highway of illegal drug trafficking as well as people trafficking. we have people coming here from multiple other countries. i mean, it's ridiculous. so i believe it is possible to seal the border within one year. and i do believe that -- [ applause ] and i believe that if you turn off the spigot that dispenses the goodies there won't be any reason for anybody to try to come over here. and then i believe that we do have to deal with the millions and millions of people who are here already. i think if they have a pristine record and they would like to stay, they have to register within a defined period of time. i would like it six months. they have to pay a back tax penalty. they have to pay taxes going

forward. they are not citizens and they don't get to vote. and they have to work somewhere where we want them to work. and it's important to recognize that some of the industries in this country very much depend on that labor. and they would collapse almost immediately without it. but it can only be done by people who are here in a legal manner. and it is not an amnesty program because it does not make people citizens. it does not give people the vote. when you hear people saying carson wants amnesty, that's not true. what carson wants is practicality. things that actually work for us. and we're also reasonable people. one of the things that i think is very important in terms of our foreign policy is not to be giving billions of dollars to

other people in foreign aid which we borrow from china and pay the interest and give it to somebody else. that doesn't make any sense. but we should be supplying foreign aid. like in cameroon right now, american companies over there helping to develop millions of acres of incredibly fertile land and they're getting record crops and they're making big profits. in the meantime they're building the infrastructure of that country and they're providing jobs there and they're teaching people there the ag business so that they can do it for themselves. and there's no reason that we can't do that in central america and south america also so that they can begin to prosper and our companies will prosper in the meantime, and they won't feel that they need to come here. i think that's the kind of leadership that we could show in the united states. all right. thank you all very much. >> thanks a lot. >> thank you.

>> dr. ben carson. thank you, dr. ben carson. john boehner gavelled out as speaker for the last time on thursday replacing him wisconsin representative paul ryan who became the 64th speaker of the house with the support of 236 members. paul ryan talked about wiping the slate clean in his acceptance speech. you can watch the election and all the speeches on our website, c-span.org. on news makers kevin brady, a member of the ways and means committee talks about his interest in replacing paul ryan as chair of the committee as well as tax issues, the budget deal, and congressional agenda under new speaker ryan. "news makers" on c-span.

this week the justice department wrapped up its investigation into the irs' treatment of organizations applying for tax exempt status. following the decision to not press charges against former irs commissioner lois lerner the senate finance committee held a hearing with the current irs commissioner john koskinen to examine the practices after the scandal. this is about two hours. >> the committee will come to order. i want to thank those who are here today. in may 2013 the treasury inspector general for tax administration revealed that in the run-up to the 2012 and 2010 elections the irs targeted certain organizations with extra and undue scrutiny based on the

group's names and political views. needless to say, we took this matter very seriously. indeed at the time both republicans and democrats condemned the agency's actions. and as the senate committee with exclusive legislative and oversight jurisdiction over the irs, the finance committee launched a bipartisan investigation into the matter. n-our investigation was the most thorough and the only bipartisan investigation conducted with regard to this events. on august 5th of this year after more than two years of investigation, we released a 375-page bipartisan investigative committee report that included approximately 4700 pages of exhibits. this report is, i believe, the definitive record of what occurred at the irs and why. as we all know, last week the department of justice stated publicly that they would not be pressing criminal charges with regard to these events at the irs. this has led some to argue that the justice department is

corrupt or biased in some way. i believe the committee's report speaks for itself on this matter and, in my opinion, rather than fueling the echo chamber, we would do better to focus on what we know actually happened and what changes need to take place to make sure it doesn't happen again. that's why we're here today. the committee's report included ten major findings that formed the basis of various recommendations for changes that we believe the agency should make to ensure the irs' actions remain above board. the purpose of today's hearing is to hear directly from the irs about their response to our report and their progress in adopting our recommendations. toward that end, i want to thank commissioner koskinen for being here today and for the agency's thoughtful response to our recommendations. in that response, the irs indicated that they have implemented all of the bipartisan recommendations from the report that are within the

agency's control as well as a separate majority and minority recommendations. our overall goal here should be to restore the creditability of the irs and ensure this powerful agency treats all american taxpayers fairly. while i want to commend the irs for the efforts they have made thus far, it is my understanding that up to now most of the changes they've made have been procedural in nature and very little has been done to begin work on the needed structural changes at the agency. today, i hope to hear more details as to why these types of changes are being delayed. at the same time, i believe the finance committee should be considering statutory changes that will improve upon the status quo. for example, there was bipartisan agreement in the report in the need to update the hatch act to ensure with regard to political activities, irs employees receive the same considerations as employees of other highly sensitive agencies like the federal election commission and the federal bureau of investigation.

