June 8, 2021
WASHINGTON, DC – During a Senate Finance Committee hearing today, U.S. Senator Rob Portman (R-OH) spoke about the need to modernize the Internal Revenue Service (IRS) and ensure the agency has adequate staffing to provide effective and efficient taxpayer services. When IRS Commissioner Charles Rettig appeared before the committee in April they discussed the challenges the agency faces in adapting to the growing use of cryptocurrencies. Portman inquired as to whether the IRS had the necessary authority to issue appropriate regulations in relation to cryptocurrency information reporting or whether congressional authority was needed.
In their proposed budget, the IRS has requested funding to implement the administration’s 10-year plan which calls for the IRS to expand its workforce by 15 percent per year, nearly doubling the size of the IRS in a decade. Portman questioned whether the IRS has the ability to train a larger workforce and if there is a qualified labor pool big enough to fill these new positions.
A transcript of Senator Portman’s questioning can be found below and video can be found here.
Senator Portman: “Thank you, Mr. Chairman. Commissioner, welcome back. We had a good conversation with you only about a month and a half ago, and had the opportunity to talk about a number of these issues, but in terms of compliance, you and I had a discussion about the need for better taxpayer service. Senator Cardin and I wrote this bill called the Protecting Taxpayers Act, some of which is now being implemented and I appreciate that – it’s part of the Taxpayer First Act – but this modernization effort is never-ending and the challenges are more and more sophisticated. And I want to talk about cryptocurrency for a second. We talked about digital assets and cryptocurrency back in April when you were before us and you talked about the low visibility of these taxpayers and the importance of their compliance in closing the tax gap. I talked about how we were working on potential legislation to address that. I want to ask you a couple questions about it, I noticed in the budget that you have $41 million to expand cybercrimes efforts and $32 million for crypto-related enforcement operations. You’ve also proposed additional information reporting for businesses that receive crypto assets with a fair market value of more than $10,000. In addressing the issues related for information reporting for cryptocurrency, do you feel that the IRS has the necessary authority to issue appropriate regulations?”
The Honorable Charles P. Rettig, Commissioner, IRS: “I think we need Congressional authority. We get challenged, as you are aware, we get challenged frequently and to have a clear dictate from Congress on the authority for us to collect that information is critical and the most recent market cap in that world, in the crypto world, exceeded $2 trillion in more than 8,600 exchanges worldwide. And by design, most crypto virtual currencies are designed to stay off the radar screens, so we will be challenged. Right now what we do is we issue John Doe summonses and I think it was highly public, we recently did that. We’re very active in both the civil and the criminal enforcement world. We do need additional tools and we absolutely need additional resources.”
Portman: “Well I appreciate that answer and as you know, we want to work with you. We’ve circulated some ideas, including to some of the stakeholders, and we want to be sure that we get your input on that as it relates to cryptocurrencies and digital assets.”
Commissioner Rettig: “We would appreciate the opportunity to work with you.”
Portman: “Thank you. On the issue of staffing, I support more resources to the IRS. I have for years, since I was involved in the reform efforts a couple decades ago. And for my small business constituents back in Ohio and individuals who are having to struggle with this over-complicated tax code, you want smart, effective people at the IRS to work with. The professionalism is important, the training is important. One of my concerns is you are asking for a lot of new people and it takes a while to train them up. I see that you have asked for the hiring of at least 5,000 new personnel for enforcement alone but you say it should not exceed a manageable 15 percent per year. Over 10 years, it seems that probably would double the IRS workforce, so do you have the ability to train these people up and to make them effective? And second, do you have the workforce out there to tap into? In other words, are you having trouble hiring people?”
Commissioner Rettig: “We are actually looking at hiring and we may have indicated earlier, we started developing a plan months ago. We went a little bit at-risk if you will. So if we receive legislation, we’ll be able to implement quickly upon that receipt of legislation. Our view, and my view, is we’re looking at different categories of individuals. We’re not looking necessarily as one might think for individuals for less than 5 or 10 years of experience on the outside, we’re looking for that category certainly, but we’re also looking for the mid-career people, maybe aged 35-45. We’re also looking for people at my age category and those last two categories can come in and hit the ground running, both in terms of managing a team of, if you will, examiners if they’re on the enforcement side, as well as being instructors – and we need private sector people to come in and help us in terms of instructing, particularly in the partnerships and virtual currency world – come in and serve as instructors to the mid and lower, lesser experienced if you will, folks. So we have a variety of plans. We are also working on our outreach to different communities, not just the professional communities, but colleges, institutions, and others. We are also working on facilities, were we would place facilities with an increase in personnel and I think the committee may be aware that proudly, we recently opened a facility in Puerto Rico. For a first time in a long time we received more applicants, more qualified applicants, than we posted for positions and the benefit is the folks there, many of them were also multilingual. We’re also looking at opening facilities in certain underserved communities and we’re already on the ground in those communities looking to see what we can do in terms of opening facilities, should we receive legislation. I give you that as an indication that we are not waiting for legislation, we will be ready.”
Portman: “But you’ll need the appropriations of the additional funding to be able to follow through on those?”
Commissioner Rettig: “Absolutely, without the funding…”
Portman: “Well thank you, Mr. Chairman, the oversight responsibilities of this committee are such as that it would be good to continue to have this discussion and to be sure that were on board with regard to the plans.”