about here. i believe 2013 you proposed enforcement initiative, return on investment would be 1.9 to 1. 2013 you project the return on investment for the enforcement initiatives will be 4.3 to 1. historically, i read some reports that projected that by 2012 it was supposed to be a 7.8 return on investment to a dollar. so do you confirm those numbers, those estimates, those projections with actual data. and if you do, how do you do that? if you don't, why don't you do that? >> that's a great question. let me give you how i think about return on investment and exactly what backs it up. first of all, we're very conservatives in the numbers we give you.

those are the people we know do those jobs, a rolling ten-year average on the exact enforce. initiative. we're going to hire 20 grade 13 examiners for an excise tax, we look at ten-year rolling average about how much revenue comes in directly from those people making adjustments that actually comes into the treasury. it's a look back ten-year rolling average are those numbers. i actually think those way understate the impact because the real game of running the tax system and the real objective is the $2.4 trillion that comes in every year which most of those people we don't engage with in that kind of activity. so our job is to run good service, so when people call they can answer our questions, compliance coverage where there's the most risk so that, if you get an audit, your neighbors know you get an audit around specific issues and it drives voluntary compliance.

so another way to look at our numbers is, $12 billion budget, give or take, $2.4 trillion in revenue, every dollar invested brings you 200. a smaller way to look at it is we have what we call our terc numbers which are real dollars in the door every year. last year it was about $55 billion. the year before it was 57, the year before it was 49. that's literally people go out, make an adjustment. people go through the adjudicatory process and bring money in to us. that's a five to one return. the numbers you gave us are based on very specific activities in a granular way, looking back ten years, how does that tie to those terc numbers. >> is it fair to say that your testimony to us would be that they're based on actual data when you go back and confirm the numbers? are you looking at actual data, 1. to 1 for 2013, return on

investment. your will be able to show us in 2013 the actual data that confirmed whether or not you hit 1.9 to 1 return on investment. >> what i said was i think it's very good numbers. it's ten-year rolling averages. i think things spike and they move. so this is an estimate. 2013 might not be exactly that. it might be higher in 2013 or lower. but over a ten-year period, you're going to see it average out to that amount. >> that's my question. in 2012, it was projected to be a 7.8 to 1 return on investment. was it 7.. what was the number for 2012? >> again, i don't think you want to look at these things as, you know, year point in time and you don't want to encourage us to do. what you want to encourage us, is to get the right resources that over time will drive the right taxpayer behavior. these numbers are ones we

certainly consult with gao, omb on. we're very comfortable with these numbers. we have on going dialogue. >> you bring up a great point when you bring gao into the conversation. my understanding is some of their materials, they're very concerned that you're not using actual data to confirm those projected return on investment numbers that you're giving to us. >> i wouldn't characterize it as very concerned. i think they said we can together work only methodology and we're having the staff conversations on a regular basis. >> so you'll work with gao to come to some sort of -- >> absolutely. again, i feel very comfortable in our numbers. if anything i think they understate the return. >> i appreciate that. i appreciate the work you do. i really do. i appreciate all the work you do over there. it's a tough job. >> these are great questions because we need to be accountable for delivering results. appreciate it. >> chairman, i yield back. >> commissioner schulman, welcome. does the irs have available

resources with the current budget to tackle new enforcement responsibilities? new enforcement responsibilities? do you have the resources available to take on new enforcement responsibilities? >> earlier i was saying we try to do the best we can with the budget that congress gives us. obviously we have a big job to do and we try to balance across the board all of the things that we do. we've requested in the 2013 budget some new resources for some of the new legislation that's come through. we or quite hopeful we'll get that in. >> in reviewing the president's 2013 budget proposal, this proposes sadding the irs with additional enforcement spomtds by shifting alcohol, tobacco tax and trade bureau duties of enforcing tax enforcement duties

to the irs with no funding allocated in this budget to pursue those kind of violations. is that something you've had internal discussions with others in the administration about? >> i'm sorry, mr. chairman. what are you referring to in the budget? i don't think there's a major shift in the budget. >> well, i think the 2013 budget proposes giving you additional enforcement responsibilities by shifting alcohol and tobacco tax and trade bureau duties to the irs. >> i should get back to you on this, because i don't think there's a full shift proposed. in the past we've been reimbursed to have some of our criminal investigators help them with some investigations. that's what i'm aware of has happened in the past. >> if you could get me clarification on that, i would appreciate it. >> sure. >> one other question. it's come to my attention, i've gotten a number of letters