in addition, as the majority views and the report noted and as i have stated publicly on multiple occasions, i have serious concern about the influence of labor union activity at the irs. while i am not anti-union and while i do not oppose collective bargaining in general, we know 2/3 of irs workers are represented by a union organization that is very politically active and that a fair number of irs employees work full-time for the benefit of that union. i don't think it's much of a stretch to argue that such a strong union presence could have contributed to a politicized environment at the irs. while current law allows current government employees represented by unions, congress has made number of exceptions to this policy. generally with agencies that have important law enforcement obligations or perform other highly sensitive work. while i expect there to be some resistance to this idea, i think

it is only reasonable that we take the time to consider whether the irs should be placed in a similar category. i hope today we can have a good discussion and get commissioner koskinen's views on these and other legislative proposals. ultimately, the theme i want to stress most today is accountability. our report clearly shows that political targeting at the irs resulted from a number of bad decisions made by a number of different officials. however, as of yet very few of these individuals have been held accountable while others have since received bonuses and even promotions. while i'm concerned about this apparent lack of individual accountability i am more concerned that first lacks the necessary structural and procedural mechanisms to ensure as an agency it remains accountable. the recommendations we included in our report were designed to provide this type of accountability. and i look forward to discussing our ideas in more detail today. before i conclude, i just want to briefly comment on the ongoing effort at the irs

to enact new regulations regarding the political activities of 501c-4 organizations. this is an issue that deeply concerns a number of people throughout the country, including members of this committee. as we know, regulations proposed in 2013 were criticized by people and organizations across the political spectrum and were subsequently withdrawn. that proposal would have created nonsense sick nonsen nonsenseicle rules and dubious speech restrictions. oddly enough it would have created stricter standards for 501c organizations that exist for public charities, which would be a perverse reversal of roles for these types of organizations. i think it's fair to say that agencies still carries with it a cloud of perceived political bias. therefore i would caution mr. koskinen and others in the

administration that have made this regulation a priority to focus instead on actions to restore the irs' creditability than to abandon any effort to inject more rules and restrictions into the political process. i expect that members of the committee will want to discuss this matter today as well as once again it is an issue that is on the minds of many people. with that, i'll turn to our distinguished co-chairman, senator wyden for his opening remarks. >> thank you very much, mr. chairman. in early august the finance committee released the final report on the bipartisan inquiry we undertook to examine the irs' processing of applications for tax exempt status. our investigation looked back at the period between 2010 and 2013. the committee reviewed 1.5 million pages of e-mails and documents and conducted interviews with more than 30 irs officials.

the finance committee inquiry colleagues was the only bipartisan inquiry on either side of capitol hill. what we found on a bipartisan basis was alarming bureaucratic dysfunction. many applicants for tax exempt status were treated badly ult and deserved much better service from their government. for example, between 2010 and late 2011 a total of 290 applications for tax exempt status had been set aside for review. only two applications had been resolved successfully. not 200. two. that was unacceptable mismanagement. the investigation, however, did not find any evidence of criminal wrongdoing. chairman hatch and i both took time to speak about our views on the senate floor when the report was issued.

the focus of today's hearing, however, is what the irs is doing to guarantee once and for all that this type of deeply troubling mismanagement never happens again. the finance committee's report included 36 recommendations. 18 were bipartisan. 12 were democratic. 6 were republican. among them set minimum training standards for managers in the exempt organization office to ensure that these employees can adequately perform their duties. institute a standard policy that employees must reach a decision on all tax exempt applications within 270 days of when they're filed. three, create a position with the taxpayer advocates office dedicated solely to helping organizations apply for tax exempt status and several others. i would like to thank the commissioner for responding to those recommendations into a letter he sent to chairman and i.

my takeaway from the letter is that it is the commissioner's view is there's been genuine progress to clean up the mess and i look forward to hearing his assessment in further detail this morning. while the commissioner is here, i also want to address the problem that occurred in martinsburg, west virginia. they deleted backup tapes that deleted e-mails that were within the scope of the committee's inquiry was ongoing. it was completely unacceptable and it was inexcusable. there are also reports that there was some lying afterward. mr. commissioner, that can just not happen again. i want to hear what the irs is doing this morning to fix it. finally on friday the committee received a detailed letter from the department of justice concerning their investigation into this matter. i ask for unanimous consent that

be entered into the record. >> without objection. >> i want to be clear on this point. the vast majority of americans want disclosure in political spending. they want all sides to be more open and more straightforward on these issues. the american people overwhelmingly disapprove of the citizens united decision that knocked down some of the key limits on political campaign spending. if there's no oversight of who receives 501c status, meaning anybody could get it and hide their donor list, then political spending will be hidden even deeper in the shadows. so my request to you on this point, mr. commissioner, is that you all work with this committee, democrats and republicans, you work with committee in a bipartisan

