sector? 

Mr. TRIBIANO. Yes, ma’am, it does. And to emphasize, it’s 

streamline critical pay. And the streamline portion of that is really 

important, because what that allows us to do is to go out into the 


KING-6430 with DISTILLER
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private industry, find somebody that’s on the cutting edge of technology, let’s just say in cybersecurity, and have them sitting in the 

chair working for the IRS in a matter of weeks than the months, 

4 to 6 months that it could take going through the normal Federal 

hiring process, and then be able to offer them a salary that maybe 

it doesn’t meet industry standards, but offers them something that 

makes it worthwhile for them coming onboard. 

And that’s a key aspect—and I’ll let Ms. Garza get into this—it’s 

a key aspect to getting, again, individuals that have a cyber background, architectural background, engineering background, those 

technical skills. And I can tell you a lot of these private sector individuals would love to come into government if it was easy, right, 

in that streamline process, add value for the amount of years that 

that authority was in place for and then go back to the private sector. 

Ms. KELLY. Can you tell me how big the gap is between Federal 

pay and a private sector, just a guesstimate? 

Mr. TRIBIANO. Well, I’m a little outdated. I’ve been in Federal 

service for a few years now, but when I was in the private sector, 

it was a—it’s a substantial pay reduction to enter Federal service. 

You—when I came in, I came in for the factor to serve, and that 

was worth taking less money and less benefits in order—in order 

to serve. 

Ms. KELLY. Oh, I didn’t know if you were going to say something. 

Mr. TRIBIANO. I was going to yield it to Ms. Garza for any input 

on the technicality. 

Ms. GARZA. So on the tech—on the streamline critical pay, some 

of the areas that were of great benefit was cybersecurity. We had 

critical pay, streamline critical pay that we got off the street that 

was extremely very technical, very good, ran our CSIRC operations, 

and he’s since left the IRS. Also, in our engineering and architecture, we had a very good group of streamline critical pay that really helped shape the direction that we were going from a technical 

perspective. They’ve all left the IRS at this point. 

Ms. KELLY. In testimony before this committee last year, IRS 

chief information officer Terence Milholland stated, and I quote: 

‘‘Making progress at a faster pace on transitioning our legacy systems will require significant sustained additional resources in the 

IT area.’’ 

Would those resources include human resources, such as individuals qualifying for critical pay? 

Ms. GARZA. Yes. I think that’s probably our biggest risk is the 

human resources that we have lost over the last several years. 

Ms. KELLY. I’m the ranking member on the IT Subcommittee, 

and my chair, Congressman Will Hurd, has often talked about 

what can we do to work out something public-private or some kind 

of system where maybe someone from the private sector is on loan 

to us, you know, for a little while. What do you guys think should 

happen or any ideas, besides pay? 

Mr. TRIBIANO. The streamline critical pay authority that we had 

in place that expired that we placed back in our 2018 budget allowed us that capability, allowed us to bring in private sector individuals for shorter periods of time, and then they can go back out 


KING-6430 with DISTILLER
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into the private sector. Or in some cases, some of them love Federal 

service and compete openly for Federal positions. 

I think if we continue down that path and concentrate on the 

streamline portion along with the critical pay, but to me it’s both 

pieces of that, because there is an authority—there’s an authority 

that OPM has out there, and I think TIGTA cited in their report, 

it’s not streamlined, but it does allow critical pay. The issue is, and 

TIGTA recognizes in their report, although I think there’s a few 

more, out of the 800 positions, at the time TIGTA did their analysis, there was only four of them that were able to get through the 

process. I think it’s a little bit greater than that now. And we initiated that process to try to see what it takes to offer that. But 

streamline critical pay, again, allows us that authority to get them 

in the chair quickly and then to be somewhat competitive with salary, but not matching the private sector comparison. 

Mr. KUTZ. Yeah. The OPM program is not as attractive either. 

It only offers $207,000 of pay versus the streamline critical pay 

was $240,000. So there’s two ways to deal with this, either give 

IRS streamline critical pay or strengthen this OPM program that 

has 800 positions available that only four are being used governmentwide. 

Ms. KELLY. I’m out of time, so thank you. 

Mr. JORDAN. I thank the gentlelady. 

The gentleman from Wisconsin is recognized. 

Mr. GROTHMAN. I’ll pass for now. 

Mr. JORDAN. The gentleman from Iowa is recognized. 

Mr. BLUM. Thank you, Mr. Chairman. Thank you to our panel 

for being here today. I appreciate it very much. 

Mr., is it Tribiano? 

Mr. TRIBIANO. Yes. 

Mr. BLUM. Are you responsible for the hiring and firing decisions 

in the IRS? 

Mr. TRIBIANO. I oversee the human capital function within the 

IRS. 

Mr. BLUM. You oversee. 

Mr. TRIBIANO. Yes, sir. 

Mr. BLUM. I’ve learned all kind—I’m from the private—I’m from 

the private sector. I’ve learned all kinds of new terms here. You 

oversee it. 

Mr. TRIBIANO. Yes, sir. 

Mr. BLUM. So are you responsible for it or not? 

Mr. TRIBIANO. I am responsible for the human capital aspect, 

yes, sir. 

Mr. BLUM. The human capital aspect. I was reading your bio 

here. It said, before joining the USDA, you worked in the private 

sector—— 

Mr. TRIBIANO. Yes, sir. 

Mr. BLUM. —with multiple high-growth organizations. 

Mr. TRIBIANO. Yes, sir. 

Mr. BLUM. The question I have for you, one of the many is, in 

the private sector, would they rehire people the way the IRS does? 

People that may have been under investigation, people that may 

have been under investigation for tax fraud, people whose perVerDate Nov 24 2008 10:25 Aug 15, 2018 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 H:\30294.TXT APRIL

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sonnel file said, do not hire? How would the private sector—your 

experience been, how would they handle that? 

Mr. TRIBIANO. They go through a—— 

Mr. BLUM. Any difference? 

Mr. TRIBIANO. Yes, sir, there’s a difference. They go through a 

process. I don’t think—in my experience, and again, this is my experience, there’s less rules and boundaries that you have to operate 

in within that. So—— 

Mr. BLUM. In the private sector? 

