[Senate Hearing 115-817]
[From the U.S. Government Publishing Office]
S. Hrg. 115-817
NOMINATIONS OF JUSTIN G. MUZINICH
AND MICHAEL J. DESMOND
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
on the
NOMINATIONS OF
JUSTIN G. MUZINICH, TO BE DEPUTY SECRETARY, DEPARTMENT OF THE TREASURY;
AND MICHAEL J. DESMOND, TO BE CHIEF COUNSEL, INTERNAL REVENUE SERVICE,
AND ASSISTANT GENERAL COUNSEL, DEPARTMENT OF THE TREASURY
__________
JULY 26, 2018
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
______
U.S. GOVERNMENT PUBLISHING OFFICE
40-487--PDF WASHINGTON : 2020
COMMITTEE ON FINANCE
ORRIN G. HATCH, Utah, Chairman
CHUCK GRASSLEY, Iowa RON WYDEN, Oregon
MIKE CRAPO, Idaho DEBBIE STABENOW, Michigan
PAT ROBERTS, Kansas MARIA CANTWELL, Washington
MICHAEL B. ENZI, Wyoming BILL NELSON, Florida
JOHN CORNYN, Texas ROBERT MENENDEZ, New Jersey
JOHN THUNE, South Dakota THOMAS R. CARPER, Delaware
RICHARD BURR, North Carolina BENJAMIN L. CARDIN, Maryland
JOHNNY ISAKSON, Georgia SHERROD BROWN, Ohio
ROB PORTMAN, Ohio MICHAEL F. BENNET, Colorado
PATRICK J. TOOMEY, Pennsylvania ROBERT P. CASEY, Jr., Pennsylvania
DEAN HELLER, Nevada MARK R. WARNER, Virginia
TIM SCOTT, South Carolina CLAIRE McCASKILL, Missouri
BILL CASSIDY, Louisiana SHELDON WHITEHOUSE, Rhode Island
Jeffrey Wrase, Staff Director and Chief Economist
Joshua Sheinkman, Democratic Staff Director
(ii)
C O N T E N T S
----------
OPENING STATEMENTS
Page
Grassley, Hon. Chuck, a U.S. Senator from Iowa................... 1
Wyden, Hon. Ron, a U.S. Senator from Oregon...................... 2
ADMINISTRATION NOMINEES
Muzinich, Justin G., nominated to be Deputy Secretary, Department
of the Treasury, Washington, DC................................ 5
Desmond, Michael J., nominated to be Chief Counsel, Internal
Revenue Service, and Assistant General Counsel, Department of
the Treasury, Washington, DC................................... 6
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Desmond, Michael J.:
Testimony.................................................... 6
Prepared statement with attachments.......................... 27
Biographical information..................................... 31
Responses to questions from committee members................ 41
Grassley, Hon. Chuck:
Opening statement............................................ 1
Hatch, Hon. Orrin G.:
Prepared statement........................................... 48
Muzinich, Justin G.:
Testimony.................................................... 5
Prepared statement........................................... 49
Biographical information..................................... 50
Responses to questions from committee members................ 54
Scott, Hon. Tim:
Department of the Treasury 2017-2018 Priority Guidance Plan.. 73
Letter from Hon. Curtis M. Loftis, Jr. to Senator Scott, July
12, 2018................................................... 88
Wyden, Hon. Ron:
Opening statement............................................ 2
Prepared statement........................................... 90
``Real Earnings--July 2018,'' Bureau of Labor Statistics,
Department of Labor, August 10, 2018....................... 92
(iii)
NOMINATIONS OF JUSTIN G. MUZINICH,
TO BE DEPUTY SECRETARY, DEPARTMENT
OF THE TREASURY; AND MICHAEL J.
DESMOND, TO BE CHIEF COUNSEL,
INTERNAL REVENUE SERVICE, AND
ASSISTANT GENERAL COUNSEL,
DEPARTMENT OF THE TREASURY
----------
THURSDAY, JULY 26, 2018
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 9:34 a.m.,
in room SD-215, Dirksen Senate Office Building, Hon. Orrin G.
Hatch (chairman of the committee) presiding.
Present: Senators Grassley, Thune, Portman, Toomey,
Cassidy, Wyden, Cantwell, Menendez, Carper, Cardin, Bennet,
Casey, and Whitehouse.
Also present: Republican staff: Jeffrey Wrase, Staff
Director and Chief Economist; Chris Armstrong, Chief Oversight
Counsel; Becky Cole, Policy Director; and Nicholas Wyatt, Tax
and Nominations Professional Staff Member. Democratic staff:
Joshua Sheinkman, Staff Director; Michael Evans, General
Counsel; Ian Nicholson, Investigator; Greta Peisch,
International Trade Counsel; Tiffany Smith, Chief Tax Counsel;
and Jayme White, Chief Advisor for International
Competitiveness and Innovation.
OPENING STATEMENT OF HON. CHUCK GRASSLEY,
A U.S. SENATOR FROM IOWA
Senator Grassley [presiding]. I am not Senator Hatch. He
will be here shortly. He asked me if I would start the meeting.
Welcome to today's hearing for the nominations of Justin
Muzinich to be Deputy Secretary and Michael Desmond to be Chief
Counsel for the IRS and Assistant General Counsel for the
Department of Treasury.
I am going to enter into the record for Senator Hatch an
opening statement that he would make.
[The prepared statement of Chairman Hatch appears in the
appendix.]
Senator Grassley. I would like to welcome everybody to this
morning's hearing and especially extend a very special welcome
to our nominees and to congratulate you. I thank both of you
for your willingness to serve in the Treasury Department and
Internal Revenue Service at a time of great importance for both
positions.
The President has nominated Mr. Muzinich to be a Deputy
Secretary of Treasury where, if confirmed, he will have a key
leadership role across the Department's activities.
The President has nominated Mr. Desmond to be Chief Counsel
for the IRS and Assistant General Counsel for the Treasury
Department.
As I have already done, I welcome you now a second time to
this hearing.
Senator Wyden?
OPENING STATEMENT OF HON. RON WYDEN,
A U.S. SENATOR FROM OREGON
Senator Wyden. Mr. Chairman, thank you.
Would you also, in our tradition, like to give our guests
the opportunity to welcome their families?
Senator Grassley. I am going to introduce them.
Senator Wyden. Oh, I see. All right, after my opening
statement?
Senator Grassley. Yes.
Senator Wyden. Okay, very good.
I too would like to welcome our nominees. We are going to
be considering the nomination of Justin Muzinich to be Deputy
Secretary of the Treasury and Mr. Michael Desmond to be Chief
Counsel at the Internal Revenue Service.
Here is where I think things are now: the committee has
faced unprecedented levels of stonewalling from the
administration on letters and policy issues that I never
expected I would see. We would get similar answers from the
Treasury if we posed our questions to the statue of Alexander
Hamilton outside the Department's headquarters.
It does go back to Secretary Mnuchin's very first
appearance before the committee. I asked then that he work with
me to crack down on the abuse of shell companies, a magnet for
all manner of shadowy, illicit conduct. Mr. Mnuchin told me
that Treasury would get right on it. But a year and a half has
passed, and it is business as usual at Treasury on shell
companies.
And let us be clear, this is not something that is a
partisan issue. I have written bipartisan legislation on this
matter with Senator Rubio, obviously an influential Republican.
Today we are going to ask Mr. Muzinich what he is going to
do to end the Treasury stonewalling if he is confirmed. Now I
enjoyed our visit a few days ago, and I was particularly struck
when you said that you saw yourself simply as being a
``building manager'' as Deputy Secretary.
And so I went and read the newspaper articles about you,
these glowing articles praising your financial expertise,
previewing your expansive role on tax policy, debt management,
and more. It is clear that people ``in the building'' have a
different perspective. Their accounts suggest to me that
calling the nominee, Mr. Muzinich, the ``building manager'' is
a little bit like saying an NBA all-star is going to be a nice
role-player off the bench. It is clear to me that the nominee,
if confirmed, would be the Secretary's right-hand man, and that
is why we expect answers as to how he is going to fix these
long-running problems.
Bottom line on the stonewalling matter: committee members
and I are not firing off nasty-grams demanding the resignation
of everybody who has come within 25 feet of Paul Manafort. We
are not asking for anybody's high school diaries. What we are
trying to do is get information that is key to uncovering
corruption and protecting our democracy from foreign
interference.
That includes working to determine the extent of the
relationship between Alexander Torshin, a Russian national with
close ties to Vladimir Putin, and the NRA. It includes a
request for information that would help determine the extent of
Michael Cohen's influence-peddling.
And because the President refuses--even though all of his
predecessors for a full 40 years did so--to release his tax
returns, we have also had a request for information that would
help shed light on questionable Trump real estate deals with
Russian individuals. The list goes on from there.
At some point, this ceases to be a case of the Treasury
Department being slow to respond, and it looks more like
actively abetting the cover-up of corruption and illegal
activity.
The committee also needs to know whether Mr. Muzinich
agrees with the recent decision to open the floodgates for more
dark money into American politics. This was a significant tax-
policy change, and our nominee says he is a tax-policy guy.
So there may be an effort to downplay the significance of
the decision. Maybe, again, we will hear it spun as a harmless
policy update, but let us be real clear what this is going to
mean. If your dark money policy gives oligarchs in Moscow
reason to throw back celebratory vodkas, and if their friends
at the NRA have a green light to flood the airwaves with even
more election secrecy, you made the wrong call.
Last Monday night, the Trump administration wrested even
more control of our democracy from the hands of American
people. Furthermore, if the Trump White House is ordering hasty
changes to tax administration policies without public debate in
ways that threaten the legitimacy of our elections, are those
changes going to stand? After all Mr. Desmond, if confirmed as
IRS Chief Counsel, is going to be responsible for carrying out
this decision, and any proposed changes to IRS rules will have
to go through him.
Mr. Desmond must demonstrate to this committee that he will
remain independent and unswayed by political pressure from the
Trump White House on this and other issues.
In closing, one final tax policy matter that I discussed
with Mr. Muzinich. A year ago, members of this committee on
this side of the aisle said loud and clear, our preference is
to have a bipartisan tax reform bill. Every single member on
this side of the dais said that was their preference. We put it
in writing.
As I mentioned to you, I wrote two full bipartisan bills--
one of them with a member of the Trump administration who used
to sit right down there, Senator Dan Coats. But what we got
from the administration is that they did not want to work on
tax reform in a bipartisan way.
People like Bill Bradley--who sat over here when he was in
the Senate--flew all over the country trying to work with
Republicans on a bipartisan bill. And in this case, a year ago,
Republicans would not even walk down the hall to work with
these Democrats who said that they wanted to have a bipartisan
tax plan.
Now we are hearing that there is a new effort for yet
another tax bill that would once again be completely partisan.
The House is working on it, apparently uninterested in learning
from the consequences of strictly partisan tax policy.
And you and I talked about that. You do it partisan, you do
not get certainty. You do not get predictability, and it makes
it harder for middle-class people to get those jobs that pay
higher wages for the long term.
The Trump tax law has been in place for months, and the
quarterly numbers from the Bureau of Labor Statistics have
shown that real wages fell over the first half of this year. So
now it looks like we are just going to do a repeat of what was
done last year, a big windfall for the high fliers, even more
goodies for the most fortunate, while so many typical families
are just trying to figure out how to get ahead.
To me, it looks like once again the administration is
taking the tax code and continuing to split it in two. People
who work for a wage--no special deals for them. Their taxes
come right out of their paycheck. If you are a high flier, you
can almost figure out what you want to pay and when you want to
pay it.
So our view is, going down the partisan route is not the
way to go, and once again, I think you are going to hear from
my colleagues that their preference is to pursue serious tax
policy in a bipartisan way. And as I told you, I put years and
years of my own time into this cause. So this is an important
hearing.
Senator Grassley, acting chairman, I am glad you are going
to have the introduction of our nominees, and we will get on
with it.
Senator Grassley. Okay.
[The prepared statement of Senator Wyden appears in the
appendix.]
Senator Grassley. This is the way we will do it to start
out. I am going to introduce our two nominees, and then they
are going to be able to make their opening statements and
introduce family and friends. And then I have the usual
obligatory questions that we ask all nominees, and then I am
going to give my time to Senator Portman, and then we will go
to Senator Wyden.
Before working at the Treasury Department, Mr. Muzinich
served as president of a company named after him. It was an
investment firm. While running his company, he also taught at
the Columbia Business School. He earned his BA and MBA from
Harvard and his J.D. from Yale, where he was an Olin fellow.
In early 2017, he was appointed a Counselor to the
Secretary at the Treasury, where he has advised Secretary
Mnuchin on several policy issues, including the tax reform. We
often saw our nominee up here last year alongside the Secretary
as we worked to create a tax reform bill that would best help
the American taxpayers. And we appreciate your help in that
very historic piece of legislation.
His work with the Treasury Department has shown him to be a
quick learner and a good listener, skills that, if confirmed,
will be an integral part of his new role.
Mr. Desmond has run his own law firm focused on tax
controversy matters in Santa Barbara, CA. Before that, he was a
partner at the international law firm of Bingham McCutchen LLP.
He earned his BA from the University of California, Santa
Barbara, and his J.D. from Catholic University of America. Mr.
Desmond served as a law clerk for a Federal judge in Los
Angeles and then, as I mentioned earlier, went on to serve as a
trial attorney with the Attorney General's honor program at the
U.S. Department of Justice.
Following this, Mr. Desmond worked at a law firm in
Washington, DC, where he soon became partner. In 2005, Mr.
Desmond returned to government service and served as Tax
Legislative Counsel at the Treasury Department.
He was a Senior Legal Advisor on several domestic tax
issues and worked with the IRS Commissioner and the IRS Chief
Counsel to implement a broad range of tax policy. Mr. Desmond's
previous work in government service as well as his continued
work representing individual businesses in the tax space will
serve him well in his new position, should he be confirmed.
So, Mr. Muzinich, go ahead.
STATEMENT OF JUSTIN G. MUZINICH, NOMINATED TO BE DEPUTY
SECRETARY, DEPARTMENT OF THE TREASURY, WASHINGTON, DC
Mr. Muzinich. Chairman Grassley, Ranking Member Wyden, and
distinguished committee members, I am honored to appear before
you today as the nominee to be Deputy Secretary of the
Treasury. I am grateful to Secretary Mnuchin for his confidence
and support in recommending me for this position.
I would like to take a moment to introduce my wife Eloise
who, on top of being a talented physician, is a wonderful
mother to our two children.
Senator Wyden. Where is your spouse?
Oh, good morning. I could not see you.
Mr. Muzinich. I would also like to acknowledge my parents,
my sister Lauren, and my brother Adrian. Their love and support
have made all the difference in my life.
My own family fled communism for the liberty of this
country, and my wife's family has a proud history of military
service, including a grandfather who served as a General in the
Air Force. So I sit before you today with a profound
appreciation for the freedoms this country stands for and the
sacrifice that has gone into protecting them.
It has been a privilege to meet with many of you and your
staffs over the past several months as a nominee, and over the
past year and a half in my role as Counselor to the Secretary.
I pledge that, if confirmed, I will be committed to dialogue
and engagement with you, and I look forward to accomplishing
more together.
The Treasury Department is tasked with oversight of some of
the most critical issues facing our country and the world. From
safeguarding our financial system and implementing sanctions to
driving economic growth and opportunity, administering the tax
system, printing the Nation's currency, and managing the
balance sheet of the U.S. Government--the role of the
Department is vast.
None of this work would be possible without Treasury's
tremendously dedicated career staff. During my time at the
Department, I have developed a deep respect for their expertise
and commitment to moving the country forward--putting in long
hours, making sacrifices, and seeking no recognition. They are
the pillars of the building, and it is a privilege to serve
side by side with them.
If confirmed, I will assist Secretary Mnuchin in carrying
out the Department's mission by bringing to bear my
perspectives from working in finance and teaching, as well as a
first-hand knowledge I have gained over the past year and a
half serving as Counselor to the Secretary.
My experience at Treasury has affirmed my long-held belief
in the importance of public service, of actively participating
in our great democratic debate, and giving back to the country.
If confirmed, I will strive to live up to all that Treasury and
this great country stand for.
I look forward to your questions.
Senator Grassley. Thank you.
[The prepared statement of Mr. Muzinich appears in the
appendix.]
Senator Grassley. Now, Mr. Desmond.
STATEMENT OF MICHAEL J. DESMOND, NOMINATED TO BE CHIEF COUNSEL,
INTERNAL REVENUE SERVICE, AND ASSISTANT GENERAL COUNSEL,
DEPARTMENT OF THE TREASURY, WASHINGTON, DC
Mr. Desmond. Good morning, Senator Grassley, Ranking Member
Wyden, and members of the committee. It is an honor for me to
appear before you as the President's nominee to be Chief
Counsel for the Internal Revenue Service.
I would like to take a moment to introduce my wife, Kristen
Desmond, and my parents, Walter and Ann Desmond, who are with
me here today. Kristen has given me her unwavering support
through more than 20 years of marriage, and without my parents'
life-long commitment to public service and education, I would
not be appearing before you here today.
I have spent over 2 decades in positions involving tax
enforcement, policy, and administration and working in private
practice representing a broad range of taxpayers in disputes
pending before the Internal Revenue Service and in litigation.
In my first job as a tax lawyer at the Tax Division of the U.S.
Department of Justice, I saw first-hand the challenges faced by
taxpayers and the Internal Revenue Service alike when
complexity and uncertainty in the law, combined with breakdowns
in the audit and administrative appeals process, lead to time-
consuming and expensive litigation.
That early experience helped shape my view of tax
administration, recognizing that while litigation is sometimes
inevitable, resolving disputes early in the process and taking
steps to avoid those disputes in the first place should be of
paramount importance.
As Tax Legislative Counsel at the U.S. Department of the
Treasury, I worked with a group of lawyers and accountants
responsible for guidance on all aspects of the domestic tax
law. I also worked closely with the staff of this and other
congressional committees in formulating and implementing tax
legislation, an important exercise that, if confirmed, I would
bring to bear at the Office of Chief Counsel.
Although the Tax Legislative Counsel position focuses on
policy, my prior background in tax practice and procedure gave
me the unique opportunity in that job to also work with the IRS
on matters relating to tax administration. As one example, I
served as the point person at the Treasury Department for
implementing the disaster relief and recovery provisions that
Congress enacted as part of the Gulf Opportunity Zone Act of
2005.
My current work focuses on representing individuals and
small and mid-sized businesses in resolving tax disputes. My
clients include sole proprietors with discrete reporting
problems, individuals with complex domestic and cross-border
compliance issues, and larger businesses that are under regular
scrutiny from the IRS.
I balance this work with active representation of pro bono
clients and leadership roles in the Section of Taxation of the
American Bar Association and the American College of Tax
Counsel.
My experience working in government and with clients of all
sizes has shown me that complexity and uncertainty in the tax
law create challenges for even the smallest taxpayers that can
be as difficult to resolve as those faced by the largest
businesses. Regardless of their size or level of
sophistication, I firmly believe that for all taxpayers, the
issuance of timely and accurate guidance is the best way to
address those challenges, avoid disputes, and foster compliance
with the tax law.
The Office of Chief Counsel plays a central role in that
effort, and, if confirmed, I look forward to doing my part to
advance it.
I am grateful for the opportunity to appear before you here
this morning and look forward to answering your questions.
[The prepared statement of Mr. Desmond appears in the
appendix.]
Senator Grassley. First, the obligatory questions.
Is there anything that either of you are aware of in your
background that might present a conflict of interest with the
duties of the office to which you have been nominated?
Mr. Muzinich. No.
Mr. Desmond. No, Senator.
Senator Grassley. Okay.
Do either of you know of any reason, personal or otherwise,
that would in any way prevent you from fully and honorably
discharging the responsibilities of the office to which you
have been nominated?
Mr. Muzinich. No, Senator.
Mr. Desmond. No.
Senator Grassley. Do you agree without reservation to
respond to any reasonable summons to appear and testify before
any duly constituted committee of the Congress if you are
confirmed?
Mr. Muzinich. I do.
Mr. Desmond. Yes.
Senator Grassley. Okay.
Finally, do you commit to provide a prompt response in
writing to any questions addressed to you by any Senator of
this committee?
Mr. Muzinich. I do.
Mr. Desmond. Yes, I do.
Senator Grassley. On that last point, I know you are very
sincere in your answer to the question. But I would like to
suggest to you--having worked with dozens and dozens, or maybe
hundreds and hundreds of people who have sat there and said the
same thing and then not answered letters fully and sometimes
not answered at all--that maybe your answer should have been
``maybe.'' [Laughter.]
Senator Portman?
Senator Portman. Senator Grassley, thank you. Thank you for
your indulgence, my friend. I appreciate it. I will be brief. I
have another markup right now, a markup of my legislation I
need to get to.
First of all, both of you, thank you for your service. It
is good to have people coming into these jobs who have the
experience you have.
Mr. Muzinich, in particular as Counselor, you went through
tax reform. You saw what our attempt was here in Congress.
My first question is, of course, about that. You have a lot
of issues, but swift implementation and proper implementation
of this historic tax law change is critical. We have already
seen a lot of positive developments.
CBO has just, as you know, said we are going to grow this
year at 3.3 percent instead of 2 percent since the tax bill
passed. Nonsupervisory wages are up 2.8 percent in the last
year. That is the most in 9 years, which I am glad to see.
Seventy-five percent of businesses in Ohio say they are hiring
and they are optimistic this quarter. So it is making a
difference. I have talked to dozens of small businesses back
home who believe that.
But there is some uncertainty about some of the delay we
have had on some of the implementation, particularly on the
international side. So can you commit today that you will work
with us in a way that is timely to get some of these
regulations out to fully implement this tax law?
Mr. Muzinich. Absolutely, Senator.
Senator Portman. The second question is also for you. It
has to do with IRS reform.
Senator Cardin and I are going to be at other hearings. I
think he had to leave to get on to one of these hearings as
well.
But I appreciate the fact that Senator Wyden and Senator
Hatch have allowed us and encouraged us to go forward on a
hearing today on tax administration. But the Deputy Secretary
typically plays a huge role at the IRS, specifically with
Oversight Board membership, and is involved with day-to-day
administration at the IRS.
Will you commit today that you will try to make that
Oversight Board more effective, and that you will indeed roll
up your sleeves and get involved with day-to-day IRS
administration issues?
Mr. Muzinich. Absolutely. I look forward to it.
Senator Portman. Thank you.
I look forward to working with both of you.
Thank you, Mr. Chairman.
Senator Grassley. Senator Wyden?
Senator Wyden. Thank you very much, Mr. Chairman.
Mr. Muzinich, let us start with a couple of ``yes'' or
``no'' questions. Do you believe that the Treasury Department
has a role in preventing foreign actors from interfering in our
elections?
Mr. Muzinich. Senator, I believe we do not want foreign
actors interfering in our relations.
Senator Wyden. So that is a ``yes''? The Treasury
Department has a role. Pretty simply question.
Mr. Muzinich. Senator, I would have to look at Treasury's
specific statutory authorities. But I certainly believe we do
not want foreign actors in our elections.
Senator Wyden. The answer is ``yes.''
Last Monday, hours after a Russian national, Ms. Butina,
was indicted for using a gun rights organization as a conduit
to undermine our democracy, the Treasury Department announced
that it would no longer require large, dark money political
donor groups to tell the IRS where they get their money.
``Yes'' or ``no,'' do you believe last Monday's action is
going to help the Treasury Department combat foreign influence
in our elections?
Mr. Muzinich. Senator, I believe the action you are
referring to was a tax administration action. Unfortunately, I
believe it has become very politicized over the last few weeks,
but the intent was to further efficient tax administration.
Senator Wyden. So is it going to help us combat foreign
influence in our elections, ``yes'' or ``no''?
Mr. Muzinich. Senator, the point of the action was to
further efficient tax administration.
Senator Wyden. Well, that just is not right.
What this action has done is essentially blindfold
intelligence officials and law enforcement folks who want to
combat foreign election interference. And without this
information--as far as I can tell--the IRS would have to
randomly go out and try to figure out who to audit.
And my view is, what has really changed here is the IRS is
not going to get information about big donors. And that is
going to make it harder than it already is to go after fraud
and foreign influence.
So one last question: how is it not in the public interest
for both the IRS and the American people to have these large
donations disclosed?
Mr. Muzinich. Again, Senator, the action taken was to
further efficient tax administration. It has become very
politicized. It was an action also recommended by the IRS
Commissioner under Preside Obama.
He testified about it. So it has become very partisan, and
that is unfortunate. But it was something which the Obama IRS
recommended as well.
I can walk through why I think it makes sense if that is
helpful. But it really was meant to further efficient tax
administration.
Senator Wyden. I have not seen anything that the American
people consider partisan about disclosure. And I have asked you
three simple questions, and it sure looks like you are going to
fit in really well down there with what we have seen over the
last year and a half.
So I am going to move on. But I would sure like to see if
we could actually make some progress that would resemble being
sensitive to the public interest.
Now I mentioned Ms. Butina and the shell companies. When
Secretary Mnuchin sat where you are a year and a half ago, he
said he would tackle the issue of anonymous shell companies.
Sixteen months later, he has yet to come to me or to the
committee with any kind of concrete proposal to address the
problem.
So when will we hear from the Treasury Department on how
the abuses of shell companies are going to be stopped? Now you
could, for example, if you wanted to be responsive this
morning, say, well, bipartisan bill in the Senate, Senator
Rubio, Senator Wyden, bipartisan bill in the House, two senior
members, what I would like to do is tell the Finance Committee
on a bipartisan basis we are going to support those bills and
make sure that the beneficial owners of the shell companies are
known at the outset.
So let me give you another chance to be responsive, rather
than just giving us some answer about how everything you are
doing is designed to promote efficiency.
Mr. Muzinich. Senator, thanks. It is a very important
question, a very important issue.
As the Secretary recently testified, it is one we are
committed to. We do think there are significant law enforcement
benefits to solving beneficial ownership.
We have not commented publicly on specific bills, but it is
something we are committed to working with you very, very
closely on and do want to solve.
Senator Wyden. If you compare what you just said to what
Secretary Mnuchin said a year and a half ago, it is almost
identical. And what you have said, both with respect to
protecting the American people from dark money and passing on
an opportunity to come out this morning for actual action on
shell companies, looks to me like more of the same that we have
seen over the last year and a half.
I am going to close by way of saying I noted Senator
Grassley talking about all of the times that you were up on the
Hill talking about tax reform and working with legislatures. My
colleagues and I were not a part of that. And I think that is
the heart of the problem.
Thank you, Senator Grassley.
And I see we have the return of our chairman, Senator
Hatch.
The Chairman. Thank you.
Senator Grassley. Mr. Muzinich, as you just heard from the
other side of this dais, making hay out of this 501(c)(3)
nonprofits reporting or not reporting donor names and
addresses--is it not true that this decision had also been
under consideration during the Obama administration?
Mr. Muzinich. Yes, absolutely.
Senator Grassley. Was this decision not based on the
determination that this information was unnecessary for tax
administration purposes and imposed unnecessary costs on both
the IRS and the taxpayers?
Mr. Muzinich. Yes, that is right.
Senator Grassley. Is it also not true that requiring these
organizations to provide the IRS with this information
needlessly put private taxpayer information at risk, resulting
in at least 14 occasions since 2010 that this information was
improperly disclosed to the public?
Mr. Muzinich. That is right, Senator.
Senator Grassley. Okay.
And then also for you: President Trump has rightly made
economic growth and job creation a focal point of domestic
policy. Tax reform was obviously a big part of that agenda, and
its positive effects are being felt, as we see in statistics
coming out of the economy.
As Deputy Treasury Secretary, you will have a seat at the
table on many of the important economic policy decisions,
including tax, trade, domestic and international finance, and
addressing our growing national debt. What policy area or areas
do you think deserve the most attention by Congress and the
administration as we seek to build upon the economic success of
the tax cuts?
Mr. Muzinich. Thanks for the question, Senator.
We will have a number of priorities going into next year
and for the remainder of this year. Tax implementation is one
of them. We would love to work closely with you on that, and we
are coordinating. Certainly housing reform is another, and
regulatory reform is another.
Senator Grassley. Okay.
For decades, tax regulations generally skipped the review
process other agencies had to follow in submitting significant
regulations to the Office of Information and Regulatory Affairs
for a cost-
benefit analysis. However, this changed in April with a release
of a memorandum of agreement between Treasury and OMB that puts
in place that review process for tax regulations.
Do you see this additional layer of review by OIRA for
significant tax regulations as a positive or negative? And
please explain your answer.
Mr. Muzinich. Sure, Senator.
We think the process is working. It is a matter of
balancing speed with oversight of the regulatory process, and
we feel like we have struck the right balance.
Senator Grassley. Mr. Desmond, I did not direct it to you,
but I would like to have your comment.
Mr. Desmond. Thank you, Senator.
I am familiar with the memorandum of understanding from
reading about reports in the past few months. Certainly from my
position as Tax Legislative Counsel when I was at the Treasury
Department, I saw some problems with the regulatory review
process.
I do know from that experience that OMB and OIRA were
involved. And I think that having them involved now in the
memorandum of understanding certainly should not be an
impediment to getting timely guidance out.
I do think there is a lot of work that can be done to
expedite the guidance process. And that starts from square one
in the Office of Chief Counsel, where most guidance originates.
Senator Grassley. Let me ask you, Mr. Desmond, something
that you know I have played a leadership role in in getting the
IRS whistleblower program as a means of addressing tax evasion.
Over the years, I have had some concerns with the Chief
Counsel's Office taking an overly narrow interpretation of the
statute to the detriment of whistleblowers and the program
generally. When there is detriment to whistleblowers, I think
it means that we are not collecting all of the taxes we should.
What, if any, experience do you have with the IRS
whistleblower law or related laws such as the False Claims Act?
Mr. Desmond. Thank you, Senator.
I did have the privilege when I was at Treasury of working
with your staff on changes to the whistleblower statute that
this committee and this Congress passed back a number of years
ago.
Since that time, I have also represented several
whistleblowers in private practice. And I have seen the
benefits that can be achieved by having information come in
from whistleblowers, and I have also seen the challenge that
they face in getting that information to the IRS, making sure
the IRS is effectively utilizing that information and
collecting more tax, which I think is the goal of the
provisions and your interest in that statute and changes in the
statute.
Senator Grassley. My time is up, but let me give you one
bit of advice on that. What I have seen as one of the most
frustrating parts of the whistleblower program is the IRS not
keeping the whistleblowers actively up to date on the status of
their whistleblowing and what is going through the IRS.
Thank you, Mr. Chairman.
The Chairman. Well, thank you.
Senator Casey?
Senator Casey. Thanks, Mr. Chairman.
Mr. Muzinich and Mr. Desmond, we are grateful you are here,
and grateful for your willingness to serve. And I know that you
both have your families here. We are appreciative of that.
I want to go back to the line of questioning that Senator
Wyden was pursuing with regard to this change which alters a
policy that, prior to the change, required organizations to
report to the IRS the identity of any donor who contributed
more than $5,000.
I think if you are going to eliminate that disclosure
requirement, it should be based upon a considered determination
that such a change is in the public interest. I do not know how
having less transparency, less sunlight, benefits the public.
To use the old expression: sunlight is the best disinfectant,
is among the best ways to prevent corruption.
So, Mr. Muzinich, I will start with how the determination
was made. And I would ask you this because you were a
Counselor, so I assume you are familiar--and as I know you
answered the earlier question, you seemed to be familiar with
why this decision was made.
The first question is: did Treasury consult with the
Financial Crimes Enforcement Network, sometimes known as
FinCEN, prior to making this decision?
Mr. Muzinich. Senator, thanks for the question.
Just for the record, I was not a decision-maker on this. I
have familiarized myself with the issue because I knew it would
be of interest to the committee. So I am happy to talk about
the policy rational behind it, but cannot speak precisely to
the decision-
making process.
Senator Casey. So you do not know if anyone in Treasury
consulted with the Financial Crimes Enforcement Network prior
to the decision?
Mr. Muzinich. That is right. I do not know.
Senator Casey. Number two, did Treasury consult with the
IRS's Criminal Investigation Division prior to making this
decision?
Mr. Muzinich. Again, I just cannot speak to the decision-
making process.
Senator Casey. Well, I hope we will get some clarity on
this, because I think if you are going to be concerned, as we
all are, people in both parties, about dark money making its
way into our system, corrupting our system, that that should be
part of the inquiry.
So I am hoping that we can get information about any
consultation. If there was none, then that is troubling,
obviously. If there was consultation, we would like to know
what was the determination made by both FinCEN and the IRS's
Criminal Investigation Division.
I point by way of reference to one expert, among many I am
sure who had this kind of a front row seat, Marv Friedlander,
former IRS official with 40 years' experience at the IRS,
including its tax-exempt organizations work. He talked about
corruption, that he personally saw corruption up close.
And then he said this, and it is interesting the way he
phrased this. He said, ``The ability to begin by looking at
large donations, whether tax-deductible or not, was a useful
tool in pursuing the possibility of corruption.'' A useful
tool--I am really at a loss to understand how changing that
rule somehow advanced the policy on having more sunlight on
dark money.
I think people in both parties would agree that we have far
too much dark, unaccountable money in our system already. So we
just want to make sure that not only is there accountability
and sunlight, we want to make sure that foreign agents are not
part of that.
I think there is a lot of evidence on the record that there
has been far too much foreign involvement, not just in the
election where the Russian Federation, at the direction of
Vladimir Putin, was interfering in our election, but it goes
below that level as well.
I guess the other question, Mr. Muzinich, because you are a
Counselor at the Treasury Department, is, why would you not be
involved or consulted in this determination?
