>> i disagree with that. perhaps that is what he is referring to. we saw congress take a political approach, a very political approach that then precipitated july in the consideration of the pipeline. what is happening and what has been happening is a price that that has been connected according to the rulebook, according to established procedure by previous administrations of the public parties. we have reached the point where there has been environmental impact statement issued by the state department, opening up a

timeframe in which the public and other agencies comment on and are heard from and those views are where the state department continues to own the process. that way it should be. the process is designed to be insulated from politics. it does the experts from the politics that if i've easily surrounded this issue. >> thank you, jay. i'm keystone, ken salazar, the former interior secretary this morning gave a news conference anomalies that he thinks the keystone should be built, but he went on to say on the issue of cracking coming he thinks it is safe and quote there is not a single case where phrack and has created an environmental problems for anyone. we need to make sure that is told. you agree or disagree?

>> on the second part? i haven't seen those remarks. the president believes natural gas is an important part of our future and the methods that we use to extract you need to be and secure. we have to take steps to ensure that is the case. i am not qualified to dunnage what impacts there has been paired but i can tell you is what his policy approach this administration has taken is. >> i'm keystone camera set is it better to get oil from record never from the north or someplace in the middle east? is that they view the white house would agree with? >> what i can tell you is for the first time in 20 years but we are producing more oil in the united states of america than we are importing. that is a fact and that is a big deal and it is ventured out for several months and will continue to be true. because in no small measure of all of the above approach the president has taken to our energy needs.

that approach includes renewables and includes the historic standard rule that the president put in place to reduce carbon emissions, reduce our dependency on oil and general and therefore reduce our need to import foreign oil. it's good for national security, our economy. the assessments about impacts related to that pipeline are being made by experts. that process is underway. you know, as i just said, a lot of effort to politicize this, too, you now, pull it out of the framework that exists precisely because the decisions need to be isolated from politics. the president's intent is to let the process play out the way it has been a pass under the republic unshared public

administration. a milestone has been crossed. the process isn't completed yet. until it is, we are going to keep it inflated the way it should be. >> on the report coming you are correct cbo is saying that unemployment and jobs may come back because there is demand being created. people on medicaid have more money to spend, et cetera. is the president talked about what the independent umpire by both parties say in the signature achievement creates an incentive to work. not that it killed jobs. >> as much of social security, much as medicare did and continues to do, a program which provides freedom, including freedom from fear is a good for our economy and the american people. there's been a lot of false

reporting and some news outlets post a report on cbo said. the fact of the matter is the opportunity created by affordable quality health insurance allows families in america to make a decision about how they will work and if they will work and there is no question if we did away with it in addition to jacking up the deficit, something republicans are supposed to want to do and in addition to throwing a lot of people off health insurance, we would add folks to the labor force. you seem to be true we demolish the social security. what is happening with the affordable care act is you are in the near term according to cbo report, the aca setting in aca setting impetus to job creation and therefore -- okay.

no, in the near term. it is also providing freedom, opportunity and choice that was important and related specifically to the job log caused by republicans and their fear of leaving a job. there is an interesting statistic in relation and to this earlier today is that folks in america who are 63 waiting to get on medicare are less likely than those who are 65 because they are the security of health insurance provided by medicare. in an explosion in a partnership at 65. why? probably not because they agreed a deal for 65 that they didn't have a 63, but they have the security. i need to emphasize today the cbo clearly states that it did not take into account very important factors that influence

labor participation figure. that is the dramatic come economic from the beneficial impact of reduced growth in health care costs. the dramatic unofficial impact of reduced absenteeism and reduced incentives of depression and injury and illnesses that comes from additional people being covered by health insurance. these are positive benefits that are strong countervailing force against even that particular development cbo identified or projected. if you take all of that into account, it reinforces with the cbo report as, which is the aca is benefiting our economy, providing access to health insurance to millions of people who didn't have it and is giving families across the country and individuals across the country the freedom and choice and opportunity they lack the

flypast. i also strongly about this at all. >> following briefly on that, i want to talk about the budget deficit spirit over the next couple years they will drop 514 million -- [inaudible] because the baby boomers retiring and shrinking. the obamacare system, which then does reduce the labor force and that some people may reduce their hours? >> peter coming you clearly didn't read the report to clearly state in cbo is previously estimated -- >> we read as much as the report as we can. we've listened to briefings on it. if fewer people are working fewer hours, by design, explain in simple terms why that doesn't provide less tax revenue can somehow doesn't hurt the economy. >> first of all, let me correct

you. as the cbo reported yesterday, consistent with what is reported in the past, cbo projects the affordable care act will reduce the deficit by a trillion dollars. another is, you abolish the aca and therefore don't have the effect you are talking about in terms of people choosing not to work or reducing hours and you jack up the deficit by a trillion dollars. let's be clear about the impact on the deficit. the cbo said yesterday as it has in the past the affordable carrot reduced the deficit over the 20 year window by trillion dollars. one. two, when it comes to the economic impact, as the head of the cbo said today, there are other factors when it comes to labor force participation and hours and that impact on job creation that are not accounted for. jason talked about this yesterday. one significant one is the

historic reduction in health care inflation that we have seen. we've had the slowest rate of health care in 50 years since the affordable care act passed in the worcester police contradict those who oppose the affordable care act. that has enormous positive impact. if you're projecting -- if you were five years ago somebody responsible for health care cost and employee provided health insurance and you have to protect what those costs would be, you were going to base it on for consensus estimates for what they would be for the next 10 years. you have found that in the interim that you saved a bunch of money because as it turns out the growth is much lower than the affordable characters contributed significantly to the production and growth. that in turn has significant positive economic benefit on job

creation. again, it is impossible to read the cbo report and not recognize that it contains rebuttals of a lot of the critiques that we have heard from republicans about what the affordable care act with due to the economy. the cbo report says specifically contrary to everything republicans have said, the affordable care act is not and will not significantly reduce employers to reduce hours, throw people into part-time employment. >> we reinforces the guys indicated, but encourages americans in his words not to get on the ladder of life and begin getting the dignity of work. what is the white house position on that language? >> i understand the report for those who actually see it for what it is is complicated if you still want to be an opponent of the affordable care act. >> i'm not going to work as much because i'm benefiting.

i'm getting new income in the form of subsidy. >> what i would say, peter, the benefit of having the freedom and choice and opportunity that health insurance security provides outweighs those considerations. if you are somebody locked in a job and has to keep that job in order to make sure your family has health care, but you either can't stand the job or you have a great idea to start a business, but you can't go out and started because you lose health care if you get your job, this creates the opportunity for entrepreneurship that did not exist prior to the affordable care act. that should be something conservatives celebrate. for free american studios celebrate. we certainly do. it is great for entrepreneurs. it is great for those five families and others were the mother and father are working full-time because only one of

them has health insurance they need for their family. they now have the choice to continue working to the point we talked about yesterday. this is that forcing people to give up their 60 hour week job if they want to keep it because as the report clearly states, the affordable care act does not cause businesses to shed jobs, again contradicting accusation critics have been making for years. >> with another deadline passing today, i want to get a sense of whether any punitive actions are presently in the works? >> of a chemical weapons issue? i really don't have anything to add except we are watching really closely and working with international partners including russia. again, i think russia has obviously a huge stake in this then is the primary intraocular with the serious regime and man out to the world they expect the regime to deliver a substantial

portion of the stockpile in the relatively near future. we watched to see that happens. >> on a lot of -- lighter now -- [inaudible] >> i don't offer any conversations we've had with athletes in the run-up to the alan pics. certainly not in the recent past. like everyone who loves to watch the games coming is looking forward to them getting underway. and is very proud of the athletes that will represent the united states, very proud of the diversity that they represent because that is such a strength in our country and looks forward to many of our act leads bringing home gold, silver and bronze. [inaudible] >> i'm not sure that he has. he has spoken to her in the

relatively recent past. i know because i saw sometime late last year. i know she has spoken with him. i don't know that she's spoken with him about the olympics or the delegation. we did announce that because of a serious illness in her family, she is not able to be part of the delegation for the opening ceremonies. >> rarely been the last few minutes of this to go live to capitol hill for a briefing on the nsa leaks of national security. chairman of the house, buck mckeon and congressman thornberry. >> the armed services subcommittee on intelligence, emerging dressing capabilities just concluded a briefing on the defense consequences of the snowden compromise. needless to say, this is very highly classified area and that