Mr. TRIBIANO. Yes, sir. In the private sector, there’s less boundaries that box you into certain scenarios. So it’s a streamline process. 

Mr. BLUM. So we have more boundaries, more rules, more regulations than the public sector, safe to say, in hiring and firing, and 

we get worse results. 

Mr. TRIBIANO. I would say—— 

Mr. BLUM. Not saying the employees are bad, but we’re rehiring 

up to 10 percent of people that have been terminated from the 

agency prior? Is that true? Is that true? 

Mr. Kutz, is that true? 

Mr. KUTZ. It’s 10 percent of the former IRS employees that were 

brought back. That’s correct. 

Mr. BLUM. That—and were they terminated with cause or did— 

that 10 percent, did they leave on their own accord? 

Mr. KUTZ. Well, they either were terminated or they were going 

to be terminated and left before. 

Mr. BLUM. And we—I literally, I’m from the private sector, can’t 

believe this. We’re going to hire back 10 percent of people we were 

going to terminate. Does that strike you an as incredible? Mr. 

Kutz. 

Mr. KUTZ. Yeah. They didn’t have to do it. Okay. And our issue 

was the selecting officials, the person we think should get the information to make the decision. I don’t think it prevents that from 

happening. There are suitability issues at the end, but I don’t think 

that’s our big issue. Our issue is early in the process, we believe 

a selecting official should have the information to make a decision. 

That’s where the bad decisions are being made. In fact, there’s not 

a decision. You’re sitting there with candidates as a selecting official and you don’t know the derogatory information that you just 

described in making your choice. 

Mr. BLUM. Does that make sense to you that they don’t know 

that? 

Mr. KUTZ. That’s why we made the recommendation that they 

change the process. 

Mr. BLUM. Mr. George, TIGTA issued a report this past July, correct, on the problem of IRS rehiring employees previously fired by 

the agency? This isn’t the first time a report like that’s been issued. 

Is that correct? 

Mr. GEORGE. That is correct. 

Mr. BLUM. That report documented, that you issued, an instance 

when the IRS rehired somebody who literally on their personal file 

it said, do not hire this person. Can that possibly be correct? 

Mr. GEORGE. That is correct. 


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Mr. BLUM. I mean, it sounds like not a good situation to me. It 

doesn’t sound like something—private sector is not perfect. It 

doesn’t sound like something that would happen in the private sector. 

Did the IRS adopt your recommendations, Mr. George, on this 

topic? 

Mr. GEORGE. They have in the—in principle in the most recent 

report. Again, we issued a previous report in 2014 on the very 

same issue. They said they were going to adopt—— 

Mr. BLUM. They did—I’m sorry, they did in principle, is that 

what you said? 

Mr. GEORGE. In the current one, they’re in process of—— 

Mr. BLUM. They’re in the process of adopting them. 

Mr. GEORGE. Correct. 

Mr. BLUM. And how is that process going? Is there a sense of urgency there? 

Mr. TRIBIANO. Yes, sir. We will have that—— 

Mr. BLUM. As evidenced by what? 

Mr. TRIBIANO. As evidence as we are going to have it implemented and running in October when we start our filing season 

hiring to bring back the part time, as you called them, but we call 

them seasonal employees. So we took all the TIGTA recommendations that came through and we are implementing them right now 

and will have them done. We are on target to have them done in 

October. 

Mr. BLUM. You know, I represent the eastern part of Iowa. It’s 

kind of a blue collar district. And I go up there and talk to the factory workers. And I tell them, you know, if you were terminated 

by this company or going to be terminated, do you think you’d ever 

get rehired again at the same company? I mean, that would be a 

laugh line. 

Can you see why people out in the real part of this country think 

what’s going on here is nonsensical, why there needs to be change, 

why we need to drain the swamp? These are the things that I don’t 

even want to repeat, because it’s embarrassing. Do you understand 

that? I mean, do you hear that? 

Mr. TRIBIANO. Yes, I—I understand. I understand what this 

looks like. And we are doing everything possible right now to put 

those things—to put the recommendations from TIGTA, plus some 

additional things, like I said, about seeking debarment authority 

from the OPM to be able to put more controls in place to stop this 

from happening. 

Mr. BLUM. But you said previously more controls and more regulations, I think you said, penned you in. And now you want to put 

more regulations—— 

Mr. TRIBIANO. No, sir. These are not controls that come from 

OPM. I’m referring to internal controls, management controls that 

we administer at the IRS to be able to stop this type of activity, 

based on the recommendations from TIGTA, from happening. 

These are recommendations that TIGTA came forward with that 

we are adopting and implementing. And I’m stating that we will 

have that in place in October to be able to monitor, to provide 

the—what Mr. Kutz talked about, which is giving the hiring manager the suitability and the issues with prior—— 


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Mr. BLUM. This will be in place next month? 

Mr. TRIBIANO. This will be in place at the end of October, yes, 

sir. 

Mr. BLUM. Mr. Chairman, can we follow up to make sure this is 

in place by the end of October? Because these are the very reasons 

why there’s so little confidence in the Federal Government out 

there in the real world. 

So I would say time is of the essence, and I took forward to you 

doing that. 

Mr. TRIBIANO. Yes, sir. 

Mr. BLUM. I yield back, Mr. Chairman, the time I do not have. 

Mr. JORDAN. I thank the gentleman for his good questions. 

The gentlelady from New Jersey is recognized. 

Mrs. WATSON COLEMAN. Thank you, Mr. Chairman. 

A quick yes or no from you, Mr. George and Mr. Kutz, the IRS 

has a lot of improvements to do. Is it moving in a right direction? 

Mr. GEORGE. I would say that, especially in the wake of the 2013 

issues and a few of the other ones that occurred after that, that 

they are taking quite seriously the issues that we have uncovered. 

Mrs. WATSON COLEMAN. And would it be very helpful if they had 

the resources they needed to get to modernize their equipment, 

their IC equipment, et cetera, would that certainly be of help? 

Mr. GEORGE. The IRS, if it had additional resources, could do 

more. 