Mr. Muzinich. Senator, I have been focused really on tax
reform and tax implementation. This was a tax administration
issue, not reform or implementation.
After I was nominated for this role, just out of deference
to this process and this committee, I just remained working
only on what I was doing before, which was tax reform and tax
implementation. I did not broaden my portfolio, just out of
deference to the process.
Senator Casey. So a complete examination of the record
would reveal that there is--on this determination, with regard
to your involvement, if any, we will not find any memos, any
emails, any evidence of conversations where you were consulted
on this?
Mr. Muzinich. That is broadly right.
We do meet with the Secretary about once a day on tax
reform. The issue was raised in a meeting, but I was not
driving the process or driving that----
Senator Casey. I understand that, but you said ``broadly
right.'' What do you----
Mr. Muzinich. It would have been discussed in meetings
where I was present, but----
Senator Casey. Okay.
Mr. Muzinich [continuing]. Other people were in the lead.
Senator Casey. Well, that is significant.
Thank you very much, Mr. Chairman.
The Chairman. Senator Toomey?
Senator Toomey. Thank you, Mr. Chairman.
While we are on this topic, Mr. Muzinich, just by way of
clarification, first of all this rule change that we have been
discussing--and thanks for being here and for your willingness
to serve.
Is it true that this applied to certain tax-exempt
organizations and that what we are talking about is not
requiring that these organizations submit names and addresses
of taxpayers who made donations, right? That is what we are
talking about here.
Mr. Muzinich. Exactly.
Senator Toomey. Right.
So these--and this category of organizations to which some
people made donations, is it not true that those contributions
are not tax-deductible?
Mr. Muzinich. That is right.
Senator Toomey. Right.
So since the mission of the IRS is to determine what people
owe in taxes, and since these contributions have nothing to do
with what people owe in taxes, it is really not the business of
the IRS to be trying to police who contributed what to these
organizations in a series of contributions that have no tax
consequences. Is that not fair to say?
Mr. Muzinich. That is right, Senator.
Senator Toomey. Right.
Now it might be entirely appropriate for other enforcement
organizations within this vast Federal Government to look into
if there is a suspicious series of transactions, but I see no
reason why that is the role of the IRS.
Furthermore, is it not the case that if the IRS for some
reason felt the need to audit one of these organizations, or
the individuals contributing, that the information has to be
retained and the IRS would discover the information upon
auditing it. Is that true?
Mr. Muzinich. That is true, Senator.
Senator Toomey. That is what I thought. Thank you.
Let me also thank you for your work on tax reform, because
the evidence is just abundantly obvious. It has been enormously
successful--tremendous economic growth, the extraordinary
situation in which there are more job openings in America than
there are people looking for work in America. I mean, it is
just terrific.
My colleague must have misspoken. I thought I heard him say
that wages were somehow declining. The fact is, over the last 6
months of this year, the first year in which this tax reform
was in effect, wages are up. The average wages are up 2.8
percent. Inflation is up by less than that. That means by
definition there are gains. And that is an average of all wages
when you take into account the fact that new entrants into the
workforce typically come in at below-average wages, and new
entrants have been coming in. That tells you that people who
are continuously employed have been experiencing even higher
wage gains.
So I am very pleased we were able to get this done. And I
thank you for your role in helping with it.
There are a couple of outstanding issues that I hope we are
going to be able to address. One of them I know you are
familiar with. It is the qualified improvement property.
There is a technical correction that I think is necessary
here. And as a result of, frankly, a drafting error, there is
the completely unintended consequence of stretching out the
cost recovery period for improvements inside real estate. This
is particularly problematic for restaurants and retailers who
typically make substantial renovations when they take on a
space.
So I have introduced to the appropriations bill an
amendment that would actually correct this. I trust my
colleagues on both sides of the aisle, however you felt about
the tax reform, would not want to visit this honest mistake
upon a very important sector of our economy. I do not know what
the outcome of this amendment vote will be, but I also think
that there is some ambiguity that might be something the
Treasury can resolve.
So my question is, if you are confirmed, will you work with
us to try to address these and other technical issues to ensure
that, where there is ambiguity, the congressional intent is
achieved through guidance and rulemaking?
Mr. Muzinich. I will.
Senator Toomey. Thank you.
I also want to bring up something we did not touch in our
tax reform, and that is the idea of indexing capital gains. As
you know, as a matter of policy we define a gain on an asset
that a taxpayer holds as the difference between the sale price
and the purchase price. And then we force the person to pay a
tax on that difference, when in fact, in the vast majority of
cases, a portion of that difference, if it is a positive
number, results from inflation. So the investor did not gain
anything from the component of the price rise that was just a
reflection of inflation. And yet we tax the person on that,
despite the fact.
So in fact, it routinely happens that people have a nominal
gain that is nothing more, or in fact, less than even
inflation. So they actually lost on their investment. And we
tax them anyway.
It is my view that the Treasury has the authority to
redefine cost to include the real cost adjusted for inflation.
And I would just ask you to work with us to see if we could not
implement that at Treasury, where I think the authority lies.
Mr. Muzinich. Yes, Senator, I would be very happy to work
with you on it.
Senator Toomey. Great. Thank you very much.
Thanks, Mr. Chairman.
The Chairman. Senator Thune is next.
Senator Thune. Thank you, Mr. Chairman.
Thank you to both of you for your willingness to serve, and
for being here today along with your families. And we thank
them for their commitment to public service as well. We know
that they all contribute to the work that you all do.
As a follow-up to Senator Toomey's questions, there were a
couple of clear drafting errors on a couple of issues that are
pretty important in the tax bill, which I hope we can get
fixed. I also hope we can have bipartisan cooperation to fix
both the qualified improvement property issue and a net
operating loss issue, both of which are just straightforward
drafting errors, and each of which has significant impacts that
I hope we can get addressed.
It was clearly congressional intent, as Senator Toomey
pointed out, with respect to qualified improvement property,
that businesses be able to take advantage of the shorter
depreciation period. And whether the solution he has proposed
as part of the appropriations process gets adopted or not, I
hope that we can get the long-term fix in place as well.
I also just want to say that the new tax law--like any
major change in the tax code, requires guidance to implement
the reforms across individual and family situations as well as
the broad range of business types, industries, and
circumstances. And each of you will have a role in that
process.
The tax code is unique in that Congress has provided broad
regulatory authority in section 7805, which has existed for
decades. A significant reason for this grant of authority is
that the statutory rules in the tax area cannot always envision
every particular circumstance in which they will need to be
applied.
And I can tell you, having just worked on the Tax Cuts and
Jobs Act, that we specifically envisioned that the Treasury
Department and the IRS will use that broad authority, as well
as specific authority, where we wanted to stress particular
issues to implement the new statutory rules for all taxpayers.
So the question is, do you agree that this authority, along
with specific authority provided to stress particular issues,
should be used broadly to implement the tax law based on
congressional intent in the statute and in the legislative
history?
Mr. Muzinich, or whomever would like to take this first.
Mr. Desmond?
Mr. Desmond. Thank you, Senator.
I certainly am familiar with provisions in section 7805.
When I was at Treasury, that was the statutory authority that
we relied upon in many instances for issuing regulations.
There are certain instances where the scope of the
statutory authority is unclear. But I think it is certainly a
tool that can be applied very broadly, and in my experience,
has been applied broadly to interpret congressional intent and
implement that through the regulatory process.
Senator Thune. Mr. Muzinich?
Mr. Muzinich. I agree with that.
Certainly, we want to work to interpret the law in a manner
consistent with the law, and in a manner consistent with
congressional intent. And the Department and the Office of Tax
Policies are working very, very hard to get regulations out.
Senator Thune. Good.
I know that, and I hope that they will continue to work
aggressively to make sure that that guidance does get out.
There are a lot of taxpayers across the country, businesses and
individuals, who are very interested in that guidance.
The Chief Counsel's Office makes legal determinations and
provides legal advice across the agency in its various
divisions, including the Office of Appeals. So the question is,
from your experience as a practitioner, do you think that the
relationship between Chief Counsel and Appeals is working
appropriately and effectively, and does it affect the ability
of the Office of Appeals to be an independent arbiter between
taxpayers and the IRS auditors?
Mr. Desmond. Thank you, Senator.
I think the process can work more efficiently. All
processes can work more efficiently in terms of getting Chief
Counsel to advise Appeals and help move cases through Appeals
and get them settled.
There are issues in the relationship that people have noted
over the years about the ex parte prohibition and ensuring the
Chief Counsel is not inappropriately being used as a conduit
for communication between examined appeals. That is an issue I
have written about, that I am very aware of. I have certainly
seen issues come up in representing my clients with ex parte
communications.
So I think that the system does work. I think that Appeals,
in particular, and that ex parte rule--the most important part
of that is the appearance of inappropriate influence from exam
on settlement offices at Appeals. So it is very important, and
I think there are some improvements that can always be made,
and I look forward to working with the Office on that, the
Office of Appeals.
Senator Thune. Okay. All right.
Mr. Chairman, my time has expired. Thank you.
The Chairman. Senator Whitehouse is next.
Senator Whitehouse. Thank you very much, Mr. Chairman.
Mr. Desmond, it is a crime to make a material false
statement to the government under 18 U.S.C. 1001. The
Department of Justice has the practice of not prosecuting those
cases unless there has been a referral from the IRS where it
relates to materially false statements in tax filings.
That gives the IRS a chokehold on those prosecutions. If
you are confirmed, will you pledge to me that you will let me
know what the number of those referrals has been in recent
years and explain any policy related to those referrals?
Mr. Desmond. Senator, yes.
I am not familiar with the numbers or what----
Senator Whitehouse. I am not asking you that now. I am
asking you if you will get me the numbers once you are in, and
if you will explain the policy behind--I suspect there are
practically no referrals. And I am interested in the actual
number and what the policy is that justifies whatever that
number is.
Mr. Desmond. Sure, Senator.
I think that information is out there. I have seen that.
And certainly, if I am confirmed and I have access to that--the
only hesitation I have is if there is any prohibition on
disclosure of that. But other than that----
Senator Whitehouse. I am not asking for the referrals
themselves, just the number.
Mr. Desmond. Understood.
Senator Whitehouse. Mr. Muzinich, shell corporations--in
what context should we be looking at the proliferation of
anonymous shell corporations? Is there a law enforcement
context with respect to shell corporations that we should
attend to?
Mr. Muzinich. Yes, Senator.
I mentioned earlier--perhaps before you arrived--that I do
think it would be helpful for law enforcement purposes to fix
the beneficial ownership issue you are referring to.
Senator Whitehouse. And it is a serious problem in law
enforcement.
Mr. Muzinich. Senator, I have not seen law enforcement data
myself, so I cannot speak to how serious it is.
Senator Whitehouse. How about national security? Are there
any national security ramifications to anonymous shell
corporations operating in the United States?
Mr. Muzinich. Again, Senator, I have not seen any national
security data on that, so I cannot speak to it.
Senator Whitehouse. Wow. Okay.
How about dark money? The ability of unknown entities to
plow money into our elections? Is there any law enforcement or
national security concern that you would see to that going on?
Mr. Muzinich. Again, Senator, I just have not seen any
national security data. So I cannot speak to that.
Senator Whitehouse. Well, just from a logical point of view
as a human being, if we do not know the source of large amounts
of money flowing into elections, what prevents that from being
a foreign source, for instance?
Mr. Muzinich. Senator, I certainly agree with you that we
do not want foreign money in elections.
Senator Whitehouse. And the Treasury has a role in
facilitating the flow of dark money or trying to put some light
onto that flow of dark money, does it not?
Mr. Muzinich. Senator, that question was asked earlier. I
am not familiar with Treasury statutory authorities on that
point.
Senator Whitehouse. Wow. Okay.
So, last question: the IRS publishes information on tax
returns. And it publishes these days the top .001 percent. It
aggregates them. It is 1,400 returns for individuals.
On average, those are individuals who make $152 million
dollars per year. The IRS also reports that, on average that
group pays a 24-percent overall tax rate, which is about what a
registered nurse pays.
We seem to have a very serious problem of the highest-
income earners paying considerably lower tax rates than many
people who earn a tenth or even a hundredth of their income,
which does not seem fair or efficient.
My concern is that this data was before the big tax bill
which many of us view as a huge handout to those very high-
income shareholders. And what I would ask both of you to pledge
is that you will not stop the reporting of this aggregate tax
return income if it should show that this tax bill has been a
huge windfall for those .001-percent high-income earners.
Will we continue to get those reports even if it shows the
windfall?
Mr. Muzinich. Senator, I do not know of any plans to stop
reporting that data.
Senator Whitehouse. Will you pledge to keep doing it?
Having no plans to stop it allows you to stop it tomorrow.
Mr. Muzinich. Senator, again, I would have to spend some
time on the issue, but it seems reasonable to me.
Senator Whitehouse. Okay. Thanks.
Thanks, Mr. Chairman.
The Chairman. Thank you.
Senator Cassidy?
Senator Cassidy. Hi, gentlemen.
Either of you can answer this, because it seems like both
of you have experience that may speak to it, but perhaps not.
I am very interested in trade-based money laundering and
the way by which transnational criminal organizations or
terrorist organizations such as Hezbollah move dollars outside
of the U.S. to wherever they wish to take them.
Can you speak to the information sharing between the IRS
and the Treasury Financial Crimes Enforcement Network,
otherwise known as FinCEN, for identifying these illicit
activities?
Mr. Desmond. Senator, I cannot speak to that specifically.
I am aware that there are both treaty provisions and
information sharing agreements the United States has with other
countries. I, in practice, have not had experience with those.
But I do know those are out there.
Senator Cassidy. In your previous experience in a previous
administration, did you have any kind of involvement with this?
Mr. Desmond. I did not, Senator. I was on the domestic side
when I was at Treasury. There was an Office of International
Tax Counsel that may have had experience, but I was on the
domestic side at Treasury.
Senator Cassidy. And you, Mr. Muzinich?
Mr. Muzinich. Senator, I cannot speak directly to it, but I
am happy to follow up.
Senator Cassidy. Let me ask, because this may be something
that, despite that, you could still speak to.
Can you imagine that--and I am not arguing against them,
but I am just asking--the tax privacy rules under the IRS code
section 6103 prevent Treasury from further enhancing this
information sharing?
Mr. Desmond. My reaction to that question, Senator, is
``no.'' In the treaty provisions that I am familiar with, the
information sharing provisions, those are tax provisions. So
sharing information under those provisions would be permissible
because it is for tax enforcement purposes. And that would be
permissible under the 6103 provisions.
Senator Cassidy. Mr. Muzinich?
Mr. Muzinich. Senator, I cannot speak to it.
Senator Cassidy. And do either of you in your experience--
again going along with my concern regarding the trade-based
money laundering--do you have any awareness of what steps
Treasury is taking to better detect criminal and terrorist
organizations and their activities in money laundering?
Mr. Desmond. I am not familiar with those activities,
Senator.
Mr. Muzinich. I know it is something FinCEN is quite
focused on. It has not been in my portfolio, but I know they
are quite focused on trade-based money laundering.
Senator Cassidy. Okay. The next question is on duty
drawback.
Mr. Muzinich, the Trade Facilitation and Trade Enforcement
Act of 2015 was explicit that regulations be promulgated by
February 24, 2018. But U.S. manufacturers still are waiting on
guidance on the duty drawback, which is as you know--but for
context--the refund of duties, taxes, and fees on imports when
those items or like-kind items are exported. The refund process
allows U.S. manufacturers to compete on a level playing field
with foreign countries--pro-U.S. jobs, pro-manufacturing, pro-
export.
I understand Treasury and CBP are continuing to process
regulations in this area. But a simple question: if you are
confirmed, will you support U.S. manufacturers by fulfilling
the intent of the Trade Facilitation and Trade Enforcement Act
with respect to duty drawback, which again, was supposed to be
released by February 24th? And the absence of release is
impacting the transition period.
Mr. Muzinich. Yes, I can commit to that. The Treasury staff
has made me aware it is important to you. And we are working
very hard on it.
Senator Cassidy. Yes.
Thank you both, and thank you for offering your service.
I yield back, Mr. Chairman.
The Chairman. Thank you.
Senator Bennet is going to yield to the ranking member for
his next questions.
Senator Wyden. Thank you very much, Mr. Chairman. I thank
my colleague for doing this and for stepping in when I have to
go to something else.
First, Mr. Chairman, I would like to put into the record
now a news release from the Bureau of Labor Statistics on wage
growth. My colleagues on the Republican side have said several
times that wages are up. This news release from the Bureau of
Labor Statistics says that that is not the case; wages actually
went down from June 2017 to June 2018. And the Pay Scale Index
reports that wage growth for the second quarter is down.
So I would ask unanimous consent that at least we correct
the record.
The Chairman. Without objection.
[The document appears in the appendix on p. 92.]
Senator Wyden. Thank you.
Mr. Muzinich, I will tell you I am just stunned that you
seem to be unaware of the enormous authority the Department has
in terms of dealing with shell companies and national security.
I asked that question. Senator Whitehouse asked the question.
These are matters that are in the morning newspaper--
talking about Ms. Butina using a shell company. So I am just
going to leave that there. And maybe you want to say something
else. But to me, when I ask a question that is just a no-
brainer, where the Treasury Department has a role in preventing
foreign actors from interfering in our elections, and you will
not answer what is so obviously a ``yes,'' that does not
demonstrate the kind of progress that I talked to you about.
So let me ask you about Treasury and IRS priorities. Most
of our Nation's businesses are small businesses. The 20-percent
tax deduction could impact about 20 million people. The fact
is, our small businesses are really in the dark about how these
rules are going to apply.
The IRS released a new postcard tax form. And I would like
to hear what the discussions were, because this is a tax policy
issue. You have said you are the tax policy guy.
Why was so much effort put into this question of the
postcard, the new postcard which was supposed to simplify
taxes? In fact, it adds six new schedules to the calculation of
taxes for many people. Why has the focus been on matters like
that new form, rather than the IRS and Treasury getting out
guidance to the millions of small businesses that have told me
that because the guidance is not out, they cannot even do an
estimate of their taxes?
Why was that not put first, the needs of the small
businesses that wanted the guidance, rather than all of this
flurry of activity on the postcard, which I know was a campaign
promise?
Mr. Muzinich. Sure, Senator. Thanks for the questions.
Just for the record, I am well-aware of Treasury's
authorities in sort of what you call the ``shell companies''
and am delighted to follow up with you on that.
On taxes----
Senator Wyden. Well, that indicates we may have made a tiny
bit of progress today. You would not take a position on the
bipartisan bills to require disclosure of the beneficial
ownership--the bill in the House, the bill in the Senate. You
would not answer my question or Senator Whitehouse's question
whether you all had a role in preventing foreign actors. But at
least we have now got to the point where you will acknowledge
that there is FinCEN. So that is, I guess, making some
progress.
Tell me now about the decision to go forward with the
postcard, rather than getting the small business people the
guidance they need on the pass-throughs.
Mr. Muzinich. Senator, I would respond in two ways. First,
we do think the postcard will simplify life for many Americans.
A typical family just taking the standard deduction with simple
tax filing will benefit from a very straightforward filing
process with a postcard.
In terms of time allocation--which is, I think what you are
getting at--between the postcard and other priorities, we think
they both are important. They are both led by the IRS, and they
are led by different groups at the IRS. So working on the
postcard is done by a different group than, for instance, 199A
guidance, which is I think what you are referring to.
On 199A guidance, we do hope to have that out very soon.
And the team is working very hard on it.
Senator Wyden. I am going to ask one other question, but
the reality is, today we have something which is not simpler.
In fact, I characterize it as ``simply complicated'' for many
people with the six schedules. But we have not gotten answers
for our small businesses. And I think that is a set of
misplaced priorities.
One last point that I talked to you about is, we have had
essentially zero responsiveness in terms of our letters on the
big issues: the question of documents, NRA and Russia, letters
to FinCEN about Michael Cohen. The reality has been that, while
the nominees come forward and say they are going to cooperate,
we never get anything.
So again, in the name of making some progress, what are you
going to do to change things, if anything?
Mr. Muzinich. Thanks, Senator.
I would love to have a good dialogue with you. In terms of
correspondence, as I mentioned when we met 2 days ago, that has
not been within my portfolio, but I did talk to the team about
it after our meeting, emphasized the importance of it. I
believe we got one of your letters answered yesterday. So I
hope that was helpful.
And all I can give you is my good faith commitment to work
with you on it.
Senator Wyden. One last point: mention was made of the dark
money rule at one point. My colleague Senator Casey asked a
question about, were you ever aware of this, essentially. And
you said you were in the room, but you did not have any
involvement in it.
I would like you to state in writing for the record what
happened when it was brought up. And I would like you to state
specifically whether you and Secretary Mnuchin ever talked
about the change in the dark money rule that would make it
harder for the IRS to run down fraud.
I would like you to state in writing whether you and
Secretary Mnuchin ever talked about it, and if so, when and
what the circumstances were.
Okay. Thank you, Mr. Chairman.
The Chairman. Senator Bennet?
Senator Bennet. Thank you. Thank you, Mr. Chairman.
Thank you, gentlemen, for your willingness to serve. It is
nice to see you.
Mr. Muzinich, last year, as you know, Secretary Mnuchin
predicted that not only would this tax plan pay for itself, but
it would pay down our debt.
Next year, we are going to have a trillion-dollar deficit,
the largest deficit that we have ever had as a percentage of
our GDP outside of war or a recession, since World War II. CBO
projects that our debt will be more than 100 percent of GDP in
the next 10 years.
Do you still defend the Treasury Department's position that
the tax cuts will pay for themselves despite every mainstream
analysis predicting they will add massively to our deficit?
Mr. Muzinich. Senator, I point you to CEA's 40-page
analysis on this, sort of explaining why it will pay for
itself, and also a letter signed by 130 economists agreeing
with that.
Senator Bennet. I am not asking what other economists say.
I am asking you----
Mr. Muzinich. I agree with that.
Senator Bennet. Your position is that the tax cuts will pay
for themselves and reduce our deficit? That is your position?
Mr. Muzinich. Yes.
Senator Bennet. Will you come back here and testify next
year if that turns out not to be the case?
Mr. Muzinich. I am happy to come back and testify.
Senator Bennet. Good. We would like to have you.
As you also know, because you have been at Treasury, it
serves as a powerful stabilizing force for our country. And
part of that stability is preserved by insulating Treasury from
politics, which is central, I think, to the role of the Deputy
Secretary.
I would like to ask whether you agree that Treasury's work
to combat illicit financial activity, impose sanctions, and
conduct national security reviews through the CFIUS process
should be free from political interference?
Mr. Muzinich. Yes, I agree with that.
Senator Bennet. And would you agree that that would be true
even if a company or an individual is affiliated with President
Trump, his closest associates, or family members?
Mr. Muzinich. Yes.
Senator Bennet. Do you believe the same is also true for
tax administration and enforcement by the IRS?
Mr. Muzinich. I believe administration should be free from
politics, yes.
Senator Bennet. Would you notify this committee, the
chairman of the committee, if inappropriate political
interference occurs in any of these areas?
Mr. Muzinich. Senator, in principle yes, but before making
a commitment, I just sort of want to make sure I----
Senator Bennet. I appreciate that, and I appreciate the
principle.
Will you commit to standing up for the independence of
monetary policy in the Federal Reserve from inappropriate
meddling by the executive branch? Do you think that is
important?
Mr. Muzinich. I believe Fed independence is important, yes.
Senator Bennet. Thank you.
Mr. Muzinich, do you think that trade wars are easy to win?
Do you think they are great and easy to win?
Mr. Muzinich. Senator, I am not sure what you mean by
``easy to win,'' but I think that through our tariffs we are
trying to open markets. And I hope that leads toward free
trade.
Senator Bennet. I'm sorry?
Mr. Muzinich. I hope that leads toward free trade.
Senator Bennet. Do you believe these tariffs are consistent
with free trade?
Mr. Muzinich. I believe the point of the tariffs is to open
markets.
Senator Bennet. Eighty percent of the wheat in Colorado is
exported. And all of the growth for our dairies, and our
farmers, and our ranchers is trade. And when Ambassador
Lighthizer was sitting there, he said that our farmers and
ranchers had his sympathy because they would be the ones likely
to be retaliated against in a trade war.
Now we see the President defying the views of, I think,
members of his own party, basically doling out $12 billion to
make up for the disaster that has been caused to our farmers
and ranchers as a result of these trade policies.
Do you think these trade policies have helped open markets
for our farmers and ranchers?
Mr. Muzinich. Senator, I think it is an ongoing process.
Senator Bennet. Do you think they have helped open markets
for our farmers and ranchers?
Mr. Muzinich. I was happy to see the EU opening up a bit
yesterday.
Senator Bennet. Let us hope that turns out to be true.
Mr. Chairman, I will yield back 13 seconds.
Thank you very much.
The Chairman. Senator Menendez, you are the last one.
Senator Menendez. Thank you, Mr. Chairman.
To both of you, congratulations on your nominations.
Mr. Muzinich and Mr. Desmond, as taxpayers attempt to
navigate their way through the tax code, they need to be able
to rely on a consistent and uniform interpretation of the
Nation's tax law. They need to know that rulings made yesterday
will still apply today and that a small business in Louisiana
will be treated the same as one in New Jersey.
Do you both pledge to adhere to longstanding precedents
that have been established by the Treasury Department and the
IRS?
Mr. Desmond. Senator, with respect to published guidance,
yes. Revenue rulings, regulations, those kinds of things are
things that should be followed consistently unless they are
changed going forward.
Senator Menendez. Mr. Muzinich?
Mr. Muzinich. I agree with that.
Senator Menendez. Okay.
Do you both pledge to give taxpayers the same fair
treatment regardless of what State they are from?
Mr. Desmond. Yes, I do.
Mr. Muzinich. Yes.
Senator Menendez. Good.
So from my perspective, they were both the right answers.
So let us apply this agreed-upon principle to an issue
currently facing States like New Jersey.
New Jersey recently joined 32 other States and the District
of Columbia in offering local tax credits as an incentive for
residents to donate to approved nonprofits. Many of the other
32 States ran similar programs for years, which have been both
blessed by the IRS and the United States Supreme Court.
Indeed, in 2011 the IRS Chief Counsel released an advisory
memo clarifying that State tax credits given in return for
charitable contributions do not--I repeat do not--prohibit
taxpayers from writing off the full value of their charitable
donations. In other words, getting a tax break does not mean
you earned more money, and thus you should not have to be taxed
more as a result.
The Supreme Court confirmed this interpretation with a 2011
ruling that found that State tax credits given for charitable
donations should not be considered a thing of value and instead
are, to quote Justice Kennedy, ``the government declining to
impose a tax.''
This decision confirmed two things: (1) State tax benefits,
even dollar-for-dollar credits, do not reduce the value of
Federal charitable deductions; and (2) such donations do not
constitute a satisfaction of tax liability.
But in plain English, it is simply illogical, impractical,
and fundamentally backwards to tax people on the value of a tax
break that they receive. But despite 32 other States running
similar programs for many years, despite these programs being
specifically blessed by the IRS in 2011, and despite the U.S.
Supreme Court further confirming this interpretation, the IRS
is now threatening New Jersey taxpayers and others with
potential consequences for participating.
So can you commit to reversing course and stopping the IRS
and Treasury Department from targeting taxpayers in States like
New Jersey, and instead pledge to apply the law equally,
regardless of what State a taxpayer is from?
Mr. Desmond. Senator, I am certainly very familiar with the
issue, being a resident of California. And I know that there
are some authorities that you referenced, case law in
particular, and also case-specific guidance that the IRS has
issued in the past. Obviously, I was not a part of that.
But I am familiar with that, some of the discussion that
has been happening recently. So I do commit to looking into and
understanding the issue more carefully. It is a complicated
issue involving issues of donative intent. You had referenced
the quid pro quo concepts that are also involved.
So I do commit to looking into the issue and ensuring that
I understand it.
Senator Menendez. Well, can you point to me anywhere that
the law has changed, either through an IRS guidance and memo,
or through a Supreme Court decision?
Mr. Desmond. Sitting here today, Senator, I cannot point to
any change in the charitable donation laws in section 170. I
think this issue is being driven currently in the States by
changes to other provisions in the code dealing with the
deductibility of State and local taxes.
Senator Menendez. I challenge you to show me, for example,
where in the Trump tax bill that passed into law did it
prohibit State tax credit programs for charitable donations,
because it is not there. I sit on this committee. I can tell
you what is in it and what is not.
So I read the bill, and nothing in it prevents the 32
States that are already doing this from continuing to operate
their programs, or additional States from developing new
programs on their own.
So here is what my problem is going to be, gentlemen: you
either treat my State and States similarly situated the same as
the 32 other States, or you take it away from the 32 States,
which happen to be very red States. This is called the United
States of America, not the red and blue States of America.
So until I have a sense of satisfaction that that is where
we are headed, and being treated fairly and not having the IRS
weaponized against certain States, I will have a problem with
these nominations--not in your competency, but on the question
of the substance of how you will approach this.
I have to understand that there is fairness here at the end
of the day.
Thank you, Mr. Chairman.
The Chairman. All right. At the request of Senator Scott, I
ask that the following two documents be printed in the record
of this hearing: (1) October 2017 Priority Guidance Plan from
the Treasury Department that makes reference to the FATCA
reporting reforms, and (2) a letter from the South Carolina
Treasurer regarding the claim of around $250 million in U.S.
savings bonds belonging to South Carolinians.
[The documents appear in the appendix beginning on p. 73.]
The Chairman. With that, I would like to thank you all for
your attendance today and participation.
And I would like, once again, to thank Mr. Muzinich and Mr.
Desmond for their patience and willingness to serve in these
important roles.
We here at the committee appreciate the new and large tasks
that you are going to have before you, and should you be
confirmed, we trust that you will serve your respective
agencies well. Now, you are both excellent people and excellent
choices as far as I am concerned.
I ask that any member who wishes to submit questions for
the record do so by close of business tomorrow, Friday, July
27th.
So with that, we are grateful to you folks for being here,
and this hearing is adjourned.
[Whereupon, at 10:55 a.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Prepared Statement of Michael J. Desmond, Nominated to be Chief
Counsel, Internal Revenue Service, and Assistant General Counsel,
Department of the Treasury
Good morning, Chairman Hatch, Ranking Member Wyden, and members of
the committee. It is an honor for me to appear before you as the
President's nominee to be Chief Counsel for the Internal Revenue
Service. I would like to take a moment to introduce my wife, Kristen
Desmond, and my parents, Walter and Ann Desmond, who are with me here
today. Kristen has given me her unwavering support through more than 20
years of marriage, and without my parents' life-long commitment to
public service and education, I would not be appearing before you here
today.
I have spent over 2 decades in positions involving tax enforcement,
policy, and administration and working in private practice representing
a broad range of taxpayers in disputes pending before the Internal
Revenue Service and in litigation. In my first job as a tax lawyer at
the Tax Division of the U.S. Department of Justice, I saw first-hand
the challenges faced by taxpayers and the Internal Revenue Service
alike when complexity and uncertainty in the law, combined with
breakdowns in the audit and administrative appeals process, lead to
time-consuming and expensive litigation. That early experience helped
shape my view of tax administration, recognizing that while litigation
is sometimes inevitable, resolving disputes early in the process and
taking steps to avoid those disputes in the first place should be of
paramount importance.
As Tax Legislative Counsel at the U.S. Department of the Treasury,
I worked with a group of lawyers and accountants responsible for
guidance on all aspects of the domestic tax law. I also worked closely
with the staff of this and other congressional committees in
formulating and implementing tax legislation, an important experience
that, if confirmed, I would bring to bear at the Office of Chief
Counsel. Although the Tax Legislative Counsel position focuses on
policy, my prior background in tax practice and procedure gave me the
unique opportunity in that job to also work with the IRS on matters
relating to tax administration. As one example, I served as the point
person at the Treasury Department for implementing the disaster relief
and recovery provisions that Congress enacted as part of the Gulf
Opportunity Zone Act of 2005.
My current work focuses on representing individuals and small and
mid-sized businesses in resolving tax disputes. My clients include sole
proprietors with discrete tax reporting problems, individuals with
complex domestic and cross-border compliance issues, and larger
businesses that are under regular scrutiny from the IRS. I balance this
work with active representation of pro bono clients and leadership
roles in the Section of Taxation of the American Bar Association and
the American College of Tax Counsel.
My experience working in government and with clients of all sizes
has shown me that complexity and uncertainty in the tax law create
challenges for even the smallest taxpayers that can be as difficult to
resolve as those faced by the largest businesses.
Regardless their size, I firmly believe that for all taxpayers, the
issuance of timely and accurate guidance is the best way to address
those challenges, avoid disputes, and foster compliance with the tax
law. The Office of Chief Counsel plays a central role in that effort,
and, if confirmed, I look forward to doing my part to advance it.
I am grateful for the opportunity to appear before you here this
morning and look forward to your questions.
______
Eversheds Sutherland (US) LLP
999 Peachtree St., N.E., Suite 2300
Atlanta, GA 30309-3996
D: +1 404-853-8038
F: +1 404-853-8806
www.eversheds-sutherland.com
[email protected]
April 5, 2018
The Honorable Senator Orrin Hatch
Dirksen Senate Office Building, Suite 219
Washington, DC 20510
The Honorable Senator Ron Wyden
Dirksen Senate Office Building, Suite 219
Washington, DC 20510
Dear Senator Hatch and Senator Wyden:
I served as Chief Counsel for the Internal Revenue Service a number
of years ago, and I have been in touch with nine other former Chief
Counsels who would like their praise of the selection of Mike Desmond
to serve in that capacity to be known and who would like his
confirmation to be undertaken as soon as possible. The attached letter
reflects those views. If there are any questions, please have them
directed to me.