fashion to get this right. thank you very much, mr. chairman. >> thank you, senator wyden. today's witness is the honorable john koskinen. commissioner koskinen was confirmed to this position in december of 201. prior to his appointment to lead the irs he served for four years at freddie mac where he served for a period as the acting chief executive officer. before that time, commissioner koskinen held various high-profile positions in public service, including president of the u.s. soccer foundation, deputy mayor of the district of columbia, deputy director of management at the office of management and budget and president clinton's chair of the president's council on year 2,000 conversion. the commissioner spent more than two decades in the private sector including time as ceo and chairman of the paul mary company. commissioner koskinen has a law degree from yale university

school of law and a bachelor's degrees from duke university. we want to thank you once again for being here today. you can proceed with your opening remarks. i ask you, if you can, to limit your opening statement to five minutes. >> right. chairman hatch, ranking member wyden, and members of the committee, thank you for the opportunity to discuss the work the irs has been doing to correct the mistakes associated with the determination process of tax exempt status two years ago. let me reiterate that the irs must continue to do everything possible to make sure all individuals and organizations can be confident that they will be treated fairly in their dealings with this agency. they need to know they will receive fair, unbiased treatment regardless of their political affiliation, their position on political issues, or whom they've supported in the last election.

when someone hears from us regarding their tax return, they need to understand it's only because of something that is or should be on their return and no other factors. and if someone else has the same issue regarding that return, they'll hear from us as well within the limits of our budget resources. it's important because even with our declining resources, the irs will still audit over 1 million taxpayers this year and they need to be competent they will be treated fairly. the situation described by the inspector general in his may 2013 report should never have happened, and we are doing everything possible to ensure that the mistakes referenced in the ig's report and reflected in the committee's bipartisan report do not happen again. it's part of our work to move forward we have implemented all of the report's recommendations from the ig. the ig noted our efforts in a follow-up report issued march of this year. as to the finance committee's own investigation, i'm pleased to report as noted the irs has accepted all the recommendations in the committee's report that are within our control, that includes recommendations in the majority report and the minority report.

we've already made significant progress in implementing those recommendations. let me briefly summarize the actions we have taken thus far. we've taken steps to ensure the determination process for tax exempt status is transparent and the public can obtain information on the procedures. we have reduced the processing times for applications for tax exempt status and we're committed to resolving all cases within 270 days as the committee has recommended. in fact, the cycle time right now as a result of the work we've taken over the last two years is down to 112 days. we continue to develop new training and workshops for employees on a number of critical issues connected with the application process for tax exempt status. we have established procedures to ensure applications undergo a neutral review process. these includes training employees on the proper way to request additional information is needed to complete action on an application. in addition, treasury and the

irs have noted our drafting guidance on social welfare and non-social welfare activities of 501c-4 organizations as recommended by the inspector general. our goal is to provide guidance that's clear, fair to everyone, and easy to administer. to ensure our accountability in the determination process, the irs has done a number of things, including requiring managers to conduct periodic workload reviews their employees. information on the average amount of time to complete cases is regularly shared up the chain of command with me and other irs leaders. our efforts to improve accountability also included centralizing our exempt organization work forces, so leaders now work in the same location as employees who process applications for tax exempt status. we've also taken actions to ensure risks are managed more effectively in the exempt organization area and throughout the irs. we now have an agency wide enterprise risk management program providing for the

regular identification and analysis of risks to be eliminated or managed across the agency. to ensure we properly respond to requests under the freedom of information act, we're developing standard procedures for employees to use when they search for information and we will provide training to those employees on those procedures. as recommended my both the committee and the gao, we are tightening internal controls for the process we use to select tax exempt organizations in the awed dets once they are identified. although the gao recently found no evidence of unfair or biased audit selections, we agree with them that tightening the controls will reduce the risk that any unfair selections would occur in the future. another issue is the need for us to improve our records retention process. we've initiated a process to secure the e-mail records of all senior officials of the agency. in addition we're taking steps to ensure employees preserve official records created when they send messages using our office communicator system.

while we continue working to implement the committee's recommendations, we also appreciate the committee's bipartisan issues. for example, a committee is considering identity theft legislation containing several provisions that would improve tax administration. these include accelerating due dates for information returns, allowing the irs to require minimum qualifications for paid tax preparers and reinstating streamline critical pay authority. i'd encourage to committee to consider two other important legislation changes, amending the statute to simplify audits of large partnerships. this concludes my opening statement, and i'd be happy to take your questions. >> thank you, mr. commissioner. again, i appreciate the way your agency has worked with this committee on our recommendations, but i also want to emphasize that there remains several open issues stemming from the targeting of conservative groups, and i want