Mrs. WATSON COLEMAN. Thank you, sir. I am going to take us 

off into an entirely different, but I think vitally important area 

here. As the House prepares to vote on a budget resolution this 

week to begin the process for enacting massive tax cuts, I want to 

take this opportunity to question the witnesses here today about 

the proposed drastic changes to our Tax Code. 

Since unveiling their tax reform plan last month, Republicans 

have tried to claim that their proposals to cut taxes for the wealthiest Americans will somehow benefit the hardworking middle class 

families. But even the Treasury Secretary himself called his party’s 

bluff, stating that it is, quote, ‘‘very hard,’’ unquote, not to cut 

taxes for the rich, and that repealing the estate tax, quote, ‘‘disproportionately helps rich people,’’ close quote. In fact, many of the 

people who stand to gain the most from the Republican tax plan 

are President Trump and the Cabinet. 

Would any one of the witnesses here disagree that repealing the 

estate tax, which limits the tax breaks granted to the wealthiest 

.2 percent of Americans, disproportionately helps rich people as the 

Secretary conceded? That’s a yes or no. 

Mr. TRIBIANO. No, ma’am. Tax policy is the purview of Treasury 

and Congress and the administration. 

Mrs. WATSON COLEMAN. You don’t know the answer to the question? 

Mr. TRIBIANO. Ma’am, we are tax administration. Laws get 

passed and we administer them. 

Mrs. WATSON COLEMAN. Thank you. In fact, 11 members of the 

Trump administration are included in the .2 percent. According to 

the Center for American Progress, repeal of the estate tax will position heirs to those 11 Cabinet members and the President’s family 

to gain almost $3.5 billion. Just to put that number into context, 


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that $3.5 billion is about one-third of IRS’s fiscal 2018 budget. Is 

that correct? Yes or no. 

Mr. TRIBIANO. Yes, ma’am. 

Mrs. WATSON COLEMAN. Thank you. That doesn’t sound like 

helping middle class working families and hardworking men and 

women. 

The Republican plan also proposes changes to the tax on the income of passthrough businesses like LLCs, which are not subject 

to the standard corporate income tax. The Republican plan would 

cut the top rate on this income from 39.6 percent to 25 percent. 

This is 10 percentage points lower than the top rate imposed on individuals, and would not benefit the 86 percent of passthrough 

businesses that already pay a tax rate of 25 percent or lower. 

Again, this would profit only millionaires who the Center on 

Budget and Policy Priorities finds, quote,receive about 80 percent 

of the tax cuts in 2018. Again, this doesn’t sound like helping the 

middle class or the working class families that make up this middle 

class, but it does indeed directly help individuals in the Trump administration. The President stands to receive a tax cut of almost 

$23 million from this proposal, while senior advisor Jared Kushner, 

his son-in-law, could receive a cut of $6 to $17 million, and Secretary of Education Betsy DeVos, a cut of $3 to $5 million. Does 

that sound like benefiting the middle class or working families to 

anyone here? I don’t think so. 

But that isn’t all. Republicans want to eliminate the alternative minimum tax under which President Trump was forced to pay $31 

million in taxes he could have otherwise avoided in 2005. Of 

course, that was well over a decade ago, and we don’t know how 

much this tax has cost the President since giving his refusal to release his tax forms. 

Mr. Tribiano, this is something that you can answer, I think, is 

President Trump under audit by the IRS? 

Mr. TRIBIANO. Ma’am, I cannot discuss any audits or anything of 

that nature. And I actually wouldn’t know who’s under audit. It’s 

not part of my responsibilities. 

Mrs. WATSON COLEMAN. Would you know if he actually paid any 

taxes? 

Mr. TRIBIANO. Ma’am, I would have no idea. 

Mrs. WATSON COLEMAN. Is there anything that stops an individual under audit from releasing his tax returns or her tax returns? Would you know the answer to that question? 

Mr. TRIBIANO. No, ma’am, I do not know. 

Mrs. WATSON COLEMAN. Would anyone know the answer to that 

question? Is there anything that stops an individual who is being 

audited from releasing his or her tax returns? Does anyone know 

the answer to that question? 

Mr. GEORGE. My understanding is there is no restriction on—— 

Mrs. WATSON COLEMAN. I didn’t think so. 

We already know that the Republican plan will benefit the Cabinet members, but if the President wants anyone to take seriously 

his claim that their tax plan won’t benefit them at the expense of 

working men and women and their families, then he can prove it 

just once and for all by showing America the money he has and releasing his own tax forms. 


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And with that, I yield back. Thank you, Mr. Chairman. 

Mr. JORDAN. I thank the lady. 

The gentleman from Wisconsin is recognized. 

Mr. GROTHMAN. Sure. A couple of questions. 

Mr. Tribiano, how many employees in the IRS? 

Mr. TRIBIANO. Give or take pending on filing season, close to 

80,000 employees. 

Mr. GROTHMAN. Eighty thousand, wow. And in every year, in an 

average year, how many are terminated? 

Mr. TRIBIANO. I don’t have that number. Sir, I can get that for 

you, though. 

Mr. GROTHMAN. Any of you inspector general guys have a stab 

at that one? 

Mr. GEORGE. Actually no, we don’t have that information, sir. 

Mr. TRIBIANO. I can get that for you and get back to you. 

Mr. GROTHMAN. Why don’t you tell me how many were maybe 

terminated right in between. Is there a probationary period? 

Mr. TRIBIANO. Yes, sir. All Federal employees have a probationary period when they enter Federal service of 1 year. 

Mr. GROTHMAN. Well, give me two statistics. Give me the number who made it to their probationary period and the number, once 

you get by the probationary period, who are let go every year. Can 

you do that? 

Mr. TRIBIANO. Yes, sir, I can. 

Mr. GROTHMAN. Now we’re going to—we got a little explanation 

for our listeners back home. Could somebody describe the Taxpayer 

Protection Program? It’s supposed to be something designed to 

strengthen catching suspicious tax return filers. Are you familiar 

with that program? 

Are you guys doing anything—you must be doing—right now 

we’re looking at tax reform, and there are feelings that, particularly on some large refund returns, particularly earned income tax 

credit returns, that people are lying and getting big refunds. Are 

you familiar with that problem? 

Mr. TRIBIANO. Mr. George? 