makes it very difficult to say much or answer questions. but i do want to say that while it is difficult to discuss the details of what we learned, it is fair to say that members left the briefing disturbed and angered. snowden's information that's what i'll be on programs associated with the nsa or data collection. the majority of them majority of information he transferred had nothing to do with nsa, but instead specifically works to compromise the military capability and defense. this information will put our men and women in uniform at greater risk, could cost lives and will certainly cost billions to repair. that of course is part of our responsibility and working with the department. his actions or espionage, plain

and simple. alternative chairman. >> thank you i am buck mckeon, chairman of the house arms services commission. i want to thank commissioner thornberry, who also serves on the house intelligence committee and chairs the intel said committee on the service committee. i want to thank him for what he is doing in the affaires. because of the seriousness of this issue and the sensitivity of that, am just going to read my statement. edward snowden isn't a hero. he is a traitor and a criminal. this much is very clear. no matter what opinion the american people hold that the nsa data collection, they would be shocked and outraged to learn that a substantial amount of the information has nothing to do with nsa. the damage he has done to our

military and national defense programs is not the mark of a whistleblower. he has given our enemies and edge and put our war fighters at risk. americans should demand he be brought to justice for his clients and dismiss any discussion of filmmaking for clemency is absolutely unacceptable. thank you very much. [inaudible conversations] >> earlier today, congressional budget office director, douglas elmendorf on the impact of the health care law. here is more now. >> i've a few questions about the health care law in respect to the labor market. what is your best estimate of the effects that obamacare will have on the total number of our

search, which is the issue we are talking about. i want to make sure we accurately understand what you're saying. >> ray. we think the affordable care act will reduce the total numbers of hours worked by 1.5% to two between 2017 in 2024 relative to what would've happened. >> what is that an equivalent fte full-time criminal coworkers? >> given the fact -- the calculation return, to translate that suggests between two and 2.5 million reduction of full-time equivalent employment. >> to make sure everybody understands this, reading the report 2 million equivalent in 2017, 2.3 million equivalent to 2021 and 2.5 equivalent in 2024. just to understand this, it is not that employers are laying people off.

it is that people are working in the workforce, aren't supplying labor to the equivalent of 2.5 million jobs in 2024 and as a result the lower workforce participation rate is less labor supply lowers economic growth. >> yes, that is right, mr. chairman. >> so who are these workers? who are the people in this category? what kind of worker from an income scale site are being affected by this? >> the effect is principally on the labor supply of low-wage workers. the reason is that the affordable care act does is provide subsidies focused on lower and lower middle income people to buy health insurance in order to courage people to buy an expensive private health insurance, subsidies are really large in dollar terms are the subsidies are drawn over time for people as their income

rises. by providing heavily subsidized health insurance to people with low income and withdrawing subsidies as income rises creates a disincentive for people to work relative to what would've been the case in the absence of that act. the subsidies of course make those lower income people better off. this is an implicit tax for the government raises our taxes, we are work off, therefore people are better off, but they do have less of an incentive to work. >> i guess i understand better off in the context of help here. the better off in inducing a person not to work who was on the low income scale not to get on the ladder of life to begin working, getting the dignity of work, more opportunities, rising income, joining the middle class is fewer people will do that.

that is why i am troubled by this. >> you can see today's entire house budget committee meeting tonight at 8:00 p.m. eastern on c-span2 or any time online is being done to work. >> i think the american public views the first lady in various glamorous circuit answers, in a beautiful gown, some speech in a handsome suit or whatever. what they may not imagine looking at the white house from the out side as it is actually a very normal life upstairs on those two floors that are the white house residence that first lady properly and i know i did lay on the couch in read a book. in my case, my cat would always curl up next to me.

>> next, irs commissioner john cosman testifies on the targeting of conservative groups. republicans in the house ways and means subcommittee present a commissioner for more documents related to the scandal. he also discuss budget cuts in the upcoming tax filing using. this is two hours. [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> the committee will come to order. welcome, commissioner coston. on december 20, the senate confirmed the 48 commissioner of the airbase. the commissioner joins the service after a distinct career of freddie mac and the u.s. soccer foundation, deputy mayor and to the administrator of washington d.c. and is deputy director for management at the office of management and budget. before that, as ceo of the management consulting firm where he helped return around large and troubled organization, a career that is sitting at this point in time. commissioners careerists and are

not that the men in repairing their institutions from private companies to freddie mac and given the challenges facing the irs, i am hopeful the troubled the will benefit from your hearing is, commissioner. the irs is staffed with hard-working men and women who do a tough job collecting 2.4 joined dollars in annual revenue and complex in outdated tax code. confidence has been really shaken. in 2011 they investigated rumors the irs was to interpret the gift task and apply to donors to write and social welfare organizations. these rumors are proven true. the committee take action to successfully halt the sudden and unexplained enforcement of the irs. the committee then begin investing allegations that the irs was delaying and harassing right-leaning applicants attacked exams that is. these rumors are proven true

despite two years of denials and now the irs has recently published draft rules that would essentially codify the continued targeting of these very groups. these insults to the public trust have occurred during a time when the irs is taking on bass was not the abilities under the president's health law, while the agency continues to struggle with many of its core essential missions of revenue collection and taxpayer service. as a mention over two years ago, the committee began investigating allegations the rss harassing individuals and organizations on the basis of their political beliefs. early last year, the treasury inspector general for tax administration released an audit finding the agency had in fact targeted groups based on their policy views. for instance, if they had not to quote, make america a better place, end quote. or based on their views have named themselves with the words tea party or pastry.

following the release at the ticket audit, the committee's not an reviewed roughly 400,000 internal irs documents and interviewed dozens of virus personnel ranging from screeners in cincinnati although after the former commissioner. however, this ongoing investigation has been delayed. we've had a robot because the irs has yet to provide all the e-mails the farmer director of exempt organizations lois lerner. despite the fact that committees investigating the matter have not in six months receipt of these documents requested were conducted interviews sock him in the irs released a report weeks after the report declaring no wrongdoing had occurred. the irs came to this conclusion without conducting an investigation for interviewing any managers involved. commissioner koskinen, if you've been told the investigation is complete and are targeting occurred, you have been misled.

last weekend, the president claimed in an interview there was not, and i quote, not even a smidgen of corruption at the irs, end quote. he blames the targeting of quote, boneheaded decisions by local office, end quote. now this committee has actually investigated the matter to a significant degree and found otherwise. i believe the president's staff is either very poorly informed or they are actually misleading you. despite the fact the investigation is ongoing, november 2013, the irs proposed new rules for 501(c)(4) organization that would push many targeted groups out of the public square completely. the draft rules would upend regulations in place since 1959. they would perversely incentivize political activity by 501(c)(3) charities. these rules were proposed because of the irs is worse, quote, considerable confusion, end quote.

by irs employees over 501(c)(4) political activity. the committee on ways and means has actually investigated the matter interview front-line employees in the exempt organizations division. the committee has found no confusion. irs screeners were confident, well equipped to evaluate applications, protect exempt status for groups or political activity. new rules do not seek to clarify this silence. we also spent time meeting with the victims. the organizations and individuals that have been targeted, something the irs still has not done. these problems come against the back drop of an unprecedented backlog in applications for 501(c)(3) applications. this is up over 500% from a year ago. they come into the context of an estimated $140 billion in improper payments processed by the irs in the past 10 years and a growing plague of identity

theft. in some cases, identity baptized by $2 million in fraudulent refunds going to single addresses or bank accounts. in one case, we had covered $156,000 sent to a single address in shanghai, china. this is a waste of taxpayer dollars must come to an end. this occurs as the artist begins implementing the single biggest change to the tax code in a generation, the health care law. the health care leister ca rs with administering 2070 tax provisions collected over $1 trillion in tax increases and looking at at complex tax credits. commissioner, task before he was daunting. your charges to restore public confidence in the irs, read the agency of this management and stop the hemorrhaging of taxpayer dollars to croaks and fraudsters. ..er dollars to crooksters and fraudsters. we are your friend.