to get your response on two of those issues. the first is, i understand that there's at least one group caught up in the targeting that is still waiting on a determination. can you commit that your agency is moving with all appropriate expediency to resolve any remaining open applications? >> yes, we will do that. i can't obviously talk about any application, but we're down to just a handful. several of those are in litigation. in some cases we're still waiting for responses, but as i noted we have reduced the backlog and a new application in today will get processed on that average of 112 days. >> okay. secondly, in my opening statement i mentioned the irs and treasury department's 2013 proposal to restrict the free speech of certain groups of

americans by rewriting 56-year-old rules of 501c-4 social welfare organizations. i know we disagree on the need for changes to the rules governing c-4 organizations and i know you have committed that no new rules will take effect before 2017, but this leaves open the irs will make proposals this year or next year, creating confusion or uncertainty regarding the free speech of certain groups and their ability to engage in civic activities like non-partisan voter registration or candidate forums. can you tell the committee whether any new proposals will be released before 2017 and if so, when do you expect that to happen? >> we are following up on a recommendation of the inspector general who said the facts and circumstances standard, which has been used for the last years, is confusing and was part of the problem employees had in interpreting the applications from c-4 organizations across

the spectrum. it is, as you noted, just before my confirmation hearing draft regulations went out that generated 160,000 comments. many of them agreeing restricting the use of bipartisan/non-partisan get out the vote campaigns, candidate forms. we're taking those into consideration. but it is clear to us that in fact what we're trying to do is not change the rules of the game. what we're trying to do is make them clearer not only for irs employees, but to have a clearer set of guidelines for those organizing these organizations and most importantly for those operating them. we think when you're running one of these organizations you ought to be able to be confident that you know what the rules are, that of nobody is going to dmom afterwards and second-guess you on the basis of what their interpretation of the facts and circumstances are. i do think that the ig was

right, that it would be important to clarify, not change, but clarify the rules under which organizations operate. that's our goal and intent. >> can you tell the committee whether any new proposals will be released before 2017 and, if so, when you expect that to be? >> we don't have a timeline. we are continuing to finish our review of all those comments and to continue to review the total statutory framework the congress has set up. we've made it clear that we have no intention of influencing the next election. on the other hand, when we issue these -- reissue them in the new format that we think will be much more acceptable to people, it will be open to public comment for 90 days. we've committed we will have a public hearing about it. we've committed we'll keep the committees updated on the progress. at this point, we don't have a timeline. we would hope that we would be able to provide these proposed new rules early enough next year

so that they could -- the work on them could be completed well in advance of the election, so there wouldn't be any confusion. but i would stress that the work that we're doing now is focused on clarifying, not changing, but clarifying the rules under which organizations operate. so i understand once we get those out, people on all sides will understand much better what it is we're talking about within the existing standards of operation. i think the clarity will benefit everyone. >> well, with the irs unable to meet its basic duties of answering taxpayer phone calls and protecting against tax fraud, i strongly encourage you to stop spending time on counterproductive proposals. commissioner koskinen, today you've mentioned several ways the irs has adjusted its operations to serve taxpayers better and even more fairly. one area in which the irs needs to continue to strive to do

better is in protecting taxpayers' identifying information and the vast amount of financial information that the irs maintains about taxpayers. the irs also needs to do better in preventing stolen identity refund fraud. you've mentioned the regulation of paid tax return preparers, but i know there's concern providing such authority could lead to more bureaucracy and potential harm to taxpayers. just one last question. will you commit today that if the irs were to be provided authority to regulate paid tax return preparers, that the irs will utilize the secular 230 framework that is already in place, not create another new regulatory regime, and we also commit to fully cooperating with this committee in the regulation of paid tax return preparers? >> i'm happy to commit to both of those positions.

we fully intend to use the 230 regulatory framework. in fact, if we were given the authority to require minimum qualifications for preparers, we would run it the same way we set up the program in 2010, which was under section 230, the regulation 230, so we have no intention of expanding that or changing it. that program started off looked like it was doing well until the courts ruled we didn't have the statutory authority. the legislation you're talking about would simply make clear we have the authority to run the program as it was originally set up so there will be no surprises. people will know exactly what it looks like because that's what we did for almost a year. >> thank you. senator wyden. >> thank you very much, mr. chairman. i appreciate you pointing out this question of the tax preparers because this is another area you and i have worked on in a bipartisan fashion with all our colleagues. on the question of however the 501 c-4 rules because this is an

area where there's been spirited debate, i think it is very much in the public interest that the agency clarify the rules for americans to follow in elections. and i would urge you, as i did in my opening statement, to work with us on a bipartisan basis. you've heard me say that a couple of times this morning. that's what's so important if you're going to come up with a approach that's substantively right and sustainable. so i urge you to do that and to work closely with us. chairman grassley and i, commissioner koskinen, have been following these new reports about the question of the irs cell phone tracking. the irs obtained and received training for hailstorm cell site simulator, a device that connects metadata from phones that connect to it. this comes on the heels of other new reports that many companies have taken to tracking their employees movements through cell phone