Mr. GEORGE. We are familiar with that problem and are quite 

concerned, sir. The instructions for the Earned Income Tax Credit 

are more than 30 pages, single-spaced, double-sided. It’s an extraordinarily difficult credit to implement, both from the perspective of the taxpayer and then from the perspective of the IRS to 

ensure that the information they’re receiving is accurate. 

What we’re especially concerned about, sir, is many of the instances in which we find that people are inappropriately receiving 

that credit are as a result of returns that have been prepared by 

professional tax preparers. So people who are supposedly trained 

and have the expertise to do this are doing so in a way that gives 

people credit or credits that they’re not entitled to. 

Mr. GROTHMAN. Is that the fault of the preparer or is that the 

fault of garbage in, garbage out? 

Mr. GEORGE. We have concerns that it’s both, sir. 

Mr. GROTHMAN. Okay. You said it’s an overly complicated credit. 

And I can’t imagine why anybody would pass a law requiring 30 

pages of instruction, but apparently people around here did, and 


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that’s one of the problems the IRS has. It is not bad IRS employees, it’s bad professional employees. Go ahead. 

Mr. TRIBIANO. I’m sorry, sir, but in that arena as well, and I 

would like to echo what Mr. George said, we can’t do the 

verification upfront. We don’t have the authority to do that, so the 

return gets processed through the system and we have to pick it 

up under compliance to see if there’s an issue. We’ve been asking 

for and seeking correctable error authority that would allow us to 

match up when those returns come in during the processing cycle, 

match up the data that’s on there with some of the Federal Government records and make those corrections while we’re processing 

the return. Because if it goes in, it has to be picked up under compliance in order for us to—— 

Mr. GROTHMAN. And compliance means—what is that, another 

word for audit? 

Mr. TRIBIANO. I mean, an audit or review. Now, the PATH Act 

helped a portion of that, and it allows us that capability to try to 

match stuff up before we release refunds, but correctable error authority will help us go further in that arena. 

Mr. GROTHMAN. If you had to guess percentage wise how many 

of those returns—say not ones where you get a little credit of $45 

bucks or something, but say credit’s in excess of $2,000—what percent do you think are fraudulent or they have errors in them? 

Mr. KUTZ. Well, the overall improper payment rate for Earned 

Income Tax Credit is about 25 percent, but they don’t all meet the 

criteria you just described. There could be some small ones and 

other types in there. But the overall has been steadily in the mid20s for over a decade. 

Mr. GROTHMAN. If you had any other Federal program and 20 

percent of the credits going out the door were wrong, would you 

continue that program? 

Mr. KUTZ. It’s not the only one. There’s other credits that IRS 

have very high improper payment rates also. 

Mr. GROTHMAN. Which other ones are those? 

Mr. KUTZ. The child credit and the education credit both have 

very high im—— 

Mr. GROTHMAN. Well, we’ve got a Ways and Means Committee 

looking at that. Maybe those are three things we ought take out 

of there, because we’re looking for ways to simplify these returns 

and get some cuts on the middle class. 

So could you give me a little or could you guys forward to me for 

me to forward to the Ways and Means Committee a little more information on the education credit and how you think people are 

cheating on that one, the child care credit—child credit or child 

care credit? 

Mr. KUTZ. Yes. The child credit. I don’t know the full name of 

it, but it’s a child credit, yes. 

Mr. GROTHMAN. Okay, the child credit. And particularly the 

Earned Income Tax Credit, because there’s some people who want 

to, you know, do a tax reform around here, we might as well make 

sure we get it done right. We might as well make sure, by the time 

we’re done with this, we don’t operate any slipshod program. 

Thank you very much. 


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Mr. JORDAN. The gentlelady from Illinois is recognized. I’m sorry. 

Oh, I’m sorry. 

Representative Lawrence, the gentlelady from Michigan is recognized. 

Mrs. LAWRENCE. Thank you. I’ll charge that to your head, not 

your heart. 

Mr. JORDAN. I apologize. 

Mrs. LAWRENCE. Since 2010, the actions of the congressional Republicans have drastically reduced both the IRS budget and your 

workforce. The IRS has lost over $1 billion in annual funding and 

18,000 employees since 2010. During that the same time, the IRS 

workforce has steadily increased. Over 10 million more tax returns 

are filed annually. 

This year, IRS is cutting its seasonal workforce during tax filing 

season by 2,000 people. Is that correct, Mr. Tribiano? 

Mr. TRIBIANO. Yes, ma’am. That sounds close to being accurate. 

Mrs. LAWRENCE. How does cutting 2,000 workers during your tax 

season affect the quality of customer service that taxpayers expect 

when they call the IRS? 

Mr. TRIBIANO. Well, it would definitely impact our ability to provide, you know, taxpayer service. This area is a little bit outside 

of my purview. It really falls in our service and enforcement side, 

the deputy commissioner that oversees that activity. 

Mrs. LAWRENCE. And who on this panel that can tell me how this 

is going to impact what the taxpayers will receive from the IRS? 

And then you talk about quality in the error rate and fraud rate. 

If you’re having an increasing number of tax returns with significant budget reductions, who in here is going to tell me that the IRS 

has any chance of being effective? 

Mr. GEORGE. Congressman, they are directing people to their online irs.gov website to assist in areas, where in the past people 

could go to taxpayer assistance centers and/or other IRS-funded entities. In addition, they also refer people to volunteers to help complete their tax filing obligation. 

Mrs. LAWRENCE. And that system is fully up and running? 

Mr. GEORGE. It has been. Sitting out the volunteer aspect of it 

and, of course, the website is. But not everyone has access to computers and the internet, and not everyone can get to one of the centers or to one of the locations where the volunteers are. So there’s 

no question a cut in resources, in the terms of human relations and 

employees, will affect the length of time and the ability of taxpayers to receive assistance. 

Mrs. LAWRENCE. How does—does the IRS have anymore plans 

for staff reduction? 

Mr. GEORGE. I’m sorry, I—— 

Mrs. LAWRENCE. Does the IRS have any further plans to reduce 

your workforce, pursuant to the President’s executive order that directs all agencies to create a workforce reduction plan? 