we are not your adversary but i cannot stress enough how important it is that we build a cooperative and productive relationship going forward. you'll serve as commissioner for five years so your relationship with the committee will be a long one. it can be a productive relationship or it can be an adversarial relationship. we have to make this productive. just this week, you announced to my surprise that you had changed an earlier decision in award over $43 million in bonuses to irs employee union members. this occurred at a time when the irs is constantly complaining about the scarce resources, making matters worse, the irs failed to inform the committee of the decision in advance of the announcement knowing it was a subject of concern for this committee and the subcommittee, in particular. adding insult to injury as we'll get to later, the irs continues to with hold documents requested by this committee pursuant to

the ongoing investigation. commissioner, we need you to turn these documents over. the agency owes us and the off to the right start and clear the slate and get a clean slate. you can implement the reforms you want to do and restore the trust to the agency and we can carry on our oversight activities and then address some of the ongoing future problems with the irs. with that i yielde yield to the distinguished ranking member to georgia mr. lewis. >> good morning and thank you mr. chairman for holding this hearing. i am pleased to welcome john koskinen to the ways and oversight subcommittee. mr. commissioner you have a tough job ahead of you. and i want to thank you for accepting this challenge for being willing to serve. please note that many of us want to work with you to address the

financing service and staffing problem facing the irs. as you know the recent omnibus bill funded $11.2 billion for irs operations in year 2014. this is a 1 billion-dollar increase from the year 2010. i'm very concerned about the unavoidable reality of these budget cuts. today there are thousand fewer irs workers to need a heavier workload. a text here to receive responses to their inquiries and backlog is not a dream. it is cold hard facts. the irs staff must process 5 million more individuals returned and answer 15 million more phone calls with $1 billion

left. let me say that again. 5 million more returns, 15 million more calls, and $1 billion less. my friends, you can only get out what you put in and you cannot get blood out of a turnip. in particular i am very concerned that of the irs resistant low income and disorderly taxpayers in preparing their returns has been discontinued because of these cuts. why is this? congress so determined to balance the budget on the backs. enforcing tax laws, collecting taxes and providing service to taxpayers are some of the most vital responsibilities to the live government.

we cannot keep robbing peter to pay paul. congress cannot cut the irs budget and hope the taxpayers will continue to receive the service they expect and that they rightly deserve. it is not just the commissioner who has called for more resources but also the oversight board, the taxpayers advocate and the treasurer inspector general when they cannot get the help they need they turn to us. i am hopeful that this committee and the appropriations committee will listen. we must do everything in our power to support this agent and its staff. in closing i would like to thank you for being here today and i look forward to your testimony and working with you and the members of the committee to address these important issues.

>> thank you mr. lewis. it's my pleasure to welcome the honorable commissioner of the internal revenue service. welcome commissioners i know this is your first appearance before the ways and means committee subcommittee included and certainly your first appearance since the confirmation before congress so we welcome you and thank you for your time today and we look forward to discussing these issues facing the irs and i want to assure you we have goals in this and we want to as i said before we want to clear the slate so that we can move forward to achieve the reforms you have to institute and the committee will be a partner with you on that. your written statement will be made a part of the record. we will give you five minutes as it is customary to deliver the comments and then we will open

up questions. you may begin when you are ready. >> ranking member and members of the committee i appreciate the opportunity to appear before you to give you an overview of the operations, and i look forward to a productive working relationship in the remaining years of my term. i'm honored to serve as the irs commissioner and have the opportunity to lead this agency and its dedicated employees, because i really believe that the success of the irs is vital to the country. the irs touches virtually every american. i want to outline what are the key challenges in what i will focus on moving forward. first and foremost, we just started a new filing season last friday and sometimes we lose sight of what a tremendous accomplishment it is for the agency to process supposedly almost 150 million individual tax payer returns with 120 of them being filed electronically. thanks to the hard work of our employees this season will go

well. another priority for the agency iagencies to put to rest all of the issues and concerns surrounding the application process for the tax-exempt status. the management problems associated with the five o. one c. four applications have shaken the public trust in the irs. under the leadership of the forming acting -- former acting commissioner of the irs has made good progress in this area and it's my job to make sure we complete the work. in every area of the taxpayers need to be confident that they will be treated fairly the matter what their background or affiliations. as the cherry noted, the public trust is the most valuable asset. the irs needs to build on the progress made to improve tax compliance in a number of areas. one of the most critical is refund. >> it would close 963,000 last year. almost double for the number before and we are resolving the

cases on average it now takes 120 to 135 days for the new case to the result compared to more than 300 days in the previous years but we can and we will do better. along with enforcement, they also need to keep looking for ways to improve the service that we provide to taxpayers which is critical to ensure that our system of the voluntary compliance works properly. we continue to upgrade the website, irs .gov and we are adding more tools this season to make it as easy as possible for the taxpayers to determine the amount they owe and to pay that amount on time. another priority is to fulfill our responsibility to implement the tax revisions of enacted legislation including the affordable care act in the v. ae foreign account tax compliance act. on the management side, i strongly believe that the success of the irs depends on the success, skills and enthusiasm of our employees. i am committed to doing everything possible to ensure

they have the leadership, systems and training to support them in their work and to allow them to reach their full potential. to keep making progress in all of the areas i just mentioned, the irs needs to have adequate resources. i'm deeply concerned about the significant reduction in the irs budget over the last several years. as noted, the current funding level over just $1.3 billion is roughly 900 million to a billion below what it was four years ago. we have about 10,000 fewer employees than four years ago, including 3,000 fewer revenue agents and officers. one of our biggest concerns was being able to deliver the service to taxpayers need during the filing season. last year for example about 40% of the taxpayers who called it the irs were unable to reach an employee. that is unacceptable. but we don't see that number in improving at all this year and we are worried it will often be extensively times trying to get through. expanding the online offerings can only go so far to emily.

the problem. in the budget difficulties i recognize there has been a loss of confidence in the congress and regarding the way that the irs has managed its operations. one of my responsibilities as to ensure that we quickly resolve management and operational problems that may arise so the congress can be confident about fundinthefunding will always bed wisely. i look forward to working with congress and with this committee to solve these budget problems. i hope that one of the disease of the four years in remaining in my term is that we will be able to put the agency's funding on a more solid and sustainable basis. that concludes my preliminary comments and i would be happy to entertain your questions. >> two days ago the irs announced that it reached a deal with the irs employee union of the national treasury employees union over $43 million in bonuses to unionize the employees. they also announced for the bonuses and the manager's executives this comes at a time

when every agency certainly is struggling to do more with less and we are open to that and sympathetic to that. the irs is blaming the decline in customer service on the insufficient funding but many americans frankly, and i hear this in my district and i think others as well are surprised to hear that he irs employees are unionized. there will be even more of a surprise at how much money is being spent on the union activity. last year as the oversight chairman and i looked into this question and i found that in 2012 the irs employees used almost 600,000 -- 600,000 hours of official works fine on the union activity and spend hundreds of thousands of taxpayers dollars on the travel expenses for the union events. i understand that the question of why h the irs employees are unionized predates the confirmation. that's no. but can you tell us why they are now reversing a decision that when he was your predecessor he made he put these bonuses on

hold, why don't you reverse that decision and will the union members be able to continue to use the time to engage in the union activity and will you seek to do something to change with seemingly appears to be an abuse to the american people? >> i appreciate that question. first of all let me make it clear these are not bonuses the czar performance awards that will not be made to every employee in the last year the performance awards were made a third of the employees got no bonuses. the performance level is determined by managers and not the employees. >> the union contract provided or provides the performance award poll on the 1.75% of bargaining unit employees. last summer it was in light of the sequester of how many

furlough days would be necessary to continue to operate the irs. it would have been made last summer and one of the options would have been to increase. under the leadership the irs had the ability to negotiate the 1.75% down to 0%. the union filed us agreed and filed an unfair labor practice, grievance and lawsuit. and all of those legal actions are pending. in the negotiations in the union, we are negotiating a new five-year agreement in which we were dealing no discussing with them the appropriate amount of time that should be spent on union activities. in the course of the agreement we reached a settlement with the agreement that we would settle all of the unfair labor practice grievances and lawsuit etc. not to by providing the 4.75 but providing the pool of 1% of the performance awards that would be made according to the performance and the employees.