trackers in order to avoid triggering a taxable presence in foreign countries. now obviously the irs has an important role to play in combatting money laundering and drug trafficking and international tax dodging. i view, however, that enforcement and protection of personal privacy must not be mutually exclusive. we've got to have both, so commissioner, what can you tell us this morning in an open session about the irs' use of cell site simulators? >> the use of that is restricted. it's our criminal investigation division that uses that techniq technique. it's only used in criminal investigations. it can only be used with a court order. it can only be used based on probable cause of criminal activity. what it does is primarily allow you to see point to point where communications are taking place. it does not allow you to overhe overhear, the technique doesn't,

the voice communications. you may pick up texting. but it follows the justice department's rules and it requires probable cause in regard to criminal investigations. it is not used in civil matters at all. it's not used by other employees of the irs. >> how frequent have these investigations gone forward? in other words, how frequently are irs criminal investigators obtaining location data about the people it is investigating? >> i'll have to get you that information. i don't know how frequent it is. i just know that it is used primarily in cases of money laundering and organized crime. >> can i have that answer within 30 days? >> you certainly can. >> on the recommendations we're talking about this morning, i have tried to make clear that i believe the way the irs handled the 501c-4 applications was a unmitigated disaster. in effect, the hand fisted methods for screening applications basically let them

pile up for what seemed like eternity and virtually none were processed. certainly the agency made unacceptable mistakes in its response to congressional inquiries, particularly taking months to inform the committee when it discovered that lois lerner's hard drive had failed. so i think i'd like to start this morning, because i appreciated the letter that you sent to chairman hatch and i. in your view, what is the most important change that you have made in terms of responding to our bipartisan recommendations? what's the most important change and why? >> i think the most important change -- and it's a combination of many of the recommendations -- is to encourage and in fact require the free flow of information from the bottom of the organization to the top. that what we're trying to ensure is if there is a problem anywhere in the organization about anything that employees feel empowered and in fact feel responsible to note that problem, report it to their managers, and if they feel

that's not appropriate or they're concerned about that, to report it up through the organization. our enterprise risk organization has its own independent line of communication, any employee can use. i've now talked to almost 17,000 irs employees telling them i want them all to view themselves as individual risk managers. i have an e-mail box that i've gotten about 1,000 suggestions from employees in. i've tried to get them to understand they should feel comfortable sending me problems, concerns, or suggestions. i think if you look back at the problem, one of the problems that led to that inordinate and unacceptable delay was that the problem never moved all of the way up the chain of command. it was, in fact, stuck in the middle. lgs the chairman mentioned about structural change. it was because there were people in cincinnati and people in washington who didn't have very good communication. so if the communication works better, if there are regular reports where the problems are, if there are issues where we

know that applications are stuck, that information should be shared, not hidden. >> one last question for you, commissioner, and it deals with the records and recordkeeping. obviously backup tapes were erased that shouldn't have been. though there's no evidence that the tapes were deliberately destroyed to hide evidence, now there have been some reports that employees didn't own up to their mistakes when investigators came knocking. what is the irs doing to ensure that its employees in the future keep e-mails and records safe? >> again, it's several things. first of all, we discovered it was a mistake that shouldn't have happened and it obviously did not help our response to the investigation. what we need to do is when we have a document protection and retention request, you can't rely on sending it up from the top, 85,000 employees, and

assume that it will automatically be transmitted accurately through the bottom. those retention requests will go individually through the chain of command. secondly, we are training our employees as to what it means to retain all media within a particular area. but the broader issue is, that we're dealing with is, we should not be depending on individual hard drives and disaster recovery backup tapes as a backup system. they made a decision not to upgrade our e-mail system. we are now doing that. we should have a standard, not something fancy, a standard e-mail system that retains the records automatically, that's easily searchable. we shouldn't have to spend $20 million in a year responding to legitimate congressional inquiries for information. so we need in the short run to make sure whenever there a is a document retention request it goes through the organization and we're satisfied it goes from the front line managers and they understand what it means.

we also will provide training for the first time for all the i.t. people, xaktly the media that should be retained. in this particular case gang rs it should not have happened. the people on the front lines, the two employees involved, nobody purposely did this. b, this was viewed as junk. it was found in a closet. what we need to make sure is that everybody understands when we retain media, it's all media. wherever you find it, however old it is, however disusable it is. the better solution in the long run is not to rely on backup disaster recovery tapes and not to rely on individual hard drives but to in fact have a readily, searchable backup system of all e-mails records at the agency. >> thank you, commissioner. >> go ahead, senator brown.

