President Obama recently announced his nomination of John Koskinen as the next Commissioner of the Internal Revenue Service for the term expiring on November 12, 2017. President Obama stated, “John is an expert at turning around institutions in need of reform. With decades of experience, in both the private and public sectors, John knows how to lead in difficult times, whether that means ensuring new management or implementing new checks and balances. Every part of our government must operate with absolute integrity and that is especially true for the IRS. I am confident that John will do whatever it takes to restore the public’s trust in the agency.”
The IRS Commissioner is appointed by the President, with the consent of the Senate, for a five-year term. Internal Revenue Code § 7803 requires that the appointment be made from individuals who, among other qualifications, have a demonstrated ability in management. Section 7803 also provides that regardless of who and when the next Commissioner is confirmed by the Senate, their term will expire on November 13, 2017 (also, it should be noted that the IRS Commissioner may be removed at the will of the President).
Treasury Secretary Lew, on the nomination of John Koskinen to lead the Internal Revenue Service, stated “I am pleased the President has nominated John Koskinen to be the next Commissioner of the Internal Revenue Service. With a distinguished record of turning around large companies and reorganizing the management and operations of highly complex public and private institutions, John is the right person to take on this critical position at this important time. Because John has a clear understanding of how to make organizations more effective and an unshakeable commitment to public service, he will be an exceptional leader who will strengthen the institution and restore confidence in the IRS. John is a man of the highest integrity, and I want to thank him for agreeing to return to public life and serve his country again after a long and accomplished career. I urge the Senate to confirm this nomination quickly.”
Treasury Secretary Lew further stated “If confirmed, John will build on the extraordinary work of Danny Werfel. Danny is an outstanding public servant who has done a remarkable job of putting the IRS on a stronger footing in just a matter of months. He has improved the agency’s operations, and he has paved the way so that the IRS can meet its fundamental obligation to provide fair, high-quality service to taxpayers.”
John Koskinen served as Non-Executive Chairman of Freddie Mac from 2008 to 2011 and acting CEO in 2009. From 2004 to 2008, Mr. Koskinen was the President of the United States Soccer Foundation. Prior to this, Mr. Koskinen was Deputy Mayor and City Administrator of Washington, D.C. from 2000 to 2003, Assistant to the President and Chair of the President’s Council on Year 2000 Conversion from 1998 to 2000, and Deputy Director for Management of the Office of Management and Budget from 1994 to 1997.
Prior to entering government service, Mr. Koskinen worked for 21 years for the Palmieri Company in a number of leadership positions including, CEO and Chairman, President, and Vice President. Earlier in his career, he served as Administrative Assistant to Senator Abraham Ribicoff, Legislative Assistant to Mayor John Lindsey of New York City, and Assistant to the Deputy Executive Director of the National Advisory Commission on Civil Disorders (the “Kerner Commission”). Mr. Koskinen practiced law with the firm of Gibson, Dunn and Crutcher and clerked for Judge David Bazelon, Chief Judge of the U.S. Court of Appeals for the District of Columbia. He serves on the boards of AES Corp. and American Capital, Ltd. Mr. Koskinen received a B.A. from Duke University and an L.L.B. and J.D. from Yale University School of Law. John Koskinen was born June 30, 1939 in Cleveland, Ohio.
Mr. Koskinen would replace Principal Deputy Commissioner Daniel Werfel, who replaced Acting Commissioner Steven Miller (before being asked to resign) who replaced Commissioner Doug Shulman (following the normal expiration of his term on November 13, 2012). Got it? John Kostinen has been described by some who know him as “incredibly fair and balanced” and “among the finest and most competent people, a total straight shooter,” character traits that generally sound right for the position.
Under any set of circumstances, being the new IRS Commissioner would be a challenging task. Assuming the role during times where the IRS has been accused of targeting taxpayers for extra scrutiny based on their political ideology and numerous other government agencies are investigating the resulting “scandal” or “phony scandal,” is deserving of our respect. Few would voluntarily walk into a political inferno without a strong degree of self-confidence in their ability to accomplish the task at hand.