i would note that one of the achievements in the negotiation and the union is for the first time we will actually align the timing of the performance awards for the bargaining of the employees with the performance awards for the managers and the irs. the result of the transition is we will not be paying any more performance awards this year began in the budget and the fact with the performance awards for this year will be paid in the next fiscal year so it is no additional funding for the irs. it is significant litigation and its performance awards may do a set of employees that had no pay raises for four years up until this year. and otherwise have been constrained in terms of limitations on their training to travel and support that we provide to them. so ultimately i think that the morale of the employees is a significant concern to everyone. federal employees in general have had a tough time in the last few years with no pay raises, the government shutdown

and furloughs, the irs morale has not been improved with the discussions over the last year, which focused on the importance of issues, but involved 800 employees in the accent organization unit. we have almost 90,000 employees across the irs. and so i think it is important to see this into perspective and to the performance awards that will only go to probably somewhere between 50 to 65% of the employees. and they will allow us to settle the litigation which would have cost if we lost 1.7% rather than 1.7. so we spent a lot of time thinking about this in the middle of the negotiations and d as complete as i said to the union and the employees an appropriate compromise and signal to our employees that we value their contributions to the value of the agency. >> i appreciate your answer but so i can get a qualification, and the negotiations, you are going to address the efficient

work time being used for the union activity. >> our discussing that with a union we are looking at the official worktime that spent and other agencies. we are discussing ways that the worktime can be used more efficiently and we have had over 80% cuts in the travel and the training across the board which is included in the travel for the union. so the amount of travel spent for the union business last year was relatively minimal. i will say as i said in my prepared testimony that while again i understand the pressures to try to make the sequestration levels in the last year on the agency, my experience in the private sector is when times are tight, the first thing to do with training and buying experience is the last thing to go is training. we need to make sure we provide sufficient training to our employees so they are comfortable and adequately informed to deal with the public so we will spend more money this year on training not as much as the past but more money than we spent last year.

>> i want to make it clear tax payer dollars are being used for the legitimate official activity and obligations and responsibilities and not for the union organizing political activities. >> those are always legitimate concerns, but the unions are legitimately bear and they have a negotiated right to represent employees. they are in fact an important partner for us in the management of the agency. and so, there's a significant amount of work they do that is appropriate on a legitimate and furthers the operational ability of the agency. so, i think it's an important question to make sure that it is within appropriate bounds, but there is a significant amount of union activity that's important and legitimate and deserves to be reported. >> we will follow closely and look forward to seeing how the progress goes on to contract negotiations. the same subjects now for nearly eight months, this committee has

had an outstanding request for all of the lowest learners e-mails. these files exist at the irs and the committee is authorized to receive 6103 information so no editing, censoring or redacting should be necessary. at the agency has continued to withhold these documents, which impedes and prolongs the investigation. commissioner, can you tell the subcommittee how many lowest learners documents or how many e-mails still exist in the scope of the committee's request that we have not received? >> i do not know the number of that. we received over 500,000 pages of information, and my understanding is that we are working with the committee, continuing to work to get you the documents you need that you already have all of the lowest alert or e-mails for the timeframe in question but that our people are working with you and your staff to make sure that we get you all the information you need to resolve this

investigation. as you and i discussed nobody wants the investigation to be sooner than i do. we need to get the facts out and we have the six investigations going on. my hope is that some consensus about what went on what i rise from those reports. i look forward to them as the facts are determined by your investigation and the others and we will deal with those and my hope is to then be able to move on taking the necessary steps to ensure not only the committee, but the public that the problems have been solved and as i said i want everyone in the united states as a taxpayer to understand and to be confident that when they deal with the irs we will deal with them in a straightforward way no matter what their political beliefs, no matter what organization they belong to, whatever church they belong to whether they belong to any church if you deal with the irs we will deal with you in a straightforward, honest way and we will deal with everyone in the same way. >> i just want to assure you that it's in your interest to clear up this and hours to get

this investigation done so that you can institute the reforms. i just want to make sure that we have your solid commitment to expedite the forwarding of the documents that we have requested. we have a number of outstanding issues that we need to cover, and we want to get these things cleared out as quickly as possible. it is clearly in the interest of the agency end of the public that we get the bottom of this as quickly as we can and then move forward with it. chairman camp gave me the list of things he thought were outstanding. at least half of those i think that we are narrowing and our goal is to have you feel comfortable that we've got in the document that you need to close this investigation. the facts will be what they are and we will deal with them accordingly.

as of this morning we have only received and completed one seventh so if we can address that and get the seven items into the hands of the committee chairman camp requested that will help us move forward. we are doing better than the one that we are clearly committed to working through that with you and the chairman. >> we are asking that you provide all documents pertaining to the recent 501(c)4. it asked for the documents by february 14. can you confirm whether the irs

will provide these documents in the requested timeframe? >> in the treasury we just received a letter from the chairman. as you noted this is not a concluded rulemaking. we are at the front end of the rulemaking draft proposal issued before i became the commissioner actually before the hearing, which made the hearing more interesting. and asked for comments on the three basic issues of the regulation. that is what should be defined as political activity and how much of that activity can be a loud for the organizations of any kind. in which organizations in the 501(c) come into the last count i am told we have received over 21,000 comments unde on the bigt responses to draft regulations. but we are in the middle of the process and we need to then have a comment period that will close at the end of the month so i

would encourage anyone that has a view on that to provide it. it will take some time to go through the comments and we will probably have a public hearing on it. so the issue in the middle of the process, providing the information about who talked to who and what they had to say is complicated, because what we do not want to do is interfere with the internal discussions into the review of those comments and the proposal of what either a potential final regulation would look like for more comments. but we are anxious to work with the chairman in terms of making sure that you have information to say we would like to close the 501(c)4 issue and how the regulations are designed is somewhat of a separate issue that we need to discuss with you. but i stress we are in the middle of the front end of that process and so we need to be careful that we do not have to appear with that process as it goes forward. >> thank. finally, the years before the lowest admission at the irs targeted conservative groups,

the committee opened an investigation into allegations that the conservative donors were being targeted into the fears were confirmed when we discover that the irs asked several groups information about the donors and even though the irs says the donor information was destroyed, the committee has found a donor information stolen the case files and to date the irs has been unable to couple the committee where the irs began action against the donors. the commissioner, can you tell us with certainty whether any of the donors were audited or otherwise targeted based on the information that the irs improperly solicited from these groups? >> they have been the strike. anyone audited is being audited for reasons other than the process. one of my concerns in terms of the public confidence in the irs is even with the resources and even though we have fewer audits now than we have had over the last five years on average, we still audit. some of them are just later and

sent out 100,000 here. so, somebody on that list is likely to be an active democrat and somebody else is likely to be a visible republican and someone is clearly going to belong to one of the organizations here just statistically. and i am concerned of everybody now said everybody must think that it is because of something i said. and i can assure you that we have looked into this. in the procedures that we have reviewed and be independent, there's a very detailed process by which the audits are determined for selection, and as far as i am able to say i can guarantee that no one has been selected because they showed us at least since i have been around, because they showed up in the list because the lists are no longer available to anyone in the country including in the irs. >> the committee will continue to follow along with any concerns expressed by the constituents of these items.

but me close by saying if you would do seven items that the chair man has requested, we hope we can get these taken care of as quickly as possible. >> i was delighted to get the list. we are working with the chair man's staff and we look at the documents as quickly as we can because it is a helpful list to get the idea what it takes to get the closure. >> many of them are letters we submitted trying to get the information so we want to get those out so you can move forward working with the committee to ensure trust once again on the part of the american people. >> thank you very much mr. chairman. mr. commissioner, it is my understanding in the union that represents the rank-and-file irs employees started many years ago maybe during the 30s.