Mr. TRIBIANO. Ma’am, we’ve been under a workforce reduction 

plan for the last 5 years, and each year, we steadily lose our total 

head count. Our—our—we are a people-driven agency. And our 

funding, the majority of our funding goes to the workers within the 

IRS. So when we have reduced funds, we hire less in certain areas. 

And we try to focus the hiring to the greatest need, but we also 


KING-6430 with DISTILLER
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have some constraints on our appropriation language. I know that’s 

not this committee, but there’s constraints on that that state what 

type of appropriations could be used for what type of work. And 

that also causes some imbalances in our workforce, but we’ve been 

slowly reducing our size. 

Now, I can tell you, ma’am, you mentioned about 18,000 employees, and I think that’s right. It’s between 16,000 and 18,000, when 

you count fluctuations and seasonal. I don’t think we’re ever going 

to get back to that and I don’t know if there’s a need to, but there 

is a need for more work. And we don’t have enough staff to be able 

to adequately service the taxpayers, to have the right compliance 

levels out there, to generate revenue, and then to support that with 

our management and administrative interior support that helps 

support that activity. So I don’t think there’s anybody within the 

IRS that says we should go back up to the levels we had. I don’t 

think that’s reasonable. 

Mrs. LAWRENCE. I have a quick question. So if this knew Tax 

Code is passed, has any of you been at the agency long enough to 

go through tax change or Tax Code process? Doesn’t that include 

the need for additional staff to implement, train, and to enforce 

new Tax Codes? 

Mr. GEORGE. At the sides, ma’am, not something as comprehensive as being discussed. But to their credit, the IRS has demonstrated an uncanny ability to implement tax law changes, even 

at the very final portion of the tax—— 

Mrs. LAWRENCE. So, sir, if I can quote you, you’re saying that if 

the proposed tax change program passed, at your reduction workforce plan, at your reduced—at your reduced level that you are at 

now, without the manpower to ask individual questions, sending 

them to a website, you are confident that the IRS will just absorb 

this and the world will continue, and you will provide the quality 

expectation that our taxpayers expect? 

Mr. JORDAN. The gentleman can respond. Mr. Tribiano. 

Mr. TRIBIANO. No, ma’am. I am not—no, I’m not confident. It depends—we haven’t seen the language at the IRS, because, again, 

policy is not what we’re about. We’re about administration of that 

policy. 

Mr. JORDAN. In—— 

Mr. TRIBIANO. But if it’s complicated, it will definitely have an 

impact, right, because we have to be able—if we’re changing the actual structure of a tax return, that has a big impact on our IT systems. And I can let Ms. Garza talk about that. But there are implications of that. And anything that’s retroactive has a big impact on 

our ability to administer or try to get the systems. 

Mr. JORDAN. The gentlelady from New York is recognized. 

Mrs. LAWRENCE. I just want to thank the chair. He didn’t remember my name, he gave me an extra minute. Thank you. 

Mr. JORDAN. Anyone from the great State of Michigan, even 

though I’m from Ohio, will do that. 

The gentlelady from New York is recognized. 

Mrs. MALONEY. Thank you so much, Mr. Chairman. 

And I’d like to ask Mr. Tribiano, last month, Equifax announced 

it had suffered one of the largest data breaches in history, compromising the personally identifiable information of more than 145 


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million Americans. That’s almost half the country now has their 

Social Security number and their date of birth compromised. And 

while that in itself is troubling, what is perhaps even more troubling is the fact that hackers roamed the Equifax network for more 

than 2 months without detection. And the company waited weeks, 

absolutely weeks to alert the FBI after learning about the breach. 

This is simply unacceptable. I will hope that the chairman of this 

committee would commit to holding a hearing on this matter. 

But today, I want to delve deeper into another fact of the issue: 

The IRS’s contract extension with Equifax while waiting for a ruling on a bid protest. And I’d like to ask you, Mr. Tribiano, is it correct that the IRS extended a current contract with Equifax after 

the breach was revealed? How much was the bridge contract 

worth? What was the length of the bridge contract? What services 

were covered by IRS’s contract with Equifax? 

Mr. TRIBIANO. Yes, ma’am. Let me start with the bridge contract 

itself was for three 3-month increments. When the reports came 

out that it was $7.3 million, that was for the whole 9 months. The 

intent of the bridge contract was to be able to cover the time period 

from the first 3 months, which was worth about $1.3 million. And 

the intent of that was to cover the time period between GAO either 

upholding the protest or not upholding the protest and our ability 

to get the new vendor online and up and running. So we had to 

have a bridge between those two contracts. 

Mrs. MALONEY. And what services were covered by this contract? 

Mr. TRIBIANO. EAuthentication services. This is where a taxpayer would provide certain data that we would verify with 

Equifax to be able to verify the identify of the taxpayer. I mean, 

I’m simplifying—— 

Mrs. MALONEY. Okay. And it’s my understanding that after the 

breach was announced, IRS personnel were sent to Equifax to assess whether IRS data was compromised. And, Ms. Garza, can you 

describe that assessment and its findings? 

Ms. GARZA. Yes. So we reached agreement with Equifax to do a 

1-day visit, followed by a 3-day visit, which we did conduct last 

week. On that first-day visit, the primary objective was to look to 

see if any IRS data had been compromised and also, working 

partnering with TIGTA investigations, look at what data had 

been—— 

Mrs. MALONEY. Was it compromised? 

Ms. GARZA. No. No IRS data had been compromised. 

Mrs. MALONEY. Well, that’s good to hear. But I’m concerned that, 

shortly after the breach, IRS entered into a short-term bridge contract with Equifax. Shortly after reports of this sole-source bridge 

contract, I sent a letter to Chairman Gowdy and Ranking Member 

Cummings requesting a hearing on this $7 million no-bid contract. 

Ms. Garza, can you elaborate on that contract? And why did IRS 

enter into it? Despite the rising concerns with the laxity of Equifax 

and their identity and theft protection to be hired to then verify 

protection further at the IRS is deeply concerning to me. 

Mr. TRIBIANO. Yes. I’ll start, if I can. 

Mrs. MALONEY. Okay. 

Mr. TRIBIANO. And then I’ll turn it over to Ms. Garza for some 

of the technical aspects of that. 