If confirmed by the Senate, John Koskinen will be spending much of
his time responding to and testifying before Congress. Based upon his previous experiences, he will likely perform in a politically satisfactory manner. As to the future tax administration operations of the IRS, much will depend on the individuals John Kostinen appoints to the upper management positions within the IRS, probably most importantly the Deputy Commissioner for Services and Enforcement having responsibility for overseeing the four primary operating divisions of the IRS – the Wage and Investment Division, the Large Business and International Division, the Small Business / Self-Employed Division, and the Tax Exempt Governmental Entities Division.
Rumors have long circulated to the effect that numerous upper IRS management people (those with career experience, enforcement and otherwise) are likely leaving in the forseeable future. Something like 35-45% of senior IRS executives are eligible to retire and many have been waiting to see who would be nominated as Commissioner and determine the future direction of the IRS. Most have remained out of a sense of loyalty to the agency – once retirement eligible, they are effectively working for less (retirement benefits basically being a function of current salary) and certainly far less than many would receive if employed in the private sector.
It is impossible to train experience without dedicated, experienced trainers. If a significant number of senior executives leave the IRS, the agency will struggle. If it struggles a little, problems will likely occur. If it struggles more than a little, significant problems will occur.
John Koskinen must quickly restore public confidence in the IRS. If he can calm the Congressional and public waterways and cooperates in letting the various investigations of the IRS run their course, he will bring value to the IRS as an institution. Prior to 1997, IRS Commissioners were typically “tax people” having knowledge and experience working with the IRS from the outside. Since 1997, there have been no “tax people” confirmed as IRS Commissioner. Some would assert that a true manager could manage any large organization, whether focused on tax or not. Others would assert that a tax person would be better equipped to more quickly identify and rectify issues lurking within a tax agency without having to rely upon others.
Whether or not John Koskinen is to some degree a “tax person”, he will need to quickly earn the respect and confidence of U.S. taxpayers and those who represent such taxpayers before the IRS. Our system of taxation depends upon voluntary compliance with our tax laws. Voluntary compliance is inherently enhanced when the taxpayer and tax professional communities respect the agency enforcing the tax laws of our country. Remember, among its various responsibilities, the IRS is also the “accounts receivable department” for the U.S. government. A proper level of tax enforcement efforts focused on areas of non-compliance can impact voluntary compliance with our tax laws. Public perceptions regarding the fairness of what is to be a non-political agency can impact voluntary compliance with our tax laws as much as parking an empty police car at the appropriate intersection.
On the tax enforcement side of the IRS house, many mid-to-lower level IRS employees are generally unaffected by who is or is not the Commissioner. The vast majority of IRS employees have never met a Commissioner. Undoubtedly, recent public events, whether accurate or not, whether isolated or not, have adversely impacted the IRS workforce – a workforce that includes many extremely fine, hard working individuals who could have reaped greater personal financial rewards in the private sector. Each IRS employee reports to someone higher up the ladder and that person is generally responsible for assuring that lower-level employees do the job at hand. As in the private sector, some are better managers than others. As in the private sector, some employees are undoubtedly more manageable than others and some do not require much in the way of management. However, the executive ranks of the IRS oversee large numbers of employees and must continually find ways to improve morale and motivate even the most dedicated employees.
The IRS must balance service to the taxpayer community with an appropriate degree of enforcement of our nation’s tax laws. A freeze of the operational status of the IRS caused by recent events and departing executives could significantly reduce tax enforcement efforts and adversely impact at least the fringe areas of voluntary compliance. Time will tell whether John Koskinen can keep the IRS focused and move it forward with respect and integrity . . . but for now, he deserves our support and respect for his willingness to assume the position of Commissioner in these difficult times for the IRS.