>> commissioner, thank you for joining us today. i'd like to shift the focus to something this committee had an opportunity to address last month but chose not to because of partisan infighting and the influence of interest groups in this town. it's the irs' ability to regulate paid tax preparers, as they have been instructed to protect our candidates from identity theft. we must ensure that paid taxpayers perform due diligence. especially important and crucial for credits that assist low-income families, earned income tax credit and child tax credit principally. as you mentioned in previous testimonies, 57% of itc returns come from paid preparers, 3/5 of whom received no oversight from the irs. there are not qualifications requirements that it must meet before it leaves this tax preparers. it leaves an enormous hole within our taxpayer information.

68% of the itc claimants turn to these paid preparers to help file their returns likely because of the very complex eligibility requirements already placed within the tax code. paid preparers who don't enroll with irs have a 40% higher chance of submitting an improper itc return. not fraud, but an improper return. despite what some of my colleagues might say about the irs' inaction on this issue, the agency tried in 2010 to bring these preparers in line with minimum qualification standards, as you know. the d.c. circuit court overturned the effort and instructed congress that it's actually our responsibility to provide your agency with the authority to do this. last month when attempting to correct this problem, some of my colleagues balked at the idea of granting your agency this crucial authority. a couple of questions. walk us through, if you would, why it's so important for congress to take action and to

help improve tax enforcement for this group of taxpayers. and i know since 2010 you've made steps to increase compliance and reduce error rates. so if you could walk us through -- integrate into your comments what you've done since 2010 and the steps you've taken. >> well, as i advised the chairman, what we're talking about is requiring minimum qualifications of preparers. nothing massive. it's simply that people ought to demonstrate a minimum capacity do understand the tax code. it goes particularly as important in low-income and immigrant areas where a lot of times people are hanging out shingles saying come with me, i'll get you a bigger refund. i would stress the vast majority of tax preparers are honest and try to do a good job. and, in fact, we do tax forms. i addressed -- we handle it over

10,000 return preparers came and spent several days with us updating themselves. what we're proposing is what we started to do and ran for almost a year is require continuing education, minimum qualifications for tax preparers particularly in areas like the eitc. t majority of eitc returns come from preparers. they've had no education about how the program and how various credits work, so we think it would be a significant step forward, provide greater protection to taxpayers, especially in low-income areas to have some level of confidence that when they pay the preparer to prepare that return, the preparer has some knowledge of the tax code, it's not somebody hanging out a shingle, somebody's brother-in-law, a community center saying i'll prepare your tox return for you. some of them are unethical. some of them say, come with me, i'll get you a big refund.

sometimes some of them are actually collecting the refunds themselves. we're not going to get crooks out of the world, but if people go through the time to become educated to some extent about what the tax law is about, it is a better indication that they're serious about doing it well. the eitc rate of improper payments and the volume of improper payments is the single most intractable problem we deal with. we have a significant problem with identity theft but we just cl created a new partnership with the tax commissioners and we're making progress on identity theft. but we need more tools. i appreciate the committee's support for getting w-2s earlier so that we could in fact match the w-2s with the returns we're getting. we need access to the new higher database which this committee would provide us with. it's a complicated problem. ultimately it goes to, as you point, the complexity of the eligibility requirements in t statute and while the statutory

framework is not my domain, if it were simpler, that would also help. >> mr. chairman, thank you. and again thanks to senator grossly. one real quick comment. senator portman in my state has played a major role in staffing and running vita sites which have made a difference. one last really brief question and you can pretty much answer yes or no. if we were to take some of these actions that you ask for, i assume you could say with some certainty that improper payments -- some would call it fraud, it's clearly not fraud -- but improper payments, the rate of them would be reduced. >> yes. what i did when i started knowing this was a problem i said i want everybody in this agency who knows about this problem and working on it to sit down and say why isn't we haven't made more progress in the ten years. it's not for want of trying. we tried aiitu range of things. i wanted to be a blank slate, what would we need. what we came out with what -- we need minimum qualifications. we'd need w-2s earlier.

we need access to databases that allow us to double-check what was going on. the final piece, which i asked the committee to consider, is we need limited correctable error authority. we can see in returns when somebody has claimed. erroneously a child, but we can't correct that under the statutes. we have to send a notice, we have to audit those people and there's a limit to our ability to do that. we can do math error corrections. and the correct i believe error authority would simply allow us -- and educational tax credits. if you went to a university not on the list, if we see that we either have to hold the return and deny you the credit and audit it or we have to let it go through. and we don't have enough resources ever to awed dilt our way out of this problem alone. so that package was what i was told a year and a half ago and that's what we're been working with and appreciate the support from the committeen all of those areas. if we had those, we think we would make a significant dent in the improper payment rate, a significant dent in the volume of improper payments that are