recently. we've seen press allegation that is the irs is targeting certain tea party groups across the country requesting what would have been described as onerous document requests, delaying approval for tax-exempt status and that kind of thing. can you elaborate on what's going on with that? can you give us assurances that the irs is not targeting particular groups based on political leanings? >> thanks for bringing this up. i think there's been a lot of press about this and a lot of moving information. so i appreciate the opportunity to clarify. first let me start by saying yes, i can give you assurances. as you know, we pride ourself as being a nonpolitical, nonpartisan organization. i'm the only -- me and our chief counsel are the only presidential appointees and i have a five-year term that runs through presidential elections just so we will have none of

that kind of political intervention in things that we do. for 501c 4 organizations which is what's been in the press, organizations do not need to apply for tax exemption. organizations can actually hold themselves out as 501c 4 organizations and file a 990 with us. the organizations that have been in the press are all ones that are in the application process. so, first of all, i think it's very important to emphasize that all of these organizations came in voluntarily. they did not need to engage the irs in a back-and-forth. they could have held themselves out, filed a 990. if we would have seen an issue, we would have engaged, but otherwise we wouldn't. the basic rules around 501c 4 organizations are that they need

to be primarily engaged in promoting the common good and general welfare of their community. they can be involved in political and campaign activity, but it can't be their primary purpose. when people apply for 501c 4 status, what we do is engage them in a number of questions about making sure that we understand their primary purpose around this and other sorts of engagement. so what's been happening has been the normal back-and-forth that happens with the irs. none of the alleged taxpayers -- obviously i can't talk about individual taxpayers and i'm not involved in these, are in an examination process. they're in an application process which they moved in to voluntarily. and so there's absolutely no targeting. this is the kind of back-and-forth that happens when people apply for 501c 4 status. >> finally, is it fair to say there's been no change in irs

practice with regard to what triggers audits and so forth with regard to tax-exempt organizations as a whole? >> so we -- as a whole, we have audits based on risk criteria, coverage requirements, et cetera. but in the area of political activities just to make extra sure that folks are very insulated, we actually have a committee of three career professionals who aren't based in washington, d.c. at any time an audit can be triggered because of potential political activity or there's a referral from a member of congress or other actives that could be viewed as political. that group of three actually first looks at it. no single individual can launch an audit. it has to be agreement amongst three. then the decision would be made for an audit based on resources,

risks, allegations, facts, et cetera. it would be shipped out to an auditor to do that audit. that's been the practice for many years for anything to do with political activity, and that's the practice now. >> i thank you for your answer. dr. mcdermott, do you want to inquire? you may inquire. >> thank you, mr. chairman. i want to shift the question just a liftal bit or the issues you've been dealing with here. i have a lot of lgbt clients or constituen constituents. they have been approaching me about the problems of dealing with the irs and how to file their income taxes and are having the experience of having more than one source give them a different answer.

they're spending some of them twice as much as a married couple would spend to get their income tax done. they've gotten married under the law, but suddenly the irs has got thing -- when they ask questions about certain things, it's just not clear what the answer is. so i'm wondering, is there any single place or perhaps should there be a single place where they can call and find out the answer to a question or some place in the irs where somebody takes thissish yund begins to give definitive answers? >> yeah. great question. i'm aware of the issue. and we've actually tried to do a bunch. first of all, this is a very complex issue for these taxpayers because under state law these taxpayers have a different legal status than under federal law because of some of our federal laws. so under state law they often

split the income, but under federal law they have to actually file separately because of the federal laws. we recognize that there was a lot of confusion, and so we actually consolidated and put a group together who worked and put out a whole set of frequently asked questions that answered a lot of these questions. so we realize that as laws have changed around the country, this has been an issue. we've been engaging with the community around this. i think we clarified a lot of questions. let me just say, though, until you have state laws and federal laws recognizing couples the same way, this is going to remain difficult for people because some of the things people have asked us to do we can't do under the law. >> when they're filing their income tax federally, do they -- i suppose if you have different thing at the state level, but

