he has now since change that. >> that is an expression. how how comfortable argue with them running for the head of your party? >> i have all i can do as speaker of the house. my focus right now is dealing with the giant debt problem that we have. that primary election will sort this out. >> mr. speaker, a debt question. there was a mission forced transfer inherits -- transfer enhancement fine of $1 billion. i think about $700 million of it was authorized before the congressman budget amendment

killed that. if these authorizations are filled, will these be earmarkes/ ? will that violate the earmark ban? >> there will be no air earmarks. we have gone to great lengths to make sure our members and at what the rules or. i do not know the specifics of your outline, but i can tell you we are not going to do earmarks. we will keep our word to the american people. >> i want to ask you about the cyber attack on googol. googol thinks it originated from china. do you have any cause to believe that the chinese government might be behind it? >> i am concerned about the report i just heard about.

i am, a debt that the fbi will be looking at this, but we do not have the details yet. i hope it will be real soon. >> are you confident [unintelligible] >> this hiring was approved by the bipartisan legal advisory group. i am confident that it complies with all the rules of the house. >> just looking at the votes last week on the amendments on afghanistan, there was a lot of bipartisan support. looking at libya, do you think those measures are an indication

that the numbers are turning? >> i think there is a lot of concern given the budget deficit, given our debt. i think every penny that the congress spans is getting a lot more scrutiny. in addition, as i said several weeks ago, members are a bit weary about the amount of money being spent in iraq, afghanistan, and what we are spending in libya. we are wondering what our vital national security interest is there. i really do believe that the president needs to speak out in terms of our mission in afghanistan, our mission in

iraq, our mission in libya. the doubts that our members have or reflected -- are reflected by what they hear from their constituents. i think the president has a role to play here. he needs to step up and help the american people understand why these missions are vital to the national security interest of our country. >> the reports say the president will withdraw about 5000 troops. >> i have been supportive of the president's goals in afghanistan. i was supportive of the surge in troops in afghanistan. i said then and i continued to say that as long as the president is listening to our diplomats and our commanders on the ground, i will support him. i do not know what the correct number should or should not be, but if he continues to work with

our diplomats and our generals on the ground, he will have my support. thank you. >> thank you. >> that was house speaker john boehner. tomorrow, a motion will be made on the house floor to have the president explain the situation in libya. earlier in the week, the u.s. house rejected a bill that would raise the debt ceiling without cutting spending.

>> we demonstrated the

determination we all have to reduce the deficit while preserving medicare. strengthening the middle class and making sure what we do is balanced with opportunity and with creating jobs. that was the special message from the democratic whip, steny hoyer. >> ross is very much, madam leader. this was a very productive meeting. the president responded. he had a clear objective that we need to address -- the debt, the deficit -- bringing those down while at the same time strengthening the security of the american people while making short medicare is strengthened and preserved for seniors. in addition to that, the american public was focused on jobs. we have the jobs agenda.

it is called "make it in america." not make it in terms of succeeding, but make it in terms of manufacturing it, growing it, and sending it around the world. america can compete with anybody in the world given the proper -- given the proper incentives and environment. we will work with the president to create that and continue to create jobs in this economy, which has slowed. we will get back to providing the jobs that people need. i will be -- yield to the assistant leader, jim clyburn. >> i was very pleased today to meet with the president of the united states. i shared my dealings about the boss i was having. i said to him as i have said to many of you in the past, the atmosphere in the room is very cordial. i think we are making significant progress. i do believe that the attitude

is there among members of both sides to get something done for the american people. we want to do it in such a way that we preserve the principles that our forefathers fought for. we must resort -- we must preserve medicare, we must protect medicare, and we must have revenue raisers that are fair and equitable. where is the chair of the caucus? >> thank you, jim. the first member of our caucus to speak to the president was our newest member. get the underscored what is vitally important to all americans. she said republicans and independents that supported her with the ongoing protection of

seniors with the preservation of medicare -- she appealed to small businesses and the need for job creation and underscored the importance of making it in america, something that resonates all across the nation and, clearly, with our caucus as well. this was a great exchange with our president. we left united. we laughed together, and -- we laughed together, and we intend to pursue these goals by investing in manufacturing, preserving medicare, and to make sure that debt revenues are placed on the table in terms of balancing our budget. i yield to the vice chair, of the year the sarah. >> i take the president made two points very clear. he said very clearly, "failure is not an option when it comes to americans paying their

