IRS pick to face tough questions on agency’s direction

On Thursday, President Trump’s nominee to lead the IRS is heading before Congress, where he will face tough questions on the agency’s top challenges.

The nomination of Chuck Rettig, a Beverly Hills, Calif., tax lawyer, comes at a critical moment for the IRS, which is tasked with implementing the new Republican tax law and needs to quickly modernize its technology.

{mosads}Trump nominated Rettig in February, and the Senate Finance Committee, after a four-month wait, will finally have the chance to question him about the major issues facing the agency and about his professional background, which differs from recent IRS chiefs.

Democrats have been critical of the tax law and many of Trump’s nominees, and will want to ensure that Rettig leads the IRS in a nonpolitical manner.

Still, Rettig is expected to be confirmed, and may even get bipartisan support.

“I think he’ll get confirmed. I hope so. It’s a very important position, and I hope and wish him the very best,” Finance Committee Chairman Orrin Hatch (R-Utah) told The Hill on Tuesday.

If Rettig is confirmed, he will be the first IRS permanent commissioner appointed by Trump. Rettig has been nominated to fill the remainder of a five-year term that ends in November 2022.

Under a 1998 law, IRS commissioners fill five-year terms with set dates. The term of President Obama’s appointee, John Koskinen, ended in November. Since then, David Kautter, a Senate-confirmed Trump appointee to a Treasury Department post, has been serving as acting IRS commissioner.

Unlike other recent IRS commissioners, who have had more of a management and business background, Rettig spent his career as a tax lawyer who represented individuals and businesses in disputes with the IRS.

Rettig has been a partner in the Beverly Hills tax law firm Hochman, Salkin, Rettig, Toscher & Perez for many years. According to Rettig’s financial-disclosure report, his clients have included the estate of Michael Jackson and the estate of actress Movita Castaneda, who was Marlon
Brando’s second wife.

Rettig has also led negotiations with the IRS that resulted in settlement agreements to bring taxpayers into compliance with the law.

He has also been active in the tax-law community, serving on an IRS advisory council and holding leadership roles in professional organizations for tax lawyers.

Tax lawyers who know Rettig say his background will be valuable because he understands how the IRS’s actions impact the real world.

“I think he’s someone who will bring a taxpayer’s perspective to the service and a fresh approach to dealing with taxpayer issues,” said Marty Dakessian, a California tax lawyer with his own firm. Dakessian has worked with Rettig through tax-law groups.

“It’s important to have a commissioner who has that perspective from the private sector so he will know and will be sensitive to the impact that a policy might have,” said Rob Kovacev, a partner at Steptoe & Johnson in Washington.

Still, lawmakers are likely to scrutinize Rettig’s management experience, given that the IRS is a sizable agency with considerable challenges ahead.

The agency’s budget for the current fiscal year is less than the funding it received in 2010, and it has seen its workforce shrink. The IRS has also been plagued with technology issues — such as the systems failure earlier this year on the tax-filing due date. It also faces threats from cyber criminals seeking to steal taxpayers’ information.

On top of the agency’s long-standing challenges, the IRS also has its work cut out for it in implementing the tax-cut law that Trump signed in December. The IRS has to update its forms and technology ahead of next year’s filing season, as well as issue guidance clarifying complicated parts of the law.

Both Republicans and Democrats on the Finance Committee are expected to ask Rettig about tax-law implementation, though lawmakers in each party will likely take different approaches on a law Republicans support and Democrats strongly oppose.

A Democratic aide said their questions would focus on pressing Rettig on how he plans to help middle-class taxpayers, given that he has spent much of his career defending wealthy clients.

Hatch is expected to say in his opening statement that “the commissioner will set the tone of the workforce and will be charged with working alongside Congress to thoroughly and fairly implement and enforce our new tax laws.”

Sen. Ron Wyden (Ore.), the top Democrat on the Finance Committee, said the IRS is “right in the middle of the various issues surrounding the Republican tax bill, so that will, I think, be the focus.”

Senators are also expected to ask Rettig about how he plans to guarantee that the IRS acts in a way that is free from political interference.

“The one thing I think is important in these hearings for Cabinet nominees, and maybe especially the IRS, is one word: independence,” said Sen. Bob Casey Jr. (D-Pa.). The IRS commissioner is a sub-Cabinet position.

Trump’s tax returns may also come up during the hearing.

The IRS has been auditing the president’s returns, and Trump has cited the audit for why he has broken with tradition and not made his returns public.

Rettig wrote in Forbes in 2016 that it would make sense for a tax lawyer to advise Trump against releasing his tax returns.

“Is there any legal impediment to Trump publicly releasing his tax returns? Absolutely not,” he wrote. “Would any experienced tax lawyer representing Trump in an IRS audit advise him to publicly release his tax returns during the audit? Absolutely not.”

There may also be questions about Rettig’s financial disclosure.

According to a memo Finance Committee staff circulated to members and obtained by The Hill, Rettig disclosed in his questionnaire to the Committee that he has a 50-percent ownership interest in two rental units in Honolulu, Hawaii. However, he did not mention that the properties were located in the Waikiki Trump International Hotel and Tower.

When Committee staff raised the issue with Rettig, he said he would update his questionnaire to provide more detail on the properties, and agreed to revisit his ethics agreement to make any appropriate amendments there as well.

Rettig is well-known and well respected in the tax community, though, and there are no indications that his nomination will be blocked. Rather, there are signs some Democrats could vote for him.

“The early previews on [Rettig] are actually encouraging,” said Sen. Tom Carper (D-Del.). But Carper did not say how he would vote or if he has met Rettig.

Former IRS commissioners are also speaking positively about Rettig.

“I think the nominee is strong,” said Mark Everson, who led the IRS from 2003 to 2007.

“I think he’s going to be able to land on his feet running,” said Koskinen.