Senate Finance Committee chairman Max Baucus, D-Mont., was confirmed Thursday as U.S. Ambassador to China, which could prolong an investigation of the Internal Revenue Service’s handling of tax-exempt applications, along with tax reform efforts.
Baucus’s committee is one of several that have been investigating the IRS since last year over how it gave extra scrutiny to applications for taxexempt status under Section 501(c)4 of the Tax Code from groups with terms such as “Tea Party,” “Patriot,” “9/12,” “Progressive,” and “Occupy” in their names. The IRS and Treasury Department issued initial guidance last November on how the IRS should decide on granting tax-exempt status to so-called “social welfare” groups that are also involved in political activity. But the proposed rules have reignited a furor among groups that claim the IRS is trying to stifle legitimate political activity.
On Wednesday, the House Ways & Means Committee held a hearing on the issue, quizzing the recently confirmed IRS commissioner, John Koskinen, who said the IRS had received an unprecedented number of comments on the proposed rules (see IRS Commissioner Koskinen Says Proposed Tax-Exempt Rules Won’t Be Finalized Soon). He was repeatedly pressed by lawmakers to release more of the documents demanded by investigators who have been probing how the IRS decided to “target” Tea Party and other affiliated groups.
In a statement issued Thursday by the press office of the Senate Finance Committee following the announcement of Baucus’s confirmation, the committee said that Baucus and the ranking Republican member on the committee, Sen. Orrin Hatch, R-Utah, “have worked long and hard, in a bipartisan manner, to examine the Internal Revenue Service’s treatment of tax-exempt applications. Over the past nine months, the committee’s investigators have reviewed more than 540,000 pages of documents and interviewed 28 IRS employees, from the most senior management to mid and lower staff as well. The IRS continues to provide thousands of new documents related to our inquiry, including 32,000 new pages of documents in the past week. Given the enormity and importance of the investigation, the committee will not be able to conclude its work before Chairman Baucus leaves the Senate to become the U.S. Ambassador to China. Senator Hatch will be reaching out to Senator Wyden in the coming days to discuss how best to conclude the investigation and share the committee’s findings.”
Sen. Ron Wyden, D-Ore., is expected to become chairman of the committee, as the most senior Democrat, Sen. Jay Rockefeller, D-W. Va., is planning to retire at the end of this year. Wyden will also have to carry on with Baucus’s efforts at comprehensive tax reform, which he has been pursuing with Rep. Dave Camp, R-Mich., who chairs the tax-writing House Ways and Means Committee. Baucus was nominated last December to the ambassador post after he had earlier announced this would be his last term in the Senate (see Baucus Nominated as Ambassador to China).
Baucus expressed his thanks after receiving confirmation from his Senate colleagues Thursday. “After nearly four decades serving the people of Montana, I am humbled to have this opportunity to represent the United States in China,” he said in a statement. “The relationship between the U.S. and China is one of the most important in the world, and we, both China and the United States, need to get it right. As ambassador, I hope to help build a stronger relationship between our two countries—one that benefits the American people and encourages partnership to promote security and prosperity around the world. I’m thankful for the support and trust of President Obama, Vice President Biden and Secretary Kerry. I look forward to working with the outstanding team at the U.S. embassy in Beijing and in our consulates across China.”
Baucus later followed up with a statement on the prospects for tax reform. “As I reflect on my time in the Senate, I am proud of our continued fight for smart tax reform,” he said. “Senator Hatch and Congressman Camp have been great partners and I am hopeful that our hard work and collaborative efforts will pave the way for further momentum in the years ahead. It’s a tough road, but ultimately we can’t let politics get in the way of much needed policy.”
He cited signs of recent momentum in the long effort. At the end of 2013, the Senate Finance Committee released four discussion drafts on international tax reform, tax administration, cost recovery and accounting, and energy. Together with Camp, Baucus set out last summer on a road show across the U.S. to meet with business leaders, policy makers and citizens to discuss how to best tackle comprehensive tax reform. Alongside Hatch, Baucus introduced 10 tax reform option papers in the Spring of 2013 which offered a variety of ideas to change various aspects of the tax code. From 2011 - 2013 the Senate Finance Committee held more than 30 hearings to drive discussion and explore opportunities regarding tax reform. The committee also secured input and ideas from over 16,000 citizens via taxreform.gov.
Separately, a group of five Republican senators on the Finance Committee sent a letter to Koskinen on Thursday protesting the decision to award $62.5 million in bonuses to IRS employees despite government-wide budget cuts. They asked Koskinen to reconsider the decision.
Hatch, along with Senators Chuck Grassley, R-Iowa; Pat Roberts, R-Kan.; John Cornyn, R-Texas; and Richard Burr, R-N.C.; signed the letter. The senators called the bonuses “an insult to taxpayers,” given the IRS’s “deterioration in performance” due to budget constraints and government-wide guidance to restrict bonuses as much as possible during the mandatory budget cuts known as “sequestration.”
“Sequestration has forced everyone to make difficult decisions when it comes to spending,” the senators wrote to Koskinen. “The American people are looking to the government to make responsible fiscal choices and use their taxpayer dollars in the most effective way. The IRS’s decision to spend $62.5 million on bonuses is a violation of the public’s trust. We strongly urge you to reconsider your decision.”