made not only in eitc, but the educational tax credit and the additional child tax credits. >> commission, thank you. i hope, mr. chairman, we can work together on that as we negotiate tax issues and extenders and all in the months ahead. thank you so much. >> senator grassley. >> thank you very much for holding this very important hearing. it's evident from the report that at the very least a dysfunctional culture and poor management led to the mistreatment of groups with conservative philosophy applying for tax exempt status. it's clear to me from the report that political biases and poor management went hand in hand with politically motivated behavior continuing unchecked. the targeting scandal coupled with poor customer service and general mismanagement has shaken what confidence taxpayers had in the irs. to move beyond this, congress and the irs are going to have to work together to make the necessary changes to ensure similar abuses can never happen

again. so i think the time is right to once again revisit the issue of taxpayers' rights and irs structural reforms. the bipartisan report has a number of good recommendations, and in addition i want to remind my colleagues that senator thune and i introduced the taxpayers' bill of rights enhancement act to further beef it up. i have three short questions. mr. commissioner, for taxpayers to move beyond the targeting scandal, they need to know that those who allowed it to occur have been held accountable. my understanding is few, if any, disciplinary actions were taken against mid-level managers who who were directly involved in the improper targeting. the bipartisan report details one such manager who was not only never disciplined but received a bonus and has been promoted. how can tax -- so my question. how can taxpayers applying for tax exempt status feel confident

they will be treated fairly when individuals who oversaw the targeting remain in place, were never disciplined, and in some instances even promoted? >> i would note a couple of things, senator. first, as i noted in testimony. the chain of command, starting with the commissioner down five levels, all of those are new, all of those has been changed. secondly, ooze the justice department noted, they interviewed 100 employees and found the no employee actually interacted regard to political bias or discrimination. there is not a finding in the reports of the recommendations that an individual exercised political bias in selecting applications for review. nonetheless as i have stated from the start, it's a situation that shouldn't have happened. people shouldn't wait two years. the categorization was erroneous. in terms of discipline, the chain of command all the way down has changed. there are new people that have gone through, and we have pursued appropriate disciplinary

review as needed. but i would note and i think it is important for the public to note, that the justice department talked to 100 individuals, some of whom identified as conservatives or republicans. none of them indicated that anyone had done anything based on political bias. >> okay. follow-up then to something that senator wyden discussed with you about the cell site simulators. the follow up would be in the past two months both justice department and the department of homeland security have publicly issued policies that require greater fourth amendment protections and greater transparencies when these devices are used. so my question is whether or not you could commitment to such a policy statement with a date certain. >> we actually follow as a regular matter our criminal investigator follow the criminal justice department policies, and if they're updated, we follow those. i'm happy to commit we will follow that justice policy. >> okay.

my last question. this bipartisan report that we've referred to was significantly hampered by poor electronic record retention. my understanding is that the irs has been working with national archives and records administration to implement a record management approach known as capstone and come into compliance with an executive directive mandating e-mails be managed in an accessible electronic format at least by december 31st, 2016. two questions. does the irs expect to be in full compliance with the executive director and capstone procedures by december 31st next year? if not, why not? and what procedures does the irs have in place presently to ensure that what happened with lois lerner's e-mails does not happen in the meantime? >> we'll be in compliance. in fact, we're almost there. we have top 400 e-mails there,

categoried and preserved. as i noted, our goal is to in fact not depend upon hard drives and individual computers. not to depend on disaster recover tapes as a backup system but to automate our e-mail system and upgrade it to what everybody else is using so that we not only have a backup system separate from the normal e-mail systems, but one that is easily searchable and readily searchable. as noted, we've got a plan that we've worked with nara on and we're in compliance. by the end of next year, we hope not only to beat the capstone issues, but to be moving even with limited resources to updating our e-mail systems so we never have this problem again. >> thank you very much. >> senator scott is next. >> thank you, ranking member. good morning. >> good morning. >> earlier, senator wyden asked you a question about the most consequential change you made at

the irs in response to our report. i think your answer is your employees can now e-mail you in a new special e-mail box that was just created. that was the most consequential thing you've done based on the report? >> i think what i said the most consequential thing i've done is try to get every employee to view themselves as a risk manager. if they have any problem, they have any issue with, any question, they should immediately report it to their manager. if they have any concern that it's not going up the chain of command they should report it directly to our risk management office or report it directly to me. we've done a whole range of things. my testimony is full of those that we've adopted. i do think that ultimately for us to avoid these kind of problems we need to have a situation where no problem gets hidden. >> got you. >> the problem gets ignored, the problem moves up. >> i want to move on to my questions but i do belief as i listen carefully to your answer,

the answer that you gave, though your testimony is filled with recommendations and suggestions based on your limited ability to move forward without legislative action, is that there's a new e-mail system in place where your employees can directly e-mail you. >> i think that's an improper characterization. >> okay. good for you. in the irs an agency in the federal government with amazing power of intimidation, there was, has been, and hopefully no longer is, a culture of discrimination. and if this culture of discrimination that focus and targeted conservative organizations, tea party and other conservative groups, 300 plus, and in addition to that, also audited individuals who were making conservative contributions, so we're here today not to have a conversation