>> that's my understanding and i dealt with all of them 20 years ago when i was the deputy director for management into the ntu was represented in the irs employees. >> is it your feeling or that the major role played assisted in the irs in carrying out its mandate? >> it is my understanding. i have had a long career of dealing with organizations in the private sector as well as the public sector that have unionized employees in the city of washington when i was responsible in the day-to-day operations and was represented by the range of unions, and much as the term and said, you can have relationships that are productive in the situation, or you can have contentious relationships and just as i look forward to any effective working relationship in the committee, my experience is that they have been very effective partners if you make them partners.

i was in the libra partners senior members of the labor-management partnership program that was set up in the mid-90s and we had a very active labor-management partnership program at the city of washington. and i look forward to a productive working relationship in the union. we won't always agree about everything in the negotiations, but the living very valuable role in terms of working with us to make sure that we are understanding what is going on in the front lines and that we are listening and responding to those concerns. >> i want to go back to something that i raised in my statement. i know the budgets have been the biggest challenge. in the necessary resources what impact is this having on your ability? >> the cuts across the board, the inspector general last fall noted that as he looked over

time, that compliancerevenues were down. his determination was $8 billion in response to the billion dollars of cuts. there are other numbers that fit four or $5 billion in different. it's clear that historically over the last 30 to 40 years that the more funding the irs is available for enforcement, the more funds it collects. the entire compliance activity in thand the agency that we colt is almost in four to five times the entire budget of the irs. this year we have 3100 fewer of the new agents and officers than we had four years ago which means that we need to get fewer audits. we begin to understand the taxpayer services on the other side of the compliance and we need to make it as easy as possible for the taxpayers to pay survey of confidence in the system. as i know the taxpayer services are suffered not because the employees are not working hard because there are fewer of them.

the people cannot get anybody on the phone and that is likely to be the circumstance this year. it's not helping taxpayers and it's not helping the taxpayer compliance. we met with the office infidelity on traveling to the 25 largest irs offices across the united states. they talked with me about the concern that we do not have enough people to be able to impact and to send out the additional letters and audit inquiries that we would send out if we have the resources. so across the board, we have already been to six offices in jacksonville this week. in the legal obligation we are understaffed. that means ultimately that we are not performing as well and one of the reasons i made a bigger issue of this as i said at a confirmation hearing to some extent you get what you pay

for. we get more than probably we have a right to deserve for the work of these employees and the stress that they are under but i think it's important to understand what we are not going to get because we are not paying for it. >> i want to thank you for making the trip to the atlanta. people there from time to time, there are hundreds and thousands of hard-working employees and we want to thank you and your back. >> my wife worries about this trip. but my experience in the public and private sector has been the people that know the best about what is going on in an organization are the front line workers and one of the things i hope to encourage is that more information is from the front line up to the top. as i told the workers if there is a problem it is my problem and we will work together to solve it. if it is a mistake it is my mistake and we will work together to solve it and if there is a problem we don't know about, that is my fault because that means i haven't developed a culture that people are

comfortable in if there is an issue they can raise it without in fact any concerns. so i told people that my way of running organization is bad news is good news and i cannot help solve a problem if it doesn't exist so i would encourage people in the across government organization of the inspectors general and i was at the omb for five years and i tried in the private sector to remind people the internal auditors or your best friend and i told the government executives in my career that the inspectors general are yougeneral or your d the internal auditors do not create problems. they simply advise you about the problem before it gets bigger. if you make a mistake you kind of hope that no one notices but my experiences problems do not get engaged. they are more difficult. so one of the things i hope to encourage i will be at the offices that covered about 55 to 60,000 employees and it is to send a message that we are all in it together and i'm prepared to stand behind them, but i need to know what they know. i need to have their suggestions

how to improve the operations and where they think that they are problems. joined by the chairman of the full committee the chairman camp is going to ask some questions. >> thank you mr. tremaine. commissioner, i haven't hear the exchange regarding the 501 -- 501(c)4 regulations in what we are requesting is everything up into the regulation issue that is issued on black friday that he after thanksgiving with imposed regulations. i would like to not interfere in the process, but to get all communications up until the regulation and i think you should be able to comply with that without having any interference with the ongoing process. so i would hope that you would comply and cooperate with the committee in that regard. >> i am anxious to cooperate in the full committee as well as the subcommittee because i think we have our substantial joint interest in improving the operations of the irs. my point was --

>> i heard the plate and i want to move onto something else now. commissioners, they tried to blame the irs targeting of conservative antiparty groups on low-level workers who were concerned about how to process their applications. and on sunday, the president claimed the targeting was based on the 501(c)4 law that people think is confusing and that is a quote and frankly that assertion i find it confusing because nowhere in our investigation have we found that to be the case. i would like to display an e-mail. are you aware when a screener in cincinnati alerted his superiors to the serpentine party cases and to be wary of 2010 that he didn't do it because he was confused? he said in his e-mail and i'm quoting the recent media attention to this type of organization indicates to me that it is a high-profile case. so did you know that there was media interest and not confusion about the law that started this?

>> in the part of the investigations all of this happened before we started. as we discussed my view is we have six investigations going on. the justice department and the inspector general. my goal is to get everybody the information they needed to get these investigations closed and to determine what the facts are. >> i would urge you to go back and look at the fact because in addition to flooding because of the media attention, though worker correctly quoted the procedures regarding the process of these kind of cases. he was clearly not confused. he knew exactly what he was doing. and it was washington dc that told him to hold an essay on these cases. i understand that when new subjects pop up alarm not sure how to interact with them and the rule for the 501(c)4

organizations are well established. do you know how long the rules have been in place for these organizations? >> the statute was passed some time ago. in 1959 the eisenhower administration made the determination that the word exclusive in the statute, which could be interpreted in a lot of different ways including no activity, should be interpreted that exclusively engaged in the social activity should mean primarily. and since 1959, that has been and -- excuse because the standard as i understand. >> these have been in place for more than half a century. so the irs and the employees have been dealing for a very long time and i think it seems like a threat to the stretch coh that it was after this long. frankly i give the employees more credit than that. now are you aware that the employees in cincinnati were actually processing the cases before washington dc's involvement? you were actually processing the

through to completion. >> i've provided over 500,000 pages of documents. i've not looked at any of the documents. my view is that for me to try to track through all that and catch up with anybody is not a productive use of my time. i look forward to the report. as i said i think the facts will be what they are and we will respond to them. so i guarantee that i will read the report and we will respond to the fact that it doesn't serve my ability to go back in time and try to look at any particular activity. >> i think this is a direct bearing on the management of the agency. it is the fact that since it was improving but he couldn't case before getting orders from washington dc to hold them and they were processing them without delay or without interest of questions. now in the investigation we have identified the applications coming in and subject to the review and improved from the conservative groups that were in three months. and it was only after cincinnati

highlighted this high-profile media attention that washington dc got involved. and it was only then that these groups were subject what i would call delay and harassment and it seems that there is a pattern that is developing. it wasn't confusion. it was washington dc that caused the groups to be targeted and harassed. the attempt to mischaracterize the targeting is being driven by confusion or as the president said, boneheaded decisions out of the local office, and that is a quote of the commander-in-chief. it's bad enough. what is worse is the administration's attempt to mislead about the proposed regulation. and the proposed regulation come as i mentioned, was released on black friday and 2013 and drafted in a manner in my view intended to shut down the tea party groups. they were marketed as the american people as a responsiveness to the targeting as a solution to clarify the rules as was recommended by the

inspector general. and the truth is that our investigation has revealed that the lack of regulations were not drafted as the remedy. in fact they were being worked on in 2011 during the time of the targeting. the committee has found that the e-mails from 2012 when the treasury discussed working on the regulations. i do not know what tha that woue meant in 2012. >> i'm pretty sure that means hidden from the public. >> in the rationale for the rule change would rais it would raiss about the integrity of the process. >> i look forward to discussing the report when it's finalized and i look forward to reviewing

with the treasury department all of the comments about the regulatory process. at this point, i did not participate in it and i do not know the background of how the regulations were drafted. but i can guarantee you that i will work independently and in a balanced way at to the extent i have any control over it at what the appropriate draft regulations and final regulations should be. as i said earlier, we have 21,000 comments which is more comments than any other regulation and i think that all of these issues will be appropriately considered in the comment review process. >> have you seen the published rationale for the 501(c)4 proposed rule? >> my understanding is all i know what i read in the press, that was before my confirmation hearing. >> i commend back to your reading. >> everyone can make comments about the draft regulations as they are now.

any information that they would like or perspectives about the regulation for work before they are finalized and they are nothing to be finalized in the near-term future. >> d. you know how many applications are still awaiting the review at the irs? >> i asked about the 131 that were in the queue and 121 of those have been resolved with about 85 of them approved. some of them dropped out into some of them are under a further review. of the ten that are remaining. so give or take a little over 95% of the applications have been resolved one way or the other. >> if they are still waiting how many have been longer than one year. >> they are more than one year. >> i had to stand obviously that you are new to this job come as you mentioned.

as the agency has had a lot of turnover in the last two years, which frankly if needed. but it's clear to me that we need to get to the truth about what happened at the irs and how conservatives and tea party groups were targeted by the agency. and i want to be perfectly clear this committee will fight any efforts to restrict the rights of groups to organize. and they need to speak out and have the ability to educate the public just as the unions are allowed to do so we will get to the bottom of this and i certainly expect you to produce and quickly the outstanding documents just as the letter i gave on january 8 with a memo or the list of outstanding request and of those, we have received some documents on one of the seven request made so there is still a lot of work to do.