Sincerely,
N. Jerold Cohen
______
April 5, 2018
The Honorable Senator Orrin Hatch
Dirksen Senate Office Building, Suite 219
Washington, DC 20510
The Honorable Senator Ron Wyden
Dirksen Senate Office Building, Suite 219
Washington, DC 20510
Dear Senator Hatch and Senator Wyden:
The undersigned are all former Chief Counsels or Acting Chief
Counsels of the Internal Revenue Service, and we are writing to both
applaud the nomination of Michael Desmond to be Chief Counsel and
recommend that he be confirmed as quickly as possible.
Mike is an excellent tax lawyer with the skills, understanding of
the tax laws and tax practice, and background to be a superb Chief
Counsel. He has been very active in the American Bar Association's Tax
Section, has spoken throughout the country on numerous occasions, and
has served as a trial lawyer with the Department of Justice's Tax
Division and as the Treasury Department's Tax Legislative Counsel. The
legal tax community was thrilled with his nomination and now hopes that
he will assume the position shortly.
Having served as Chief Counsel in the past, and being well aware of
Mike's qualifications, we think his assuming the Chief Counsel position
would be a great contribution to the Internal Revenue Service and the
country at this critical time.
Very truly yours,
B. John Williams William F. Nelson
William J. Wilkins Fred T. Goldberg
Abraham N.M. Shashy, Jr. Lawrence B. Gibbs
Clarissa Potter Donald L. Korb
Emily A. Parker N. Jerold Cohen
______
Tax Executives Institute, Inc.
1200 G Street, NW, Suite 300
Washington, DC 20005-3814
P: 202-638-5601
www.tei.org
June 8, 2018
The Honorable Orrin Hatch The Honorable Ronald Wyden
Chairman Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, DC 20510-6200 Washington, DC 20510-6200
Re: Nomination of Michael Desmond to serve as Chief Counsel, Internal
Revenue Service
Dear Chairman Hatch and Ranking Member Wyden:
As president of Tax Executives Institute, I write to convey TEI's
unqualified support for the confirmation of Michael Desmond to serve as
IRS Chief Counsel. Mike possesses the technical depth, policy
experience, and interpersonal skills necessary to effectively lead the
Office of Chief Counsel. TEI urges his swift confirmation.
Over a 20-year career, Mike has developed sophisticated tax,
policy, and litigation experience both inside and outside the Federal
Government. His service as a trial attorney in the Tax Division of the
Department of Justice, Tax Legislative Counsel in the Department of the
Treasury, and partner in private practice has exposed him to the broad
range of technical and administrative challenges that confront
taxpayers, policymakers, and regulators. Notably, Mike recognizes the
importance of listening to stakeholders, understanding diverse and
often divergent points of view, and working faithfully to achieve
reasonable and realistic solutions.
TEI is a global membership organization founded in 1944 to support
the educational, networking, and advocacy needs of the in-house tax
professional community worldwide. Our membership is comprised of over
7,000 individual members who work for over 3,200 companies, and is
dedicated to the development and effective implementation of sound tax
policy, to promoting the uniform and equitable enforcement of the tax
laws, and to reducing the costs and burdens of administration and
compliance on both taxpayers and the government.
TEI had frequent opportunities to engage with Mike and his team
during his tenure as Tax Legislative Counsel (2005-2008). In every
instance, Mike demonstrated himself to be a thoughtful practitioner and
a careful listener, capable of recognizing the many sides and nuances
to a given issue or a proposed interpretation. And, as important, Mike
always provided a fair hearing, no matter the policy decision or
outcome.
Since leaving the Treasury Department, Mike has practiced law as a
tax controversy specialist and litigator, involved in tax matters at
every stage of the tax controversy life cycle. While in private
practice, Mike has been a regular speaker at TEI's educational
conferences and programs, bringing his sophisticated expertise and
practicality along with an open and engaging manner.
At this critical juncture in U.S. tax administration, it is vital
to have a tax lawyer of Mike's background and experience to lead the
Office of Chief Counsel. He possesses the technical depth to
effectively oversee the broad range of regulatory issues which will
arise during the implementation of the Tax Cuts and Jobs Act, the
judgment to recognize and embrace compromise and accommodation as
essential elements of sound tax administration, and the personal manner
to lead a diverse cadre of 1,400 attorneys assigned among the IRS
National Office and various operating divisions. Mike is ideally suited
to confront the duties and challenges that lay ahead, and, accordingly,
TEI urges his swift confirmation.
If you need additional information concerning TEI's experiences
with Mike, please contact TEI's executive director, Eli J. Dicker, at
202-464-8354 or [email protected].
Respectfully submitted,
Tax Executives Institute, Inc.
By: Robert L. Howren
International President
______
Federal Bar Association
Section on Taxation
1220 North Fillmore Street, Suite 444
Arlington, VA 22201
T 571-481-9090 F 571-481-9092
Email [email protected]
www.fedbar.org
April 11, 2018
The Honorable Orrin G. Hatch The Honorable Ron Wyden
Chairman Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, DC 20510 Washington, DC 20510
Re: Letter in Support of Michael J. Desmond, nominee for Chief Counsel
of the Internal Revenue Service
Dear Chairman Hatch and Ranking Member Wyden:
The Federal Bar Association's Section on Taxation (the ``Tax Section'')
writes to express its support \1\ for Michael J. Desmond for the
position of Chief Counsel of the Internal Revenue Service (``IRS'') and
urges the Senate Finance Committee to approve his nomination swiftly.
Mike's broad experience in the practice of tax law, as an attorney in
various roles in the government, and as a private practice lawyer, give
him the necessary credentials to be the IRS's top legal advisor.
---------------------------------------------------------------------------
\1\ This letter in support of Mr. Desmond's nomination is in the
name of the Tax Section itself, and is not on behalf of the Federal Bar
Association. This letter also may not reflect the views of all members
of the Tax Section, its members' employers, or the Federal Bar
Association.
The Tax Section is a nonpartisan organization, the primary goals of
which are to promote the welfare, interests, education, and
professional growth and developments of its members; promote high
standards of professional competence and ethical conduct in the
practice of Federal tax law; and to provide opportunities of
interaction between tax practitioners in public service and the private
---------------------------------------------------------------------------
sector.
The Chief Counsel is the chief law officer of the IRS and is an
integral figure in determining and coordinating the litigation
positions of the IRS as well as, among other things, promulgating
regulations and other guidance. These responsibilities, as well as the
others to which the Chief Counsel is obligated by statute, will require
capable coordination with the Treasury Department, the Commissioner of
Internal Revenue, and the Department of Justice (``DOJ'').
Mike is uniquely suited to the job of Chief Counsel. He has firsthand
knowledge of the regulatory process, having served as Tax Legislative
Counsel--the Treasury Department's top legal advisor on domestic tax
issues--from 2005 to 2008. Mike's encyclopedic knowledge of the
regulatory process has also benefited the broader tax bar, and by
extension, taxpayers as well.\2\ Mike has deep litigation experience as
a trial attorney for the DOJ Tax Division and as an attorney in private
practice, having worked for mid-size and large law firms and, most
recently, as a lawyer in a solo practice. This breadth of expertise is
important and gives Mike a perspective of practitioner and client
issues across a broad spectrum.
---------------------------------------------------------------------------
\2\ Mike's remarks at a 2011 forum on the regulatory process,
sponsored by Tax Analysts, were made into an article that is routinely
referred to by practitioners. See Michael J. Desmond, ``Former Official
Summarizes the Formal Guidance-Making Process,'' 132 Tax Notes 639
(August 8, 2011).
Currently, the IRS is faced with the challenge of implementing the Tax
Cuts and Jobs Act, while administering and enforcing the law. The Chief
Counsel will need to work closely with the tax experts at the Treasury
Department to promulgate regulations and other guidance for a new,
complex law that is largely already in effect. The Chief Counsel will
also need to ensure that the IRS's position is well-
---------------------------------------------------------------------------
represented in court.
The Tax Section believes that Michael J. Desmond's experience in
government and in private practice gives him the necessary perspective
to be an effective Chief Counsel that can give the IRS competent legal
advice. We fully support Mike's nomination and urge the Committee on
Finance to approve him swiftly.
Respectfully submitted,
Shamik Trivedi
Chair, Section on Taxation
Federal Bar Association
cc: Anne R. Gordon
Chair Elect
______
SENATE FINANCE COMMITTEE
STATEMENT OF INFORMATION REQUESTED
OF NOMINEE
A. BIOGRAPHICAL INFORMATION
1. Name (include any former names used): Michael Joseph Desmond.
2. Position to which nominated: IRS Chief Counsel and Assistant
General Counsel, U.S. Department of the Treasury.
3. Date of nomination: March 6, 2018.
4. Address (list current residence, office, and mailing addresses):
5. Date and place of birth: July 28, 1968, Santa Monica, California.
6. Marital status (include maiden name of wife or husband's name):
7. Names and ages of children:
8. Education (list all secondary and higher education institutions,
dates attended, degree received, and date degree granted):
Georgetown University Law School (September 2000-August 2001).
Graduate coursework, no degree sought or received.
Catholic University, Columbus School of Law (September 1991-May
1994). Juris Doctor, magna cum laude granted May 1994.
New York University (June 1990-August 1990). Graduate
coursework, no degree sought or received.
University of California, Santa Barbara (August 1986-June
1990). Bachelor of arts in political science and history
granted June 1990.
Mesa Community College, San Diego, California (July 1989-August
1989). Undergraduate coursework, no degree sought or received.
Point Loma High School, San Diego, California (September 1982-
June 1986). High school diploma granted June 1986.
9. Employment record (list all jobs held since college, including the
title or description of job, name of employer, location of work, and
dates of employment for each job):
January 2012 to present: founder and shareholder, Law Offices
of Michael J. Desmond, APC, Santa Barbara, California.
March 2000 to December 2004 and June 2008 to January 2012:
partner and senior associate, Bingham McCutchen LLP and its
predecessor firm, McKee Nelson LLP; Washington, DC, New York,
New York and Los Angeles, California.
January 2005 to May 2008: Tax Legislative Counsel, U.S.
Department of the Treasury, Office of Tax Policy, Washington,
DC.
October 1995 to March 2000: Trial Attorney, U.S. Department of
Justice, Tax Division, Washington, DC.
August 1994 to August 1995: Law Clerk, Hon. Ronald S.W. Lew,
U.S. District Court for the Central District of California, Los
Angeles, California.
May 1992 to August 1992 and May 1993 to August 1993: summer law
clerk, Columbus Community Legal Services, Washington, DC.
February 1991 to June 1991: Special Assistant to the Chief of
Staff, House Committee on Veterans' Affairs, Washington, DC.
September 1990 to January 1991: Legislative Assistant,
Congressman Douglas H. Bosco, Washington, DC.
10. Government experience (list any current and former advisory,
consultative, honorary, or other part-time service or positions with
Federal, State, or local governments held since college, including
dates, other than those listed above):
None, other than those listed above.
11. Business relationships (list all current and former positions held
as an officer, director, trustee, partner (e.g., limited partners, non-
voting, etc.), proprietor, agent, representative, or consultant of any
corporation, company, firm, partnership, other business enterprise, or
educational or other institution):
Adjunct professor of law, Georgetown University Law Center
(2007-2014).
12. Memberships (list all current and former memberships, as well as
any current and former offices held in professional, fraternal,
scholarly, civic, business, charitable, and other organizations dating
back to college, including dates for these memberships and offices):
American Bar Association, Section of Taxation (2000-present).
Council director (2017-present); chair and vice chair,
Standards of Tax Practice Committee (2012-2017); chair and vice
chair, Tax Shelters Committee (2008-2012).
District of Columbia Bar Association, Tax Section (2000-2008).
Chair and vice chair, Tax Audits and Litigation Committee
(2001-2004).
American College of Tax Counsel (2008-present). Regent (2016-
present).
University of California Santa Barbara Alumni Association
(1990-present). Member, board of directors (2017-present).
Santa Barbara Athletic Association (2012-present). Treasurer
and member, board of directors (January 1, 2018-present).
Santa Barbara Triathlon Club (2012-present).
13. Political affiliations and activities:
a. List all public offices for which you have been a candidate
dating back to the age of 18.
None.
b. List all memberships and offices held in and services
rendered to all political parties or election committees,
currently and during the last 10 years prior to the date of
your nomination.
Informal tax and economic advisor to Neel Kashkari for Governor
2014.
c. Itemize all political contributions to any individual,
campaign organization, political party, political action
committee, or similar entity of $50 or more for the past 10
years prior to the date of your nomination.
Neel Kashkari for Governor 2014, $500 (January 2014).
John McCain for President 2008, $1,000 (September 2008).
14. Honors and awards (list all scholarships, fellowships, honorary
degrees, honorary society memberships, military medals, and any other
special recognitions for outstanding service or achievement received
since the age of 18):
Chambers USA: America's Leading Lawyers for Business, Tax, and
Tax Controversy.
The Best Lawyers in America, Leading Lawyer in Tax Law.
IRS Commissioner's Award (2008).
IRS Chief Counsel's Award (2008).
Treasury Secretary's Honor Award (2007).
U.S. Department of Justice, Tax Division Award for Sustained
Superior Performance (1998).
15. Published writings (list the titles, publishers, dates, and
hyperlinks (as applicable) of all books, articles, reports, blog posts,
or other published materials you have written):
Author, Foreword to Jasper L. Cummings, Jr.'s, ``The Supreme
Court's Federal Tax Jurisprudence,'' American Bar Association
(2d ed. 2016).
Principal drafter, American College of Tax Counsel Comments on
Recent Changes to IRS Appeals Conference and Settlement
Practices (October 2016).
Contributing author, ABA Section of Taxation Comments on
Partnership Tax Audit and Litigation Regime Revisions (November
2015).
Contributing author, ABA Section of Taxation Comments on 2014
Offshore Voluntary Disclosure Program and the Streamlined
Program (October 2015).
Author, ``Legislative Authority to Regulate Paid Tax Return
Preparers: The Focus Turns to Congress to Act,'' Procedurally
Taxing Blog (Febuary 2015).
Author, ``Is There a Future Role for Circular 230 in the IRS's
Efforts to Improve Tax Compliance?'', Procedurally Taxing Blog
(October 2014).
Author, ``Final Circular 230 Written Tax Advice Regulations,''
Procedurally Taxing Blog (June 2014).
Author, ``The Continuing Evolution of Circular 230: Proposed
Regulations Repealing the `Covered Opinion' Standards, Imposing
General Competence Requirements and Expanding Existing
Procedures to Ensure Compliance,'' CCH Journal of Tax Practice
and Procedure (December 2013-January 2014).
Principal drafter, ABA Section of Taxation Comments on Proposed
Regulations Relating to Practice Before the Internal Revenue
Service (November 2012).
Contributing author, ABA Section of Taxation Comments on Notice
2011-62, Ex Parte Communications Between Appeals and Other
Internal Revenue Service Employees (August 2011).
Contributing author, ABA Section of Taxation Comments on Notice
2010-62 Regarding Implementation of the Economic Substance
Legislation (January 2011).
Author, ``Revisiting the Broad Definition of Return Preparer,''
Tax Notes (January 2011).
Contributing author, ABA Section of Taxation Comments on
Circular 230 Sections 10.2, 10.3, 10.4, 10.5, 10.6, 10.30, and
10.34 (December 2010).
Co-author, ``Practical Considerations for Schedule UTP . . . an
Addendum,'' The Tax Executive (October 2010).
Co-author, ``Practical Considerations in Preparing for the
Impending Schedule UTP Filing Requirement,'' The Tax Executive
(September 2010).
Author, ``Resolution of Financial Products Tax Controversies,''
Practicing Law Institute (2009).
Co-author, ``Improving Compliance Through Changes to the Return
Preparer Regulations,'' BNA (2008).
Author, ``Opinion Standards for Tax Practitioners Under U.S.
Department of the Treasury Circular 230,'' Tax and Corporate
Governance (Wolfgang Schon ed.) (2008).
Author, note, ``Limiting a Defendant's Peremptory Challenges,''
42 Cath. U.L. Rev. 389 (1993).
16. Speeches (list all formal speeches and presentations (e.g.,
PowerPoint) you have delivered during the past 5 years which are on
topics relevant to the position for which you have been nominated,
including dates):
All speeches and presentations delivered in the past 5 years
are listed on Attachment A.
Attachment A: Speeches and Presentations (2013-2018)
------------------------------------------------------------------------
Conference/
Organization Seminar Date Location Topic
------------------------------------------------------------------------
ABA Section of Third January 16, Teleconfere Update on
Taxation Wednesday 2013 nce Annual IRS
(Administrativ Series Ruling
e Practice Guidance
Committee)
------------------------------------------------------------------------
ABA Section of Midyear January 25- Orlando, FL (1) Circular
Taxation Meeting 26, 2013 230 Redux:
What the
Changes Mean
for EO
Practitioners
; (2) The
Proposed
Amendments to
Circular 230;
and (3)
Changes in
Opinion
Practice
After the
Amendments to
Circular 230
------------------------------------------------------------------------
Practising Law Tax Planning May 2, 2013 Chicago, IL Economic
Institute for Substance--Un
Domestic derstanding
and Foreign the Limits
Partnership and Effects
s, LLCs, of
Joint Codification:
Ventures, Partnership
and Other Anti-Abuse
Strategic Rules and Tax
Alliances Shelters
------------------------------------------------------------------------
CalCPA Channel Luncheon August 27, Santa Circular 230
Counties Seminar 2013 Barbara, and the
Chapter CA Regulation of
Tax Advisors:
Expansion,
Pushback, and
Hot Topics
------------------------------------------------------------------------
ABA Section of Midyear September 19- San Circular 230
Taxation Meeting 21, 2013 Francisco, Prohibition
CA on Contingent
Fees
------------------------------------------------------------------------
American Law Handling a October 17- Washington, (1) Handling a
Institute Tax 18, 2013 DC Tax
Controversy Controversy:
: Audit, Audit,
Appeals, Appeals,
Litigation, Litigation,
and and
Collection Collection;
(2) Tax
Practice
Ethics for
Preparers and
Advisors
------------------------------------------------------------------------
UCLA School of 3rd Annual October 22, Beverly The Continuing
Continuing Tax 2013 Hills, CA Evolution of
Education Controversy Circular 230:
Institute Written Tax
Advice,
Competence,
and Other
Proposed
Changes to
the Rules
------------------------------------------------------------------------
ABA Section of Third November 20, Teleconfere IRS Priority
Taxation Wednesday 2013 nce Guidance Plan
(Administrativ Series Update
e Practice
Committee)
------------------------------------------------------------------------
ABA Section of 3rd Annual December 11- Las Vegas, Ethical Issues
Taxation Institute 13, 2013 NV in Tax
on Tax Practice
Controversy
------------------------------------------------------------------------
ABA Section of Midyear January 23- Phoenix, AZ Ensuring
Taxation Meeting 24, 2014 Compliance
With Circular
230:
Responsibilit
ies of Firm
Management
------------------------------------------------------------------------
USC Gould Tax January 28, Los Partnership
School of Law Institute 2014 Angeles, Tax Ethics:
CA The Changing
Landscape
------------------------------------------------------------------------
Practising Law Tax Planning May 1, 2014 Chicago, IL Economic
Institute for Substance,
Domestic Judicial
and Foreign Doctrines,
Partnership and Ethics
s, LLCs,
Joint
Ventures,
and Other
Strategic
Alliances
------------------------------------------------------------------------
American Law Webcast May 29, 2014 Webcast Practical Tax
Institute Series Opinions
------------------------------------------------------------------------
ABA Section of Webcast August 12, Webcast Everything Is
Taxation Series 2014 Fine Until it
Isn't:
Ethical
Issues in a
Tax Practice
------------------------------------------------------------------------
ABA Section of Annual September Denver, CO What's Going
Taxation Meeting 19, 2014 on With
Circular 230?
Recent
Regulatory
and
Litigation
Developments
and the
Question of
What's Next
------------------------------------------------------------------------
American Law Handling a October 17, Washington, Tax Court
Institute Tax 2014 DC Procedures
Controversy
: Audit,
Appeals,
Litigation,
and
Collection
------------------------------------------------------------------------
Insurance Tax 39th Annual November 14, Chicago, IL Standards of
Institute Insurance 2014 Tax Practice
Tax Update
Conference
------------------------------------------------------------------------
ABA Section of Third November 19, Teleconfere IRS Notice on
Taxation Wednesday 2014 nce Codified
(Administrativ Series Economic
e Practice Substance (no
Committee) outline)
------------------------------------------------------------------------
ABA Section of 4th Annual December 10- Las Vegas, Civil
Taxation Institute 12, 2014 NV Enforcement
on Tax Priorities
Controversy
------------------------------------------------------------------------
ABA Section of Midyear January 30- Houston, TX (1) Litigating
Taxation Meeting 31, 2015 Financial
Products
Cases; (2)
Special
Issues
Representing
Partners and
Partnerships;
and (3)
Presentation
to the
Plenary
Session on
Proposed
Statutory
Amendments
Relating to
the
Regulation of
Tax Return
Preparers (no
outline)
------------------------------------------------------------------------
University of Tax Study March 27, Charlottesv Reforming the
Virginia Group 2015 ille, VA TEFRA
School of Law Partnership
Audit
Procedures
------------------------------------------------------------------------
Practising Law Tax Planning April 29, Chicago, IL Economic
Institute for 2015 and and San Substance,
Domestic June 10, Francisco, Judicial
and Foreign 2015 CA Doctrines,
Partnership and Ethics
s, LLCs,
Joint
Ventures,
and Other
Strategic
Alliances
------------------------------------------------------------------------
Tax Executives Audits and May 20, 2015 Chicago, IL Document
Institute Appeals Retention
Seminar
------------------------------------------------------------------------
United States Judicial May 20-22, Durham, NC (1) Privileges
Tax Court Conference 2015 and Waivers;
and (2)
Conflicts and
Chaos: The
Importance of
Timely
Recognizing
and Managing
Conflicts of
Interest in
Tax
Litigation
------------------------------------------------------------------------
NYU School of 7th Annual June 5, 2015 New York, A Debate About
Professional Tax NY the Future of
Studies Controversy Tax Ethics
Forum
------------------------------------------------------------------------
ABA Section of Third June 17, Teleconfere Exceptions to
Taxation Wednesday 2015 nce the
(Administrativ Series Assessment
e Practice Limitations
Committee) Period
------------------------------------------------------------------------
ABA Section of Annual September Chicago, IL Conflicts and
Taxation Meeting 18, 2015 Chaos: The
Importance of
Timely
Recognizing
and Managing
Conflicts of
Interest in
Tax
Litigation
------------------------------------------------------------------------
American Law Handling a October 8-9, Washington, (1)
Institute Tax 2015 DC Examinations
Controversy of TEFRA
: Audit, Partnerships;
Appeals, and (2) FOIA:
Litigation, From Request
and to Litigation
Collection
------------------------------------------------------------------------
New York 74th November 19, San Ethical Issues
University Institute 2015 Francisco, for Tax
on Federal CA Practitioners
Taxation : Good Tax
Planning,
Aggressive
Tax Advice,
or Criminal
Tax Evasion?
------------------------------------------------------------------------
ABA Section of 5th Annual December 10, Las Vegas, Conflicts and
Taxation Institute 2015 NV Chaos: The
on Tax Importance of
Controversy Timely
Recognizing
and Managing
Conflicts of
Interest in
Tax
Litigation
------------------------------------------------------------------------
USC Gould 2016 Tax January 26, Los Tax
School of Law Institute 2016 Angeles, Practitioner
CA Penalties--Se
ction 6694,
Circular 230,
and Beyond
------------------------------------------------------------------------
ABA Section of Midyear January 29, Los APA and the
Taxation Meeting 2016 Angeles, Administrativ
CA e Process:
How Has
Altera
Altered the
Landscape?
------------------------------------------------------------------------
Tax Executives IRS Audit May 18, 2016 Santa Is That What
Institute and Appeals Clara, CA Your Appeals
Conference Protest Looks
Like?
------------------------------------------------------------------------
Practising Law Tax Planning May 28, 2016 Chicago, IL Economic
Institute for and June 9, and San Substance,
Domestic 2016 Francisco, Judicial
and Foreign CA Doctrines,
Partnership and Ethics
s, LLCs,
Joint
Ventures,
and Other
Strategic
Alliances
------------------------------------------------------------------------
New York 75th November 17, San Diego, Ethical and
University Institute 2016 CA Penalty
on Federal Issues for
Taxation Tax
Practitioners
: When Good
Tax Planning
Turns Bad
------------------------------------------------------------------------
ABA Section of 6th Annual December 8, Las Vegas, The New
Taxation Institute 2016 NV Partnership
on Tax Audit Rules
Controversy
------------------------------------------------------------------------
ABA Section of Midyear January 20, Orlando, FL (1)
Taxation Meeting 2017 Implementatio
n of the New
BBA
Partnership
Audit Rules;
and (2) Form
1099
Information
Reporting
Issues
------------------------------------------------------------------------
USC Gould 2017 Tax January 23, Los From IRS
School of Law Institute 2017 Angeles, Contact to
CA Final
Judgment:
Preparing for
and Handling
a Tax Dispute
------------------------------------------------------------------------
Practising Law Tax Planning May 4, 2017 Chicago, IL Economic
Institute for and June 8, and San Substance,
Domestic 2017 Francisco, Judicial
and Foreign CA Doctrines,
Partnership and Ethics
s, LLCs,
Joint
Ventures,
and Other
Strategic
Alliances
------------------------------------------------------------------------
ABA Section of May Meeting May 12-13, Washington, (1)
Taxation 2017 DC Unauthorized
Practice of
Law and the
Practice of
Benefits Law;
and (2)
Ethical
Issues in
Representing
Tax
Professionals
------------------------------------------------------------------------
ABA Section of Webcast September Webcast Unauthorized
Taxation Series 19, 2017 Practice of
Law--Issues
for Employee
Benefit
Lawyers
------------------------------------------------------------------------
Practising Law Tax October 20, New York, Limits of the
Institute Strategies 2017 NY Evolving
for Economic
Corporate Substance and
Acquisition Business
s Purpose
Doctrines and
Related
Ethical
Issues
------------------------------------------------------------------------
UCLA School of Tax October 24, Beverly Dealing With
Continuing Controversy 2017 Hills, CA the ``New''
Education Institute IRS Appeals
------------------------------------------------------------------------
Cambridge Forum on November 8- Surrey, Recent
Forums Internation 10, 2017 U.K. Developments
al Tax in U.S. Tax
Disputes Disputes
------------------------------------------------------------------------
Loyola Law Tax Policy November 13, Los Comments on
School Colloquium 2017 Angeles, Structural
CA Inequities of
Exchange
Traded Funds
------------------------------------------------------------------------
ABA Section of 7th Annual December 8, Las Vegas, Ask the
Taxation Institute 2017 NV Judges: Trial
on Tax Tips and
Controversy Traps
------------------------------------------------------------------------
ABA Section of Midyear February 9, San Diego, (1) A
Taxation Meeting 2018 CA Comparison of
the
California
Rules of
Professional
Conduct and
the ABA Model
Rules; and
(2) Taxation
of Damages
Received
Pursuant to a
Settlement
------------------------------------------------------------------------
17. Qualifications (state what, in your opinion, qualifies you to
serve in the position to which you have been nominated):
I have nearly 2 decades of experience working in positions of
tax enforcement, policy, and administration and working in
private practice representing a broad range of individual and
business taxpayers in disputes pending before the Internal
Revenue Service and in litigation.
As a trial attorney at the Tax Division of the U.S. Department
of Justice, early in my career I saw the challenges faced by
taxpayers and the IRS alike when complexity and uncertainty in
the tax law, combined with breakdowns in the audit and
administrative appeals process, lead to litigation. While
litigation is one focus of the job of IRS Chief Counsel,
resolving disputes early in the process and taking steps to
avoid those disputes in the first instance should be of
paramount importance.
At my current firm, my work focuses on representing individuals
and small and medium-sized businesses with pass-through income.
My clients range from low-income individuals and sole
proprietors with discrete tax reporting problems to high net
worth individuals with complex domestic and cross-border
compliance matters. I also represent a number of large
businesses on discrete procedural issues and tax disputes,
balancing that work with active pro bono representation,
including work with the Tax Court's calendar call program in
Los Angeles.
In my prior work as a partner and senior associate at a global
law firm, my practice focused on corporate clients involved in
large-dollar tax disputes. Although that work gave me an
appreciation for a different client base, I fully understand
that the challenges faced by the largest businesses in
complying with the tax law are not unique. Working closely with
the IRS's taxpayer service, examination, and collection
functions, the IRS Office of Chief Counsel plays an important
role in mitigating these challenges, and my experience working
with taxpayers of all sizes and backgrounds qualifies me to
lead in that role.
Although my early career in government and my work in private
practice have focused on resolution of tax controversies, those
experiences are complemented by my tenure as Tax Legislative
Counsel at the U.S. Department of the Treasury. In that role, I
supervised a group of lawyers and accountants responsible for
guidance on all aspects of the domestic tax law, working in
coordination with Treasury's International Tax Counsel and
Benefits Tax Counsel. In collaboration with the Assistant
Secretary (Tax Policy) and others in the administration, I also
worked with staff of the congressional tax writing committees
and the Joint Committee on Taxation on formulating tax
legislation, an experience that I would bring to bear in
working as Chief Counsel to implement and enforce the tax law.
With a background in tax procedure, as Tax Legislative Counsel
I also worked closely with colleagues at the IRS on matters of
tax administration. As one example, I served as the point
person at the Treasury Department for implementation of the
disaster relief and recovery provisions enacted in the Gulf
Opportunity Zone Act of 2005. In that role, I worked with IRS
Small Business and Self-Employed Division personnel throughout
the country and was given the Treasury Secretary's Award for my
work. This and similar experiences working with the IRS to
implement and administer the law in a manner that achieves
policy objectives while taking practical enforcement challenges
into account give me a unique skill set for the IRS Chief
Counsel position. My experience working at the intersection of
tax policy and administration would also help to ensure that,
as Chief Counsel, my office would operate in a constructive and
collaborative manner to implement and enforce the law while
always keeping in mind congressional purpose in enacting that
law.
B. FUTURE EMPLOYMENT RELATIONSHIPS
1. Will you sever all connections (including participation in future
benefit arrangements) with your present employers, business firms,
associations, or organizations if you are confirmed by the Senate? If
not, provide details.
Yes.
2. Do you have any plans, commitments, or agreements to pursue
outside employment, with or without compensation, during your service
with the government? If so, provide details.
No.
3. Has any person or entity made a commitment or agreement to employ
your services in any capacity after you leave government service? If
so, provide details.
No.
4. If you are confirmed by the Senate, do you expect to serve out
your full term or until the next presidential election, whichever is
applicable? If not, explain.
Yes.
C. POTENTIAL CONFLICTS OF INTEREST
1. Indicate any current and former investments, obligations,
liabilities, or other personal relationships, including spousal or
family employment, which could involve potential conflicts of interest
in the position to which you have been nominated.
If confirmed by the Senate, I would terminate all client
relationships and, under applicable conflict rules, recuse
myself from any matters connected with past or current client
engagements. Outside of my work as an attorney representing
clients in disputes with the Internal Revenue Service and
subject to the divestitures set forth in my agreement with the
Office of Government Ethics, neither I nor my spouse have any
investments, obligations, liabilities, or other relationships
that could raise conflict of interest issues with the position
of IRS Chief Counsel.
2. Describe any business relationship, dealing, or financial
transaction which you have had during the last 10 years (prior to the
date of your nomination), whether for yourself, on behalf of a client,
or acting as an agent, that could in any way constitute or result in a
possible conflict of interest in the position to which you have been
nominated.
Over the past 10 years I have represented clients in IRS
audits, administrative appeals, and litigation. If confirmed by
the Senate, I would terminate all client relationships and,
under applicable conflict rules, recuse myself from any matters
that involve past client engagements.
3. Describe any activity during the past 10 years (prior to the date
of your nomination) in which you have engaged for the purpose of
directly or indirectly influencing the passage, defeat, or modification
of any legislation or affecting the administration and execution of law
or public policy. Activities performed as an employee of the Federal
government need not be listed.
As described in section A, paragraph 15, above, over the past
10 years I was the principal or a contributing author on
several comment letters submitted to the U.S. Congress or the
Internal Revenue Service on behalf of the ABA Section of
Taxation and the American College of Tax Counsel.
In 2009 I was engaged, through my law firm, by a U.S. company
engaged in international shipping activities to submit a
comment letter to the U.S. Department of Treasury on
regulations relating to nonqualified deferred compensation
plans. The comment letter was made publicly available and
published in the tax press and is being provided.
In 2011 I was engaged, through my law firm, by a company in the
financial services industry to submit a comment letter to the
U.S. Department of Treasury on regulations relating to the use
and reporting of identification numbers by tax return
preparers. The comment letter was made publicly available and
published in the tax press and is being provided.
4. Explain how you will resolve any potential conflict of interest,
including any that are disclosed by your responses to the above items.
If confirmed by the Senate, I would terminate all client
relationships and, in consultation with IRS ethics officials,
under applicable conflict rules, recuse myself from any matters
connected with past or current engagements.
5. Two copies of written opinions should be provided directly to the
committee by the designated agency ethics officer of the agency to
which you have been nominated and by the Office of Government Ethics
concerning potential conflicts of interest or any legal impediments to
your serving in this position.
Copies have been provided.
