The Internal Revenue Service used its legislative authority to hire employees at salaries higher than those typically given to senior executives in the federal government, according to a new government report that found the practice appropriate, even though Congress has now stepped in to change it.

The report, from the Treasury Inspector General for Tax Administration, noted that the IRS Restructuring and Reform Act of 1998 authorized the IRS to hire up to 40 individuals (at any one time) into positions it deemed to require extremely high-level expertise in an administrative, technical, or professional field that is critical to the IRS's success. The appointments were limited to four years. Employees hired under the Streamlined Critical Pay, or SCP, program received base salaries ranging from $130,000 to $227,300. The base pay for members of the Senior Executive Service in 2010-2013 ranged from $177,000 to $179,700.

The IRS used its streamlined critical pay authority to fill 168 critical pay positions between 1998 and 2013, when the program expired, TIGTA found. Over half were information technology positions and the remaining positions were distributed among the other nine IRS functions. Approximately 39 (38 percent) of the critical pay appointees were retained and held different appointments after their initial appointment or assigned project ended.

TIGTA's review found that the critical pay positions were adequately justified. The report said the need to recruit or retain exceptionally well-qualified individuals was demonstrated and that pay limitations were adhered to by the IRS.

In November 2009, the Treasury Secretary's critical pay approval authority was delegated to the IRS commissioner, effectively eliminating an important oversight control written into the original authority.

TIGTA found that two critical pay appointees had previously worked for the IRS. After they separated from the IRS, they held private sector jobs for several years before returning to fill the critical pay positions to which they were appointed.

TIGTA did not make any recommendations in its report.

The report comes after a decision last month by IRS commissioner John Koskinen to award bonuses of around 1 percent of base salary to IRS employees. That decision came under sharp attack from some members of Congress.

On Thursday, Koskinen pointed to the results of the TIGTA report. “The IRS is pleased that the Inspector General’s review and report on the agency’s use of its Streamlined Critical Pay authority found that the IRS had ‘appropriately used its legislative authority’ and that the ‘critical pay positions were adequately justified; the need to recruit or retain exceptionally well-qualified individuals was demonstrated; and that pay limitations were adhered to,’” Koskinen said in a statement. “Over the past year, I have strongly urged the Congress to reinstate this critical program. Therefore, we are deeply disappointed that Congress has decided not to reauthorize this program, which was an important reform in the Internal Revenue Service Restructuring and Reform Act of 1998.

"The IRS has found that the Streamlined Critical Pay authority has been an enormously cost-effective and necessary tool in recruiting top-tier talent," Koskinen added. "Its renewal is essential to continuing IRS technology modernization progress and advances in other high-demand areas requiring people with specialized skill sets. This authority will allow the IRS to attract private-sector executives for Information Technology programs as well as other specialized functions requiring cutting edge skills and specialized expertise. The Streamlined Critical Pay program has been a huge success over the past decade, giving the IRS access to highly qualified people who have helped usher in a period of remarkable IT advances vital to running a modern tax system.

"I encourage the 114th Congress to reinstate Streamlined Critical Pay authority to ensure the tax system has the necessary level of talent required for efficient and effective tax administration," said Koskinen. "Without Streamlined Critical Pay authority, the IRS’s ability to attract top talent and deliver vital tax functions will be hampered during a period of rapid change both in technology as well as in tax administration overall."

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access