public trust is the most important valuable asset and i believe they have a long way to go in restoring the credibility. stopping the rulemaking action on the 50 -- 501(c)4 until the investigations are complete. and as soon as they get the documents that have been requested for a long-standing time, i can assure you that we will move forward on this investigation in a very timely manner. with that i would yield back. >> we have also been joined by the ranking member and i am pleased to welcome you for questions. >> thank you and welcome, mr. commissioner. >> i think it is not surprising, but it is unfortunate that this hearing with the new commissioner has taken this

approach. i remember when we had a hearing for the inspector general when the chair man talked about a culture of corruption and there's never been any evidence of that or political influence. the e-mails that were just put forth here came from hm a gentle man. the headline is conservative republican defense t. party and john schaefer described himself as a conservative republican told the congressional investigators he flagged the tax-exempt status that the

lower-level agents came across in february of 2010 because it was a new high-profile issue. this is from mr. schieffer who describes himself as a conservative republican. the efforts to tie this to the white house have been fallacious and i would like to read a communication from the deputy inspector general for investigations dated friday, may 3, 2013, gentlemen as a result of the meeting a couple of weeks ago, we have agreed to pull e-mails from the identified staff members of the organization to find out, number one, if an e-mail existed directed the staff to target a teen party and other political

organizations and if there was a conspiracy or effort to hide the e-mails about the alleged directive. the list of employees and questions. in the keyword search terms and time frame for the e-mails we pulled the available irs e-mails which resulted in 5500 responsive e-mails. he continues the review of the e-mails determined that there was a lot of discussion between the employees and how to treat the key party -- tea party and other organizations. there was a lookout specifically naming these groups. by the way, it turned out that groups decided that she party. they continue however that e-mail indicated that the organizations needed to be called because the irs employees were not sure how to process

them not because they wanted to stall or hinder the applications, there was no indication that the selected applications were politically motivated. i repeat there was no indication that pulling the selective activations were politically motivated. i ask that this be inserted into the record. >> without objection. >> will a gentle man yielded for a moment? >> the investigation is not complete and the purpose of all of this with the commissioner today is to get his assurances that he will provide the documents that we have requested to complete this investigation and then come up with conclusions. i think it's in the interest of every member of the committee

regardless of their party affiliation to get to the bottom of this. >> just ask them will you supply the information? don't veer off from trying to revive a position that has not been supported one iota and it's clear that you are trying to keep this alive for political purposes. this statement from the deputy says there was no political motivation and there never has been a scintilla of evidence so now the commissioner comes here when we should try to get off on the right foot in a constructive foot. you confront him with e-mails he wasn't involved.

they tried to resurrect an issue that was not supported. if you want a bipartisan effort, do so but don't use this hearing is an effort to essentially pursue a political purpose. so i will ask you and finish are you willing to cooperate fully with this committee? >> i look forward as i said to that cooperation. i want to simply emphasize there are a number of outstanding requests that have not been met to meet the demands of the committee to complete its investigation. we clearly have documentation that a member of the front-line workers were doing their work appropriately and that the

confusion set in only after there was some intervention by washington. so we just want to get to the bottom of this and the information will be necessary to do so. >> thank you mr. chairman and commissioner, welcome to the committee we appreciate you being here and we understand there are some questions you cannot answer. i'm going to try to ask you some questions maybe you can clear up about something that we did see. i want to follow-up on two follo things that you answered four tremendous -- for the chairman. if that's what i heard that there are six investigations? >> there is an investigation going on by the senate finance committee on investigations into this committee about the oversight committee, the justice department and the fbi and the inspector general and that adds

up to six. >> at this point in time, none of the investigations have offered a report or completed a report; is that correct? i'm not aware of any of those either and i thank you for chronicling those investigatio investigations. the other thing i thought i heard you say that i wanted to clarify as always you said that they evaluating the 501(c)3. is that for all of the 501 or the 501(c)4? >> several things, what should be the definition of the political activity, to what organizations showed that the definition of light, not just whether it should be just a gleaso501(c)4 or beyond that ant political activity would disqualify you from tax

exemption. one of the questions on which people are providing the comments is whatever the definition of political activity, to what organizations of the definition applied. >> so the 501(c)5 would be included? >> i have not looked at the comments but i assumed some of the comments are coming from people familiar with the activity of the 501(c)3, four, five to six and seven and if there is a definition for those particular subjects with the percentage should be and that is what the requests were for. >> so potentially we may see some changes in the regulation for the 501(c)5 and their political activity as well? >> the comments will be considered and then the determination will be made as to what if any regulation should be issued and as to which it should

apply. >> so let me go back. last year the committee uncovered the existence of the irs program called the review of operations that we used to keep tabs on organizations that were approved. they've already been approved for the tax-exempt status and the committee is in possession of the e-mails. i'm not going to ask you to weigh in on those e-mails that you have not seen. but in the high-ranking irs socials said we will have to approve the majority of the applications. but also for the review of operation and follow-up in a later year. this was a perco in th period ir of 2012 where the irs applications that they were approving the search of applications for the status in response to the congressional pressure and also the

commencement of the investigation. so, to be clear, the employee said that they would approve the applications and subject them to the later future surveillance. the investigation also discovered the groups that were referred to the surveillance 83% for right-leaning and after the committee discovered the practice, the irs quickly suspended it saying that, and i quote, referrals were being returned to the determination for further review to ensure that they were appropriate. so moving forward and looking at the current status, where is the status of the surveillance program now? >> my understanding is that there is not a surveillance program in existence. they are made at the front end of the applicants. the bulk of them proceeded to

three statuses. it passes through that hurdle aninto get a certification to ba 501(c) three, four, five, six or seven and then over the course of time to review those activities to determine that they are in fact doing what they said they were going to do when they were given the 501(c) status. most of those oversight reviews are for the 501(c)3 because they are voluminous, and overall it is probably four or 5% of the application comes a 95% of the work that goes on has nothing to do with 501(c)4 coming into the 501(c)4 applications are spread around a lot of activity. there are a lot of other social welfare activities in that pool. >> if i can reclaim my time i just want to be sure that none of those applications that were

in that roo or that category have all been released into the thing taken care of. >> but i would stress that every organization that has a 501(c) determination overtime will be reviewed because that is an obligation to make sure that people are in fact performing in the dare 501(c) status as they say they were going to whether they are a charitable organization or political organization or social welfare organization five years out it's important for the public to be confident that they are still doing what they said they were doing when the application process. what did you confirm for your commission at the irs? >> i was confirmed on the last day of the session on december 20. >> do you feel like you're in a position to speculate as to people's motivations or pieces

of evidence or activity that might have occurred at your prior to being there? that i am not qualified and i don't think i will be qualified to speculate what happened in the past. >> i'm getting the sense that i maybe wrong but i thought the hearing was prospectively about the issues that were concerned with things like identity theft and improper payments. i understand the importance of but i would like to talk prospectively about the other issues that were noticed in the hearing for today. and i will use my time to do that. i joined my colleagues in expressing deep concern for things like identity theft and improper payments. but i do want to commend you for coming and being forthright and for addressing those issues head-on and continuing to keep us informed about how the

congress can improve the situation. i want to talk about the eotc. i don't agree with the comments on the outstanding goals that have been approved through the income tax credit. i think that we can probably all agree that fraudulent payments have to be combated, but for me that doesn't mean that you throw the baby out with the bathwater. eitc is one of the most anti-poverty programs we have in the country and we need to not get rid of it. i think that hard-working americans are struggling to make ends meet can benefit from that because nobody gets rich from the eitc. folks that claim the eitc generally are trying to make ends meet. it's the under utilization of the credits by the people that needed the most in hard-working americans.

many of whom are trying to support a family, and i think somewhere between 3.5 to 5 million eligible families ever even claimed that credit. eitc has been one of the most powerful working incentives and we should be promoting it quite frankly, not cutting the budget of the irs and not getting rid of programs that help the tax filers understand how to file a tax return and how to claim the credit. i would be much more in favor of the constructive discussion by this committee instead of a partisan witch hunt at the issues at the irs. eitc enjoyed years of bipartisan support, and i have to say that i'm frustrated and put down by the recent conversations that have taken the unconstructive turned towards the eitc. i would love to hear your ideas on ways that we could possibly strengthen the eitc.