bills." secondly, he made it very clear that the middle-class and seniors will not get step formed in these budget negotiations. i believe that every single democrat in that room is ready to stand and fight with the president to make sure the priorities of america are fulfilled. let me yield now to the ranking democrat on the budget committee and one of the negotiators with the by dint group -- biden group. >> i think it was a very good exchange with the president as my colleagues and said. mr. clyburn and i congratulate the vice president. we let the president know that we thought the vice president was conducting these discussions in the right spirit. we laid out the principles we brought to the table. number one, nothing that we do as we try to reduce the deficit in a predictable way should upset the fragile economy.

we know that people are hurting. the american people are struggling with our fragile economy. we need to make sure we focus on jobs. nothing that we do should interfere with that. secondly, you need to have a balanced approach. you need to make sure that as we put together a plan to reduce the deficit we do not adopt the lopsided approach the republicans did in their budget. what did they do? they essentially said, "we are going to terminate the medicare guaranteed. we're going to slash medicare benefits. all of this wall they allowed to stay in place big subsidies for the oil companies. while they had not asked the very wealthiest americans to participate in addressing this issue. we made it clear that we support the president was the approach that he laid out a number of weeks ago in saying that we need to take a balanced

approach. yes, we need a plan today to reduce the deficit, but let's make sure we do it without hurting the economy or without hurting jobs. let's invest in our future in a balanced way. [unintelligible] >> the president had a budget that he put forth. went to theeh i bipartisan meetings. the bipartisan nature of the talks about the in this it did the is being taken there -- we are determined to reduce the deficit. we will have that message in a

timely fashion so that we cannot default on our debt. hopefully that will be soon brigid's i want to yield to mr. van holland. that is not the issue. the issue is how do we work together to fix the deficit, to have fairness in our tax system, to preserve medicare, to create jobs. >> [unintelligible] >> as the vice-president has said, as i have said, and as a republican counterparts have said, we have made progress on important issues. the reality is that you have to begin a wall with the first step. we have made progress and we have to find a way to address

this issue going forward. again, true to the principles i just outlined -- that is why we are continuing with that effort. the president has but a proposal on the table. he did >> i think that mister and holland is correct. it is a 1,000 mile journey that we are on here. we have taken some first steps. i do believe that everybody will agree that you cannot do anything unless you create an atmosphere in which you can have productive talks. that atmosphere has been created. we're having productive talks. we are not where we want to be. and it will be some time getting there. but i hope, by the time we all celebrate independence day, we

will demonstrate that we have shown ourselves to the american people in a very positive way. >> it was interesting. we learned when we came out. we had a meeting with the new york partnership. of moody's said to us at that time that they would probably not downgrade. this is interesting news today. the fact is that we cannot be called. we all agree to that. it is a message that we have to sen. what was interesting in the meeting was how the members came around the idea of not the fault him on the debt. it was a pivotal moment to enable us to do deficit reduction in a real way, in a playlist -- in a balanced way

that will give confidence to the market as we do not the fault. >> can you give us a formula? >> they are not necessarily linked. but it is a pivotal moment. did you want to speak? >> i think all of us agree. every republican leader and every democratic leader agrees that defaulting on our debt is not an american value. americans believe that we make a promise and we borrow money and we make a promise that we will pay it back. we will pay it back. holding hostage the credit worthiness of the united states of america is not a word the bargaining chip. this week, the republicans frankly offered a debt extension, which they announced they offered to have it fail. and in fact it failed. but we are prepared to work with the republicans in a bipartisan

way to make sure that america's credit worthiness is not put at risk. what moody's has done has made that more clear. it needs to be objective of us all, not just the president. the republicans and democrats have a responsibility. americans expect us to perform that responsibility. we ought to do it by the end of the month. when we met with the president two months ago, i indicated that we should get it done by june 8. it will not have been. that is when mr. geithner said it would be july 8. our cash flow has been a little better. if we will be responsible, we will come together and get this done. >> from moody's perspective, what would it change from last week? >> let me say this, not to speak