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So when I originally was discussing this earlier, and I forgot who 

asked me the question, I was trying to lay out the pattern that 

happened. So right now, we had a sole-source contract with 

Equifax as our sole vendor in this arena for a long time. We recompeted that contract, and that’s the one that they protested, to bring 

other—other companies into the fold and have them all for their 

service as well. Experian met the qualifications from a technical 

perspective and put in a lower bid than Equifax and they won the 

contract. So now we have competitiveness. When GAO put the stay 

out there, and knowing that GAO has up to 100 days to decide on 

whether or not the protest—— 

Mrs. MALONEY. Well, my time is almost up, and I sort of know 

the whole line of circumstances. Can I ask, given the circumstances 

of the bid protest and the data breach, were there any other options the IRS had, besides extending the contract with Equifax and 

temporarily discontinuing the services that were being provided to 

consumers? 

Mr. TRIBIANO. Well, ma’am, we could have discontinued the service or we could have provided the bridge contract. What you heard 

from GAO when they talk about the authority to be able to—a 

higher authority level that you could override a protest or start the 

process of implementing something in the middle of a protest, we 

didn’t reach that level to be able to exercise that option. 

Mrs. MALONEY. My time has expired. I have further questions 

and will submit them to the record. 

Mr. JORDAN. Or if you want, we can do a few more—— 

Mr. Kutz, the 200—was it 213 who were fired and then rehired, 

213? 

Mr. KUTZ. Correct. Fired or left in lieu of termination. 

Mr. JORDAN. Okay. Yeah. When they were rehired, there has to 

be some kind of interview process, something that goes on. In that 

interview process, does the IRS say like, oh, I see you were employed at the IRS before and you were let go, do they get into that 

questioning? 

Mr. KUTZ. They may get to it in suitability, but they don’t get 

to it when the selecting official is making the decision to make the 

offer. That person does not have the derogatory information in 

front of them, which is our primary concern here. 

Mr. JORDAN. But someone at some time knew this person was 

fired and now they’re back in front of me seeking employment at 

the very agency that fired him? 

Mr. KUTZ. Yes. It’s in IRS’s database called ALERTS. It’s right 

in there. 

Mr. JORDAN. Okay. So four people were fired for looking at information, private taxpayer information that they were not entitled to 

look at, right? 

Mr. KUTZ. Correct. 

Mr. JORDAN. They were fired for that. They are now back in front 

of the IRS wanting a job, and someone says—has that information 

in front of them and says, you were fired for looking at confidential 

taxpayer information and now you want to come back and work for 

the Internal Revenue Service. And somehow that gets moved along 

to the next level, where supposedly they don’t have this information. Is that accurate? 


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Mr. KUTZ. No. I think the bigger issue is they don’t have that 

information. And it’s the selecting official who has people who are 

best qualified, they get into their desk, and that person does not 

have the information you just described. I think that’s what we 

want to happen here. We want the person making the hiring decision to know the derogatory information. 

Mr. JORDAN. But someone in some point in the process did have 

that information? 

Mr. KUTZ. They may have it after the offer’s been made. But if 

it’s a suitability issue, as Mr. Tribiano’s described, they can forget 

about it if it’s more than 5 years old or 6 years old or there’s other 

circumstances where it doesn’t matter. And that’s what he’s talking 

about—— 

Mr. JORDAN. How can it not matter that people were accessing 

confidential taxpayer information, were fired for it, are now back 

in front of the IRS asking for a job, and are going to have access 

to that same kind of confidential taxpayer information? 

Mr. KUTZ. Because the OPM process for the suitability forgives 

certain things after a certain period of time. It’s mitigated by time. 

Mr. JORDAN. And there’s no obligation on the part of the person 

seeking employment to give that information? 

Mr. KUTZ. Well, when it gets to that point, you can’t say—you 

can’t reverse it. You could have reversed it earlier in the process, 

that’s why we want it earlier in the process. When the official is 

making the selection, you can do it then. So they need to do it earlier in the process. 

Mr. JORDAN. Absolutely, absolutely crazy. 

Ms. Garza, let’s go back to the previous questions. The 145 million, 143 million, that number that Equifax announced, what relationship does that 143 million have to people who file with the IRS, 

if any? What’s the overlap? How does that relate to the Internal 

Revenue Service? 

Ms. GARZA. We don’t know what that overlap is. We went in and 

just looked at what data elements had been compromised. 

Mr. JORDAN. I mean, it would have to be substantial, because 

there are 330 million people in the country. There’s probably 150- 

, 160 million taxpayers, right? 

Mr. KUTZ. Of course. There’s an assumption that, you know—— 

Mr. JORDAN. Eventually, every single taxpayer. 

Ms. GARZA. A good portion of those are, you know, directly related to taxpayers. 

Mr. JORDAN. Yeah. Maybe all of them. It would have to be so. 

This is announced, that there’s this major breach, 143 million 

Americans, and 1 month after it’s announced, you do this no-bid 

contract to Equifax. Is that right? 

Mr. TRIBIANO. Yes, sir. 

Mr. JORDAN. Okay. And, Ms. Garza, you testified before the 

Ways and Means Oversight Subcommittee that you had no knowledge of the short-term contract prior to it being made public. 

Ms. GARZA. What I testified was that I did not know it was 

signed on the 27th. 

Mr. JORDAN. Why would you not know that? 

Ms. GARZA. It was not an IT contract. It was actually administered from the IA, identity assurance office. 


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Mr. JORDAN. Yeah. But you’re the chief information officer, right? 

You’re in charge of all this stuff. 

Ms. GARZA. The contract was for professional services for credit 

bureau, and so the folks that were involved in establishing that 

contract deemed that it did not have to come to my organization 

for review. 

Mr. JORDAN. Any services or equipment that are used in the 

automatic acquisition, storage, analysis, evaluation, manipulation, 

management, movement, control, display, switching, interchange, 

transmission, reception, information again. That’s the definition of 

information officer. I just find that hard to believe you had no idea 

that this was happening. 

Ms. GARZA. It was—I knew that there was a problem with original Equifax and there had been a protest. But I was not involved 

in any discussions about what was to occur, how we were going to 

mitigate the situation. 