i understand that we need to combat the fraud exists in the program, but it's kind of hard i think for an agency to do its best work when it is being underfunded. any comments, commissioner? >> i have been around a while so i was actually working in the senate. i was the administrative assistant during the nixon administration when the eitc program was passed with the support of the administration and somebody reminded me recently that president ronald reagan referred to as his favorite poverty program for the reason that you noted his support of the working poor and encouraged people to work and provided added incentives. so we have a balancing act because we are running the program in addition to collecting taxes to make sure that it is properly utilized. so we kicked off the tax filing season. last friday i was in baltimore with an awareness day because we estimate about 20% of eligible people for the program that do not apply.

we are providing the appropriate amount of money to the right people, not more and not less. we need to get everybody eligible to participate but we need to make sure that the payment stream is effective and appropriate. and so we are working on both counts. i noted in the challenges that we are facing and it is an area that i think we need to devote as much resources as we can. part of its resources on the front and in terms of providing advice to taxpayers and the qualification changes is about a third of people the qualification changes every year to make more money or less money. the family situation changes, they may get divorced, children move. so it is a complicated program for someone trying to make an honest determination or prepare. we are trying to work on both sides and we want everybody eligible to benefit from the program and we want to make sure that improper payments are cut

to the extent we can to make sure that the funds are good ways to effectively. >> thank you commissioner i see that my time is expired and instead of going over time i would like to alert you to the fact about the orphan drug tax credit. >> think the gentle lady and i can be sure that we want to move out the fraudulent payments in the eitc program and certainly recognize we will be able to partner with the commission to hopefully simplify it to make it work better. with that i will yield to ms. jenkins. >> thank you for joining us. the law resulted in the largest expansion of the role in history burdening the agency with an enforcement of the 47 new

provisions totaling about a trillion of new taxes. one of the new duties under the law will be verifying income information to determine how much an individual will receive in the premium tax credit subsidies. and back last fall the treasury inspector general in the tax administration released a report detailing improvements needed in order to ensure that the irs could adequately strengthen the tax project that is a part of the law. as you know these premiums are taxpayer subsidies that are available to the enrollees in the tax credits the annual budget and economic outlook which is released just yesterd yesterday. the healthcare exchange will qualify for and use one of the premium tax credits. the cbo estimates the treasury

will be giving out nearly $900 billion over the next ten years in healthcare premium tax credits. the most honest of the taxpayers can expect to face difficulties in the irs over the subsidy. you talked about the eitc such as marriage or a job promotion code inadvertently lead to an individual being paid too large a premium tax credit and it will be up to the irs to recover that money. however that doesn't begin to touch on the difficulty that we would face when confronting folks who might commit outright tax fraud. these are refundable tax credits which are particularly attractive to those that are wishing to commit fraud. we are talking about millions of individual tax returns in a pot of nearly $900 billion. so that brings me to my primary

concern. beginning on page 14 of the report, the inspector general raises significant concerns over the lack of the fraud mitigation strategy to guide the system development as it relates to the premium tax credits and it notes that there is no overarching fraud and integration strategy and concludes by saying and i quote the irs is existing fraud detection system may not be all of identifying aca refund or schemes prior to the issuance of the tax refund returns. now i see the irs agreed with the inspector general recommendations to develop the mitigation. can you give the committee an update on what exactly the irs is doing in its effort and how successful we could expect that to be? >> we could have a long hearing on where we are on that let me say first of all in the front

end of the program it went very well so with all of the other difficulties it is important to note we were able to serve the verification role in the fall it do that effectively. we are concerned people's experiences will change and the determination for made up with the premium tax credit is an advanced based on the estimates by the individual or what they will learn in 2014. and as we all know in the withholdings for the purposes and otherwise you make an estimate but it is never exactly right so there will be reconciliations of those tax credits at the back end and that is a challenge for us but on the fraud potential it is important to understand as the committee does more than most the advanced premium tax credits don't go to the individual they go to the insurance company so the opportunity at the front end in

claiming the credit with third parties claiming it are limited compared to what the refund claims are. unless you have a relative company you would like to help out by getting them more money there is no incentive at the front end to have an increased payment. at the back end when you come in and reconcile what you thought you would earn in 2014 with what you did earn and then complete a calculation as to what the tax credit should be to the extent you demand to get a credit or you got a small credit and you are owed a refund that would be based on a policy that you owned. you cannot fabricate that. we would be getting from it the end of the leases on the policies and engaged in them so that your chances at the backend even if you get a refund you cannot get that free and clear you would have to have a policy

you paid the premium on so notwithstanding all of that we do need to make sure people are reporting their income correctly because the way you could increase or decrease you may have a policy of you underreport your income and say you have the right to a bigger premium that would be a refund fraud if you are doing it willingly and we are developing the screening for that. i would note in the inspector general report that was a report requested by our people who are working in partnership with the inspector general to have the inspector general come in on a regular basis and review the status of the progress and that's why it's a productive working relationship. we are confident that based on some extent on the success of the front end will allow it to some extent on the success we've had on other initiatives in the last three or four years we are going to be successfully able to execute the responsibility of the backend but it comes at a cost and that is under the resources. it's an additional burden that we are bearing. we expec expected as great a cot three to $400 million it's going

to come out of other irs activities because no funding has been provided in the budget. >> thank. mr. davis. >> thank very much mr. chairman and commissioner for being here. i was thinking i don't envy your challenge of trying to clear up some misconceptions and obligations, things that may have occurred and did ocher prior to the time that you have become the commissioner. but i'm also wondering, and i agree that you cannot necessarily get blood out of a turnip, and like my colleague from california, i don't necessarily want to rehash all of the old difficulties that have existed, but i do want to explore how do we go forward. i noticed that you put a great

deal of emphasis on training. that is training staff so that they fully understand the best approaches to meeting the service needs of the agency, and yet i note that the training budget has been severely slashed so that the resources simply aren't there. i guess my first question is how do you motivate staff and stimulate the agency putting in the management and procedures that's going to allow us to get more with less? and it seems to me that is one of your real challenges based upon all of the knee that we

know exist. >> that goes to the heart of your management approach to the organization. as i said earlier, i spent my career taking over the management organizations overstress of one kind or another and private-label is not to look back or second guess what happened in the past but to play the hand you're dealt. i noted earlier one of the things that seems to get cut is training. it's the last thing that ought to get cut. 75% of the budget is people so we need to be efficient with those people and train them appropriately so they can you lift the public appropriately and provide them the resources so that we can increase their effectiveness. one of the things we are doing to help them deal with the budget constraints but in fact move forward into the century is change the utilization of the website. if you look today from where it was a year ago it's like it's a different agency.

last year it got 250 million hits. obviously some people are checking to see where they're refund is that they would be making calls otherwise sets 250 million that you didn't have to entertain theoretically. you can authenticate information and that was a significant volume as well so we are trying as best we can to utilize technology and provide a more user-friendly interface with the taxpayer which will allow us to be more efficient and use the resources better. we have got below the occupy over a million square feet of office space. by the end of this year than we had before we got outside contractors by $200 million we no longer send anybody an irs tax booklet and that' save $60 n in printing and postage.

that's why i stress the workers so much he can do the work and get the most information on what needs to be done and we need to do whatever we can to support them so we will spend more money on training i'm going to find it someplace. but i think it's a critical investment for the agency to make. >> when you talk to the frontline staffers what do they tell you? the overriding one is the staffing. it doesn't matter whether they are in call centers or revenue agents they work in the legal but they describe the limitations on the ability to do the work because we don't have enough people. on the other issue i discovered and it isn't fair is that it happens in the private sector as well. frontline employees often times never get asked what they think

and they have a feeling no one listens to the answers to one of the things i would hope to encourage and irs culture is more information flow as i said earlier from the bottom-up as well as the top down and also across the silos that inevitably exist in the organization because i think it's important for them to understand the value of their insights into their work and we are only going to be as good as the information they provide us. >> welcome, commissioner. the frontline people back home are constituents. they do not share the shortcomings and to the concerns, and right now they have lost confidence in the end partiality. and i don't know of any time in

my career where they have been more vocal about and they are angry about it. some of the questions i will ask our questions they are asking me. can you say at this time that there is no targeting going on in the irs if any of these groups? >> i asked that question myself as far as i know there is no targeting and one of the things i hope to hear from frontline is is if anybody thinks they are asked to do something they should let me know directly and personally they know how to reach me but at this point we are -- every place i go i stress the irs needs to be a political candidate needs to be viewed as an agency with integrity and people should have trust in it but ultimately the proof will be in the pudding. we need to deliver on the opposition.