D. LEGAL AND OTHER MATTERS
1. Have you ever been the subject of a complaint or been
investigated, disciplined, or otherwise cited for a breach of ethics
for unprofessional conduct before any court, administrative agency
(e.g., an Inspector General's office), professional association,
disciplinary committee, or other ethics enforcement entity at any time?
Have you ever been interviewed regarding your own conduct as part of
any such inquiry or investigation? If so, provide details, regardless
of the outcome.
No.
2. Have you ever been investigated, arrested, charged, or held by any
Federal, State, or other law enforcement authority for a violation of
any Federal, State, county, or municipal law, regulation, or ordinance,
other than a minor traffic offense? Have you ever been interviewed
regarding your own conduct as part of any such inquiry or
investigation? If so, provide details.
No.
3. Have you ever been involved as a party in interest in any
administrative agency proceeding or civil litigation? If so, provide
details.
While working as an associate at McKee Nelson LLP, I
represented the Ernst and Young LLP accounting firm in an IRS
audit of the firm's potential liability for civil tax
penalties. In December 2002, I was named as a defendant in a
civil lawsuit brought by clients of Ernst and Young--seeking
among other relief--to prevent the firm, and me as one of its
attorneys, from responding to a summons issued by the IRS that
sought the names of individuals who had participated in a
specified type of structured tax transaction (Camferdam v.
Ernst and Young LLP, et al., Case No 1:02-cv-10100-BSJ
(S.D.N.Y.)). The only relief sought against me in the case was
an injunction prohibiting a response to the IRS summons. I was
dismissed as a defendant in the case on June 10, 2003. The
Court never acted on the plaintiffs' request for injunctive
relief against me or my law firm.
4. Have you ever been convicted (including pleas of guilty or nolo
contendere) of any criminal violation other than a minor traffic
offense? If so, provide details.
No.
5. Please advise the committee of any additional information,
favorable or unfavorable, which you feel should be considered in
connection with your nomination.
None.
E. TESTIFYING BEFORE CONGRESS
1. If you are confirmed by the Senate, are you willing to appear and
testify before any duly constituted committee of the Congress on such
occasions as you may be reasonably requested to do so?
Yes.
2. If you are confirmed by the Senate, are you willing to provide
such information as is requested by such committees?
Yes.
______
Questions Submitted for the Record to Michael J. Desmond
Questions Submitted by Hon. John Cornyn
Question. Earlier this year, approximately 2,500 households in
northwest Dallas were impacted by an emergency gas shutdown for the
replacement of gas mains and service lines. The gas company provided
direct financial assistance to these households in the amount of $250 a
day, which was based on input from the Dallas Office of Emergency
Management. In addition to direct financial assistance, the gas company
repaired or replaced the in-home gas lines and equipment for those
families whose homes did not meet the current code requirements so that
service could be restored. I have been told that the total amount of
assistance was over $15 million.
In IRS Announcement 2016-25, the Obama administration explicitly
excluded from income similar payments to displaced customers of the
Southern California Gas Company (SoCal Gas). Like the residents in
Announcement 2016-25, residents in northwest Dallas were displaced from
their homes by a natural gas emergency and received reimbursement for
their displacement. The payments made by the Dallas gas company were
designed to cover lodging and food costs, which stands in stark
contrast to tax-exempted payments by SoCal Gas, which included, inter
alia, pet boarding, Internet service, interior and exterior air
filtration and purification expenses, and vehicle detailing expenses.
As of today, in stark contrast to the SoCal incident and absent IRS
guidance, the financial assistance provided to my constituents could
constitute income. Although the Dallas payments are analogous to
qualified disaster relief payments, they are not clearly excludable
under section 139 because it is uncertain whether the events
precipitating the payments were a ``qualified disaster.''
What are your views of the merits of explicitly exempting disaster
relief payments under Announcement 2016-25, but not providing similar
relief to my constituents?
Answer. As a tax practitioner, I think that similar treatment of
similarly situated taxpayers should be a basic principle of tax
administration. From my experience at the Treasury Department assisting
in the implementation of disaster relief legislation, I also think that
it is important for the tax law be administered in a way that provides
appropriate relief to those whose lives are impacted by disasters. If
confirmed, I will work to ensure that the Office of Chief Counsel
provides impartial and consistent guidance to your constituents and
look forward to working with you on this issue.
Question. Does a smaller scale of the displacement with respect to
the number of displaced customers or length of displacement justify not
issuing the same relief provided in the SoCal Gas situation?
Answer. I am not aware of any provision in the tax law that would
provide a different result based on the scope of the disaster. If
confirmed, I will consult with subject matter experts in the Office of
Chief Counsel to understand the issue and be sure that impartial and
consistent guidance is provided to your constituents.
Question. Will you commit to review this announcement exemption
request, consider the merits, and make it a priority to issue guidance
as soon as possible?
Answer. Yes.
______
Questions Submitted by Hon. Sheldon Whitehouse
Question. What role does the IRS play in identifying,
investigating, and preventing money laundering?
Answer. It is my understanding that the IRS Criminal Investigation
Division investigates money laundering related to tax crimes and
coordinates with other law enforcement agencies when appropriate and
authorized by law.
Question. Is there a national security threat posed by foreign
money entering U.S. elections? If so, please describe.
Answer. I have not worked on this issue in my prior career in
government or the private sector, but I am aware of public reports of
this threat, which I believe should be taken seriously.
Question. The IRS has said that collecting beneficial ownership
information would ``ease tax examinations by enabling the IRS to look
through artificial structures and more clearly determine if the tax
payer was compliant with the tax laws as well as laws related to money
laundering.''
Do you agree the United States' lack of beneficial ownership
collection presents a serious shortcoming in our anti-money laundering
regime?
Answer. As a practitioner, I am aware of certain beneficial
ownership reporting requirements, particularly in the context of
foreign entities. If confirmed, I will seek to better understand how
this issue relates to the work of the IRS in investigating tax crimes
relating to money laundering and consider how the Office of Chief
Counsel can better assist in that work.
Question. How can shell companies be used by criminals to avoid
paying taxes?
Answer. It is my understanding that by hiding beneficial ownership,
criminals can more easily hide their ill-gotten gains and avoid
associated tax liabilities.
Question. Would having access to beneficial ownership information
make it easier for the IRS to investigate tax evasion and other crimes?
Answer. I believe so. If confirmed, I will work with the
Commissioner to examine the impact that access to this information
might have in practice and how the Office of Chief Counsel might
provide assistance on this important issue.
______
Questions Submitted by Hon. Bill Nelson
Question. In your view, what sort of questions arising from the new
tax law (Pub. L. 115-97) do you think you could help with?
Answer. The Office of Chief Counsel plays a central role in the
issuance of guidance to taxpayers. If confirmed, I would review the
Priority Guidance Plan issued by the Department of Treasury and the IRS
to ensure that wherever possible, questions arising under the new tax
law are promptly answered, focusing in particular on questions that
have an impact on the broadest number of taxpayers.
Question. How will you work to stop corporations from using the new
tax law (Pub. L. 115-97) to avoid paying their fair share?
Answer. If confirmed, I will work to identify areas of non-
compliance with the new law and examine how to address them through
additional guidance and appropriate enforcement efforts.
Question. Recently, the Treasury Department and the IRS changed the
rules for tax-exempt entities, removing the requirement for 501(c)(4)
groups and other tax-exempt groups to share their major funding sources
with the IRS. Given this change, how will you advise the IRS to ensure
foreign actors are not using tax-
exempt groups to undermine our political process?
Answer. The Federal Election Commission and the Department of
Justice are charged with enforcing Federal election laws, while the IRS
is charged with implementing the tax law. In making this change, I
understand that the Treasury Department and the IRS explained that the
IRS was previously making no systematic use of Schedule B donor
information. If confirmed, I will seek to understand all of the factors
that went into the decision to make the change.
______
Questions Submitted by Hon. Michael B. Enzi
Question. The Internal Revenue Service continues to experience
significant challenges in updating its technology. For example, in
2009, the IRS began developing the Customer Account Data Engine (CADE
2) to replace the Individual Master File for managing taxpayer
accounts. Since then, the agency has spent more than $1 billion on the
project, but has only completed one phase, has significantly scaled
back other phases, and has delayed CADE 2's estimated completion date.
In your position at either Treasury or the IRS, how would expect
your role to address these challenges?
Answer. The management and development of IT systems is within the
purview of the Commissioner. Over my career as a tax practitioner, I
have seen the impact of these challenges on taxpayers. If confirmed, I
will assist the Commissioner whenever possible to ensure that the IRS
strengthens its IT systems while responsibly managing tax dollars.
Question. A July 2017 Treasury Inspector General for Tax
Administration report came to following conclusion. ``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.''
In your position at either Treasury or the IRS, how would expect
your role to address these challenges?
Answer. If confirmed, I will assist the Commissioner in any way I
can to ensure that the IRS maintains a talented and dedicated
workforce.
______
Question Submitted by Hon. Robert P. Casey, Jr.
Question. As reflected in section 6103, the IRS currently provides
the Social Security Administration with taxpayer data to facilitate the
mailing of Social Security statements. These statements educate
Americans about their earned Social Security benefits and provide
information on deciding when to claim benefits. There is growing
concern that Americans are not similarly and appropriately educated
about their earned Medicare benefits and the program's enrollment
rules. SSA is responsible for certain aspects of Medicare
administration, specifically as it relates to eligibility. In your
view, does the current statute and existing data-sharing agreements
between SSA and IRS permit SSA to add additional content to the Social
Security statements on Medicare enrollment rules and benefits? Would
SSA be permitted to add a stand-alone Medicare notice to the Social
Security statement mailings?
Answer. If confirmed, I will examine all of the factors pertaining
to this issue and work to ensure that the IRS coordinates with the
Social Security Administration to better serve taxpayers while
furthering tax administration.
______
Questions Submitted by Hon. Maria Cantwell
Question. Mr. Desmond, you have strong practice and Federal agency
experience. You have represented individuals and small, medium, and
large businesses before the IRS You have served as the Tax Legislative
Counsel at the Treasury and as a trial attorney in the tax division at
the Justice Department. The Treasury is about to undertake the largest
regulatory project in a generation to put in place the regulations for
the recently passed $1.5-trillion tax bill.
What are your biggest concerns about implementing the tax bill
regulations?
Answer. As a practitioner, my biggest concern is avoiding expensive
and time-
consuming disputes over how to apply the new tax law, particularly for
individuals and small businesses who may not have the resources to
handle those disputes. The tax reform legislation impacts every
taxpayer. Consequently, all taxpayers must receive clear and
expeditious guidance from the IRS and Treasury in order to comply with
and benefit from the new provisions. I am aware that the IRS and
Treasury are working to issue additional guidance. If confirmed, I will
work with the IRS and Treasury to issue the guidance in as timely a
manner as possible.
Question. In many surveys, small business owners repeat that the
new tax law is complicated, complex and takes time away from growing
their business or hiring new employees. The new pass-through deduction
has only added to the problems. Many of these pass-throughs are also
small businesses which do not have tax departments and cannot afford to
hire tax professionals to provide highly technical tax advice.
Small business owners need clear guidance to be able to comply with
the new law. For example, they need to be able to make sure their
estimated tax payments reflect their tax liability so they don't
overestimate their payments, which lowers their ability to invest or
underestimate these payments and end up getting hit with a big tax bill
and penalty the next year.
Will the IRS provide detailed guidance so that these business
owners have the tools they need to plan for the future while complying
with the new tax law as they run their businesses today?
Answer. If confirmed, I will make sure that all taxpayers,
including small business owners, have the guidance they need to comply
with the new law, including making appropriate and timely estimated tax
payments.
Question. While many of the ``pass-throughs'' are actually quite
large businesses, what can we do to help the truly small business
understand this new and complex system?
Answer. Although the issuance of timely and accurate guidance is
important for taxpayers of all sizes, for smaller businesses it is also
important for that guidance to be widely distributed and explained
through outreach to tax practitioners and others. This is particularly
true for small businesses that can benefit from the deduction provided
for under new section 199A. I understand that Treasury and the IRS are
about to issue guidance on that statute. If confirmed, I will work to
expedite the guidance process and disseminate guidance as broadly as
possible once it is issued.
______
Questions Submitted by Hon. Ron Wyden
syndicated conservation easement tax shelters
Question. In December 2016, IRS issued Notice 2017-10 identifying
certain conservation easement syndication transactions as abusive tax
shelters and requiring participants to disclose their involvement to
the IRS. On March 29, 2017, I wrote to IRS Commissioner John Koskinen
about the growth in abusive tax shelters involving the syndication of
conservation easements. I asked the IRS to provide a report on the
nature and scope of this problem. From the IRS's responses, we know
that more than 550 abusive tax shelters have been sold, involving 1,500
promoters, 38 appraisers, and 15,000 investors. The IRS says that more
than $20 billion in improper charitable deductions have been claimed
which equates to the loss of $8 billion in tax revenue. I am concerned
that promoters and participants continue to engage in these
transactions despite IRS labeling them an abusive tax shelter.
Will you commit to work with this committee to put an end to
abusive conservation easement syndications described in Notice 2017-10?
Answer. As a tax practitioner, former Treasury Department official,
and former Justice Department trial lawyer, I am keenly aware of the
threat that abusive tax shelters pose to the integrity of the tax law.
If confirmed, I will make addressing and preventing tax shelters a high
priority. I believe that the conservation easements provisions in the
Internal Revenue Code provide an important incentive and should be
protected. I share your concern that syndicated transactions could
threaten the integrity of this incentive. You have my full commitment
to working with you and the committee to address this problem.
Question. Do you believe the IRS currently has the authority,
tools, and resources necessary to put an end to these abusive
transactions?
Answer. I have not investigated these issues in detail but do know
from experience in both government and the private sector the
challenges the IRS can face when combating marketed tax strategies. If
confirmed, I look forward to working with the committee on this issue.
Question. If you find that the IRS does not have the authority,
tools, or resources necessary to put an end to these abusive
transactions, will you commit to providing the committee
recommendations on legislative proposals to ensure the IRS has
sufficient ability to prevent the abuse of this critical conservation
tool?
Answer. Yes.
donor disclosure necessary for tax administration
Question. You are viewed as an expert in the tax community, and, if
confirmed as Chief Counsel of the IRS, you will be responsible for
providing advice to the IRS Commissioner on all matters pertaining to
the interpretation, administration, and enforcement of the Internal
Revenue laws. Accordingly, I would like you to answer the following
questions to clarify matters relating to tax-exempt donor disclosure
requirements.
Please indicate ``yes'' or ``no'' (in each case where I ask for a
``yes'' or ``no'' answer, you are of course welcome to also provide a
brief explanation): is the IRS responsible for enforcement of the
prohibition on private inurement under IRC section 501(c)(4) and the
rules under IRC section 4958 related to self-dealing?
Answer. Yes. As part of its responsibility for tax enforcement, the
IRS is responsible for enforcement of the prohibition on private
inurement and the excise taxes related to self-dealing.
Question. Please indicate ``yes'' or ``no'': is it true that IRC
section 4958 and the regulations promulgated thereunder impose taxes on
self-dealing transactions between 501(c)(4) organizations and
``substantial contributors'' in certain cases?
Answer. Yes. Although I am not an expert in this area of the tax
law, I understand that section 4958 imposes an excise tax on excess
benefit transactions between tax-exempt organizations (including
501(c)(4) organizations) and certain disqualified persons, which can
include major contributors to those organizations.
Question. Please indicate ``yes'' or ``no'': isn't it true that
without donor information provided on Schedule B of form 990, the IRS
will have limited ability to identify substantial contributors who may
have engaged in self-dealing, without subjecting the organization to an
audit?
Answer. No, not necessarily. In making the recent change, I
understand that the Treasury Department and the IRS explained that the
IRS was previously making no systematic use of Schedule B donor
information in connection with its enforcement of code provisions
dealing with excess benefit transactions or otherwise. I am also aware,
however, that Schedule L of Form 990 requires reporting of the names of
disqualified persons engaged in transactions with 501(c)(4)
organizations, including excess benefit transactions with substantial
contributors.
proposed treasury action to index capital
gains to inflation through regulation
Question. One of your chief responsibilities is to advise the IRS
Commissioner on all matters pertaining to the interpretation of
internal revenue laws and related statutes. During your nomination
hearing, Senator Toomey requested that Mr. Muzinich, in his role as
Deputy Secretary of the Treasury, should he be confirmed, enlist
Treasury to authorize indexing of capital gains to inflation through
regulations. I would like to refer you to a May 24, 2018 letter to
Treasury from eight Finance Committee Democratic members and myself, in
which we argue that indexing capital gains to inflation requires
legislative action and so exceeds Treasury's rule-making authority.
If confirmed as IRS Chief Counsel, do you pledge to interpret our
Nation's internal revenue laws faithfully, regardless of any policy and
political directives made to you by the Secretary of the Treasury, the
Deputy Secretary of the Treasury, the Treasury Assistant Secretary for
Tax Policy, or the IRS Commissioner?
Answer. If confirmed, I will work to apply the tax laws impartially
and consistent with congressional intent.
Question. In your faithful interpretation of U.S. internal revenue
laws and related regulatory authority, has Congress granted Treasury
the authority to write new rules that impose capital gains taxes only
on real gains, and not nominal gains, as has been the law--and the
interpretation, to our understanding--since the Revenue Act of 1918? If
so, can you cite what IRC statute(s) extends such authority to
Treasury?
Answer. In section 7805 and other provisions of the Internal
Revenue Code, Congress has authorized the Treasury Department to
prescribe rules and regulations needed for the enforcement of the tax
law. I have not had occasion to examine how that authority might apply
in the context of recent suggestions that capital gains could, by
regulation, be indexed for inflation.
Question. Legal opinions written by the Treasury and Justice
Departments in 1992 under President George H.W. Bush concluded that
Congress intended the word ``cost'' to mean the price paid in nominal
dollars without adjustment for inflation. That plain language
definition of cost appears in IRC section 1012--Basis of Property. Can
you explain then why the 1992 Treasury and DOJ legal opinions are
wrong?
Answer. I am aware of the legal opinions but have not had reason to
evaluate them and do not have any view on, or explanation for, whether
the conclusions they reach are correct or incorrect. If confirmed, I
will consult with subject matter experts in the Office of Chief Counsel
to better understand the issue.
Question. Does the language of IRC section 1012 contain sufficient
ambiguity to permit rule-making by Treasury that interprets basis to be
measured in real terms as opposed to nominal terms?
Answer. If confirmed, I will consult with subject matter experts in
the Office of Chief Counsel to better understand the issue.
Question. Finally, please supply the legal argument for why
inflation indexing is explicitly provided in statute, such as with
respect to income tax bracket amounts described in IRC sections 1 and
11.
If such indexing to inflation were absent, in your interpretation,
would Treasury have rule-making authority to allow for such indexing?
Answer. I am aware of arguments made by academics and other
commentators on this issue, but have not examined them in detail and
have not formed a view on the merits of those arguments. If confirmed,
I will consult with subject matter experts in the Office of Chief
Counsel to better understand the issue.
Question. The new tax law passed at the end of last year changed
the measure of inflation used to index individual income tax brackets
and other tax provisions from CPI-U to chained CPI. In your faithful
interpretation, did Treasury already possess sufficient rule-making
authority to index provisions of the tax code to whatever measure of
inflation it deemed fit, without congressional action?
Answer. If confirmed, I will consult with subject matter experts in
the Office of Chief Counsel to better understand the issue.
______
Questions Submitted by Hon. Chuck Grassley
Question. I have been particularly interested in how the IRS
enforces its charitable hospital regulations to ensure companies are
not gaming the system. A few years ago, I discovered one charitable
hospital had incorrectly charged millions of dollars to low-income
people. After a year of aggressive oversight, that charitable hospital
eventually forgave almost $17 million worth of bills. That situation
should have never happened in the first place.
The IRS has provided wide latitude to charitable hospitals to
determine what a ``community benefit'' is, which can include cash
contributions to third party groups and hard to define ``community
building'' activities. It seems the true test of a charitable hospital
is how much free and discounted medical care they offer to patients
with a legitimate need for it.
Should the IRS take additional steps to ensure that charitable
hospitals qualify more of their patients for actual charitable medical
care?
Answer. If confirmed, I would work to ensure that IRS enforcement
efforts consistent with statutory law and regulation, including IRC
section 501(r) and the regulations thereunder. I look forward to
working with the committee to determine if there are additional areas
of guidance in this area that should be developed.
______
Questions Submitted by Hon. Orrin G. Hatch
Question. You have been around Washington and have worked in the
Treasury Department. If you are confirmed to this role, you will have
broad authority and responsibilities, especially in providing public
guidance as well as technical and legal advice to IRS personnel. What
lessons have you drawn from your past experience, and what changes or
improvements would you seek to accomplish, should you be confirmed?
Answer. In my previous experience at Treasury, Justice, and in the
private sector, I have seen the important role that the Office of Chief
Counsel play in impartially interpreting tax law. This is the
cornerstone of everything that the Office of Chief Counsel does,
whether it is issuing guidance, advising the IRS or litigating tax
cases. I believe that the most pressing goal is to issue guidance in as
timely a manner as possible so that taxpayers can comply with the new
tax law.
Question. How will you ensure that guidance and information are
made available in a reasonable time period to assist taxpayers in
complying with the tax code?
Answer. I understand that Treasury and the IRS are working
expeditiously to issue guidance on tax reform. If confirmed, I will
examine this process and will work with the IRS and Treasury to
facilitate the issuance of the most significant guidance in as timely a
manner as possible so that taxpayers can comply with the law.
Question. One of the responsibilities of the Office of Chief
Counsel is to deal with United States Tax Court litigation. Do you
think you might be able to lessen your workload, and the workload of
the Tax Court, through timely and thorough public guidance, which is
another responsibility of the Office of Chief Counsel?
Answer. I agree that published guidance helps to reduce tax
controversy and litigation, however, it cannot eliminate it. If
confirmed, I will work to find ways to address compliance issues
earlier and more strategically.
______
Questions Submitted by Hon. Benjamin L. Cardin
Question. Under the Taxpayer Bill of Rights adopted by the IRS and
codified at IRC section 7803(a)(3), the very first right is ``The Right
to Be Informed.'' Historically, the IRS Office of Chief Counsel has
often sought to keep its legal advice confidential under the
``deliberative process'' or other exceptions from disclosure rules.
While there are circumstances in which nondisclosure is justifiable,
the public and Congress generally benefit from maximum transparency.
In 2007, the IRS entered into a settlement agreement to resolve
litigation with Tax Analysts. Under that agreement, the IRS committed
to disclose certain categories of advice to National Office officials.
The IRS initially released a significant number of Chief Counsel memos,
but it has been releasing a declining number of advice memos in recent
years. If confirmed, will you commit to reviewing the Office of Chief
Counsel's disclosure guidelines and how they are implemented, in
consultation with the National Taxpayer Advocate, and do so with a bias
in favor of transparency?
Answer. Although I believe that the issuance of published guidance
that taxpayers can rely on in taking positions on their tax returns
should be the highest priority, I also recognize the need for
transparency consistent with the Freedom of Information Act and other
public disclosure rules. If confirmed, I will work to ensure that I
understand the disclosure guidelines and consult with the Taxpayer
Advocate to be sure they draw an appropriate balance.
Question. In 2006, the National Taxpayer Advocate requested that
the Office of Chief Counsel provide a sample of unreleased legal memos
so she could assess whether the public would benefit from their
disclosure. The Chief Counsel at that time initially declined to
provide access, and it was only after public criticism that the IRS
reversed its position. The National Taxpayer Advocate's office has a
statutory responsibility to assess IRS programs and report to Congress.
If confirmed, will you commit to working with the National Taxpayer
Advocate and ensuring she is given immediate access to Chief Counsel
memos (with the understanding that the Advocate follows the IRS's
determinations regarding public disclosure)?
Answer. If confirmed, I will work with the Taxpayer Advocate's
office to be sure that it has the information it needs from the Office
of Chief Counsel to assess IRS programs and report to Congress.
Questions Submitted By Hon. Michael F. Bennet
Question. The IRS's stability and credibility is preserved by
keeping it free from political influence.
Do you agree that the IRS's work to administer and enforce the tax
code should be free from political interference (even if--and
especially if--a company or individual affiliated with President Trump,
his close associates, or family members is involved)?
Answer. Over the course of my career--both as a civil servant at
the Departments of Justice and Treasury and as a tax practitioner--I
have developed an appreciation for the need to insulate the IRS from
improper political interference. The IRS must treat all taxpayers
impartially.
Question. Would you notify me and the bipartisan membership of the
Finance Committee if inappropriate political interference occurs, from
the White House, Treasury, or otherwise?
Answer. It is unlawful for the President, Vice President, or any
employee of the Executive Office of the President to take certain
actions with respect to the operation of the IRS. If confirmed, I will
work to uphold the law and take appropriate steps to address any
violations.
______
Prepared Statement of Hon. Orrin G. Hatch,
a U.S. Senator From Utah
WASHINGTON--Senate Finance Committee Chairman Orrin Hatch (R-Utah)
today offered the following opening statement at a Treasury nominations
hearing.
Today we will consider the nominations of Justin Muzinich, to be
Deputy Secretary of the Treasury, and Michael Desmond, to be Chief
Counsel for the IRS and Assistant General Counsel in the Department of
the Treasury. I would like to extend a warm welcome to both of our
nominees here today and thank you both for your willingness to serve in
these important positions.
Mr. Muzinich, should you be confirmed, the Treasury Department will
not be an entirely new workplace for you. You have been serving at the
Treasury Department as a Counselor to the Secretary, advising the
Secretary on several domestic and international policy initiatives,
including tax reform. As I know you are aware, this committee has a
special interest in the new tax reform policies that have already
started to improve the lives of many Americans through higher wages,
bonuses, and increased business optimism.
If confirmed as Deputy Secretary, you will be responsible for
assisting Secretary Mnuchin with the administration of the Treasury
Department, including implementing the recently passed tax reform law.
Mr. Desmond, if confirmed, will serve as Chief Counsel for the IRS
and Assistant General Counsel in the Department of the Treasury. In
similarity to Mr. Muzinich, government service is not unfamiliar to
you, Mr. Desmond. From 2005 to 2008, you worked at Treasury as a tax
legislative counsel and, before that, you had worked in the Justice
Department as a trial attorney.
If confirmed, Mr. Desmond will be the chief legal advisor to the
IRS Commissioner on all matters relating to interpretation,
administration, and enforcement of the tax code. The chief counsel
oversees an office responsible for providing IRS agents, and taxpayers,
with guidance on how to comply with our tax laws. This is no easy task,
but especially given Mr. Desmond's work in the Treasury Department, I
believe he is a good candidate for the job. We thank you and look
forward to having you back in government service again.
Before we begin, I want to address something that I suspect my
colleagues from across the aisle will bring up during today's hearing.
Just a few weeks ago, the Treasury Department released new regulations
which caused some dramatic responses from the Democratic members of
this committee.
Today, our Democratic colleagues may argue against these nominees
on the basis of these recent policy changes, which were made to
streamline information returns by certain tax-exempt organizations. As
I explained on the Senate floor yesterday, what this regulatory change
actually does is far different than the characterization coming from my
colleagues.
So, let me repeat myself and re-explain the facts behind this
change. Earlier this month, the Treasury Department changed a Nixon
administration regulation that required social welfare organizations,
labor organizations, and Chambers of Commerce to report the names and
addresses of their donors.
This rule was a problem for several reasons. The IRS doesn't need
this information for tax administration, since these donations aren't
tax-deductible. If the IRS decides it does need the information, it is
still available to them upon request.
The Nixon-era rules required a lot of time and resources both at
the IRS, which had to redact the information to protect it against
improper disclosure, and at the tax-exempt organizations. The rules put
taxpayer information at risk. Indeed, the IRS knows of at least 14
instances where this information was improperly released since 2010.
So while our Democratic friends will pretend this is some
conspiracy theory to overthrow democracy or cloak the political world
in so-called dark money, in reality this was a simple change to improve
IRS efficiencies and protect taxpayer data. And, on the heels of IRS
taxpayer-information abuses during the Obama administration, attention
to taxpayer protection is a must.
On top of that, the recent change in regulations isn't even really
a newfound Republican idea. Under the Obama administration, the IRS
sought to make an even more extensive change on Schedule B reporting.
So let's keep that in mind when our Democratic colleagues inject
politics into our nomination proceedings and into what is in reality a
common-sense regulatory change.
______
Prepared Statement of Justin G. Muzinich, Nominated to be
Deputy Secretary, Department of the Treasury
Chairman Hatch, Ranking Member Wyden, and distinguished committee
members, I am honored to appear before you today as the nominee to be
Deputy Secretary of the Treasury. I am grateful to Secretary Mnuchin
for his confidence and support in recommending me for this position.
I would like to take a moment to introduce my wife Eloise who, on
top of being a talented physician, is a wonderful mother to our two
children. I would also like to acknowledge my parents, my sister
Lauren, and my brother Adrian. Their love and support have made all the
difference in my life.
My own family fled communism for the liberty of this country, and
my wife's family has a proud history of military service, including a
grandfather who served as a General in the Air Force. So I sit before
you today with a profound appreciation for the freedoms this country
stands for and the sacrifice that has gone into protecting them.
It has been a privilege to meet with many of you and your staffs
over the past several months as a nominee, and over the past year and a
half in my role as Counselor to the Secretary. I pledge that, if
confirmed, I will be committed to dialogue and engagement with you, and
look forward to accomplishing more together.
The Treasury Department is tasked with oversight of some of the
most critical issues facing our country and the world. From
safeguarding our financial system and implementing sanctions to driving
economic growth and opportunity, administering the tax system, printing
the Nation's currency, and managing the balance sheet of the U.S.
Government, the role of the Department is vast.
None of this work would be possible without Treasury's tremendously
dedicated career staff. During my time at the Department, I have
developed a deep respect for their expertise and commitment to moving
the country forward--putting in long hours, making sacrifices, and
seeking no recognition. They are the pillars of the building, and it is
a privilege to serve side-by-side with them.
If confirmed, I will assist Secretary Mnuchin in carrying out the
Department's mission by bringing to bear my perspectives from working
in finance and teaching, as well as the first-hand knowledge I have
gained over the past year and a half serving as Counselor to the
Secretary.
My experience at Treasury has affirmed my long-held belief in the
importance of public service--of actively participating in our great
democratic debate and giving back to the country. If confirmed, I will
strive to live up to all that Treasury and this great country stand
for.
I look forward to your questions.
______
SENATE FINANCE COMMITTEE
STATEMENT OF INFORMATION REQUESTED
OF NOMINEE
A. BIOGRAPHICAL INFORMATION
1. Name (include any former names used): Justin George Muzinich.
2. Position to which nominated: Deputy Secretary of the Treasury.
3. Date of nomination: April 10, 2018.
4. Address (list current residence, office, and mailing addresses):
5. Date and place of birth: November 5, 1977, Zurich, Switzerland.
6. Marital status (include maiden name of wife or husband's name):
7. Names and ages of children:
8. Education (list secondary and higher education institutions, dates
attended, degree received, and date degree granted):
Groton School, 1993-1996, high school diploma received in June
1996.
Harvard College, 1996-2000, bachelor's degree received in June
2000.
London School of Economics, 2000-2001, master's degree received
in May 2001.
Harvard Business School, 2003-2007, M.B.A. received in May
2007.
Yale Law School, 2004-2007, Juris Doctor degree received in May
2007.
9. Employment record (list all jobs held since college, including the
title or description of job, name of employer, location of work, and
dates of employment):
U.S. Department of Treasury, Counselor to the Secretary,
Washington, DC, 2017-present.
Muzinich and Co., president, New York, NY 2010-2017.
Jeb 2016/Right to Rise, policy director, New York, NY, 2015-
2016.
Columbia Business School, adjunct professor, New York, NY 2014-
2016.
Romney Transition Team, Washington, DC, 2012 (2 months).
Alta Investors, co-founder, New York, NY, 2010-2011.
Lazio for Governor, policy director, New York, NY, 2010 (3
months).
EMS Capital, managing director, New York NY, 2007-2010.
CR Intrinsic Investors, intern/analyst, New York, NY, 2006-2007
(3 months full-time as analyst).
Department of Defense, intern OGC, Arlington, VA, 2006 (2
months while grad student).
Department of Defense, intern CT policy, Arlington, VA, 2005 (3
months while grad student).
White House, intern NEC, Washington, DC, 2004 (3 months while
grad student).
Senate Republican Policy Committee, intern, Washington, DC,
2003 (3 months).
Morgan Stanley, analyst, New York, NY 2001-2003.
10. Government experience (list any advisory, consultative, honorary,
or other part-time service or positions with Federal, State, or local
governments, other than those listed above):
None, other than those listed above.
11. Business relationships (list all positions held as an officer,
director, trustee, partner, proprietor, agent, representative, or
consultant of any corporation, company, firm, partnership, other
business enterprise, or educational or other institution):
The Buckley School, director.
New York Presbyterian Hospital, trustee.
2012 Stock Trust, trustee.
Henry R. Breck 2016 Insurance Trust, trustee (resigned).
2008 Muzinich Family Trust, trustee (resigned).
Muzinich 2011 GST Exempt Family Trust, trustee (resigned).
Muzinich and Co., director (resigned).
12. Memberships (list all memberships and offices held in
professional, fraternal, scholarly, civic, business, charitable, and
other organizations):
Council on Foreign Relations, member of a membership committee.
Harvard Club, New York.
Tuxedo Club, New York.
Lyford Cay Club, Nassau.
River Club, New York.
Metropolitan Club, DC.