federally if they're doing it together, they can't do it together, is that what you're saying? >> it all depends. different states have different domestic partnership laws. but there's state returns often piggyback on federal returns. but recognizing couples as couples is different depending on whether you're in the state or depending which state and also federal laws are different. >> so the pig gik backing off the federal tax return sort of works at reverse at the federal level. they'll change state laws to actually make this rational. >> it adds complexities to these taxpayers filing. we've tried very hard to make sure we do our job like we do with all taxpayers which is we've got a set of taxpayers with specific issues. we've got a team together. we worked on these things, we did outreach and engagement. we tried to really clarify what we could clarify. >> if i had a question, what

number would i call to get the answer? >> you'd dial our 800 number. >> and that number get you have to somebody who will give you the same answer day after day after day, you won't get two different answers? >> that's our hope. we track accuracy and consistency and they're always in the high 90s. >> okay. i appreciate that. it's an issue i hear from the district a lot. i want to know what it is that you have tried to do and we'll see if there's problems or we need to do something about it, we can look at it. thank you. >> thank you. >> with your indulgence, commissioner schulman, mr. be sarah has one follow up question. >> mr. chairman, thank you for generously allowing me to ask one last question. commissioner, two weeks ago i sat down with my tax preparer and went over my taxes in preparation to file and he's been doing this forever. he's an enrolled agent, licensed

and all the rest. he said i was always supportive of what you were doing with regard to the tax preparers and trying to get us to be a more defined group. he gets folks who come in to correct taxes that have been filed improperly by folks who prepared these things, charged people money and did it the wrong way. he said i thought it was always good. he asked me a question and said, seems to me like a lot of us who have done this for a long time are the ones being asked to go through the process to certify that we're competent and all the rest. i said to him, my sense is that everyone is going to be at some point touched by the irs as it's moving toward the effort of trying to certify that folks are competent to be out there representing themselves as qualified preparers of tax returns for money. the chairman was gracious enough to indulge me. i'm wondering if you can tell us what the status is of the initiative of the irs to try to

help do the bird dogging and oversight of tax preparers and maybe respond to the question of who is being contacted out in the tax prayer world by the irs to follow up. he said he had to go through some courses or programs to test his qualifications and so forth. so if you can give us a quick sense of where things stand. >> sure. similar to what i talked about with the realtime system, it's a big initiative. we had multiple public hearings around the country. vetted it with the report, put out regulations with lots of public comment. we've had a lot of engagement with the prayer community. this is about partnering with the preparer community to make sure they're prepared well. status is we've had 840,000 people apply and receive pee

tanks prayer taxpayer identification number. about 60% of those were not already an enrolled agent, a cpa or a lawyer. now, enrolled agents, your prayer and cpas and lawyers who already had higher level qualifications had already gone through their own set of competency testing, already had on going continuing education requirements, were not requiring to take the test because they've already taken a test or have continuing education. so your prayer should not have had to take a test if he was already an enrolled agent. so we have about 840,000 people who have signed up. last fall we started administering the competency examination, and we have a number of people through that. one of our promises was to the

american people, we weren't going to cut out prayer services. we wanted to make sure people still could get service. there's a lot of very competent preparers who have been preparing returns for 20, 30 years who haven't taken a test in a while. so we gave them three years to pass the test. so people are now starting to pass the test. you don't actually become a registered tax return preparer until you pass the test. all you do is have a p-10 right now. now people are starting to move through the test and we've had several thousands who have taken the test and we expect that number to grow. and we've started approving continuing education providers. this year continuing education requirements kick in. we're well on the way there. the last thing we would say is this filing season, we had the p-10, we had cade processing everything faster and we've gotten better at data analytics. we were able to look at prayers