Mr. JORDAN. But you obviously knew there was a contract with 

Equifax at the time that they announced the breach, that the IRS 

had a contract with Equifax? 

Ms. GARZA. Yes. 

Mr. JORDAN. Yeah. And you knew it was up for renewal? 

Ms. GARZA. Yes. 

Mr. JORDAN. And it gets renewed without your knowledge? 

Ms. GARZA. I did not know the specifics. And I was not involved 

in the conversations that went to making that decision. 

Mr. JORDAN. So this is—again, this is what drives Mr. Hice—the 

first member to question today, this is what drives Americans 

crazy, we didn’t know that we were rehiring people who committed 

fraud. We didn’t know that we had 213 folks who have been terminated who are now back in front of us and we’re going to rehire 

them, and they looked at confidential tax payer information in a 

way that they weren’t supposed to. And we didn’t know, even 

though we had a contract with Equifax, even though we knew it 

was up for renewal, even though they announced 143 million 

Americans had their data compromised, we didn’t know and I had 

no part—it’s like this pass—this is what drives them crazy. 

So again, let’s hope it all clears up when Mr. Koskinen is stepping down and we get someone new to run the place. 

The gentlelady from D.C. is recognized, if she’d like an additional 

few minutes. 

Ms. NORTON. Thank you. 

I wanted to stay to ask a question. And by the way, I’m not sure 

how the IRS is going to know anything if we keep cutting their 

budget. But I’m concerned for Federal employees that work at the 

IRS, because there have been reports of really vitriol well beyond— 

I think this question is for you, Mr. George, because I think that 

this was reported to the IG. 

It’s clear that IRS employees have had increase, in fact, a 

marked increase in the number of threats. Apparently, there have 

been 1,556 investigations into possible threats since the beginning 

of the year. And there have been prosecutions, apparently. I was 

very concerned that commercial trucks—and I must indicate that 

these reports say that the Trump Hotel is very close to the IRS, 

so some of this may be people from God knows where protesting 


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that or they are protesting the IRS. So it makes this a volatile 

shop—spot. 

The report, and these are news reports, said that commercial 

trucks, Ubers, and taxis are not being checked by canine and magnetic wands, and that they are parked, allowed to park and idle between the hotel and the IRS building. Employees say that they 

were particularly concerned, because all of us may have read about 

this as well, about the arrest in May of a man from Pennsylvania 

who brought a whole cache of weapons and 90 rounds of ammunition into the Trump Hotel parking lot. So he was somehow caught, 

I’m gratified to say. He pleaded not guilty, but then he—and, of 

course, after arrest, pleaded not guilty, but while he was out after 

that awaiting trial, prosecutors said he posted dangerous 

antigovernment messages on social media. Now, look, I’m a First 

Amendment absolutist, but when prosecutors say that there may 

be a crime here, I do pay attention. 

I wonder, before something really serious happens, Mr. George, 

whether or not there ought not be an investigation of what is a 

very unusual number of threats against Federal employees who 

they say make it difficult to do their work. I’m looking to you for 

advice. Sometimes they don’t even know who to complain to, the 

police or the IG or the FBI. Would an investigation help to put to 

rest where the problem is and what should be done about it? 

Mr. GEORGE. Congresswoman, that’s a very important and timely 

question. And, in fact, we are currently working with the Internal 

Revenue Service’s security division on that very issue. And so I 

don’t know whether we will be able to report publicly, because we 

don’t want to endanger—again, further endanger lives of IRS employees or other Federal workers or private citizens who are there, 

but we would be happy to brief you and the chairman and the committee on what we find in a nonpublic setting. 

Ms. NORTON. That’s very engaging—very encouraging, Mr. 

George. I would take it, though, that after a report—I mean, after 

an investigation, some kind of report that the public could see 

would be appropriate. We’re not asking for reports of who struck 

John or what should be done about it, but it would be reassuring, 

just as I am reassured by knowing you are indeed involved in an 

investigation, at the end of that investigation, surely there is something that the IG’s office could say so that, for example, people 

would know that various, various steps have been taken, et cetera. 

Is that not possible? 

Mr. GEORGE. I will certainly take that under advisement. And 

I’m certain there would be a possibility for us to issue a somewhat 

redacted version that wouldn’t endanger security and methods and 

sources, but nonetheless, inform the public and the IRS employees 

about what actions have been taken. 

Ms. NORTON. Thank you very much, Mr. George. I appreciate 

that kind of initiative. 

Mr. GEORGE. Certainly. 

Mr. GROTHMAN. [Presiding.] Thank you very much. 

I’ll give just one question, maybe you guys aren’t qualified to answer, because it’s really not along the same vein as the other questions today. But I’ll try to ask you, Mr. Tribiano. As you know, 

we’re working on a major tax law change, which may or may not 


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come to fruition, it probably will, but there are people here who 

want to make sure it’s done by the end of the year and make it 

retroactive on the 2017 returns. Are you familiar with how the IRS 

handles tax changes passed in November or December, retroactively? 

Mr. TRIBIANO. Sir, I haven’t been with the IRS for a major tax 

change like this. I can tell you, though, talking to my colleagues— 

and I know Ms. Garza can add some additional comments on this— 

talking to my colleagues about this, it depends on the complexity 

of what’s in this law or what gets passed. And if it’s retroactive, 

it does cause us concerns because we don’t have enough time internally to make the changes to the systems, to educate our phone assisters and the people that would—the influx of people asking the 

tax questions. Plus, our partners out there, the software companies 

that produce the software that a lot of Americans use, need time 

also to be able to build into their software whenever these 

changes—— 

Mr. GROTHMAN. Maybe I should ask Ms. Garza. What happens 

if there’s even a minor change in December, because we’ve done 

that before, retroactive changes? 

Ms. GARZA. So it really depends on the change and what exactly 

is being changed. One of the things that is probably the most difficult to implement is, if you change what we call the record, core 

record layout, which is kind of how the return is structured, it has 

all of the business rules associated, and those are all programmed. 

So if you’re going, you know, from a 2-page 1040 return to a 1-page 

or a postcard type, that’s significant work. 

On the other—on going back in time making it retroactive, that 

is very difficult because we have to go back to our systems. Depending on how the language is, you know, how far back do we 

have to go and how do we apply that to things that have already 

occurred? 