13. Political affiliations and activities:
a. List all public offices for which you have been a
candidate.
None.
b. List all memberships and offices held in and services
rendered to all political parties or election committees during
the last 10 years.
Lazio for Governor, policy director, New York, NY, 2010.
Romney Transition Team, Washington, DC, 2012.
Jeb 2016/Right to Rise, policy director, 2015-2016.
c. Itemize all political contributions to any individual,
campaign organization, political party, political action
committee, or similar entity of $50 or more for the past 10
years.
------------------------------------------------------------------------
Date Amount Recipient
------------------------------------------------------------------------
October 17, 2016 $2,700.00 Gallagher, Mike (R)
------------------------------------------------------------------------
June 13, 2016 $2,700.00 Gallagher, Mike (R)
------------------------------------------------------------------------
May 23, 2016 $2,700.00 Stefanik, Elise (R)
------------------------------------------------------------------------
March 24, 2016 $1,000.00 Starrett, Grant (R)
------------------------------------------------------------------------
November 19, 2015 $250.00 Zeldin, Lee (R)
------------------------------------------------------------------------
June 23, 2015 $2,700.00 Bush, Jeb (R)
------------------------------------------------------------------------
January 16, 2015 $500.00 Zeldin, Lee (R)
------------------------------------------------------------------------
January 9, 2015 $5,000.00 Right To Rise PAC (R)
------------------------------------------------------------------------
November 3, 2014 $500.00 Zeldin, Lee (R)
------------------------------------------------------------------------
November 2, 2014 $1,000.00 Stefanik, Elise (R)
------------------------------------------------------------------------
June 6, 2014 $2,600.00 Moll, Thomas (R)
------------------------------------------------------------------------
March 31, 2014 $2,600.00 Cotton, Tom (R)
------------------------------------------------------------------------
March 31, 2014 $2,600.00 Cotton, Tom (R)
------------------------------------------------------------------------
March 29, 2014 $1,000.00 Zeldin, Lee (R)
------------------------------------------------------------------------
March 28, 2014 $5,200.00 Cotton, Tom (R)
------------------------------------------------------------------------
March 26, 2014 $2,600.00 McConnell, Mitch (R)
------------------------------------------------------------------------
December 30, 2013 $2,600.00 Stefanik, Elise (R)
------------------------------------------------------------------------
August 18, 2013 $2,600.00 Moll, Thomas (R)
------------------------------------------------------------------------
August 18, 2013 $2,600.00 Moll, Thomas (R)
------------------------------------------------------------------------
October 19, 2012 $2,500.00 Romney, Mitt (R)
------------------------------------------------------------------------
14. Honors and awards (list all scholarships, fellowships, honorary
degrees, honorary society memberships, military medals, and any other
special recognitions for outstanding service or achievement):
Phi Beta Kappa, Harvard College.
Baker Scholar, Harvard Business School.
Olin fellow in law, economics, and public policy, Yale Law
School.
15. Published writings (list the titles, publishers, and dates of all
books, articles, reports, or other published materials you have
written):
``Sisyphus Just Needs a Hand,'' Foreign Policy, January 27,
2015 (with Admiral Jim Stavridis).
``Beware Regulatory Concentration Risk,'' American Banker,
February 25, 2014 (with Glenn Hubbard).
``A New Mandate for the Federal Reserve,'' Washington Post,
October 11, 2013 (with Glenn Hubbard).
``North Korea's Surprising Sense of Vulnerability and Hopes for
Change,'' Huffington Post (with Vishaka Desai).
``Credit Where Credit Is Due,'' Longitude, February 2013 (with
Richard Greco).
``The Nuke in the Cargo Hold,'' Hoover Policy Review, August
2010.
``Nuclear Free Seas,'' The New York Times, September 23, 2009
(with Thomas Lehrman).
``A Better Approach to Foreign Aid,'' Hoover Policy Review,
June 2008 (with Erik Werker).
``Global Tax Credit,'' The New York Times, October 20, 2007
(with Eric Werker).
16. Speeches (list all formal speeches you have delivered during the
past 5 years which are on topics relevant to the position for which you
have been nominated):
None.
17. Qualifications (state what, in your opinion, qualifies you to
serve in the position to which you have been nominated):
If confirmed, I would bring to the job of Deputy Secretary a
unique combination of policy experience, an understanding of
domestic and international finance, and a working knowledge of
Treasury.
I have been involved in complex public policy issues, including
at the State level, presidential level, and through writing
about policy, for over a decade. I have held leadership roles
directing policy for campaigns and managed teams responsible
for a broad range of policies in high-pressure environments.
I have also worked in domestic and international finance for
much of my career, having held jobs on both the sell side
(advisory) and buy side (investing). I have managed global
teams and navigated numerous market and economic environments.
I have also created and taught a course on credit markets at
Columbia Business School. I believe my understanding of markets
and finance would allow me to bring a real-world perspective to
the Deputy role.
In addition, should I be confirmed by the Senate, I will have
already been at Treasury for over a year and a half serving as
Counselor to the Secretary. I believe my relationships within
the building, including with the Secretary and the leadership
team, would allow me to be uniquely effective in the Deputy
role.
B. FUTURE EMPLOYMENT RELATIONSHIPS
1. Will you sever all connections with your present employers,
business firms, associations, or organizations if you are confirmed by
the Senate? If not, provide details.
As I am currently employed by the Department of the Treasury, I
will continue my connection to my current employer.
2. Do you have any plans, commitments, or agreements to pursue
outside employment, with or without compensation, during your service
with the government? If so, provide details.
No.
3. Has any person or entity made a commitment or agreement to employ
your services in any capacity after you leave government service? If
so, provide details.
No.
4. If you are confirmed by the Senate, do you expect to serve out
your full term or until the next presidential election, whichever is
applicable? If not, explain.
Yes.
C. POTENTIAL CONFLICTS OF INTEREST
1. Indicate any investments, obligations, liabilities, or other
relationships which could involve potential conflicts of interest in
the position to which you have been nominated.
I have consulted with the Office of Government Ethics and the
Department of the Treasury's designated agency ethics official
to identify any potential conflicts of interest. All such
potential conflicts have been resolved in accordance with the
terms of my ethics agreement.
2. Describe any business relationship, dealing, or financial
transaction which you have had during the last 10 years, whether for
yourself, on behalf of a client, or acting as an agent, that could in
any way constitute or result in a possible conflict of interest in the
position to which you have been nominated.
I have consulted with the Office of Government Ethics and the
Department of the Treasury's designated agency ethics official
to identify any potential conflicts of interest. All such
potential conflicts have been resolved in accordance with the
terms of my ethics agreement.
3. Describe any activity during the past 10 years in which you have
engaged for the purpose of directly or indirectly influencing the
passage, defeat, or modification of any legislation or affecting the
administration and execution of law or public policy. Activities
performed as an employee of the Federal government need not be listed.
None, beyond the activities performed as an employee of the
Federal government.
4. Explain how you will resolve any potential conflict of interest,
including any that may be disclosed by your responses to the above
items.
I have consulted with the Office of Government Ethics and the
Department of the Treasury's designated agency ethics official
to identify any potential conflicts of interest. All such
potential conflicts have been resolved in accordance with the
terms of my ethics agreement.
5. Two copies of written opinions should be provided directly to the
committee by the designated agency ethics officer of the agency to
which you have been nominated and by the Office of Government Ethics
concerning potential conflicts of interest or any legal impediments to
your serving in this position.
Copies have been provided.
D. LEGAL AND OTHER MATTERS
1. Have you ever been the subject of a complaint or been
investigated, disciplined, or otherwise cited for a breach of ethics
for unprofessional conduct before any court, administrative agency,
professional association, disciplinary committee, or other professional
group? If so, provide details.
No.
2. Have you ever been investigated, arrested, charged, or held by any
Federal, State, or other law enforcement authority for a violation of
any Federal, State, county, or municipal law, regulation, or ordinance,
other than a minor traffic offense? If so, provide details.
No.
3. Have you ever been involved as a party in interest in any
administrative agency proceeding or civil litigation? If so, provide
details.
No.
4. Have you ever been convicted (including pleas of guilty or nolo
contendere) of any criminal violation other than a minor traffic
offense? If so, provide details.
No.
5. Please advise the committee of any additional information,
favorable or unfavorable, which you feel should be considered in
connection with your nomination.
None.
E. TESTIFYING BEFORE CONGRESS
1. If you are confirmed by the Senate, are you willing to appear and
testify before any duly constituted committee of the Congress on such
occasions as you may be reasonably requested to do so?
Yes.
2. If you are confirmed by the Senate, are you willing to provide
such information as is requested by such committees?
Yes.
______
Questions Submitted for the Record to Justin G. Muzinich
Questions Submitted by Hon. Maria Cantwell
trade
Question. In your role as Deputy Secretary, your portfolio is
broader than it was as Counselor. As the number two person at the
Treasury Department, you will have a role not limited to tax policy,
but also in domestic finance, terrorism and illicit finance, financial
sanctions, and international economic policy, including the
administration of U.S. trade and economic sanctions.
The administration's end game to resolve trade issues with China,
like concerns about intellectual property protection, remains unclear.
The President's tariffs have resulted in Chinese retaliation that is
hurting Washington State exporters. The Comprehensive Economic Dialogue
(formerly called the Strategic Economic Dialogue) remains frozen and
appears unlikely to be revived by this administration.
Why are there no ongoing dialogues on economic and commercial
issues between the United States and China?
Answer. To the extent that China is prepared to make serious
efforts to make structural changes to end unfair trade practices, the
Treasury Department and the administration are available to discuss
those. Large formal dialogues such as the Strategic Economic Dialogue
and Strategic and Economic Dialogue, however, have not been effective
in addressing unfair Chinese trade and investment practices.
Question. What role is the U.S. Treasury Department going to be
playing in getting China back to the table to resolve economic and
trade disputes?
Answer. Secretary Mnuchin has played, and will continue to play, a
leadership role alongside Ambassador Lighthizer and Secretary Ross in
our economic discussions with China.
affordable housing
Question. We have a lack of affordable housing in my State of
Washington and across the country. We know that there is a shortage of
7.2 million affordable rental homes nationwide for extremely low income
renters. Only 35 affordable and available rental homes exist for every
100 extremely low income renter households on a national basis. The
solution to this crisis is the Low-Income Housing Tax Credit, which is
a partnership between the Federal and State governments and the private
sector that provides incentive to build more affordable housing.
The Low-Income Housing Tax Credit is a cost-effective program that
creates jobs. This bipartisan program was enacted as a part of the 1986
Tax Reform Act. It is responsible for 90 percent of the affordable
housing built in this country.
I am working with Chairman Hatch and many of my colleagues on a
bill that would provide a permanent 50-percent increase in the Low-
Income Housing Tax Credit, fix the 4-percent floor, and make numerous
other important reforms, such as helping homeless students, and
building more affordable housing in Indian Country and in rural areas.
If confirmed, will you work with me and this committee to address
the affordable housing crisis in this country?
Answer. Thank you for your leadership on this issue. Yes, I
certainly agree about the importance of affordable housing. I
congratulate you on the progress made in the Consolidated
Appropriations Act of 2018. I look forward to working with you on this
issue, including to better understand the Cantwell-Hatch legislation
discussed in your question.
Question. Would you support Congress taking action on pressing tax
priorities, including energy and housing, before the end of the year?
Answer. Yes, if confirmed as Deputy Secretary, I will work to
ensure the Department provides technical assistance and other feedback
as you and your colleagues draft legislation related to these and other
committee priorities.
dodd-frank oversight and the role of fsoc
Question. In the wake of one of the most damaging financial crises
in our history, Congress passed the Dodd-Frank Wall Street Reform and
Consumer Protection Act, (Dodd-Frank) to address the abuses which
caused that crisis and put in place a framework to protect against
future financial sector crises.The Dodd-Frank Act established the
Financial Stability Oversight Council (FSOC) to bring together all the
prudential financial regulators and help protect the safety and
soundness of our financial system. I support the work that the FSOC
does.
Your experience at EMS Capital was right in the middle of the
crisis. This experience should give you a perspective on many of the
issues addressed at the FSOC, including risk tolerance, over-
leveraging, and capital requirements.
Since the 2008 market crisis, the interconnectedness in the
financial services sector has increased. Additionally, recently there
have been several changes that I believe increase risk in our financial
system, including changes to the Volker rule, capital requirements, and
a loosening of the prudential regulatory standards for financial
institutions with assets between $100 billion and $250 billion for
example.
How will you approach evaluating and managing the systemic risk as
a part of the role that Treasury plays on the FSOC?
Answer. I support Secretary Mnuchin's view that the convening
authority of FSOC is valuable in coordinating the activities of our key
prudential and market regulators to increase communication, identify
and decrease unnecessary regulatory overlap and burden, and take steps
to ensure the safety and soundness of the financial system. FSOC plays
a particularly important role in monitoring financial stability and
cross-sector issues that may arise from time to time. I support the
policy of the administration, reflected in the recently passed
bipartisan banking bill, of promoting effective and efficient
regulation and oversight and appropriate tailoring of regulatory
requirements.
Question. What kinds of risk do you see as posing potential
systemic risk to our financial system?
Answer. The U.S. banking system is well-positioned to serve the
needs of consumers and businesses, which is critical to supporting
economic growth. Regulatory enhancements since the financial crisis
have significantly improved the quantity and quality of both capital
and liquidity in the banking system. Disciplines imposed by the
regulators, such as stress testing and resolution planning, have
improved both the readiness of the system to absorb shocks as well as
promoted a significant increase in transparency. As the business cycle
matures, it is critical that the regulators continue to be vigilant in
monitoring the credit and counterparty risk profile of the banking
system, as I believe they are.
A risk that we are very focused on at Treasury is cybersecurity and
the potential vulnerabilities of our financial institutions and
financial markets. While significant gains have been made as a result
of government and industry working together, the financial system
increasingly relies on technology and mobile communication, which
presents ever-changing scenarios to consider. Treasury is approaching
this challenge by advocating for increased collaboration among
regulators, leveraging FBIIC, which the Secretary chairs, and improving
international coordination with our G7 and G20 partners. Advancing
real-time information sharing and the development of a common lexicon
are just two components that can decrease vulnerabilities. If
confirmed, I look forward to assisting the Secretary in engaging with
all FBIIC members to improve the cybersecurity of the U.S. financial
system.
Question. How can you accurately assess systemic risk or the
riskiness of any one financial institution given all the changing
variables?
Answer. I support the use of transmission channels assessment
adopted by FSOC in determining the extent to which the material
distress of an individual firm could pose a threat to U.S. financial
stability, namely counterparty exposure, implication of asset
liquidations and the inability to provide critical functions or
services for which there are no ready substitutes. I also believe that
the approach adopted by the Federal Reserve to calculate the overall
measure of systemic importance, linked to 12 financial indicators,
provides a regular and useful update to look at systemic risk across a
broad set of U.S. banking institutions. These indicators cover several
categories including asset size, interconnectedness, substitutability,
complexity, and cross-jurisdictional activity. Since the financial
crisis, this has been an area of active research, and that research
continues at the FSOC as well as at the Federal Reserve, the IMF and in
academia with many scholars publishing research through the Bureau of
Economic Research.
cdfis
Question. The Community Development Financial Institution (CDFI)
Fund promotes economic revitalization and community development in low-
income communities and helps build affordable housing. I was very
disappointed to see the President's budgets for fiscal years 2018 and
2019 eliminate funding for the CDFI program entirely. Last year, across
the country, CDFI participants made over 120,000 loans or investments
worth over $5 billion to more than 12,000 small businesses. CDFIs also
financed nearly 28,000 affordable housing units last year. In my State
of Washington, there are 25 CDFIs which have made 6,068 loans, worth
$425 million, 120 New Markets projects, leveraging $556 million in
investments, and the Native American CDFI Assistance Program has
provided $10.6 million in loans and assistance.
CDFIs are an incredibly effective economic development tool for
rural and urban communities across the country. If confirmed, will you
support full funding for this program as a part of next year's budget?
Answer. CDFIs do important work. The CDFI Fund will continue to
certify financial institutions. Not only does certification make an
entity eligible for multiple programs at the CDFI Fund, it also serves
as a qualifier for other Federal government programs such as the Small
Business Administration's Community Advantage Program and Federal Home
Loan Bank membership.
In addition, the budget provides funding for the CDFI Fund to
continue to operate the non-grant programs, such as the New Markets Tax
Credit Program, which provide support for CDFIs and other community
organizations lending and investing in economically distressed
communities across the country. Since 2001, the New Markets Tax Credit
Program has allocated $54 billion in tax credit allocations in urban
and rural areas. The budget also proposes to reauthorize the Bond
Guarantee Program to allow $500 million in new guarantees in FY 2019.
This program provides capital to CDFIs at no cost to the taxpayer.
Effectively managing those resources will ensure that CDFIs have access
to capital to continue to support urban and rural distressed
communities.
Question. I have also heard concerns from local Community
Development Enterprises (CDEs) in my State that are concerned that
locally based CDEs are losing out to national CDEs for New Markets
allocations.
If confirmed, will you commit to working with local CDEs to ensure
that they can compete against the national CDEs, and will you make the
CDFI staff available to review applications if the CDE does not get an
award?
Answer. If confirmed, I will commit to exploring this issue and the
process around CDFI award procedures and communications to ensure that
they are consistently fair and transparent.
______
Questions Submitted by Hon. Robert P. Casey, Jr.
Question. The IRS plays a critical role in identifying and
investigating suspicious financial activities. Do you agree?
Answer. The mission of the IRS is to administer and enforce the
Federal tax laws. If in the course of its examination activities the
IRS discovers evidence of a possible violation of Federal criminal law
outside its jurisdiction, on a case by case basis, the IRS may refer
the matter to ``the appropriate Federal agency charged with the
responsibility of enforcing such law'' (26 U.S.C. Sec. 6103).
Question. If an individual or organization were receiving large
amounts of money--including from foreign sources--that the IRS found
suspicious, the IRS should investigate the matter or refer the matter
to another authority for investigation, as appropriate. Do you agree?
Answer. Yes, the IRS should refer evidence of serious potential
violations of Federal criminal law to ``the appropriate Federal agency
charged with the responsibility of enforcing such law'' (26 U.S.C.
Sec. 6103).
Question. There may be instances where suspicious tax returns raise
red flags with the IRS about the violation of non-tax laws; for
example, suspicious tax returns may suggest to the IRS that an
individual is involved in money laundering, terrorist financing, or
drug trafficking, in violation of U.S. laws governing fraud,
importation, terrorism, or controlled substances. Do you agree?
Answer. Yes, the IRS should refer evidence of serious potential
violations of Federal criminal law to ``the appropriate Federal agency
charged with the responsibility of enforcing such law'' (26 U.S.C.
Sec. 6103).
Question. If the IRS plays a key role in identifying suspicious
activity that may be related to money laundering, terrorist financing,
or drug trafficking, the IRS may also play a key role in identifying
suspicious financial activity that could be related to violation of our
election laws. Do you agree?
Answer. The Federal Election Commission and the Department of
Justice are charged with enforcing Federal election laws. If in the
course of its examination activities the IRS finds evidence of serious
potential violations of Federal criminal law, it should refer that
evidence on a case by case basis to ``the appropriate Federal agency
charged with the responsibility of enforcing such law'' (26 U.S.C.
Sec. 6103).
Question. Without automatically receiving the names of large-scale
donors, will it be more difficult for the IRS to determine if a single
donor or group of related donors has made suspicious contributions to
multiple tax-exempt organizations?
Answer. The mission of the IRS is to administer and enforce the
Federal tax laws, including whether a donor claiming a charitable tax
deduction under section 170 of the Internal Revenue Code qualifies for
such a deduction, or whether an organization claiming tax-exempt status
is operated for exempt purposes. There is no limitation under the
Federal tax laws preventing a donor or group of related donors from
making contributions to multiple tax-exempt organizations, although
there are limitations on whether such contributions may be deductible
under the Internal Revenue Code. If in the course of its examination
activities the IRS finds evidence of serious potential violations of
Federal criminal law, it should refer that evidence on a case by case
basis to ``the appropriate Federal agency charged with the
responsibility of enforcing such law'' (26 U.S.C. Sec. 6103).
Question. Do you agree with Secretary Mnuchin and IRS Acting
Commissioner Kautter's decision to roll back donor transparency
requirements for certain tax-
exempt entities?
Answer. Tax-exempt entities should not be required to report on
their annual returns to the IRS information that the IRS does not need
in that form to administer or enforce the Federal tax laws. The new
policy announced by the IRS will protect taxpayers by reducing the risk
of inadvertent disclosure or misuse of confidential information and
will save both taxpayer and government resources. It is worth noting
that the Schedule B modifications resulted in no change to data that is
disclosed publicly, and the IRS retains its ability to access all data
it had before.
______
Questions Submitted by Hon. Claire McCaskill
Question. China is still the world's largest steel producer and
accounts for half of all global steel output. Steel overcapacity is
still a global concern.
What steps should the Treasury Department pursue to address the
global steel overcapacity problem?
Answer. The Treasury Department, along with the rest of the
administration, supports the need for effective policy solutions that
enhance market functions and reduce excess capacity. The administration
is actively engaged with steel producing nations, including China, to
address the systemic issues that led to the creation of steel excess
capacity, particularly government subsidies and other support measures.
The administration is working to coordinate efforts with like-minded
trading partners, including the European Union, Japan, Mexico, and
Canada, to reduce or eliminate subsidies and other government supports
for steel and to support other measures that will improve the
functioning of market mechanisms in the steel sector. The
administration also supports bilateral and multilateral engagement on
solutions to the excess capacity problem and is working with trading
partners to address its root causes, for example in the Global Forum on
Steel Excess Capacity.
Question. Will you commit to addressing steel overcapacity through
multilateral or bilateral negotiations? If yes, please specify what
timeline you recommend for these negotiations.
Answer. China's and other countries' market-distorting practices
hurt firms around the world. Many like-minded countries have long
shared these concerns about excess capacity, which leads to excess
production, as well as subsidies and dumping. As noted above, the
administration supports bilateral and multilateral engagement on
solutions, and is working to address the excess capacity problem
through the Global Forum on Steel Excess Capacity. It is time for all
countries to take concrete action to fight market distortions in steel
and aluminum at its source. Continued international efforts to combat
global excess capacity and overproduction are welcome.
Question. The administration's tariffs on imported steel and
aluminum are devastating to Missouri's manufacturers. Is there a
particular goal or other trigger point for the U.S. economy before the
administration will turn off the tariffs that are so disruptive to
downstream manufacturing?
Answer. Global excess production and resulting excessive imports in
the steel and aluminum industries have already harmed the U.S. economy.
To address impacts on industries that rely on imports, the Department
of Commerce has put in place a product exclusion process. The
administration is also working with countries to address the underlying
problem.
Question. Treasury officials repeatedly promised that the 2017 tax
law would pay for itself. Just months later, the Congressional Budget
Office projects the deficit will be $804 billion in fiscal year 2018, a
21-percent increase to the $655-billion deficit at the end of fiscal
year 2017.
What assumptions or rationale did the Congressional Budget Office
get wrong in order to arrive at a dramatically different conclusion
regarding the fiscal impact of tax law?
Answer. I do not know the assumptions underlying the CBO estimate.
I do agree with the analysis of the Council of Economic Advisors, which
suggests that the Tax Cuts and Jobs Act and other policies of this
administration will lead to increased investment, growth, and tax
revenue. In addition, other outside analyses have found that the
proposals that underpinned the tax bill will produce significant
economic responses including higher wages for the average American
household (e.g., Laurence Kotlikoff of Boston University and others).
Question. Data released by the Bureau of Labor Statistics concluded
that real average hourly earnings for all workers were unchanged, from
June 2017 to June 2018.
What policy changes do you recommend to generate a positive trend
in wage growth?
Answer. The policies that were just enacted in the Tax Cuts and
Jobs Act are expected to increase capital investment, thereby
increasing labor productivity and resulting in wage growth. If
confirmed, I look forward to working with you on additional tax and
other reforms to increase productivity and wages.
______
Questions Submitted by Hon. Michael B. Enzi
Question. The Internal Revenue Service continues to experience
significant challenges in updating its technology. For example, in
2009, the IRS began developing the Customer Account Data Engine (CADE
2) to replace the Individual Master File for managing taxpayer
accounts. Since then, the agency has spent more than $1 billion on the
project, but has only completed one phase, has significantly scaled
back other phases, and has delayed CADE 2's estimated completion date.
In your position at either Treasury or the IRS, how would you
expect your role to address these challenges?
Answer. IRS IT modernization is a complex and challenging issue.
Secretary Mnuchin has made this a priority. He and his senior staff
meet regularly on the subject with the Department's CIO and IRS
officials. As he has mentioned in recent testimony, he has directed the
IRS to develop a 5-year plan to modernize its core systems, including
completing CADE II. IRS is working on this 5-year plan with help from
the Department's CIO. If confirmed as Deputy Secretary, part of my role
would be to assist the Secretary in the management and oversight of the
Department's programs including IRS IT.
Question. A July 2017 Treasury Inspector General for Tax
Administration report came to the following conclusion: ``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.''
In your position at either Treasury or the IRS, how would you
expect your role to address these challenges?
Answer. If confirmed, I would be happy to discuss this with the IRS
and to work with your office to help address these challenges.
______
Questions Submitted by Hon. Bill Nelson
Question. In your view, what sort of questions arising from the new
tax law (Pub. L. 115-97) do you think you could help with?
Answer. I expect to continue to work closely with the Office of Tax
Policy to implement various provisions of the Tax Cuts and Jobs Act. As
questions arise with implementation, I will help manage Treasury to
ensure the best possible outcome.
Question. Do you have any concerns about how the new tax law (Pub.
L. 115-97) impacts the Nation's debt? If not, why not?
Answer. The Nation's debt is something that we must all take very
seriously. I support the administration's position that the Tax Cuts
and Jobs Act and other policies of this administration will lead to
increased investment, incomes and tax revenue. The Council of Economic
Advisors has published a white paper explaining this economic reasoning
in depth.
Question. How will you work to stop corporations from using the new
tax law (Pub. L. 115-97) to avoid paying their fair share?
Answer. The Tax Cuts and Jobs Act lowered tax rates on American
taxpayers, including American corporations, which will reduce the
incentives to engage in tax-planning and instead encourage increased
investment in the United States. In addition, the new tax law also
contains provisions that will significantly reduce base erosion
associated with international tax planning. The need to address this
was at the forefront of concerns from the last administration as well.
Question. Do you believe tax-exempt groups could be used by Russia
or other adversaries to interfere with our elections? If not, why not?
Answer. I have not seen data regarding tax-exempt groups and
foreign money in elections. As I understand it, Treasury does not track
this type of data. I would refer you to the Federal Election
Commission, the independent regulatory agency charged with
administering and enforcing the Federal campaign finance law.
Question. Recently, the Treasury Department and the IRS changed the
rules for tax-exempt entities, removing the requirement for 501(c)(4)
groups and other tax-
exempt groups to share their major funding sources with the IRS. Do you
think it makes sense to hamstring the IRS's ability to ensure 501(c)(4)
groups and other tax-exempt groups are not being used by foreign states
to undermine our democracy? If so, please explain why.
Answer. The mission of the IRS is to administer and enforce the
Federal tax laws. The Federal Election Commission and the Department of
Justice, not the IRS, are charged with enforcing Federal election laws.
Nevertheless, it is worth noting that the Revenue Procedure resulted in
no change to data that is disclosed publicly, and the IRS retains its
ability to access all data it had before.
Question. What metrics should we use to judge the performance of
the administration's trade policies?
Answer. The administration is working to ensure balanced trading
relationships in which U.S. firms and workers are protected against
unfair foreign trade practices. Our firms and workers should be able to
compete on a fair and level playing field globally. It is in this
context that trade policy actions should be viewed.
Question. What are the top three lessons you learned from the 2008
financial crisis?
Answer. While it is difficult to rank the many important lessons
from the financial crisis, here are three that I think are key. First,
make sure that our largest financial institutions have adequate
quantity and quality of both capital and liquidity that can be assessed
by the regulators and the market continually on a very transparent
basis. Second, promote market regulation that encourages transparency,
efficiency, and the orderly flow of capital and effective management of
counterparty risk through central clearing, disclosure of trade data
and rigorous margin requirements. Third, promote communication among
regulators, to identify emerging risks and to deal, on a timely basis,
with market shocks or dislocations.
Question. What do you believe is the greatest threat to the global
economy?
Answer. A risk that we are very focused on at Treasury is
cybersecurity and the potential vulnerabilities of our financial
institutions and financial markets. While significant gains have been
made as a result of government and industry working together, the
financial system increasingly relies on technology and mobile
communication, which presents ever-changing scenarios to consider.
Treasury is approaching this challenge by advocating for increased
collaboration among regulators, leveraging FBIIC which the Secretary
chairs, and improving international coordination with our G7 and G20
partners. Advancing real-time information sharing and the development
of a common lexicon are just two components that can decrease
vulnerabilities. If confirmed, I look forward to assisting the
Secretary in engaging with all FBIIC members to improve the
cybersecurity of the U.S. financial system.
Question. What do you believe are the top three issues/risks facing
international finance that need to be addressed?
Answer. It is difficult to precisely rank risks, but here are three
that are important. First, a significant concern to the Treasury
Department is the lack of transparency with respect to the indebtedness
of governments worldwide, particularly among developing countries.
Existing regimes to compile and publish sovereign debt statistics have
serious deficiencies. Many government liabilities are excluded from
official debt statistics, thereby masking the actual amount of leverage
in the public sector of many economies. Hidden liabilities often
include obligations incurred by public and private entities guaranteed
by the government, the debts of state-owned enterprises (SOE), and
financing secured by government commitments and forward sales of
commodities. Second, rising interest rates will necessarily raise debt
servicing costs for governments, at best crowding out other areas of
public investment and at worst moving countries toward debt crises.
This can be compounded by movements in exchange rates. Finally, the
threat of debt crisis is potentially exacerbated by the provision of
easy credit from emergent creditors, such as China, which are motivated
by geopolitical ambitions rather than development economics and
principles of debt sustainability.
Question. What would you do if the President asked you to do
something unethical or morally questionable?
Answer. If confirmed as Deputy Secretary, I will work to set an
example by upholding the ethical standards that apply to all senior
Department officials.
Question. If the President said something publicly that was
factually untrue, what would you do to correct the record?
Answer. If confirmed as Deputy Secretary, I will work to ensure the
Department engages as an honest broker with Congress and the American
people.
Question. Do you disagree with any of the Trump administration's
trade policies, regulatory policies, or tax policies? If so, please
explain which ones.
Answer. I agree with the agenda of driving economic growth through
tax reform, deregulation, and achieving free and fair trade. Within my
area of responsibilities, if I were to have a disagreement on a
specific policy, I would share this privately with the appropriate
person.
Question. Do you believe climate change is a threat to the long-
term interests of the United States?
Answer. The Treasury Department is not the lead agency charged with
responding to climate change. If confirmed, I will work to ensure the
Department provides appropriate support to those agencies charged with
responding.
Question. What effect do you believe the U.S.'s withdrawal from the
2015 Paris Agreement on Climate Change will have on the U.S. economy
over the long run?
Answer. I have not studied this question, and I am not aware of any
analysis from the Department on this matter. If confirmed, I would be
happy to work with you on this issue.
______
Questions Submitted by Hon. Sheldon Whitehouse
Question. At the hearing, you said you were unable to answer
questions about the national security threat that shell companies pose
because you had not seen relevant national security data.
After reviewing the data, what is the national security threat
shell companies pose to the United States?
Answer. The 2015 U.S. National Money Laundering Risk Assessment
found that one of the main methods used to move dirty money involves
creating legal entities without accurate information about the identity
of the beneficial owner. Bad actors may more easily hide illicit funds
and avoid detection through business entities because the true owner is
masked. Treasury recognizes the vulnerabilities that exist in corporate
formation without the disclosure of beneficial ownership information.
U.S. companies with hidden beneficial owners have been used by arms
dealers, narco-traffickers, proliferators of weapons of mass
destruction, and facilitators of massive health care and mortgage
frauds, among other abuses. As one example, Viktor Bout, a Russian arms
dealer, used at least 12 companies incorporated in the United States to
carry out his arms dealing. Similarly, Samark Lopez Bello, the primary
frontman for Tareck El Aissami, the former Venezuelan Vice President
and current Minister of Industries and National Production (both
designated pursuant to the Foreign Narcotics Kingpin Designation Act in
February 2017), created five U.S. LLC companies in Florida to hold real
estate or other U.S. assets in Lopez Bello's name.
Question. What role does Treasury play in identifying,
investigating, and preventing money laundering?
Answer. Treasury is fully dedicated to combating all aspects of
money laundering at home and abroad, through the mission of the Office
of Terrorism and Financial Intelligence (TFI). TFI utilizes the
Department's many assets--including a diverse range of legal
authorities, core financial expertise, operational resources, and
expansive relationships with the private sector, interagency, and
international communities--to identify and attack money laundering
vulnerabilities and networks across the domestic and international
financial systems. Treasury's Financial Crimes Enforcement Network
(FinCEN) is the administrator of and lead regulator for the Bank
Secrecy Act (BSA), the primary anti-money laundering law of the United
States.
The BSA reporting that financial institutions provide is used in a
variety of ways in support of law enforcement and FinCEN's important
missions, including:
Serve as tips to initiate investigations;
Expand existing investigations by pointing to the identities
of previously unknown subjects;
Promote international information exchange through the
Egmont Group of Financial Intelligence Units; and
Identify significant relationships, trends, and patterns.