who had egregious problems with their returns, go with them immediately in late january with visits, letters, phone calls and really start to engage the prayer community to make sure they're treating taxpayers well. very pleased with the stats of the initiative. that's a broad overview. >> thank you very much. mr. kind, you may inquire. >> thank you, mr. chairman. apologize i was a little late. commissioner, thank you for the testimony for the work you're doing. we really appreciate it. a lot of issues are pending, but i had a chance to review the national taxpayer advocate report and i'm sure you at the irs pay attention to that as well. some of the disturbing trends they see in the report is the inadequacy of funding for the irs in order to to your job adequately and serve our citizens properly, and they were concerned because of funding cuts and the inadequacy of resources, what it means to the

noncompliance issue. our concern is it's only going to grow wider, if there's a lack of comp tnls or believe in the irs in compliance matters, it's only going to exacerbate the issue. are you agreeing? >> we had budget cuts, and we trooto do the best we can with the budget cuts. we talked for a while before about service. we haven't talked a lot about compliance. clearly, we're doing less exams this year, and we have the triage in places. we're doing less collection activities. and it's going to result in less money coming in than otherwise would have come in. the big trend i'm worried about is if we don't stem the tide in the 2013 and 2014 budget, is you get to a point where there's enough news about compliance rates being so low that still a lot of people are going to pay

their taxes because they're honest, hard-working americans and they want to pay into the society that they feel benefits them, but if people want to push the envelope, which some do and want to cut corners, if they think we're not on the job, then they'll do so. so i think the general comments about you can't have a long-term trend of degrading compliance resources because that really starts to hit voluntary compliance accurate and i think the specifics of just less funding means less dollars in the door. that's simple math. >> let me ask you a couple questions. we're approaching the second anverseerary of the passing of the affordable care act, and one is to small businesses who provide health care coverage for their workers. 35% this year, supposed to go to 40% in 2014. there are moments back home in small business owners come to me and complain about the complexity about the tax credit and having to fill that out.

what is your poin on that, and is that an idea where the irs or us working with you can try to simplify the process to make it easier for small businesses to qualify for that tax credit? >> yeah, one, it's obviously an important tax credit for small businesses to help them afford paying for health coverage for their workers, which is, you know, a key component of the affordable care act. i think it's a very complex credit. we have heard from a lot of practitioners and small businesses that the phase out around that and other issues have made it very hard for people to, a, understand, if they can hit the sweet spot where you get the credit, and b, sometimes discourages people from actually taking cradvantag of the credit. the budget actually has a simplification proposal in it which works on the phase out and other issues to make it hopefully much more attractive to small businesses and congress taking up and passing that, i

think, would be ben financial. >> you think that makes a lot of sense with what the administration has looked at? >> yes. >> in 2014 with the exchanges, a lot of credits going for the individuals in the exchange market. is the irs making preparations in order to deal with that and are you on track? >> we are making preparations. we are on track. we -- the majority of the work we're doing and the people we had to hire is to build technology systems, to interact with the state exchanges and the federal exchange so that an estimated 30 million people can get over a ten-year period, $400 billion of tax credits. i testified yesterday before our appropriations committee and what i said to them is i understand that there's hea heartfelt policy debate about

the affordable care act and there's members of congress who don't like it, some who like it, but the bottom line is come 2014, there's going to bow a lot of constituents in every district who expect the tax credit and we need to get funded appropriately in the 2013 budget to prepare for that. and so we're on track. we're spending money now based on authorization that came through the bill, but we need to get financial support because we have a big job to do. again, we are not involved in health pale os. we're involved in moving the money to help the law work. >> thank you. >> this broader question of the complexity of the tax code should give impetus to all of us to look at tax reform. the chairman has set that at a goal, and it's something we should do in a bipartisan way. thank you for appearing before us today. as is customary, please be advised that members may have questions they may submit to you in writing and the questions and

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debates play in a general election. do they re-enforce the view that the public has of a candidate or change the view that the public and the electorate has on a public candidate? >> our understanding from the research that is done on the questions which we do not do independently, they tend less to change minds than they give information that helps people confirm the impressions they may have had going into the debate. polling has shown that they cite the debate as the most important factor in how to cast their votes than any other single issue. that isn't to say that they are mind changers. it is to say that people find the content of the debates extremely helpful. >> you'll have a chance to talk to students from dozens of colleges and universities around the country. when the debates began in 1960, they took place in television studios. they could take place in a studio like this today, but