One of the things that I would suggest is, and I’m sure it’s probably already happening, is that we engage with your staffs to figure out what’s the best approach that we can use to still get you 

to where you want to get, but make it in the simplest way. 

Mr. GROTHMAN. You’re going to have to come up with new instructions for the returns, right? 

Ms. GARZA. Yes. 

Mr. GROTHMAN. New instructions presumably for the Schedule C, 

presumably for the Schedule E, and many other schedules, right? 

How quickly in days do you think you can turn that around? I 

mean, these are not obscure schedules. 

Ms. GARZA. So the development of the schedules actually comes 

out of our W&I organization, so I don’t know how long that would 

take for them to do. I do think it’s an extended period of time. 

Mr. GROTHMAN. Why don’t you—I’m a little bit afraid they’re not 

doing it. I just hope that you’re coordinating with the Ways and 

Means Committee. Because I used to do taxes and we used to make 

fun of Congress when they changed things for the prior year. But 

that’s even on minor things where you, you know, can contact the 

licensed tax preparers. I would—I’ll talk to the Ways and Means 

folks, but they should be, you know, dealing with you guys on a 

routine basis. 


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But while we hope—I asked some questions, I hope we get answers in the future. You can tell we’re very disappointed with, you 

know, some of the ways some of your people are hired.I mean, it’s 

to the point of bizarre that you’d rehire somebody who was fired 

before, particularly—it’s obvious it causes just tremendous amount 

of public lack of confidence in the IRS. 

But I would like to thank you all for appearing before us today. 

The hearing record will remain open for two more weeks for any 

member to submit a written opening statement or questions for the 

record. 

If there is no further business, I see I’m all alone here, without 

objection, the subcommittee will stand adjourned. 

[Whereupon, at 4:20 p.m., the subcommittee was adjourned.] 


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APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD


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HOGR Hearing . Ongoing Management Challenges at IRS 

Representative Hice 

With the recent Equifax data breach, there is more and more personally 

identifiable information available for criminals to use when filing fraudulent 

returns. 

1. Can the IRS create a "refund lock" option for taxpayers' Future State personnel 

accounts? The application could allow taxpayers to permanently apply any 

refund they might receive toward the following year's tax payment - until they 

went back and expressly "unlocked" it. This would render their information 

useless to criminals trying to file fraudulent returns. Taxpayers could 

theoretically leave their refund locked all year and then if they want their refund at 

filing season, they simply go back into their accounts and unlock them for a short 

period of time. Once the refund is in the bank, they relock their accounts. 

We are currently exploring options, which would allow taxpayers the ability to lock their 

personal online accounts, similar to what you describe. The options we are considering, 

however, are not focused on whether there is a refund. The focus is providing the 

taxpayer an option to self-initiate an account lock, if the taxpayer is concerned about the 

potential for tax related identity theft, suspected fraudulent activity, or whether their 

account will be used toe-file a false return. 

One solution we're exploring is an online account lock/unlock feature. This would allow 

taxpayers to self-initiate a lock of their online account and trigger processes to validate 

(re-authenticate) their account. This option would prevent additional online transactions 

and provide self-initiated protections to the online account. 

Another solution we're exploring is an at-filing lock/unlock feature. This would allow a 

taxpayer to initiate a lock to prevent the submission of an electronically filed (e-File) 

return. In addition, the lock will prevent the electronic acceptance of the return if the 

taxpayer, spouse or dependents' social security number is presented on an 

electronically filed return while the lock is in place. The premise is to provide taxpayers 

control of their account with the IRS and prevent e-filing activity until they are ready to 

file their return. When the taxpayers are ready to file, they will unlock their accounts and 

provide return information to electronically file their returns. 

Both solutions are in the very early stages of development. We will continue to consider 

ways to address this issue. 

Note that current law allows taxpayers to elect to apply their tax refund to the following 

tax year's tax liability through the estimated tax process. We monitor these estimated 

tax payments to identify potential fraudulent activity. 
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2. Is this a viable idea, and is this something that the IRS is considering? 

A refund lock option that would permanently prevent refunds unless the taxpayer 

unlocks the account is not a solution we are pursuing because: 

• Under Internal Revenue Code (IRC) section 6611, we are required to pay interest 

on overpayments. Under this section, when a taxpayer files a timely, processible 

return, interest generally accrues on overpayments that are not refunded within 

the later of 45 days of filing or 45 days from the due date of the return. 

Therefore, the overpayment may accrue interest depending on when a taxpayer 

"unlocks" their refund, potentially creating additional cost to the government 

unless the taxpayer opts for a credit election or the refund is used for a payment 

offset. Furthermore, statutory changes would be required if this option is intended 

to apply to any type of tax other than income tax. Under IRC section 6402(b), 

income tax overpayments can be credited to the subsequent year's estimated tax 

payments, but IRC section 6402(a) provides no generalized right for taxpayers to 

carry overpayments forward against future projected tax liabilities. Under the 

current statute, an election to credit an overpayment to the subsequent year's 

estimated tax must be made every year. No interest is allowable on an 

overpayment that is credited to a subsequent year's estimated tax. 

• A refund lock that requires taxpayer action to have a refund issued rather than 

being applied to the following year's tax liability would likely only help a small 

segment of taxpayers and would burden a larger segment of taxpayers who rely 

on actually receiving their refunds every year. For example, taxpayers claiming 

refundable credits or in lower income brackets are more likely to need refunds at 

the time of filing and would not choose to freeze or carryover refunds to a future 

year. Though a refund lock could be helpful to taxpayers who make estimated 

payments, only about 16 million of 140 million returns filed this year included 

estimated tax payments. 

• A refund lock places additional burden on taxpayers to track their refunds and 

increases the risk of unclaimed refunds over time. 

We believe the solutions we are exploring, described in the response to question one, 

are better options to protect taxpayers from tax-related refund fraud. We take our 

responsibility to protect sensitive data seriously and continuously evaluate solutions in a 

changing environment to ensure the integrity of the tax system. We are committed to 

doing all that we can to prevent the payment of fraudulent refunds, pursue the 

perpetrators, and assist the victims.