Question. Currently no jurisdiction in the United States requires
shell companies to disclose their beneficial ownership. Jennifer
Fowler, the Deputy Assistant Secretary, Office of Terrorist Financing
and Financial Crimes at Treasury recently told the Judiciary Committee
that the lack of beneficial ownership information for shell companies
is ``a vulnerability.'' John Cassara, a former Treasury Special Agent
and FinCEN Agent, agreed saying, ``[R]equiring the real owner of a U.S.
company to be named during the incorporation process will cut down, in
dramatic fashion, the ability of criminals to finance their crimes.''
Do you agree the United States' lack of beneficial ownership
collection presents a serious shortcoming in our anti-money laundering
regime?
Answer. Treasury recognizes the vulnerabilities that exist in
corporate formation without the disclosure of beneficial ownership
information. Illicit actors may more easily hide funds and avoid
detection through business entities because the true owner is not
disclosed. The collection of beneficial ownership information is
critical both at the time of account opening and when a company is
being incorporated. Treasury's Customer Due Diligence Rule, which went
into effect in May 2018 for financial institutions, requires those
institutions to identify and verify the identity of the beneficial
owners of their legal entity customers at the time of account opening.
This change assists financial institutions in managing risks and law
enforcement in pursuing criminals who launder illicit proceeds through
legal entities. It is an important step forward. Treasury is evaluating
various options in the area of collecting beneficial ownership at the
time of company formation, and we look forward to working with Congress
to support legislation that addresses this issue.
Question. Is there a national security threat posed by foreign
nationals spending money in U.S. elections? If so please describe.
Answer. I have not seen data regarding tax-exempt groups and
foreign money in elections. As I understand it, Treasury does not track
this type of data. I would refer you to the Federal Election
Commission, the independent regulatory agency charged with
administering and enforcing the Federal campaign finance law.
Question. What is Treasury's role in preventing foreign money from
entering our elections?
Answer. The Federal Election Commission, not Treasury or the IRS,
is charged with enforcing Federal election laws. If in the course of
its examination activities the IRS discovers suspicious financial or
other activities, on a case by case basis, the IRS may coordinate with
other Federal agencies.
Question. The IRS has the ability to audit 501(c)(4) organization's
donor lists. For what purposes would the IRS need this information?
Answer. It is my understanding that the IRS makes no systematic use
of Schedule B donor information filed by section 501(c)(4)
organizations for the purpose of tax administration. If donor
information is needed for the purposes of an examination, the IRS
retains the ability to obtain the information directly from the
organization. Such information may be relevant, on a case by case
basis, to audit excess benefit transactions under section 4958 and to
audit the organization's tax exempt status under the general
prohibitions on private inurement and private benefit.
Question. You said that you were not involved in the deliberative
process regarding Revenue Procedure 2018-38, which allows certain tax-
exempt organizations to no longer report donor information to the IRS.
Who at Treasury was involved?
Answer. Revenue Procedure 2018-38 addresses a matter of tax
administration, which is primarily a matter for the IRS. As with most
tax guidance, the Office of Tax Policy works with the IRS on guidance
that is issued. The decision-makers were Secretary Mnuchin and Acting
Commissioner Kautter.
Question. Today is it easier or more difficult for the IRS to know
whether foreign nationals are behind politically active non-profit
organizations than it was before Revenue Procedure 2018-38?
Answer. The mission of the IRS is to administer and enforce the
Federal tax laws. The Federal Election Commission, not the IRS, is
charged with enforcing Federal election laws. Nevertheless, it is worth
noting that the Revenue Procedure resulted in no change to data that is
disclosed publicly, and the IRS retains the ability to access all data
it had before.
______
Questions Submitted by Hon. Tim Scott
opportunity zones
Question. The Department of Treasury and Internal Revenue Service
formally certified nominations from States, the District of Columbia,
and all possessions of the United States to designate Opportunity Zones
in their areas of jurisdiction.
This is great news! Securing this provision in the tax bill was a
huge legislative win for the millions of Americans living in struggling
communities in need of a renaissance.
This provision will help to create permanent and positive change
that will benefit generations to come.
I look forward to further guidance for the investors and
entrepreneurs on establishing the investment vehicles and identifying
qualified investments most likely to drive jobs and economic activity.
Can I count on you prioritizing this project?
Answer. Yes. Thank you for your leadership on this issue.
fatca and p&c premiums
Question. I've also raised the issue with Secretary Mnuchin: FATCA
in relation to property and casualty insurance premiums.
Anyone with a background in insurance like myself knows that these
payments don't have a cash value and can't be used to evade taxes.
Treasury put out a PGP (Priority Guidance Plan) indicating it was
evaluating the need to report such payments under FATCA.
I hope you and your team will keep on this in the future. Will you
commit to working with me on this issue?
Answer. Yes. I look forward to working with you on this issue.
redeeming unclaimed treasury bonds
Question. South Carolina's Treasurer wrote me a letter in which he
describes our State's struggle to obtain legal title to over $250
million in matured and unredeemed U.S. savings bonds owned by South
Carolinians.
As you can imagine, South Carolina wants to reunite its citizens
with their unclaimed assets.
If the State cannot do so after a rigorous search process, the
proceeds from the bonds will go to our general treasury for the benefit
of South Carolina's schools, hospitals, and roads.
Senator Moran has discussed this issue with Secretary Mnuchin.
Will I have your attention to it should you be confirmed?
Answer. Yes, if confirmed, you will have my attention on this
issue.
______
Question Submitted by Hon. Dean Heller
Question. Nevada has become a hotbed for technology companies
because of its business-friendly environment and collaborative approach
toward attracting investment. In fact, the Silver State is now a key
player in the development of cutting-edge technologies like mission-
critical data centers, drones, and autonomous cars and trucks, just to
name a few. Internet and technology companies are not only a critical
component of Nevada's economy, but also the American economy,
contributing an estimated 6 percent to U.S. GDP. Because these
companies are a core source of U.S. economic strength, an increasing
number of foreign nations have imposed or are considering imposing
unilateral taxes on American digital companies to solve their domestic
fiscal challenges and to promote domestic digital competitors. These
taxes violate the spirit of our tax treaties, may conflict with
international trade rules, and in some cases could directly expropriate
revenue owed to the U.S. Treasury.
If confirmed, please comment on how the Treasury Department should
push back on digital taxation proposals emerging in the international
arena.
Answer. The administration firmly opposes proposals by any country
to single out digital companies. Such proposals are based on an
unprincipled distinction between digital companies and non-digital
companies. Treasury will continue to engage through the Organization
for Economic Cooperation and Development's Task Force on the Digital
Economy, which it co-chairs, as well as in bilateral discussions with
our trade partners.
______
Questions Submitted By Hon. Orrin G. Hatch
Question. If confirmed by the Senate as Deputy Secretary, part of
your role will be to ensure that the many offices of the Treasury
Department are functioning in concert with one another. What past
experience do you have that will help you manage the Treasury building,
and how has the time spent as a Counselor to the Secretary helped you
prepare for the position you are nominated to?
Answer. In my previous roles in the private sector I have managed
teams across a number offices, often dispersed globally. This
experience has taught me a lot, including that managers must establish
credibility, act as fair arbiters, and maximize their own effectiveness
by seeking to make those who report to them most effective. My time
serving as Counselor has been very valuable in allowing me to build an
understanding of how the Department works and form strong working
relationships within the Department.
Question. As you know, this committee is very active in engaging
with the Treasury Department, conducting oversight of its activities,
and working to ensure that regulations the Department issues are in
line with the legislation Congress has passed. Describe for the
committee how you envision the relationship between the Department
generally, and you if confirmed as Deputy Secretary specifically, and
this committee.
Answer. I think it is very important that the Department (and I, if
confirmed) have a strong working relationship with the committee.
Frequent dialogue is an important part of a strong relationship, so I
would envision a close and continuous dialogue with the committee.
Question. The European Commission has proposed new digital services
taxes. Although such proposals are facially neutral, I am concerned
that their actual effect would be to single out U.S. high-tech
companies for onerous taxation, contrary to the spirit, if not the
letter, of various international commitments. As such, these taxes take
aim at a core source of U.S. economic strength. Please comment on how
the U.S. Treasury Department should push back on digital taxation
proposals emerging in the international arena.
Answer. The administration firmly opposes proposals by any country
to single out digital companies. Such proposals are based on an
unprincipled distinction between digital companies and non-digital
companies. Treasury will continue to engage on this basis through the
Organization for Economic Cooperation and Development's Task Force on
the Digital Economy, which it co-chairs, as well as in bilateral
discussions with our trade partners.
______
Questions Submitted by Hon. Ron Wyden
involvement with irs dark money donor disclosure rule change
Question. In responding to Senator Casey's question during your
nomination hearing, you stated that while you were ``not the decision
maker'' with respect to the IRS's recent decision to exempt dark money
groups from disclosing donor information to the IRS (Revenue Procedure
2018-38), you were aware of the issue and present at meetings with
Secretary Mnuchin where the issue was discussed. Please State in
writing for the record.
(a) The dates and locations of any meetings you attended in which
any matter relating to the disclosure of donor information by tax-
exempt entities was discussed. Of these meetings, please specify which
meetings Secretary Mnuchin attended.
Answer. To the best of my recollection, tax-exempt organization
reporting of information on Schedule B of Form 990 was discussed in a
handful of meetings between March 2018 and July 2018.
Question. (b) The names and titles of any individuals attending a
meeting described in (a) above.
Answer. The above meetings were regularly scheduled tax meetings
hosted by the Secretary to discuss a variety of tax-related items.
Those regularly invited to the meetings include officials from the
Office of Tax Policy, the IRS, the Office of General Counsel, the
Office of Legislative Affairs, the Office of Public Affairs, and other
senior Treasury officials.
Question. (c) The names and affiliations of any individuals
associated with an outside group attending a meeting described in (a)
above.
Answer. None.
Question. Please provide any memoranda, meeting summaries, or other
documents produced in connection with the meetings described in (a)
above.
Answer. These documents, if any, would be deliberative in nature.
Question. Please provide any documents Treasury Department staff
received or distributed in connection with any meeting described in (a)
above.
Answer. These documents, if any, would be deliberative in nature.
Question. Please provide descriptions of any statements you made
related to any matter relating to the disclosure of donor information
by tax-exempt entities during any meeting described in (a) above.
Answer. These statements, if any, would be deliberative in nature.
As I stated during my confirmation hearing, my role on this issue was
limited.
Question. On July 16, 2018, the Treasury Department issued a press
release related to the administration's decision to eliminate donor
disclosure rules for tax-
exempt organizations (https://home.treasury.gov/news/press-releases/
sm426). The press release includes a statement from Secretary Mnuchin.
Please describe whether you reviewed or were otherwise involved in the
development of that press release or statement. Please provide any
emails, memoranda, or other documents related to any involvement you
may have had in review or development of the press release or
statement.
Answer. I was not involved in the development of the press release.
The press release was shared by Acting Commissioner Kautter with
Secretary Mnuchin at one of the above-mentioned regular tax meetings,
but I did not comment on it, as far as I can remember.
Question. Please provide any emails, memoranda, or other documents
related to donor disclosure of tax-exempt organizations which were
authored by you, which you were involved in developing, or which you
reviewed.
Answer. I did not author any documents, nor was I involved in their
development. I recall documents being circulated, though I did not
engage substantively in their review.
Question. Please identify who the ``decision-maker'' was with
respect to the Treasury Department's decision to eliminate donor
disclosure rules for tax-exempt organizations.
Answer. The decision-makers were Secretary Mnuchin and Acting
Commissioner Kautter.
obama administration position on tax-exempt donor disclosure
Question. I am concerned that a statement you made in response to
one of my questions relating to dark money disclosure during your
confirmation hearing did not accurately reflect the facts surrounding
this issue. As such, I would like to provide you the opportunity to
clarify the matter. Specifically, in relation to the Trump
administration's decision to exempt dark money groups from disclosing
the identities of major donors to the IRS you stated: ``It was an
action also recommended by the IRS Commissioner under President Obama.
He testified about it. So it has become very partisan and that's
unfortunate. But it was something which the Obama IRS recommended as
well.''
It has been widely reported that the IRS was exploring whether to
eliminate Schedule B donor reporting in 2015 and consulting with
stakeholders, including State tax administrators, on whether to
recommend removing the donor disclosure requirement.\1\ IRS's
exploration of this issue was discussed by Commissioner Koskinen in a
July 2015 Senate Judiciary Committee hearing. However, I am not aware
of any instance where any Commissioner or Treasury Secretary under the
Obama administration made any official statement explicitly
recommending elimination of the donor disclosure requirement for tax-
exempt entities. Please provide me with a copy of any documents on
which you based this statement.
---------------------------------------------------------------------------
\1\ Fred Stokeld, ``IRS Considers Ending Required Reporting of EO
Contributions,'' Tax Notes, December 14, 2015.
Answer. As you note, Commissioner Koskinen, in his July 2015
testimony before the Senate Judiciary Committee, stated that the IRS
was trying to change the requirement on Form 990 to list donors. In
addition, in 2014, 2015, and 2016, the Priority Guidance Plan published
by Treasury and the IRS listed as an item, ``Guidance under Sec. 6033
relating to the reporting of contributions.'' The Priority Guidance
Plan is a joint statement issued annually by the Treasury Assistant
Secretary for Tax Policy, the IRS Chief Counsel, and the IRS
Commissioner regarding the priorities for tax issues that should be
addressed in regulations, revenue rulings, revenue procedures, notices,
or other published administrative guidance. Finally, Treasury and the
IRS's spring 2016 unified regulatory agenda submitted to OIRA describes
anticipated regulations to address this issue. Specifically, the agenda
lists guidance under section 6033 regarding the reporting of
contributors' names and addresses to be issued as proposed regulations.
---------------------------------------------------------------------------
The agenda abstract states in relevant part:
Guidance Under Section 6033 Regarding the Reporting of
Contributors Names and Addresses (TEMP)
Current regulations under the Internal Revenue Code and related
reporting forms require many tax-exempt organizations to report
detailed information regarding contributions received and their
contributors. Some of this information is required by law. Most
is required by regulations adopted by the IRS under 26 U.S.C.
6001 and 6033. The IRS has determined that for many
organizations, the reporting of such information is no longer
necessary for the efficient administration of the internal
revenue laws. The proposed regulations will eliminate the
current reporting requirements for most organizations. The
current reporting requirements relating to contributions and
contributors will be retained for private foundations and
supporting organizations. Organizations that will no longer be
required to report such information will continue to be
required to collect it and maintain it in their books and
records so that it will be available to the Internal Revenue
Service upon request. The proposed regulations also will be
published simultaneously as temporary regulations effective for
information returns filed for taxable years beginning after
December 31, 2015.
This entry is available at https://reginfo.gov/public/do/
eAgendaViewRule?pubId
=201604&RIN=1545-BN29.
Question. Please indicate ``yes'' or ``no'' (in each case where I
ask for a ``yes'' or ``no'' answer, you are of course welcome to also
provide a brief explanation): is it true, as has been reported, that
while the IRS was exploring whether to eliminate Schedule B reporting
in 2015, the agency had made no final decision, and was consulting with
stakeholders including State regulators because they have an interest
in the information on the Schedule B?
Answer. I have no information concerning why the Treasury
Department in the previous administration did not take final action on
this reform.
Question. Please indicate ``yes'' or ``no:'' did the IRS or
Treasury Department under the Obama administration issue any formal
regulation, revenue procedure, or other guidance eliminating the Form
990 Schedule B donor disclosure requirement?
Answer. No.
Question. Please indicate ``yes'' or ``no:'' did the Obama
administration issue a Statement of Administration Policy opposing H.R.
5053 (114th Congress), which would have generally eliminated Schedule B
donor disclosure, because eliminating donor reporting would constrain
the IRS in enforcing tax laws?
Answer. Yes.
Question. Please indicate ``yes'' or ``no:'' as has been reported,
the IRS explored whether it was appropriate to eliminate the Schedule B
donor reporting requirement in 2015 and consulted with various
stakeholders, including State tax administrators who regularly use
Schedule B information for State tax administration. The IRS and
Treasury Department under the Obama administration ultimately did not
propose eliminating the donor disclosure requirement. Did the IRS or
Treasury Department under the Trump administration provide State tax
administrators an opportunity for notice and comment before issuance of
Revenue Procedure 2018-38? If not, why didn't the Trump administration
consult with States about this change as the Obama administration had
done?
Answer. Revenue Procedure 2018-38 addresses an issue of Federal tax
administration and is a matter of agency procedure.
Question. Does the Treasury Department/IRS plan to submit Revenue
Procedure 2018-38 to the Senate for review under the Congressional
Review Act?
Answer. As a matter of general practice, the IRS ordinarily submits
revenue procedures and other guidance to Congress for review, even when
not required by the Congressional Review Act. It is my understanding
that Revenue Procedure 2018-38 was submitted to the congressional
offices on July 24th.
donor disclosure necessary for tax administration
Question. I am concerned that an exchange you engaged in with
Senator Toomey may not accurately reflect the facts surrounding donor
disclosure as it relates to tax administration. As such, I would like
to provide you the opportunity to clarify the matter.
With respect to Revenue Procedure 2018-38, Senator Toomey asked
you: ``This category of organizations to which some people made
contributions, isn't it true that those contributions are not tax
deductible?'' You responded: ``That's right.''
Please indicate ``yes'' or ``no:'' while individuals' contributions
to 501(c)(4) and (c)(6) organizations are generally not tax-deductible,
isn't it also true (as is stated clearly on the IRS website \2\) that
contributions to such organizations by a corporation, partnership, or
other person may be tax-deductible as a trade or business expense?
---------------------------------------------------------------------------
\2\ https://www.irs.gov/charities-non-profits/other-non-profits/
donations-to-section-501c4-organizations.
Answer. Yes, if the payment independently meets the requirements of
a trade or business expense and the requirements for deductibility of
---------------------------------------------------------------------------
such expenses.
Question. Senator Toomey also stated: ``Since the mission of the
IRS is to determine what people owe in taxes, and since these
contributions have nothing to do with what people owe in taxes, it's
really not the business of the IRS to be trying to police who
contributed what to these organizations in a series of contributions
that have no tax consequences. Isn't that fair to say?'' You responded:
``That's right, Senator.''
Please indicate ``yes'' or ``no:'' is the IRS responsible for
enforcement of the prohibition on private inurement under IRC section
501(c)(4) and the rules under IRC section 4958 related to self-dealing?
Answer. Yes.
Question. Please indicate ``yes'' or ``no:'' is it true that IRC
section 4958 and the regulations promulgated thereunder impose taxes on
self-dealing transactions between 501(c)(4) organizations and
``substantial contributors'' in certain cases? \3\
---------------------------------------------------------------------------
\3\ 26 CFR Sec. 53.4958-3(e)(2).
---------------------------------------------------------------------------
Answer. Yes.
Question. Please indicate ``yes'' or ``no:'' isn't it true that
without donor information provided on Schedule B of Form 990, the IRS
will have limited ability to identify substantial contributors who may
have engaged in self-dealing, without subjecting the organization to an
audit?
Answer. No. The IRS makes no systematic use of the information
regarding section 501(c)(4) organization's donor lists for purposes of
tax administration. If the information is needed for the purposes of an
examination, the IRS retains the ability to obtain the information
directly from the organization.
proposed treasury action to index capital
gains to inflation through regulation
Question. During your nomination hearing, Senator Toomey requested
that you, in your role as Deputy Secretary of the Treasury, enlist
Treasury to authorize indexing of capital gains to inflation through
regulations. You replied to Senator Toomey that you believed Treasury
has the authority to index capital gains through regulations without
needing Congress to take legislative action. I would like to understand
the basis of this authority. I refer you to a May 24, 2018 letter to
Treasury from eight Finance Committee Democratic members and myself, in
which we argue that indexing capital gains to inflation requires
legislative action and so exceeds Treasury's rule-making authority.
If confirmed as Deputy Secretary of the Treasury, do you pledge to
interpret our Nation's internal revenue laws faithfully, regardless of
any policy and political directives made to you by the Secretary of the
Treasury?
Answer. Yes.
Question. In your faithful interpretation of U.S. internal revenue
laws and related regulatory authority, has Congress granted Treasury
the authority to write new rules that impose capital gains taxes only
on real gains, and not nominal gains, as has been the law--and the
interpretation, to our understanding--since the Revenue Act of 1918? If
so, can you cite what IRC statute(s) extends such authority to
Treasury?
Answer. In response to Senator Toomey's request to work with him to
determine whether the Treasury Department could implement regulations
to tax real capital gains instead of nominal capital gains, I committed
to work with him on the issue. This Treasury Department has not taken a
position on the issue, and the Department's Office of General Counsel
would need to evaluate the issue.
Question. Legal opinions written by the Treasury and Justice
Departments in 1992 under President George H.W. Bush concluded that
Congress intended the word ``cost'' to mean the price paid in nominal
dollars without adjustment for inflation. That plain language
definition of cost appears in IRC section 1012--Basis of Property. Can
you explain then (a) why the 1992 Treasury and DOJ legal opinions are
wrong?
Answer. The Treasury Department's Office of General Counsel would
need to evaluate this issue.
Question. (b) Why the language of IRC section 1012 contains
sufficient ambiguity to permit rule-making by Treasury that interprets
basis to be measured in real terms as opposed to nominal terms?
Answer. Section 1012 of the Internal Revenue Code provides that the
basis of property is generally its ``cost'' but does not provide a
definition for that term. To provide certainty for taxpayers and the
IRS, the Treasury regulations under section 1012 interpret the term
``cost'' generally to be ``the amount paid for such property in cash or
other property'' (see 26 CFR Sec. 1.1012-1(a)). Beyond this, the
Treasury Department's Office of General Counsel would need to evaluate
this issue.
Question. Finally, please supply the legal argument for why
inflation indexing is explicitly provided in statute, such as with
respect to income tax bracket amounts described in IRC sections 1 and
11.
If such indexing to inflation were absent, in your interpretation,
would Treasury have rule-making authority to allow for such indexing?
Answer. The Treasury Department's Office of General Counsel would
need to evaluate this issue.
Question. The new tax law passed at the end of last year changed
the measure of inflation used to index individual income tax brackets
and other tax provisions from CPI-U to chained CPI. In your faithful
interpretation, did Treasury already possess sufficient rule-making
authority to index provisions of the tax code to whatever measure of
inflation it deemed fit, without congressional action?
Answer. Where Congress has already provided a specified measure of
inflation to be used to index amounts provided in particular provisions
of the tax code, the Treasury Department would be required to use that
measure.
currency manipulation
Question. During his candidacy, President Trump repeatedly promised
to name China a currency manipulator. Almost immediately after being
inaugurated, he seems to have changed course, and every currency report
issued by the Treasury Department has declined to label China as a
currency manipulator. Just last week, the President again tweeted that
China, as well as ``the European Union and others have been
manipulating their currencies and interest rates lower, while the U.S.
is raising rates while the dollar gets stronger and stronger with each
passing day.''
Do you agree with the President that China and the EU are
manipulating their currencies?
Answer. The Treasury Department issued its most recent semiannual
currency report to Congress on April 13th. As noted by the Senator, the
Department did not find any country had manipulated its currency in the
period covered by that report. On October 16th, the Treasury Department
will deliver to Congress its next semiannual currency report, which
will examine the currency policies of all major U.S. trading partners.
Question. What do you take from the President's statement about how
you and other Treasury officials should be evaluating countries that
are manipulating their currency?
Answer. I take from the President's statement that securing
stronger and more balanced global growth requires that countries avoid
policies that facilitate unfair competitive advantage. The Treasury
Department continues to track closely the foreign exchange and
macroeconomic policies of all major U.S. trading partners in order to
monitor where unfair currency practices may be emerging.
trade deficits
Question. What do you believe trade deficits reflect about our
trade relationships?
Answer. Large trade imbalances can reflect underlying trade
distortions resulting from unfair trade practices. It is critical that
the administration enforce the trade agreements we have as well as
address unfair practices that hurt our firms and workers, in order to
bring about free and fair trade.
Question. Do you agree with the President's apparent position that
trade deficits are per se detrimental to the United States?
Answer. As previously stated, to the extent large and continuing
trade imbalances arise from unfair and distortive trade actions by our
trading partners, they are likely to be detrimental to U.S. firms and
workers.
Question. Do you think there is a relationship between our
increasing budget deficit, which is driven by the Republican tax cuts,
and the trade deficit since much of our budget deficit is financed from
foreign purchases of U.S. Government debt?
Answer. As previously stated, large trade imbalances can reflect
underlying trade distortions resulting from unfair trade practices. At
a macroeconomic level, trade balances--or more accurately, current
account balances, discussed in the next response--reflect the imbalance
between saving and investment within an economy. Countries where saving
is higher than investment have current account (and typically trade)
surpluses, whereas countries like the United States where overall
investment is higher than saving (including consumers, businesses, and
the government), have current account (and typically trade) deficits.
Question. What is the relationship between the current account
balance and the trade balance?
Answer. The trade balance is one component of the current account
balance, which also includes the net income balance. In the majority of
economies--including the United States--the trade balance is the
largest component of the current account balance. In 2017, the U.S.
current account balance stood at a deficit of $449 billion (or 2.3
percent of GDP). This overall current account deficit was made up of a
trade deficit of $552 billion and an income surplus of $103 billion.
currency advisory committee
Question. Dealing with the issue of currency manipulation is
something this committee has spent a lot of time on. In the Bipartisan
Congressional Trade Priorities and Accountability Act of 2015, or
``TPA,'' we included two new negotiating objectives to address currency
manipulation in trade agreements--something we haven't heard a lot
about from the Treasury Department in the context of NAFTA. Thanks to
Senator Bennet and others, we also strengthened enforcement tools to
combat currency manipulators in the Customs bill, which became law in
2016.
As part of the Customs bill, we created a new Advisory Committee on
International Exchange Rate Policy. That committee has yet to be
established, even though Democrats in the House and Senate have
recommended members.
If confirmed, will you commit to work to set up the Advisory
Committee to assist the Treasury Department on international currency
topics?
Answer. Section 702(c) of the Customs bill required termination of
the Advisory Committee 2 years after its enactment in February of 2016.
During the Obama administration and the present administration, no
members were appointed to the Advisory Committee per the procedures
described in section 702(b). The issue of currency manipulation remains
important, and the Treasury Department looks forward to continuing to
work closely with Congress to ensure our major trading partners do not
engage in currency policies that distort trade and hurt American firms
and workers.
china strategy
Question. There is widespread agreement that we have major problems
in our trade relationship with China, but there are also many questions
about what the administration's strategy is, or whether there is a
strategy at all. At times it is not clear to our trading partners or to
Congress who is calling the shots on trade negotiations with China--
sometimes it's Secretary Mnuchin, sometimes it's Secretary Ross,
Ambassador Lighthizer, or Mr. Navarro. And they are rarely sending a
consistent message on behalf of the United States.
If confirmed, part of your responsibilities will be to oversee
trade policy. What role will you play in helping to implement a
coherent China trade policy? Do you agree with the current China trade
policy?
Answer. I support the administration's efforts to create a more
fair and reciprocal trade relationship with China and, as appropriate,
will work with Secretary Mnuchin and other senior officials to push
China to address its unfair trade practices.
consultations on china strategy and trade matters
Question. Other appointees to this administration have promised to
consult with Congress and be responsive to questions from this
committee about China and other matters. And yet repeatedly, appointees
to the Treasury Department have fallen miserably short in doing just
that. If the administration continues to box out Congress, it risks a
blowback against its trade agenda.
If confirmed, will you make it a priority to bring Congress--and
other stakeholders--into the conversation about a China strategy? We
don't need more empty promises, so please give me some specific
examples of how you will effectuate better communication with Congress.
Answer. I highly value input from Congress and relevant
stakeholders. If confirmed as Deputy Secretary, I will work to ensure
that the Department communicates with members of Congress and their
staffs on Treasury's role in trade negotiations. I am aware of the
consultation requirements that Congress set forth in Pub. L. 114-26. To
the degree they apply to Treasury, even in spirit, you have my
commitment to work to ensure the Department adheres to them.
international affairs staffing
Question. There are recent reports that the Office of International
Affairs has lost a significant number of both highly experienced career
staff and rising junior staff. This raises significant concerns about
Treasury's capacity to handle the multitude of important international
topics it is currently engaged in, from its role in the relationship
with China and tariff policy, to CFIUS reform, to monitoring currency
manipulation and engaging in international negotiations supporting our
trade agenda.
In your view, what has caused this wave of attrition, and how do
you plan to address it?
Answer. We have a very high-caliber civil service working within
the Treasury Department, as well as highly qualified administration
appointees. The International Affairs office is exemplary, and we could
not fulfill our mission without the deep expertise and passion for
public service by all employees. With the recent lifting of Treasury's
hiring freeze, we are beginning external recruitment consistent with
the administration's commitment to very high standards for Federal
employees.
anonymous shell companies
Question. During your confirmation hearing, I asked you about the
national security risks posed by the abuse of anonymous shell
companies. As you know, anonymous shell companies are abused by bad
actors for money laundering and terrorist financing, and at your
nomination hearing you agreed that ``there are significant law
enforcement benefits to solving beneficial ownership.'' You further
stated that beneficial ownership legislation is something you are
``committed to working with you very closely on and do want to solve.''
Will you commit to working with me and this committee on a
bipartisan basis to ensure that we adopt meaningful beneficial
ownership legislation before the end of 2018? And, will you personally
commit to working with my office to realize this important goal, and
consult with this committee and my staff on any potential actions
Treasury takes on this issue before doing so?
Answer. Treasury recognizes the vulnerabilities that exist in
corporate formation without the disclosure of beneficial ownership
information. We look forward to working with you and other members to
enhance transparency of the ownership of legal entities. I will commit
to working on this issue with the committee on a bipartisan basis,
including your staff. I believe the end of 2018 is a worthy goal,
though timing will of course not be solely in Treasury's control.
______
Questions Submitted by Hon. Michael F. Bennet
Question. The Treasury Department recently announced that 501(c)(4)
social welfare organizations are no longer required to report their
donors to the IRS. A former general counsel to the Federal Elections
Commission thought that this change in policy will ``make it easier for
large contributors to hide money that is being used to influence
elections, including money given by foreign interests.''
Why shouldn't the IRS be able to determine whether groups are
receiving contributions from foreign nationals to influence our
elections, which are prohibited under the law?
Answer. The integrity of the U.S. electoral system is central to
our democracy, and foreign nationals should not be permitted to
improperly interfere in U.S. elections in any way. Congress entrusted
the Federal Election Commission and the Department of Justice with the
enforcement of our Nation's campaign finance laws, including the
prohibition to which you refer.
The mission of the IRS is to administer and enforce the Federal tax
laws. If in the course of its examination activities the IRS discovers
evidence of a possible violation of Federal criminal law outside its
jurisdiction, on a case by case basis, the IRS may refer the matter to
``the appropriate Federal agency charged with the responsibility of
enforcing such law'' (26 U.S.C. Sec. 6103).
Question. What public policy goal is this serving?
Answer. Tax-exempt entities should not be required to report on
their annual returns to the IRS information that the IRS does not need
in that form to administer or enforce the Federal tax laws. The new
policy announced by the IRS will protect taxpayers by reducing the risk
of inadvertent disclosure or misuse of confidential information and
will save both taxpayer and government resources. It is worth noting
that the Schedule B modifications resulted in no change to data that is
disclosed publicly, and the IRS retains its ability to access all data
it had before. It is worth further noting that the IRS under President
Obama was pursuing this policy, I assume for similar public policy
reasons. In 2014, 2015, and 2016, the Priority Guidance Plan published
by Treasury and the IRS listed as an item, ``Guidance under Sec. 6033
relating to the reporting of contributions,'' and Treasury and the
IRS's spring 2016 unified regulatory agenda submitted to OIRA describes
anticipated regulations to address this issue. This is available at:
https://reginfo.gov/public/do/eAgendaViewRule?pubId=201604&RIN=1545-
BN29.
Question. In your view, does the need to protect secret donors
outweigh the need to protect our democracy from foreign nationals?
Answer. We clearly must not have foreign nationals interfere in our
elections. The Federal Election Commission and the Department of
Justice are charged with enforcing Federal election laws.
The recent Treasury/IRS decision to end the collection of donor
names and addresses for certain tax-exempt organizations will have no
effect on public transparency of donor information. As stated in the
previous question, the Schedule B modifications resulted in no change
to data that is disclosed publicly, and the IRS retains its ability to
access all data it had before. The modifications affected only
personally identifiable information that Federal law prohibits the IRS
from publicly disclosing. I understand the issue has become quite
politicized, but the IRS under the Obama administration reached a
similar public policy conclusion, as noted above.
Question. Last year, Secretary Mnuchin predicted that, ``Not only
will this tax plan pay for itself, but it will pay down debt.'' Next
year we're going to have a
trillion-dollar deficit--the largest as a share of our economy outside
of a recession since World War II. Deficits are projected to remain
historically high through the rest of the decade.
You answered at the hearing that you agree that the tax cuts will
pay for themselves. Can you explain what you disagree with in the
analysis by the Joint Committee on Taxation, the Tax Policy Center, and
the committee for a Responsible Federal Budget--all nonpartisan,
independent scorekeepers--who each found that the tax cuts would add
more than $1 trillion to deficits over the next decade (and more if
fully extended)?
Answer. I do not know the assumptions underlying the analyses you
point to. I do agree with the analysis of the Council of Economic
Advisors, which suggests that the Tax Cuts and Jobs Act and other
policies of this administration will lead to increased investment,
growth and tax revenue. In addition, other outside analysts have found
that the proposals that underpinned the tax bill will produce
significant economic responses (e.g., Laurence Kotlikoff of Boston
University and others).