we need to end sure people that when they hear from the irs isn't because of some basic or someplace they belong to. they hear from us because we have an inquiry about information and it's the same inquiry anybody else would get. people can listen to me and think if a belief may no one has challenged my integrity in the past but also the words won't do it. we need to be liver with performance. >> in the committee historically members on both sides of the idol have asked about very specific question and were not e not for the complete truth. so i appreciate your answer. if you discover this kind of activity, will there be immediate and swift action taken to bring that back to this committee and relieve and fire employees for that kind of behavior? >> i have committed those in the senate and to the committee as

well that if there is a problem, you will be the first to hear about it, not the last. one of my reasons for traveling the 25 cities over the next few weeks am as i said i have 19 to go come is because i said i want to stress that to employees. what i want to know is if somebody has a concern if something was going on that shouldn't be going on, we need to know about it. we need to know about it and fix the problem quickly. and we need to be transparent about it. again, as i said, i don't look back in life. i have enough problems looking for work, but clearly i understand that it you don't have confidence that you were getting a straight answer from us, our working relationship won't be productive. >> several of the groups that were targeted are in my distri district. and many of those groups in order to try to achieve their

status filled out these questionnaires that went out and many of them gave the names of their donors. in the previous testimony today, you have said that there is no correlation between any of those donors being audited now and in the fact that their names were disclosed is that correct? >> is no longer exists. >> of ththe list no longer exit. and you said that if they are it is a -- it is just something that is statistical but it's less than 100 names that were disclosed. and you said that there is 1.4 million audit this year. so it is difficult to believe that 100 possible donors names are out there over 1.4 million audits are going on, and if any of those people are being audited it is difficult to

believe that there is any correlation there. would you disclose to the council of the committee that if any of those names, if any of those people are being in fact audited? >> i would be happy. i don't actually have the authority and it's appropriate that i do not actually investigate any individual audit that's going on. and you should be assured of that. but let me stress the audit rate is 1,400,000 audits. for people making more than a thousand dollars a year your chance of getting a letter is 10%, so i don't know who they are or what their income base is, but i guarantee there are 1,000,004 dot it's coming out in some of these people will be upper-middle-class or higher income earners. somebody in that group is likely to get an audit because it's one out of ten for people making over a million dollars. it's about 3% for everybody between 200,000 a million

dollars. i expect i'm somewhere in the middle and i will get a letter and it's not because i'm the commissioner, and in fact i won'wantnot get one because i'ms commissioner. there is a set of procedures to determine what the allocation is and the determination for the audits. so my concern is that people are legitimately going to be in that 1.4 million. and if they happen to be very liberal, very conservative, i don't want them thinking i got this letter from the irs because of who i am in terms of what organization i belong to, who i voted for in the last presidential election, what church i go to war whether i go or not and that is my commitment to the american public. but to say that i can't connect to nobody in the organization that had that was improperly selected for further review that it would be inappropriate. the fact that whatever your

difficulties were in the irs and passed it doesn't mean you're ever going to get a legitimate audit. >> mr. crowley. >> first i would appreciate if you could enter into the wreck or to a reuters article that they defended the treatment of petite party -- tea party. >> can you get copies of that to the committee members? thank you. >> commissioner, while some. >> i anticipate that there is more drama here -- >> i've been a loyal. >> we are going to talk about that in a moment. but the chairman of the full committee coming down this morning and dramatically delivering to the committee was what appeared to be new e-mails that are old e-mails in an attempt to find a smoking gun that would link with has taken

place were supposedly taken place to the president. and then i have tremendous respect for the subcommittee chairman doctor boustany and i appreciate the hearing being called this morning. but let me just -- this is an open investigation. leading to ineffective there have been no conclusions made as of yet, but i have to read from the chairman's opening statement and i quote last weekend the president claimed that there was not, quote come even a little corruption, en "-end-double-quo, at the irs and he blamed the targeting on, quote, boneheaded decisions by the local office. and again further quoting the chairman. the committee has actually investigated the matter and found otherwise those two statements don't necessarily

jive. i would suspect it isn't necessarily an attempt to find the smoking gun. 500,000, the numbers that are congressional committees without any indication of political motivation. 60. the number of interviews conducted by the congressional committees in the current and former irs employees. 14. the number of congressional hearings where the irs personnel have answered questions regarding the investigation. 5,500. the number of irs employee e-mails and the inspector general chief investigators that concluded that no indication of the political motivation before the take-up of the audits was published. they failed to even mention this investigation and led reviews until it was revealed in the july of 2013, two months after the audit was published. there was no indication that the

selected applications were politically motivated. the head of the investigations were up to the e-mail to the senior staff two weeks before it was published. of the e-mail traffic indicated that they were unclear processing directions and the group wanted to make sure they have guidance on improving the application so they pulled them. this is a very important nuance. the treasury inspector general never mentioned that the term progressive was used to single out applications. in ththe applications reviewed n this order in the presentation that instructed screeners to use the word progressive and emerge alongside the tea party to select applications for the further scrutiny.

only by the questioning of the other side. when in fact, the political persuasions of all sorts were targeted as well. it is an outrage that the irs doesn't as you've indicated commissioner as well. if any group is targeted because the political persuasion or the religion or ethnicity or whatever it may be. i mentioned before drama and the need to touch the smoking gun. as a boy i played cowboys and indians as i suspected you did, too. you probably have better equipment when you were growing up. [laughter] >> i was playing at an earlier stage. >> whoever was playing with the indians, they slowed down, stay there i have to fix my god. because we got it just right, you could pull the trigger of the catholic gun debate co- --

cap gun it would make a loud sound and cuba to get an awful lot of smoke. it is a smoke gun and that's what they have been doing over and over again. commissioner, you have been dealing with this for sometime and you will continue to hear the rhetoric on the other side. but remember they had a gun, it is a smoking gun but it is a cap gun. >> i want to acknowledge the fact that we are still waiting on information and in fact, the central committee -- the central person in all of this is somebody that we have not had access to in this investigation and we are still awaiting a very important e-mail communication. so, with that -- >> just for clarification on the statement in your opening statement you made reference to the fact now that committee has investigated the matter and found otherwise. at the conclusion --

>> otherwise we have not completed the investigation. >> i appreciate and healed back. >> mr. reid. >> to my colleague from new york, who i think still does play cowboys and indians because i know him very well. >> would you yield? you don't play fair cowboy i know that. [laughter] >> my good friend from new york. mr. chairman and i appreciate you being here and i appreciate being the young east of 12, coming from a single mother households, i was always taught to look forward, look to the future, the sun is going to come up. and you have a very important task ahead of you, sir. the irs has a reputation i will tell you from my constituents it is just very troublesome to me. you need to have that objective, fair reputation in this agency. in particular, and you just don't have it right now. and so i'm going to give you an

opportunity. and i will take my oversight responsibility here on the committee very seriously. and i want to see if you are going to show any independence or if you are just going to rubberstamp the white house and the president. and i will give you an example of what i'm talking about. when the president makes a statement in the sea for targeting situation comedy party situation targeting that there is not even a smidgen of corruption in a situation. after you testified to us and confirm to the american public that there are six open investigations that have not been completed yet. is that a responsible statement from our commander-in-chief to draw a conclusion on national tv, talking to millions of americans that you can trust me, there isn't a smidgen of corruption in the party targeting situation?

.. today that the investigations are nowhere complete. so, is that a responsible statement or is that something that may be a little irresponsible? >> i don't want to get into a big argument here. a lot of statements have been made in the face of an open investigation that would be drawing conclusions prior to the conclusion of that investigation. so, i don't think that there is a single focus on people at this point drawing conclusions. my position is, as i have said, i'm looking forward to this cotee's inigat determining where the facts actually are, and i look toward to that. >> you are relatively new member. register did not want to answer the question. you are afraid to stand for the white us and say, you know what, mr. president, that may have not been the most appropriate comment. >> let me make it clear. that is not responsive the chairman of the subcommte