about simple structural change, we're actually here today because there was a cultural discrimination in the agency that has the power of intimidation in a way that no other agency in the federal government has and it used that power of intimidation against conservative organizations and then there was a cover-up of that intimidation. that's why we're having this hearing today. if you think about the fact that those conservative organizatio s waited 600 years, 600 years to receive an irs determination, we should seriously consider what actions are necessary for us to make sure that culture never again exists. you were brought in as a turn around man, to turn this around. and as senator grassley asked,

who has been fired? what are the disciplinary measures that you have taken? do you have the power to fire the employees who were involved, because we know that we have the power to promote some of the employees because obviously some have been promoted as senator roberts has clearly stated earlier. i'm concerned as a taxpayer with the breaches that we've had that the new culture is a culture that is still as inconsistent with the right direction as the old culture. my concern for the 8,000 south carolina ans who have had their information exposed because of the breach is just on top of the concern that i have for this culture that seems to target individuals based on this notion that america is a nation of free speech. and if they don't like it, there's someone in the irs that

can tamper it down. that is a problem from my perspective that we should pay close attention to. and then, mr. koskinen, you mentioned in your opening statement that there are limited resources. my question is, if there are limited resources as the turn around guy, should you ask for the ability to take the employees to 200 plus employees who are working full time on union activities, should you take the 600,000 hours, the 600,000 hours invested yearly on only union activities, should you redirect, if you had that power, the $27 million of taxpayer resources in a different direction so as to meet the obligation of the irs as it relates to actually dealing with taxpayers?

and if you don't have that authority, which i'm sure that you don't have all the authority, should a part of your response be, asking for the authority? we need the legislation that will empower you to complete the job as a turn around guru that i'm sure you could be. and if you need that legislative action, tell us what it is so that we can work with you in making sure that the irs is the premier agency within the federal government that emboldens people to have great confidence in the outcome and in the process. i would love to partner with you in that journey. >> if i could respond? >> briefly, mr. commissioner. senator robterts is sneks. >> can i respond? >> yes, of course. >> this is important to ensure that public has confidence.

you mentioned as a fact the culture of discrimination. there's no evidence that supports that there was any culture of discriminatio as noted the department interviewed hundreds of employees of the irs, some were conservative, some republicans. none of them said that political bias entered into any decision. in terms of individual audit selection, anyone claimed to be targeted, the inspector general has looked at over one hup of those cases and have found not one where anyone was, quote, targeted because of their political activities. so we need to deal with the problem but we need to characterize it appropriately. the committee in a bipartisan say listed a set of recommendations they thought would deal with this problem and we have said and committed to implementing all of those implementations within our control. we remain committed to make sure it does not happen again. group should not have to wait for 250, 500 days to get certifications. in fact, it should be noted which we sometimes forget, you

can set up a c-4 organization and go into operation without the approval of the irs. so that anyone who wants to set up tomorrow morning or wanted to over the last several years, could become a c-4, do that on their own without our approval. the reason why they seek our approval is that the rules are complicated and they want to be able to have us review that in terms of facts and circumstances which is why i think if we could clarify and not rely on, quote, facts and circumstances, it would be much easier for those interested in becoming c-4 organizations to set up and operate with a set of confidence that the rules are clear and that nobody is going to second-guess them. >> thank you, commissioner. >> mr. chairman, i do need to respond to what he said if you don't mind. give me 30 seconds. >> very briefly. >> in a document cited at the top of page 53, lerner prepares to getting al capone to using audits to intimidate tax exempt organizations.

lerner's improper intervention into the audit process is described in section 2c-5b of the republican review, examples include how lerner may have directed audits of cross roads gps, a group affiliated with ms. palen. >> thank you, senator. thank you and senator hatch for holding this important hearing. it's been almost 2 1/2 years since the committee opened this based on their conservative political views. the question to ask at this point is what have we learned? certainly that the irs was guilty of gross mismanagement or in the words of our ranking member, vast bureaucratic dysfunction. but i believe we do the american people a disservice if we attribute the inexcusable behavior of irs employees to simply to incompetence.

the fact that the culture at the irs allowed employees to believe that they could let their personal political views guide how they treated taxpayers. and that there would be no repercussions whatsoever for so. simply put, we need a cultural change at the irs. american taxpayers should expect at the very least a culture of accountability, of fairness, impartiality. no taxpayer ever again should fear that they will be discriminated against based on their political or ideological beliefs. while i appreciate the changes the irs is attempting to implement on their own i believe implement on their own i believe more needs to be done. captioning performed by vitac grassley and i introduced the enhancement act of 2015 which is a series of measure to hold the irs kpat h accountable. the irs has lost the trust of the american people and doesn't have the ability to make the necessary reforms on its own. congress needs to