Question. Treasury serves as a powerful stabilizing force for our
country. Part of that stability is preserved by insulating Treasury
from politics, which is central to the role of the Deputy Secretary.
I appreciate that in your answers at the hearing, you agreed that
Treasury's work to combat illicit financial activity, impose sanctions,
and conduct national security reviews through the CFIUS process should
be free from political interference, even if a company or individual
affiliated with President Trump, his close associates, or family
members is involved. I also appreciate that you agreed the same is true
for tax administration and enforcement at the IRS.
Can you confirm that if inappropriate political interference occurs
in any of the above processes that you will notify the bipartisan
membership of the Finance Committee (either the chairman and ranking
member or the full membership, as appropriate)?
Answer. If confirmed, I am committed to full compliance with laws
and regulations designed to prevent conflicts of interest and any other
form of improper influence over Treasury's execution of its statutory
responsibilities. In addition, under Treasury Order 114-10, all
Treasury employees are expected to report violations of Federal law
through appropriate channels. In addition, I will work hard to set an
example by conducting myself in accordance with high ethical standards.
Question. What are you going to do if confirmed as Deputy Treasury
Secretary to push back on some of the damaging escalation in trade
policies that harm our domestic manufacturers, our workers, and our
farmers and ranchers?
Answer. The administration believes in free trade, but it must also
be fair trade to ensure a balanced relationship in which U.S. firms and
workers are protected against unfair foreign trade practices. The
administration stands ready to engage with our trading partners to
resolve these differences. The administration, including Secretary
Mnuchin and I, have sympathy for industries that are targeted by unfair
trade practices, and we remain committed to defending America's workers
and agricultural producers.
______
Submitted by Hon. Tim Scott,
a U.S. Senator From South Carolina
DEPARTMENT OF THE TREASURY
WASHINGTON, DC 20220
October 20, 2017
Department of the Treasury
2017-2018 Priority Guidance Plan
Joint Statement by:
David J. Kautter
Assistant Secretary for Tax Policy
U.S. Department of the Treasury
John A. Koskinen
Commissioner
Internal Revenue Service
William M. Paul
Acting Chief Counsel
Internal Revenue Service
We are pleased to announce the release of the 2017-2018 Priority
Guidance Plan. As described below, the 2017-2018 Priority Guidance Plan
sets forth guidance priorities for the Department of the Treasury
(Treasury) and the Internal Revenue Service (IRS) based on public
input, and taking into account the burden-reducing policies and reforms
described in Section 1 of Executive Order 13789 (April 21, 2017; 82 FR
19317) and Executive Order 13777 (February 24, 2017; 82 FR 9339).
The 2017-2018 Priority Guidance Plan contains guidance projects that we
hope to complete during the twelve-month period from July 1, 2017,
through June 30, 2018 (the plan year). Part 1 of the plan focuses on
the eight regulations from 2016 that were identified pursuant to
Executive Order 13789 and our intended actions with respect to those
regulations. Part 2 of the plan describes certain projects that we have
identified as burden reducing and that we believe can be completed in
the 8\1/2\ months remaining in the plan year. As in the past, we intend
to update the plan on a quarterly basis, and additional burden
reduction projects may be added. Part 3 of the plan describes the
various projects that comprise our implementation of the new statutory
partnership audit regime, which has been a topic of significant concern
and focus as the statutory rules go into effect on January 1, 2018.
Part 4 of the plan, in line with past years' plans and our long-
standing commitment to transparency in the process, describes specific
projects by subject area that will be the focus of the balance of our
efforts this plan year. Many of these projects are included on the plan
in response to specific requests for guidance from interested
stakeholders. In addition, many of these projects afford burden
reduction by providing taxpayers and their advisers with clarity as to
the application of the tax law so that businesses and individuals can
significantly reduce the time needed to plan their affairs with
certainty as to their tax consequences. Finally, most of these projects
do not involve the issuance of new regulations. Rather, they will
provide helpful guidance to taxpayers on a variety of tax issues
important to individuals and businesses in the form of: (1) revocations
of final, temporary, or proposed regulations; (2) notices, revenue
rulings, and revenue procedures; and (3) simplifying and burden
reducing amendments to existing regulations.
As in past years, we solicited comments from taxpayers to develop our
Priority Guidance Plan, and we received many thoughtful suggestions for
areas where guidance could clarify existing rules, eliminate
unnecessary complexity, and provide reliance authority in areas where
non-precedential IRS rules already exist. With respect to all of the
projects described in this plan (as well any added in our quarterly
updates), regardless of how they are categorized here, we will be
guided by the
burden-reducing principles and policies described in aforementioned
Executive Orders, and focusing on reducing burdens and complexity
wherever possible.
As in past years, we intend to update and republish the 2017-2018 plan
during the plan year to reflect additional items that have become
priorities and guidance that we have published during the plan year.
The periodic updates allow us flexibility to consider comments received
from taxpayers and tax practitioners relating to additional guidance
priorities and to respond to developments arising during the plan year.
The published guidance process can be fully successful only if we have
the benefit of the insight and experience of taxpayers and
practitioners who must apply the internal revenue laws. Therefore, we
invite the public to continue to provide us with their comments and
suggestions as we develop guidance throughout the plan year.
Additional copies of the 2017-2018 Priority Guidance Plan can be
obtained from the IRS website at http://www.irs.gov/uac/Priority-
Guidance-Plan. Copies can also be obtained by calling Treasury's Office
of Public Affairs at (202) 622-2960.
______
office of tax policy
and
internal revenue service
2017-2018 priority guidance plan
Updated as of October 12, 2017
Released October 20, 2017
PART 1. E.O. 13789--IDENTIFYING AND REDUCING REGULATORY BURDENS
1. Withdrawal of proposed regulations under Sec. 2704 regarding
restrictions on liquidation of an interest for estate, gift, and
generation-skipping transfer taxes. Proposed regulations were published
on August 4, 2016.
2. Withdrawal of proposed regulations under Sec. 103 regarding the
definition of political subdivision. Proposed regulations were
published on February 23, 2016.
3. Proposed amendment of regulations under Sec. 7602 regarding the
participation of attorneys described in Sec. 6103(n) in a summons
interview. Final regulations were published on July 14, 2016.
4. Proposed removal of temporary regulations under Sec. 707
concerning treatment of liabilities for disguised sale purposes and
review of regulations under Sec. 752 concerning liabilities recognized
as recourse partnership liabilities. Temporary and proposed regulations
were published on October 5, 2016.
5. Delay and proposed removal of documentation regulations under
Sec. 385 and review of other regulations under Sec. 385. Final,
temporary, and proposed regulations were published on October 21, 2016.
PUBLISHED August 14, 2017 in IRB 2017-33 as NOT. 2017-36
(RELEASED July 28, 2017).
6. Proposed modification of regulations under Sec. 367 regarding the
treatment of certain transfers of property to foreign corporations.
Final regulations were published on December 16, 2016.
7. Proposed modification of regulations under Sec. 337(d) regarding
certain transfers of property to regulated investment companies (RICs)
and real estate investment trusts (REITs). Temporary and proposed
regulations were published on June 8, 2016.
8. Proposed modification of regulations under Sec. 987 on income and
currency gain or loss with respect to a Sec. 987 qualified business
unit. Final regulations were published on December 8, 2016.
PART 2. NEAR-TERM BURDEN REDUCTION
1. Guidance removing or updating regulations that are unnecessary,
create undue complexity, impose excessive burdens, or fail to provide
clarity and useful guidance.
2. Guidance under Sec. 871(m), including with respect to non-delta-
one transactions.
PUBLISHED August 21, 2017 in IRB 2017-34 as NOT. 2017-42
(RELEASED August 5, 2017).
3. Guidance under Chapter 3 (Sec. Sec. 1441-1446) and Chapter 4
(Sec. Sec. 1471-1474). Final and temporary regulations were published
on January 6, 2017. Guidance may include the following: addressing
withholding on gross proceeds and foreign passthru payments under
Chapter 4; coordinating certain documentation requirements for
participating foreign financial institutions with the requirements
under IGAs; revising the withholding requirements on insurance premiums
under Chapter 4; guidance concerning certain due diligence requirements
of withholding agents under Chapter 3, including the requirement to
collect and report foreign taxpayer identification numbers of certain
account holders; and guidance on refunds and credits under Chapter 3,
Chapter 4, and related provisions. Notice 2015-10 (regarding refunds
and credits) was published on May 18, 2015.
PUBLISHED October 10, 2017 in IRB 2017-41 as NOT. 2017-46
(RELEASED September 25, 2017).
4. Regulations under Sec. Sec. 1014(f) and 6035 regarding basis
consistency between estate and person acquiring property from decedent.
Proposed and temporary regulations were published on March 4, 2016.
5. Guidance under Sec. 170(e)(3) regarding charitable contributions
of inventory.
6. Final regulations under Sec. 263A regarding the inclusion of
negative amounts in additional Sec. 263A costs. Proposed regulations
were published on September 5, 2012.
7. Final regulations under Sec. Sec. 4051 and 4071 on heavy trucks,
tractors, trailers, and tires. Proposed regulations were published on
March 31, 2016.
8. Final regulations under Sec. 2642(g) describing the circumstances
and procedures under which an extension of time will be granted to
allocate GST exemption.
9. Regulations streamlining the Sec. 754 election statement.
PUBLISHED October 12, 2017 in FR as REG-116256-17 (NPRM).
10. Guidance under Sec. 1362(f) regarding the validity or continuation
of an S corporation election in certain situations involving
disproportionate distributions, inconsistent tax return filings, or
omissions on Form 2553, Election by a Small Business Corporation.
11. Guidance under Sec. 301.9100 regarding relief for late regulatory
elections.
12. Relief for late elections due to erroneously late-filed
partnership and REMIC returns.
PUBLISHED September 18, 2017 in IRB 2017-38 as NOT. 2017-47
(RELEASED September 1, 2017).
13. Final regulations under Sec. 3402(q). Proposed regulations were
published on December 30, 2016.
PUBLISHED September 27, 2017 in FR as TD 9824.
14. Guidance on refunds under Combat-Injured Veterans Tax Fairness
Act.
15. Guidance under Sec. 954(c) regarding foreign currency gains.
16. Guidance under Sec. 954, including regarding the use of foreign
statement reserves for purposes of measuring qualified insurance income
under Sec. 954(i).
17. Final regulations and related guidance on closed defined benefit
plans and related matters. Proposed regulations were published on
January 29, 2016.
PUBLISHED September 18, 2017 in IRB 2017-38 as NOT. 2017-45
(RELEASED August 31, 2017).
18. Guidance under Sec. 3405 regarding distributions made to payees,
including military and diplomatic payees, with an address outside the
United States.
19. Update to Revenue Ruling 67-390.
PART 3. BIPARTISAN BUDGET ACT OF 2015--PARTNERSHIP AUDIT REGULATIONS
1. General guidance under new partnership audit rules.
2. Regulations addressing administrative and judicial review rules.
3. Regulations addressing push out election by tiered structures.
4. Regulations addressing adjustments to bases and capital accounts
and the tax and book basis of partnership property.
5. Regulations addressing the operation of certain international
provisions in the context of the centralized partnership audit regime,
including rules relating to the withholding of tax on foreign persons,
withholding of tax to enforce reporting on certain foreign accounts,
and the treatment of creditable foreign tax expenditures of a
partnership.
PART 4. GENERAL GUIDANCE
CONSOLIDATED RETURNS
1. Regulations under Sec. 1.1502-36 and related provisions regarding
losses on subsidiary stock.
2. Regulations under Sec. 1.1502-75(d) regarding group continuation.
Final regulations were published on September 8, 1966.
3. Final regulations under Sec. 1.1502-76 regarding when a member
joins or leaves a consolidated group. Proposed regulations were
published on March 6, 2015.
4. Final regulations under Sec. 1.1502-91 regarding the
redetermination of consolidated net unrealized built-in gain and loss.
Proposed regulations were published on October 24, 2011.
CORPORATIONS AND THEIR SHAREHOLDERS
1. Updating Sec. 301 regulations to reflect statutory changes.
2. Guidance under Sec. 305(b) regarding certain stock distributions
by REITs and RICs.
PUBLISHED August 28, 2017 IN IRB 2017-35 as REV. PROC.
2017-45 (RELEASED August 11, 2017).
3. Final regulations under Sec. 305(c) regarding the amount and
timing of deemed distributions from conversion ratio adjustments on
convertible debt and stock. Proposed regulations were published on
April 13, 2016.
4. Regulations regarding transactions involving the transfer or
receipt of no net equity value. Proposed regulations were published on
March 10, 2005.
PUBLISHED in FR on July 13, 2017 as REG-139633-08
(WITHDRAWAL).
5. Regulations under Sec. 336(e) to revise the treatment of certain
stock dispositions as asset sales. Final regulations were published on
May 15, 2015.
6. Revising regulations under Sec. 1.337(d)-7 regarding the treatment
of certain foreign corporations. Final regulations were published on
August 2, 2013.
7. Guidance regarding the application of Sec. Sec. 355 and 361 to a
distributing corporation's use of its controlled corporation's stock,
securities, or other obligations to retire putative debt of the
distributing corporation.
8. Guidance regarding procedures of Pilot Program for issuing private
letter rulings under Sec. 355.
PUBLISHED October 10, 2017 in IRB 2017-41 as REV. PROC.
2017-52 (RELEASED September 21, 2017).
9. Revising regulations under Sec. 368(a)(1)(F). Final regulations
were published on September 21, 2015.
10. Guidance regarding continuity of interest under Sec. 368. Proposed
regulations were published on December 19, 2011.
11. Final regulations regarding the scope and application of Sec. 597.
Proposed regulations were published on May 20, 2015.
EMPLOYEE BENEFITS
A. Retirement Benefits
1. Regulations updating the rules applicable to ESOPs.
2. Final regulations on the application of the normal retirement age
regulations under Sec. 401(a) to governmental plans. Proposed
regulations were published on January 27, 2016.
3. Guidance under Sec. 401(a)(9) on the use of lump sum payments to
replace lifetime income being received by retirees under defined
benefit pension plans.
4. Final regulations regarding Qualified Nonelective Contributions
(QNECs) and Qualified Matching Contributions (QMACs). Proposed
regulations were published on January 18, 2017.
5. Announcements on hardship distributions and loans from retirement
plans as a result of Hurricanes Harvey and Irma.
PUBLISHED September 25, 2017 in IRB 2017-39 as ANN. 2017-11
(RELEASED August 30, 2017).
PUBLISHED October 2, 2017 in IRB 2017-40 as ANN. 2017-13
(RELEASED September 12, 2017).
6. Regulations under Sec. Sec. 219, 408, 408A, and 4973 regarding
IRAs.
7. Guidance updating regulations for service credit and vesting under
Sec. 411.
8. Regulations under Sec. 411(a)(11). Proposed regulations were
published on October 9, 2008.
9. Guidance on the treatment of future interest credits and annuity
conversion factor under a hybrid defined benefit plan and adjustments
under a variable annuity plan for purposes of satisfying certain
qualification requirements.
10. Guidance related to church plans.
11. Regulations on the definition of governmental plan under
Sec. 414(d). An ANPRM was published on November 8, 2011.
12. Guidance regarding the aggregation rules under Sec. 414(m).
13. Final regulations under Sec. 415 regarding Sec. 7873 treaty
fishing rights income. Proposed regulations were published on November
15, 2013.
14. Final regulations under Sec. 417(e) that update the minimum
present value requirements for defined benefit plans. Proposed
regulations were published on November 25, 2016.
15. Notice providing model amendments for Sec. 417(e).
PUBLISHED September 5, 2017 in IRB 2017-36 as NOT. 2017-44
(RELEASED August 18, 2017).
16. Revenue procedures relating to approval for funding method
changes.
17. Final regulations and other guidance under Sec. 430(h)(3) revising
the mortality tables used for pension funding purposes. Proposed
regulations were published on December 29, 2016.
PUBLISHED October 5, 2017 in FR as TD 9826.
18. Notice on funding relief as a result of Hurricanes Harvey and
Irma.
PUBLISHED October 2, 2017 in IRB 2017-40 as NOT. 2017-49
(RELEASED September 12, 2017).
19. Revenue Procedure on multiemployer plan benefit suspensions under
Sec. 432(e)(9) as amended by the Multiemployer Pension Reform Act of
2014.
PUBLISHED July 31, 2017 in IRB 2017-31 as REV. PROC. 2017-
43 (RELEASED July 12, 2017).
20. Regulations relating to the reporting requirements under
Sec. 6057. Proposed regulations were published on June 21, 2012.
21. Additional guidance on issues relating to lifetime income from
retirement plans and IRAs.
22. Revenue procedure modifying EPCRS to provide guidance with regard
to certain corrections.
23. Guidance on missing participants.
B. Executive Compensation, Health Care and Other Benefits, and
Employment Taxes
1. Regulations under Sec. 86 regarding rules for lump-sum elections.
2. Regulations under Sec. Sec. 119 and 132 regarding employer-
provided meals.
3. Updated guidance on the classification system for the line of
business determination under Sec. 1.132-4 for purposes of qualified
employee discounts and no-additional-cost services.
4. Guidance under Sec. 162(m) addressing certain situations involving
a short taxable year.
5. Final regulations on income inclusion and various other issues
under Sec. 409A. Proposed regulations were published on December 8,
2008, and on June 22, 2016.
6. Revenue ruling under Sec. 419A on the definition of post-
retirement medical benefits.
7. Regulations amending Sec. 1.419A-2T relating to collectively-
bargained welfare benefit funds.
8. Final regulations under Sec. 457(f) and related guidance on
ineligible plans. Proposed regulations were published on June 22, 2016.
9. Guidance on the application of Sec. 409A to compensation deferred
prior to 2009 and includible in income under Sec. 457A no later than
2017.
10. Final regulations under Sec. 512 explaining how to compute
unrelated business taxable income of voluntary employees' beneficiary
associations described in Sec. 501(c)(9). Proposed regulations were
published on February 6, 2014.
11. Guidance on the application of Sec. 1402(a)(13) to limited
liability companies.
12. Guidance under Sec. 3402 to remove alternative method of figuring
withholding based on combined income, employee social security, and
employee Medicare tax withholding tables.
13. Guidance on certain transactions involving welfare benefit funds.
14. Guidance on issues under Sec. 4980H.
15. Regulations under Sec. 4980I regarding the excise tax on high cost
employer-
provided coverage.
16. Guidance on procedures under Sec. 7436.
17. Guidance under Sec. 9831(d) on qualified small employer health
reimbursement arrangements (QSEHRAs) as added by section 18001 of the
21st Century Cures Act.
EXCISE TAX
1. Guidance under Sec. 48.4041-7 on dual use of taxable liquid fuel.
2. Guidance on the definition of compressed natural gas for purposes
of Sec. Sec. 4041 and 6426.
3. Guidance on claims for dyed fuel relief under Notice 2017-30.
4. Regulations under Sec. 4261(e)(3)(C) regarding the application of
the domestic air transportation excise tax under Sec. 4261 to the
purchase of mileage awards.
5. Guidance on whether gasoline blendstocks combined with taxable
fuel qualify for the alternative fuel mixture credit under
Sec. 6426(e).
6. Final regulations under ACA Sec. 9010 regarding retrospectively
rated insurance contracts.
7. Guidance on the allocated fee amount under ACA Sec. 9010 for the
2019 fee year.
8. Final regulations for ACA Sec. 9010 on definition of a covered
entity.
EXEMPT ORGANIZATIONS
1. Update revenue procedures on grantor and contributor reliance
under Sec. Sec. 170 and 509, including update to Revenue Procedure
2011-33 for EO Select Check.
2. Final regulations on Sec. 509(a)(3) supporting organizations.
Proposed regulations were published on February 19, 2016.
3. Guidance under Sec. 512 regarding methods of allocating expenses
relating to dual use facilities.
4. Guidance on Sec. 529(c)(3)(D) on the recontribution within 60 days
of refunded qualified higher education expenses as added by section 302
of the Protecting Americans from Tax Hikes Act of 2015.
5. Final regulations under Sec. 529A on Qualified ABLE Programs as
added by section 102 of the ABLE Act of 2014. Proposed regulations were
published on June 22, 2015.
6. Guidance under Sec. 4941 regarding a private foundation's
investment in a partnership in which disqualified persons are also
partners.
7. Update to Revenue Procedure 92-94 on Sec. Sec. 4942 and 4945.
PUBLISHED October 2, 2017 in IRB 2017-40 as REV. PROC.
2017-53 (RELEASED September 14, 2017).
8. Guidance regarding the excise taxes on donor advised funds and
fund management.
9. Final regulations under Sec. 6104(c). Proposed regulations were
published on March 15, 2011.
10. Final regulations designating an appropriate high-level Treasury
official under Sec. 7611. Proposed regulations were published on August
5, 2009.
FINANCIAL INSTITUTIONS AND PRODUCTS
1. Regulations relating to the definition of registered form under
Sec. Sec. 149(a) and 163(f).
PUBLISHED September 19, 2017 in FR as REG-125374-16 (NPRM).
2. Guidance under Sec. 166 on the conclusive presumption of
worthlessness for bad debts. Notice 2013-35, which requested comments
on the existing rules, was published on June 10, 2013.
3. Regulations under Sec. 249 relating to the amount of a repurchase
premium attributable to the cost of borrowing.
4. Guidance under Sec. Sec. 446, 1275, and 6050H to address the
treatment and reporting of capitalized interest on modified home
mortgages.
5. Guidance addressing issues relating to mark-to-market accounting
under Sec. 475.
6. Final regulations under Sec. 851 relating to investments in stock
and securities. Proposed regulations were published on September 28,
2016.
7. Guidance regarding application of the cure provisions under
Sec. 851(i) for regulated investment companies (RICs) and
Sec. 856(c)(7) and (g)(5) for real estate investment trusts (REITs).
8. Guidance clarifying the definition of income in Sec. 856(c)(3) for
purposes of the REIT qualification tests.
9. Guidance under Sec. 856(c)(5)(J) to determine whether Subpart F
income and passive foreign investment company (PFIC) inclusions are
treated as qualifying income for purposes of Sec. 856(c).
10. Regulations under Sec. 1001 on the modification of debt
instruments, including issues relating to disregarded entities.
11. Guidance on the constant yield election under Sec. 1276(b).
12. Regulations under Sec. 7872. Proposed regulations were published
on August 20, 1985.
13. Guidance on the exchange of mortgage-backed securities.
14. Guidance on the treatment of fees relating to debt instruments and
other securities.
GENERAL TAX ISSUES
1. Guidance under Sec. Sec. 24, 25A, and 32 pursuant to section 208
of the Protecting Americans from Tax Hikes Act of 2015.
2. Final regulations on the allocation of the research credit to
corporations and trades or businesses under common control for purposes
of Sec. 41(f)(1). Final, temporary, and proposed regulations were
published on April 3, 2015.
3. Final regulations under Sec. 42 relating to compliance monitoring,
including issues identified in Notice 2012-18. Proposed and temporary
regulations were published on February 25, 2016.
4. Final regulations under Sec. 45D that revise and clarify certain
rules relating to recapture of the new markets tax credit as well as
other issues. Proposed regulations were published August 11, 2008.
5. Marginal well production credit under Sec. 45I for natural gas.
PUBLISHED October 2, 2017 in IRB 2017-40 as NOT. 2017-51
(RELEASED September 12, 2017).
6. Guidance under Sec. 47 concerning the rehabilitation credit and
2017 disaster relief.
7. Guidance on the modification, extension, and phase out of the
investment tax credit (ITC) for solar energy property under Sec. 48.
8. Revenue Ruling under Sec. 102 regarding whether contributions of
money received through a crowdfunding site to pay for medical expenses
under Sec. 213 are excludable from income because the contributions are
gifts.
9. Final regulations under Sec. 152 regarding dependency deduction.
10. Guidance facilitating leave-donation programs in areas affected by
Hurricane and Tropical Storm Harvey.
PUBLISHED October 25, 2017 in IRB 2017-39 as NOT. 2017-48
(RELEASED September 5, 2017).
11. Guidance facilitating leave-donation programs in areas affected by
Hurricane and Tropical Storm Irma.
PUBLISHED on October 2, 2017 in IRB 2017-40 as NOTICE 2017-
52 (RELEASED September 14, 2017).
12. Guidance extending relief originally provided in Notice 2011-14,
2011-11 I.R.B. 544, for the Treasury Department's Housing Finance
Agency Innovation Fund for the Hardest-Hit Housing Markets (HFA Hardest
Hit Fund).
PUBLISHED August 7, 2017 in IRB 2017-32 as NOT. 2017-40
(RELEASED July 31, 2017).
13. Guidance under Sec. 167 regarding a safe harbor for normalization.
PUBLISHED October 18, 2017 in IRB 2017-38 as REV. PROC.
2017-47 (RELEASED September 7, 2017).
14. Final regulations under Sec. 170 regarding charitable
contributions. Proposed regulations were published on August 7, 2008.
15. Final regulations under Sec. 199 regarding allocation of W-2 wages
in a short taxable year and in an acquisition or disposition. Proposed
and temporary regulations were published on August 27, 2015.
16. Regulations under Sec. 199 relating to computer software.
17. Guidance on qualified films under Sec. 199.
18. Guidance clarifying whether the business use of an aircraft by a
lessee that is a five percent owner or related party of the lessor of
the aircraft is qualified business use for purposes of Sec. 280F.
19. Final regulations under Sec. 468A involving the decommissioning
costs of a nuclear power plant.
20. Final regulations under Sec. 1411 regarding issues related to the
net investment income tax. Proposed regulations were published on
December 2, 2013.
21. Guidance under Sec. 7701 providing criteria for treating an entity
as an integral part of a state, local, or tribal government.
GIFTS AND ESTATES AND TRUSTS
1. Guidance on basis of grantor trust assets at death under
Sec. 1014.
2. Final regulations under Sec. 2032(a) regarding imposition of
restrictions on estate assets during the six month alternate valuation
period. Proposed regulations were published on November 18, 2011.
3. Guidance under Sec. 2053 regarding personal guarantees and the
application of present value concepts in determining the deductible
amount of expenses and claims against the estate.
INSURANCE COMPANIES AND PRODUCTS
1. Final regulations under Sec. 72 on the exchange of property for an
annuity contract. Proposed regulations were published on October 18,
2006.
2. Guidance under Sec. 807 and 816 regarding the determination of
life insurance reserves for life insurance and annuity contracts using
principles-based methodologies, including stochastic reserves based on
conditional tail expectation.
INTERNATIONAL
A. Subpart F/Deferral
1. Guidance on the treatment of upfront payments on swaps under
Sec. 956. Temporary and proposed regulations were published on May 8,
2015.
2. Guidance on the treatment under Sec. 956(c) of certain property
temporarily stored in the United States following Hurricane Irma or
Hurricane Maria.
3. Guidance under Sec. 1295, 1297, and 1298 on passive foreign
investment companies. Proposed regulations regarding foreign insurance
companies were published on April 24, 2015.
B. Inbound Transactions
1. Regulations under Sec. 897 and 1445 relating to changes in the
Protecting Americans from Tax Hikes Act of 2015.
C. Outbound Transactions
1. Regulations under Sec. 367. Notice 2016-73 regarding the treatment
of certain triangular reorganizations involving foreign corporations,
and the amount of an income inclusion required in certain inbound
nonrecognition transactions was released December 6, 2016. Notice 2014-
32 regarding triangular reorganizations involving foreign corporations
was released April 25, 2014.
2. Guidance on transfers of property to partnerships with related
foreign partners and controlled transactions involving partnerships.
Temporary and proposed regulations were published on January 19, 2017.
D. Foreign Tax Credits
1. Guidance under Sec. 901, including on the allocation of foreign
tax imposed on disregarded entities and partnerships.
2. Final regulations under Sec. 901(m) on covered asset acquisitions.
Temporary and proposed regulations were published on December 7, 2016.
3. Guidance under Sec. 905, including final regulations under
Sec. 905(c) on foreign tax redeterminations. Temporary and proposed
regulations were published on November 7, 2007. Notice 2016-10 was
released on January 15, 2016.
E. Transfer Pricing
1. Guidance under Sec. 482, including with respect to the treatment
and allocation of risk. Temporary and proposed regulations were
published on September 16, 2015.
2. Annual Report on the Advance Pricing Agreement Program.
Announcement 2017-03 was released March 27, 2017.
F. Sourcing and Expense Allocation
1. Regulations and other guidance under Sec. 861 regarding the
allocation and apportionment of interest expense, including guidance
related to interest expense attributable to certain loans to related
partnerships.
2. Regulations under Sec. 861 on the character of income, including
income arising in transactions involving intellectual property and the
provision of digital goods and services.
G. Treaties
1. Guidance under Sec. 894 and treaties, including regarding the
application of various treaty provisions to hybrid entities and
instruments.
H. Other
1. Guidance on the physical presence of certain individuals in the
Commonwealth of Puerto Rico or the United States Virgin Islands under
Sec. 937(a) following Hurricane Irma or Hurricane Maria.
2. Guidance under Chapter 3 (Sec. Sec. 1441-1446) and Chapter 4
(Sec. Sec. 1471-1474), including regulations on verification
requirements for sponsoring entities for Chapter 4 purposes, and
regulations regarding the withholding obligations on deemed
distributions from conversion ratio adjustments on convertible debt and
stock. Final, temporary, and proposed regulations under chapters 3 and
4 were published on January 6, 2017. Proposed regulations (regarding
verification requirements for sponsoring entities) were published on
January 6, 2017. Proposed regulations (regarding conversion ratio
adjustments) were published on April 13, 2016.
3. Regulations under Sec. Sec. 6039F, 6048, and 6677 on foreign trust
reporting and reporting with respect to foreign gifts, and regulations
under Sec. Sec. 643(i) and 679 relating to certain transactions between
U.S. persons and foreign trusts.
4. Regulations and other guidance under Sec. 7701.
5. Regulations under Sec. 1256(g)(2) regarding the definition of a
foreign currency contract, in light of the decision in Wright v.
Commissioner, 809 F.3d 877 (6th Cir. 2016).
PARTNERSHIPS
1. Final regulations under Sec. 1.337(d)-3 relating to partnership
transactions involving a corporate partner's stock or other equity
interests. Final, temporary, and proposed regulations were published on
June 12, 2015.
2. Final regulations under Sec. 469(h)(2) concerning limited partners
and material participation. Proposed regulations were published on
November 28, 2011.
3. Final regulations on the fractions rule under Sec. 514(c)(9)(E).
4. Regulations to update the securities partnership aggregation rules
under Sec. 704(c).
5. Final regulations under Sec. Sec. 704, 734, 743, and 755 arising
from the American Jobs Creation Act of 2004, regarding the disallowance
of certain partnership loss transfers and no reduction of basis in
stock held by a partnership in a corporate partner. Proposed
regulations were published on January 16, 2014.
6. Guidance under Sec. 707 on disguised sales of partnership
interests.
7. Final regulations under Sec. 732(f) regarding aggregation of basis
for partnership distributions involving equity interests of a partner.
Proposed regulations were published on June 12, 2015.
8. Final regulations under Sec. 752 regarding related person rules.
Proposed regulations were published on December 16, 2013.
9. Final regulations under Sec. Sec. 761 and 1234 on the tax
treatment of noncompensatory partnership options. Proposed regulations
were published on February 5, 2013.
10. Guidance under Sec. 7704(d)(1)(E) regarding qualifying income
derived from fertilizer for publicly traded partnerships.
TAX ACCOUNTING
1. Guidance under Sec. Sec. 167 and 168 for determining whether
certain assets used by a wireline telecommunication service provider
are primarily used for providing one-way or two-way communication
services.
2. Revenue procedure under Sec. 263(a) regarding the capitalization
of natural gas transmission and distribution property.
3. Guidance regarding the treatment of deferred revenue in stock
acquisitions.
4. Regulations under Sec. 453A regarding contingent payment sales.
5. Regulations under Sec. 472 regarding dollar-value last-in, first-
out (LIFO) inventories, including rules for combining pools as a result
of a change in method of accounting, certain corporate acquisitions,
and certain nonrecognition transactions.
6. Final regulations amending Sec. 1.472-8 regarding the inventory
price index computation (IPIC) method.
TAX ADMINISTRATION
1. Guidance under Sec. 6011.
2. Guidance under Sec. Sec. 25A, 6050S, and 6724(f) relating to
changes made by sections 804 and 805 of the Trade Preferences Extension
Act of 2015 regarding education tax credits and related information
reporting. Proposed regulations were published on August 2, 2016.
3. Update to Sec. Sec. 6051 and 6052 regarding truncated taxpayer
identification numbers.
PUBLISHED September 20, 2017 in FR as REG-105004-16 (NPRM).
4. Guidance under section 2006 of the Fixing America's Surface
Transportation Act of 2015 regarding due dates and extensions for
certain forms.
PUBLISHED July 20, 2017 in FR as REG-128483-15 (NPRM).
PUBLISHED July 20, 2017 in FR as TD 9821 (FINAL and TEMP).
5. Finalize removal of automatic extension of time to file certain
information returns. Proposed and temporary regulations were published
on August 13, 2015.
6. Regulations under Sec. Sec. 6662, 6662A, and 6664 regarding
accuracy-related penalties relating to understatements. Notice 2005-12,
which provided interim guidance, was published on February 14, 2005.
7. Final regulations under Sec. 6707A, as amended by section 2041(a)
of the Small Business Jobs Act of 2010, regarding the penalty for
failure to disclose reportable transactions. Proposed regulations were
published on August 28, 2015.
8. Guidance on safe harbors for de minimis errors on information
returns and payee statements under section 202 of the Protecting
Americans from Tax Hikes Act of 2015.
9. Guidance under Sec. 7123 concerning alternative dispute
resolution.
10. Guidance under Sec. 7345.
11. Update to Revenue Procedure 2007-56 (Combat Zone and Disaster
Relief).
12. Update to the whistleblower regulations.
13. Guidance on user fees.
PUBLISHED July 19, 2017 in FR as TD 9820.
TAX-EXEMPT BONDS
1. Guidance on remedial actions for tax-advantaged bonds under
Sec. Sec. 54A, 54AA, and 141.
2. Guidance on private activity bonds under Sec. 141.
3. Regulations on public approval requirements for private activity
bonds under Sec. 147(f). Proposed regulations were published on
September 9, 2008.
PUBLISHED September 28, 2017 in FR as REG-128841-07 (NPRM).
4. Guidance on rebate overpayment under Sec. 148.
PUBLISHED September 11, 2017 in IRB 2017-37 as REV. PROC.
2017-50 (RELEASED August 25, 2017).
5. Regulations on bond reissuance under Sec. 150.
APPENDIX--Regularly Scheduled Publications
JULY 2017
1. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. Sec. 42, 382,
1274, 1288, and 7520.
PUBLISHED July 3, 2017 in IRB 2017-27 as REV. RUL. 2017-14
(RELEASED June 16, 2017).
2. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in July 2017, the 24-month average segment
rates, the funding segment rates applicable for July 2017, the spot
segment rates for June 2017 that are used for determining minimum
present values, and the 30-year Treasury rates.
PUBLISHED July 31, 2017 in IRB 2017-31 as NOT. 2017-39
(RELEASED July 13, 2017).
3. Revenue ruling providing the average annual effective interest
rates charged by each Farm Credit Bank District.
PUBLISHED August 28, 2017 in IRB 2017-35 as REV. RUL. 2017-
16 (RELEASED August 25, 2017).
AUGUST 2017
1. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. Sec. 42, 382,
1274, 1288, and 7520.
PUBLISHED August 7, 2017 in IRB 2017-32 as REV. RUL. 2017-
15 (RELEASED July 18, 2017).
2. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in August 2017, the 24-month average segment
rates, the funding segment rates applicable for August 2017, the spot
segment rates for July 2017 that are used for determining minimum
present values, and the 30-year Treasury rates.
PUBLISHED August 28, 2017 in IRB 2017-35 as NOT. 2017-43
(RELEASED August 11, 2017).
3. Revenue procedure providing the domestic asset/liability
percentages and the domestic investment yield percentages for taxable
years beginning after December 31, 2015, for foreign companies
conducting insurance business in the United States.
PUBLISHED August 28, 2017 in IRB 2017-35 as REV. PROC.
2017-44 (RELEASED August 11, 2017).
SEPTEMBER 2017
1. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. Sec. 42, 382,
1274, 1288, and 7520.
PUBLISHED September 5, 2017 in IRB 2017-36 as REV. RUL.
2017-17 (RELEASED August 16, 2017).
2. Revenue ruling under Sec. 6621 regarding the applicable interest
rates for overpayments and underpayments of tax for the period October
through December 2017.
PUBLISHED September 25, 2017 in IRB 2017-18 as REV. RUL.
2017-18 (RELEASED September 8, 2017).
3. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in September 2017, the 24-month average
segment rates, the funding segment rates applicable for September 2017,
the spot segment rates for August 2017 that are used for determining
minimum present values, and the 30-year Treasury rates.
PUBLISHED October 2, 2017 in IRB 2017-40 as NOT. 2017-50
(RELEASED September 13, 2017).
4. Notice under Sec. 274 regarding the deemed substantiation of
travel expenses using per diem rates.
5. Update of Notice 2004-83 to add approved applicants for designated
private delivery service status under Sec. 7502(f). Will be published
only if any new applicants are approved.
6. Notice identifying the counties that experienced exceptional,
extreme, or severe drought during the preceding 12-month period ending
August 31, 2017, for purposes of determining whether the replacement
period within which to replace livestock sold on account of drought is
extended under Sec. 1033(e)(2)(B) and Notice 2006-82.
7. Revenue ruling setting forth the terminal charge and the standard
industry fare level (SIFL) cents-per-mile rates for the second half of
2017 for use in valuing personal flights on employer-provided aircraft.
8. Notice on annual adjustment in the fee imposed to fund the Patient
Centered Outcomes Research Trust Fund.
OCTOBER 2017
1. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. Sec. 42, 382,
1274, 1288 and 7520.
PUBLISHED October 10, 2017 in IRB 2017-41 as REV. RUL.
2017-20 (RELEASED September 19, 2017).
2. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in October 2017, the 24-month average segment
rates, the funding segment rates applicable for October 2017, the spot
segment rates for September 2017 that are used for determining minimum
present values, and the 30-year Treasury rates.
3. Revenue procedure under Sec. 1 and other sections of the Code
regarding inflation adjusted items for 2018.
4. Revenue procedure providing the loss payment patterns and discount
factors for the 2017 accident year to be used for computing unpaid
losses under Sec. 846.
5. Revenue procedure providing the salvage discount factors for the
2017 accident year to be used for computing discounted estimated
salvage recoverable under Sec. 832.
6. Update of Revenue Procedure 2005-27 listing the tax deadlines that
may be extended by the Commissioner under Sec. 7508A in the event of a
presidentially declared disaster or terrorist attack. Will be published
only if there are any updates.
7. Guidance providing the amounts of unused housing credit carryover
allocated to qualified states under Sec. 42(h)(3)(D) for the calendar
year.
8. Guidance providing the calendar year inflation adjustment factor
to be used in determining the credit for carbon dioxide
(CO2) sequestration under Sec. 45Q.
NOVEMBER 2017
1. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. 42, 382, 1274,
1288 and 7520.
2. Revenue ruling providing the ``base period T-Bill rate'' as
required by Sec. 995(f)(4).
3. Revenue ruling setting forth covered compensation tables under
Sec. 401(l)(5)(E) that are used for purposes of applying the permitted
disparity rules under Sec. 401(l) to defined benefit plans for the 2018
plan year.
4. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in November 2017, the 24-month average segment
rates, the funding segment rates applicable for November 2017, the spot
segment rates for October 2017 that are used for determining minimum
present values, and the 30-year Treasury rates.
5. Update of Revenue Procedure 2016 13 regarding adequate disclosure
for purposes of theSec. 6662 substantial understatement penalty and the
Sec. 6694 preparer penalty. Will be published only if there are any
updates.
6. Notice setting forth cost-of-living adjustments effective January
1, 2018, applicable to the dollar limits on benefits under qualified
defined benefit pension plans and other provisions affecting certain
plans of deferred compensation.
7. Federal Register Notice on Railroad Retirement Tier 2 tax rate.
8. Notice under Sec. 274 regarding the 2018 optional standard mileage
rates.
9. Notice setting forth required amendment deadlines for Sec. 401(a)
plans with respect to certain changes in qualification requirements.
10. Notice providing guidance for public power providers to submit
applications relating to reallocations of New Clean Renewable Energy
Bonds under Sec. 54C.
DECEMBER 2017
1. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. Sec. 42, 382,
1274, 1288, and 7520.
2. Revenue ruling under Sec. 6621 regarding the applicable interest
rates for overpayments and underpayments of tax for the period January
through March 2018.
3. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in December 2017, the 24-month average segment
rates, the funding segment rates applicable for December 2017, the spot
segment rates for November 2017 that are used for determining minimum
present values, and the 30-year Treasury rates.
JANUARY 2018
1. Revenue procedure updating the procedures for issuing private
letter rulings, determination letters, and information letters on
specific issues under the jurisdiction of the Chief Counsel.
2. Revenue procedure updating the procedures for furnishing technical
advice, including technical expedited advice, to certain IRS offices,
in the areas under the jurisdiction of the Chief Counsel.
3. Revenue procedure updating the previously published list of ``no-
rule'' issues under the jurisdiction of certain Associate Chief Counsel
(Corporate), Associate Chief Counsel (Financial Institutions and
Products), Associate Chief Counsel (Income Tax and Accounting),
Associate Chief Counsel (Passthroughs and Special Industries),
Associate Chief Counsel (Procedure and Administration), and Associate
Chief Counsel (Tax Exempt and Government Entities) on which advance
letter rulings or determination letters will not be issued.
4. Revenue procedure updating the procedures for issuing
determination letters and letter rulings on issues under the
jurisdiction of the Office of the Commissioner, Tax Exempt and
Government Entities Division, Employee Plans Rulings and Agreements
Office.
5. Revenue procedure updating the procedures for issuing
determination letters under the jurisdiction of the Office of the
Commissioner, Tax Exempt and Government Entities Division, Exempt
Organizations Rulings and Agreements Office.
6. Revenue procedure updating the previously published list of ``no-
rule'' issues under the jurisdiction of the Associate Chief Counsel
(International) on which advance letter ruling or determination letters
will not be issued.
7. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. Sec. 42, 382,
1274, 1288, and 7520.
8. Revenue ruling providing the dollar amounts, increased by the 2018
inflation adjustment, for Sec. 1274A.
9. Revenue procedure under Sec. 280F providing limitations on
depreciation deductions for owners of passenger automobiles first
placed in service during the calendar year and amounts to be included
in income by lessees of passenger automobiles first leased during the
calendar year.
10. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in January 2018, the 24-month average segment
rates, the funding segment rates applicable for January 2018, the spot
segment rates for December 2017 that are used for determining minimum
present values, and the 30-year Treasury rates.
11. Revenue procedure under Sec. 143 regarding average area purchase
price.
12. Notice providing the maximum allowable value for use of the fleet-
average value and vehicle-cents-per-mile rules to value employer-
provided automobiles first made available to employees for personal use
in the calendar year.
13. Revenue ruling setting forth the prevailing state assumed interest
rates provided for the determination of reserves under Sec. 807 for
contracts issued in 2017 and 2018.
FEBRUARY 2018
1. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. 42, 382, 1274,
1288, and 7520.
2. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in February 2018, the 24-month average segment
rates, the funding segment rates applicable for February 2018, the spot
segment rates for January 2018 that are used for determining minimum
present values, and the 30-year Treasury rates.
3. Notice under Sec. 911 on the Housing Cost Amount for 2018.
4. Notice providing the inflation adjustment factor for renewable
electricity (revised).
MARCH 2018
1. Revenue procedure providing annual indexing required under 36B.
2. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. Sec. 42, 382,
1274, 1288, and 7520.
3. Guidance providing the 2018 calendar year resident population
estimates used in determining the state housing credit ceiling under
Sec. 42(h) and the private activity bond volume cap under Sec. 146.
4. Revenue ruling under Sec. 6621 regarding the applicable interest
rates for overpayments and underpayments of tax for the period April
through June 2018.
5. Revenue ruling setting forth the terminal charge and the standard
industry fare level (SIFL) cents-per-mile rates for the first half of
2018 for use in valuing personal flights on employer-provided aircraft.
6. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in March 2018, the 24-month average segment
rates, the funding segment rates applicable for March 2018, the spot
segment rates for February 2018 that are used for determining minimum
present values, and the 30-year Treasury rates.
7. Revenue procedure providing the annual update to the List of
Automatic Changes for taxpayer changes in method of accounting.
APRIL 2018
1. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. Sec. 42, 382,
1274, 1288, and 7520.
2. Revenue procedure providing a current list of countries and the
dates those countries are subject to the Sec. 911(d)(4) waiver and
guidance to individuals who fail to meet the eligibility requirements
of Sec. 911(d)(1) because of adverse conditions in a foreign country.
3. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in April 2018, the 24-month average segment
rates, the funding segment rates applicable for April 2018, the spot
segment rates for March 2018 that are used for determining minimum
present values, and the 30-year Treasury rates.
4. Guidance providing the calendar year inflation adjustment factor
and reference prices for the renewable electricity production credit
under Sec. 45.
MAY 2018
1. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. Sec. 42, 382,
1274, 1288, and 7520.
2. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in May 2018, the 24-month average segment
rates, the funding segment rates applicable for May 2018, the spot
segment rates for April 2018 that are used for determining minimum
present values, and the 30-year Treasury rates.
3. Revenue procedure providing guidance for use of the national and
area median gross income figures by issuers of qualified mortgage bonds
and mortgage credit certificates in determining the housing cost/income
ratio under Sec. 143.
4. Revenue procedure under Sec. 223 regarding the inflation adjusted
items for 2019.
5. Revenue procedure under Sec. 5000A concerning the 2018 national
average premium for a bronze level of coverage.
6. Guidance providing the inflation adjustment factor to be used in
determining the enhanced oil recovery credit under Sec. 43 for tax
years beginning in the calendar year.
7. Notice regarding marginal production rates under Sec. 613A for oil
and gas well depletion.
JUNE 2018
1. Revenue ruling setting forth tables of the adjusted applicable
federal rates for the current month for purposes of Sec. Sec. 42, 382,
1274, 1288, and 7520.
2. Revenue ruling under Sec. 6621 regarding the applicable interest
rates for overpayments and underpayments of tax for the period July
through September 2018.
3. Notice setting forth updates for the corporate bond yield curve
for plan years beginning in June 2018, the 24-month average segment
rates, the funding segment rates applicable for June 2018, the spot
segment rates for May 2018 that are used for determining minimum
present values, and the 30-year Treasury rates.
4. Notice setting forth the 2015 Sec. 45K(d)(2)(C) reference price
for the nonconventional source production credit.
5. Notice setting the inflation adjustment factor for the credit for
carbon dioxide (CO2) sequestration under Sec. 45Q for
calendar year 2017.
______
THE HONORABLE CURTIS M. LOFTIS, JR.
State Treasurer
Post Office Box 11778
Columbia, SC 29211
Wade Hampton Building
1200 Senate Street
Columbia, SC 29201
(803) 734-2101 Fax (803) 734-2690
www.treasurer.sc.gov
July 12, 2018
Senator Tim Scott
717 Hart Senate Office Building
Washington, DC 20510
Dear Senator Scott:
I am writing to ask you to join a letter directed to Secretary
Mnuchin requesting answers to questions regarding matured and
unredeemed United States Savings Bonds. In the May 22, 2018,
Subcommittee on Financial Services and General Government Hearing,
Secretary Mnuchin gave his personal assurance to Senator Moran that he
would follow up with answers to Senator Moran's questions regarding
U.S. Treasury's refusal to honor certain states' escheat judgments and
redemption requests for the proceeds of matured and unredeemed U.S.
Savings Bonds.
U.S. Treasury passed a regulation on Christmas Eve in 2015, which
effectively prohibits my ability to fulfill my responsibilities under
South Carolina law to make every effort to reunite our citizens with
their lost or unclaimed properly. This regulation obstructs slates'
efforts to redeem matured and unredeemed savings bonds that have been
lost, stolen, abandoned, or destroyed and return the proceeds to their
citizens.
In the past, little or no effort has been made by Treasury to
locate the owners of matured and unredeemed debt (commonly called
``MUD'' by Treasury). Savings bonds that are fully mature yet remain
unredeemed by the savings bond owner are classified as MUD. These
savings bonds, by Treasury's own admission, are unpaid loans that are
owed to the citizens by the federal government. Every effort has been
made to convince Treasury to return these U.S. savings bonds to the
states so that the states could carry out their statutory duties as
unclaimed prope1ty administrators. The states have made numerous
redemption attempts and Freedom of information Act requests to Treasury
in order to accomplish reuniting savings bond owners with their
proceeds. Unfortunately, Treasury has refused to redeem escheated
savings bonds unless a state has physical possession of the bond and
has also denied states' repeated Freedom of Information Act requests
seeking to identify and locate the owners of the lost or unclaimed
bonds. As a result, a number of state treasurers, including myself,
have brought lawsuits against Treasury in the Court of Federal Claims
to address this issue. If the escheated savings bonds are redeemed and
the money sent to the states, the states will use their highly
celebrated unclaimed property programs to reunite savings bond owners
with the proceeds of their savings bonds. The states are uniquely
prepared and have the resources to address this issue. This effort by
the states will allow citizens to be reunited with their investments
and will allow U.S. Treasury to fulfill its contractual responsibility
to repay these savings bonds.
To give you an example, our state obtained a court order with an
effective date of December 18, 2015, escheating the title to
approximately $249 million of these matured and unredeemed bonds. When
I presented this order to the U.S. Treasury along with a request for
Treasury to redeem the proceeds of these bonds that South Carolinians
purchased many years ago, Treasury denied my request.
I hope this letter raises your awareness of Treasury's endeavors to
impede the states' efforts. I ask that you urge Treasury to reconsider
this regulation and their policies, and to develop a reasonable
solution to this issue. Finally, I ask that you join the attached
letter and request that Treasury provide the information that has been
sought by you and your colleagues for many years.
Sincerely,
Curtis Loftis
Treasurer for the State of South Carolina
______
U.S. SENATORS
States Currently Involved in Federal Case
------------------------------------------------------------------------
State Name
------------------------------------------------------------------------
Kansas Pat Roberts
------------------------------------------------------------------------
Jerry Moran
------------------------------------------------------------------------
South Dakota John Thune
------------------------------------------------------------------------
Mike Rounds
------------------------------------------------------------------------
Louisiana Bill Cassidy
------------------------------------------------------------------------
John Kennedy
------------------------------------------------------------------------
Kentucky Mitch McConnell
------------------------------------------------------------------------
Rand Paul
------------------------------------------------------------------------
Mississippi Roger F. Wicker
------------------------------------------------------------------------
Cindy Hyde-Smith
------------------------------------------------------------------------
South Carolina Lindsey Graham
------------------------------------------------------------------------
Tim Scott
------------------------------------------------------------------------
Indiana Joe Donnelly
------------------------------------------------------------------------
Todd Young
------------------------------------------------------------------------
Ohio Sherrod Brown
------------------------------------------------------------------------
Rob Portman
------------------------------------------------------------------------
Florida Bill Nelson
------------------------------------------------------------------------
Marco Rubio
------------------------------------------------------------------------
Arkansas John Boozman
------------------------------------------------------------------------
(represented by separate counsel) Tom Cotton
------------------------------------------------------------------------
Additional States With Escheatment Laws
------------------------------------------------------------------------
State Name
------------------------------------------------------------------------
Pennsylvania Robert P. Casey, Jr.
------------------------------------------------------------------------
Patrick J. Toomey
------------------------------------------------------------------------
Missouri Claire McCaskill
------------------------------------------------------------------------
Roy Blunt
------------------------------------------------------------------------
Iowa Chuck Grassley
------------------------------------------------------------------------
Joni Ernst
------------------------------------------------------------------------
North Carolina Richard Burr
------------------------------------------------------------------------
Thom Tillis
------------------------------------------------------------------------
Georgia Johnny Isakson
------------------------------------------------------------------------
David Perdue
------------------------------------------------------------------------
New Hampshire Jeanne Shaheen
------------------------------------------------------------------------
Margaret Wood Hassan
------------------------------------------------------------------------
Maine Susan M. Collins
------------------------------------------------------------------------
Angus S. King, Jr.
------------------------------------------------------------------------
Illinois Richard J. Durbin
------------------------------------------------------------------------
Tammy Duckworth
------------------------------------------------------------------------
Wisconsin Ron Johnson
------------------------------------------------------------------------
Tammy Baldwin
------------------------------------------------------------------------
Rhode Island Jack Reed
------------------------------------------------------------------------
Sheldon Whitehouse
------------------------------------------------------------------------
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
The Finance Committee meets this morning to consider the
nominations of Justin Muzinich to be Deputy Secretary of the Treasury
and Michael Desmond to be Chief Counsel at IRS. I'll begin my remarks
with this.
This committee is facing levels of stonewalling from the
administration on letters and policy issues that I never expected I'd
see. We'd get similar answers from the Treasury if we posed our
questions to the statue of Alexander Hamilton outside Department
headquarters. And it goes back to Secretary Mnuchin's very first
appearance before this committee. I asked that he work with me to crack
down on the abuse of shell companies, a magnet for all manner of
shadowy, illicit conduct. He told me the Treasury would get right on
it. But a year and a half have passed, and it's business as usual at
the Treasury on shell companies. And let's be clear, this wasn't some
wacky proposition out of left field. I wrote a bill on this issue with
Senator Rubio, a Republican.
Today we'll ask Mr. Muzinich what he will do to end this Treasury
stonewalling if he's confirmed. He told me in our meeting earlier this
week that he'd simply be a ``building manager'' as Deputy Secretary.
But based on the glowing quotes in the newspapers from Treasury
officials praising his financial expertise and previewing his expansive
role on tax policy, debt management, and more, it's clear people in the
building have a different perspective. Their accounts suggest that
calling Mr. Muzinich the ``building manager'' is a little like saying
an NBA all-star will be a nice role-player off the bench. It's clear
he's the Secretary's right-hand man, and that's why we expect answers
on how he's going to fix these long-running problems.
Bottom line on the stonewalling issue: committee members and I
aren't firing off nasty-grams demanding the resignation of everybody
who's ever come within 25 feet of Paul Manafort. We're not asking for
anybody's high school diaries. This committee is attempting to pursue
information that's key to uncovering corruption and protecting our
democracy from foreign interference.
That includes working to determine the extent of the relationship
between Alexander Torshin, a Russian national with close ties to Putin,
and the NRA. It includes a request for information that would help
determine the extent of Michael Cohen's influence-peddling. And because
the President refuses to release his tax returns, it includes a request
for information that would help shed light on questionable Trump real
estate deals with Russian individuals. The list goes on from there.
At some point, this ceases to be a case of Treasury being slow to
respond, and it looks more like actively abetting the coverup of
corruption and illegal activity.
This committee also needs to know whether Mr. Muzinich agrees with
the recent decision to open the floodgates to more dark money in our
politics. This was a tax-policy change, and Mr. Muzinich says he's a
tax-policy guy. You can try to downplay the significance of this
decision, and you can try to spin it as a harmless policy update. But
here's my view: if your dark money policy gives oligarchs in Moscow
reason to throw back celebratory vodkas, and if their friends at the
NRA have a green light to flood the airwaves with even more election
secrecy, you made the wrong call. Last Monday night, the Trump
administration wrested even more control of our democracy from the
hands of American citizens.
Furthermore, if the Trump White House is ordering hasty changes to
tax administration policies without public debate in ways that threaten
the legitimacy of our elections, are those changes going to stand?
After all, Mr. Desmond, as IRS Chief Counsel, will be responsible for
carrying out this decision, and any proposed changes to IRS rules will
have to go through him. Mr. Desmond must demonstrate to this committee
that he will remain independent and unswayed by political pressure from
the Trump White House on this and other issues.
In closing, there's one final tax policy issue to discuss. A year
ago, the Treasury Department and Republicans in Congress made it clear
they didn't want to work on tax reform in a bipartisan way. Now
Americans are learning there's a new effort to update the partisan tax
playbook with another plan that will benefit the wealthy. The House is
already working on it, apparently uninterested in learning from the
mistakes they made the first time around.
The Trump tax law has been in place for months, and the quarterly
numbers from the Bureau of Labor Statistics show real wages fell over
the first half of this year. Now it's looking like Trump tax cut 2.0 is
going to be yet another massive windfall for high flyers. Even more
goodies for the most fortunate while typical families are having a
harder time making ends meet.
It's another plan that does nothing to resolve the fact that our
tax code is split in two. There's one strict, punishing set of rules
for factory workers and cops on the beat, and another loose set of
rules that allows high flyers to pay what they want, when they want.
Going down the partisan road yet again makes it harder for this
committee and the Congress to return to a point where bipartisanship on
taxes is possible. So I'll have questions for Mr. Muzinich on that
issue today as well.
______
NEWS RELEASE
Bureau of Labor Statistics
u.s. department of labor
Transmission of material in this release is embargoed USDL-18-1279
until 8:30 a.m. (EDT), Friday, August 10, 2018
Technical Information: (202) 691-6555 [email protected] www.bls.gov/
ces
Media Contact: (202) 691-5902 [email protected]
REAL EARNINGS--JULY 2018
All employees
Real average hourly earnings for all employees were unchanged from June
to July, seasonally adjusted, the U.S. Bureau of Labor Statistics
reported today. This result stems from a 0.3-percent increase in
average hourly earnings combined with a 0.2-percent increase in the
Consumer Price Index for All Urban Consumers (CPI-U).
Real average weekly earnings decreased 0.2 percent over the month due
to no change in real average hourly earnings combined with a 0.3-
percent decrease in the average workweek.
Chart 1: Over-the-month percentage change in real average hourly
earnings for all employees, seasonally adjusted, July 2017-July 2018
Percent Change
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Real average hourly earnings decreased 0.2 percent, seasonally
adjusted, from July 2017 to July 2018. Combining the change in real
average hourly earnings with the 0.3-percent increase in the average
workweek resulted in a 0.1-percent increase in real average weekly
earnings over this period.
Production and nonsupervisory employees
Real average hourly earnings for production and nonsupervisory
employees decreased 0.1 percent from June to July, seasonally adjusted.
This result stems from a 0.1-percent increase in average hourly
earnings combined with a 0.1-percent increase in the Consumer Price
Index for Urban Wage Earners and Clerical Workers (CPI-W).
After combining the change in real average hourly earnings with no
change in average weekly hours, real average weekly earnings were
unchanged over the month.
Chart 2: Over-the-month percentage change in real average hourly
earnings for production and nonsupervisory employees, seasonally
adjusted, July 2017-July 2018
Percent Change
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
From July 2017 to July 2018, real average hourly earnings decreased 0.4
percent, seasonally adjusted. Combining the change in real average
hourly earnings with a 0.3-percent increase in the average workweek
resulted in a 0.1-percent decrease in real average weekly earnings over
this period.
``Real Earnings for August 2018'' is scheduled to be released on
Thursday, September 13, 2018 at 8:30 a.m. (EDT).
Table A-1. Current and real (constant 1982-1984 dollars) earnings for
all employees on private nonfarm payrolls, seasonally adjusted
------------------------------------------------------------------------
June 2018 July 2018
July 2017 May 2018 p p
------------------------------------------------------------------------
Real average hourly earnings $10.78 $10.75 $10.76 $10.76
\1\........................
Real average weekly earnings $370.99 $370.98 $372.13 $371.38
\1\........................
Consumer Price Index for All 244.236 250.535 250.857 251.286
Urban Consumers............
Average hourly earnings..... $26.34 $26.94 $26.98 $27.05
Average weekly hours........ 34.4 34.5 34.6 34.5
Average weekly earnings..... $906.10 $929.43 $933.51 $933.23
OVER-THE-MONTH PERCENT
CHANGE
Real average hourly earnings 0.2 0.1 0.1 0.0
\1\........................
Real average weekly earnings 0.2 0.1 0.3 -0.2
\1\........................
Consumer Price Index for All 0.1 0.2 0.1 0.2
Urban Consumers............
Average hourly earnings..... 0.3 0.3 0.1 0.3
Average weekly hours........ 0.0 0.0 0.3 -0.3
Average weekly earnings..... 0.3 0.3 0.4 0.0
OVER-THE-YEAR PERCENT CHANGE
Real average hourly earnings 0.7 0.0 0.0 -0.2
\1\........................
Real average weekly earnings 0.7 0.4 0.5 0.1
\1\........................
Consumer Price Index for All 1.7 2.7 2.8 2.9
Urban Consumers............
Average hourly earnings..... 2.5 2.8 2.7 2.7
Average weekly hours........ 0.0 0.3 0.6 0.3
Average weekly earnings..... 2.5 3.1 3.3 3.0
------------------------------------------------------------------------
\1\ The Consumer Price Index for All Urban Consumers (CPI-U) is used to
deflate the earnings series for all employees.
p Preliminary.
Table A-2. Current and real (constant 1982-1984 dollars) earnings for
production and nonsupervisory employees on private nonfarm payrolls,
seasonally adjusted \1\
------------------------------------------------------------------------
June 2018 July 2018
July 2017 May 2018 p p
------------------------------------------------------------------------
Real average hourly earnings $9.27 $9.23 $9.24 $9.23
\2\........................
Real average weekly earnings $312.44 $312.04 $312.15 $312.11
\2\........................
Consumer Price Index for 237.939 244.587 244.931 245.287
Urban Wage Earners and
Clerical Workers...........
Average hourly earnings..... $22.06 $22.58 $22.62 $22.65
Average weekly hours........ 33.7 33.8 33.8 33.8
Average weekly earnings..... $743.42 $763.20 $764.56 $765.57
OVER-THE-MONTH PERCENT
CHANGE
Real average hourly earnings 0.1 0.0 0.1 -0.1
\2\........................
Real average weekly earnings 0.1 0.0 0.0 0.0
\2\........................
Consumer Price Index for 0.1 0.2 0.1 0.1
Urban Wage Earners and
Clerical Workers...........
Average hourly earnings..... 0.2 0.3 0.2 0.1
Average weekly hours........ 0.0 0.0 0.0 0.0
Average weekly earnings..... 0.2 0.3 0.2 0.1
OVER-THE-YEAR PERCENT CHANGE
Real average hourly earnings 0.5 -0.2 -0.2 -0.4
\2\........................
Real average weekly earnings 0.9 0.4 0.0 -0.1
\2\........................
Consumer Price Index for 1.7 2.9 3.0 3.1
Urban Wage Earners and
Clerical Workers...........
Average hourly earnings..... 2.2 2.7 2.7 2.7
Average weekly hours........ 0.3 0.6 0.3 0.3
Average weekly earnings..... 2.5 3.3 3.0 3.0
------------------------------------------------------------------------
\1\ Data relate to production employees in mining and logging and
manufacturing, construction employees in construction, and
nonsupervisory employees in the service-providing industries. These
groups account for approximately four-fifths of the total employment
on private nonfarm payrolls.
\2\ The Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W) is used to deflate the earnings series for production and
nonsupervisory employees.
p Preliminary.
Technical Note
The earnings series presented in this release are derived from the
Bureau of Labor Statistics' Current Employment Statistics (CES) survey,
a monthly establishment survey of employment, payroll, and hours. The
deflators used for constant dollar earnings series presented in this
release come from the Consumer Price Indexes Program. The Consumer
Price Index for All Urban Consumers (CPI-U) is used to deflate earnings
for the all employees series, while the Consumer Price Index for Urban
Wage Earners and Clerical Workers (CPI-W) is used to deflate earnings
for the production and nonsupervisory employees series. Seasonally
adjusted data are used for estimates of percent change from the same
month a year ago for current and constant average hourly and weekly
earnings. Special techniques are applied to the CES hours and earnings
data in the seasonal adjustment process to mitigate the effect of
certain calendar-related fluctuations. Thus, over-the-year changes of
these hours and earnings are best measured using seasonally adjusted
series. A discussion of the calendar-related fluctuations in the hours
and earnings data and the special techniques to remove them is
available in the February 2004 issue of Employment and Earnings or at
www.bls.gov/ces/cesfltxt.htm.
Earnings series from the monthly establishment survey are estimated
arithmetic averages (means) of the hourly and weekly earnings of all
jobs in the private nonfarm sector of the economy, as well as of all
production and nonsupervisory jobs in the private nonfarm sector of the
economy. Average hourly earnings estimates are derived by dividing the
estimated industry payroll by the corresponding paid hours. Average
weekly hours estimates are similarly derived by dividing estimated
aggregate hours by the corresponding number of jobs. Average weekly
earnings estimates are derived by multiplying the average hourly
earnings and the average weekly hours estimates. This is equivalent to
dividing the estimated payroll by the corresponding number of jobs. The
weekly and hourly earnings estimates for aggregate industries, such as
the total private sector averages printed in this release, are derived
by summing the corresponding payroll, hours, and employment estimates
of the component industries. As a result, each industry receives a
``weight'' in the published averages that corresponds to its current
level of activity (employment or total hours). This further implies
that fluctuations and varying trends in employment in high-wage versus
low-wage industries as well as wage rate changes influence the earnings
averages.
There are several characteristics of the series presented in this
release that limit their suitability for some types of economic
analyses. (1) The denominator for the all employee weekly earnings
series is the number of private nonfarm jobs. Similarly, the
denominator of the production and nonsupervisory employee weekly
earnings series is the number of private nonfarm production and
nonsupervisory employee jobs. This number includes full-time and part-
time jobs as well as the jobs held by multiple jobholders in the
private nonfarm sector. These factors tend to result in weekly earnings
averages significantly lower than the corresponding numbers for full-
time jobs. (2) Annual earnings averages can differ significantly from
the result obtained by multiplying average weekly earnings times 52
weeks. The difference may be due to factors such as turnovers and
layoffs. (3) The series are the average earnings of all employees or
all production and nonsupervisory jobs, not the earnings average of
``typical'' jobs or jobs held by ``typical'' workers. Specifically,
there are no adjustments foroccupational, age, or schooling variations
or for household type or location. Many studies have established the
significance of these factors and that their impact varies over time.
Seasonally adjusted data are preferred by some users for analyzing
general earnings trends in the economy since they eliminate the effect
of changes that normally occur at the same time and in about the same
magnitude each year and, therefore, reveal the underlying trends and
cyclical movements. Changes in average earnings may be due to seasonal
changes in the proportion of workers in high-wage and low-wage
industries or occupations or to seasonal changes in the amount of
overtime work, and so on.
For more information, see Thomas Gavett, ``Measures of Change in Real
Wages and Earnings,'' Monthly Labor Review, February 1972. Information
in this release will be made available to sensory impaired individuals
upon request. Voice phone: 202-691-5200; TDD Message Referral Phone
Number: 1-800-877-8339.