for the people who were at the meeting, but what we learned at our trip there, if we default on our debt, which we have no intention of doing, it would cause a real mess in the mortgage market. that would have its own impact on our economy. there were some other aspects of what would happen if there was a default, which was discussed at those meetings, which woul. if that had an impact on that decision, i do not know. we will use this opportunity to take us on a path of deficit reduction. we have no intention of passing on debt to our children and grandchildren. it is the fiscal soundness of that is important to our economic growth. creating jobs and growth is one way to reduce the deficit. again, putting revenue on the

table is another way to reduce the deficit and making the cuts we need to make, which we are fully prepared to do that and determined to do, to reduce the deficit. >> can i reiterate? i share the leaders' confidence. we will get this done. the markets ought to know we will get it done. i told speaker boehner and leader kantor that i will work with them, that the leader will work with them in making sure we get this done. we clearly have differences. we clearly will have some very serious negotiations. but we will get this done. we will work together. i believe john boehner and leader kantor when they say that the fault is not an option. it would have catastrophic consequences which, as americans, we will not let that happen. >> on the jobs issue, we understand that the president is dealing with issues of

manufacturing, pushing new manufacturing jobs. what is the formula as you all see fit to create new manufacturing jobs? this is really not the new job of the new generation? we were told that it was science and technology and things of that nature. what is the formula? >> they are not in opposition to each other. when the president became president, he put forth a budget that said he would reduce taxes, lower the deficit, and create jobs around three principles -- investments, education, and innovation, quality health care, and energy and the green infrastructure of our country. those investments in science and technology as well as tax credits and the rest would be used to make us number one. the president said it best. we will out-educate and out-

build. he reiterated that today. this is not a contradiction in terms. it is a reinforcement of the same message. very important to it is all of these points of making it in america appeared >> the president, tomorrow, will be going to toledo. he will visit the automobile industry. we made sure that the automobile companies had the opportunity to be successful. they're now creating jobs. we saved up for the 1 million jobs in the automobile industry. we save an industry critical to our national security. and we saved jobs and opportunity for our people. that is a specific example of specific investments. but we need to invest in infrastructure and innovation as

the leader has said. the president spoke of all those in the state of the union. that is the type of agenda we will be pursuing so that our people can make it in america. >> are you telling us that the talks led by vice president biden will provide a budget by july 4? >> no. >> we will get the budget debt limit result. people can have confidence that the american people will know that their representatives, republican and democrat, will get that done. >> when can we expect -- >> we are working on deficit- reduction and what is necessary for us to be able to do an increase in the debt limit. the budget and all that will be worked out by others once we get that done. but we talk about jobs. something very important in this meeting today, something that a lot of us have invested in is

that secretary chu and others have said that we cannot create an automobile that is 300 miles per gallon. i drive a hybrid myself. i can tell you, that technology is working. but there is an age-old manufacturers' concern that we talk about, rebuilding our infrastructure. that does not require a whole lot of new technology. what that requires is for us to get roads and bridges that are deteriorating rebuilt. we can do that in the tried and true way. there are fundamentally sound manufacturing jobs involved. >> that is part of it.

>> that with a small part of it appeared >> -- part of it. >> we began the meeting by thanking the president and joined by my colleagues for his inspirational message in joplin, missouri. people in the south are still staggering from the natural disasters that came their way. missouri is devastating. and now massachusetts today. we have some older natural disasters that are not done yet, be it in the gulf states or in iowa. as we come together, we have to recognize that people in our country, in some parts of the country, are suffering in an even greater weight. i hope that as we help them and pray for them, that we can do so in a way that helps build their economy as well. -- to use this terrible experience as an economic

opportunity. we are talking about to the underlying manufacturing base and the rest. these people are crying out for help. this is one with it we can help them. we started this in the recovery package. there were magnificent things in there. but there was the prospect of more to come. taking from survival to success, the president is talking about something transformational when we talk about being no. 1 in the auto industry and new technology. but when you do that, you can only succeed if you do not cut these investments in science and technology and tax credits and the rest to incentivize the private sector to ido its job. it is not just a partnership. it is an encouragement to the private sector. we're hopeful about the future. we are determined.

white house and congress has to make sure to remove all doubt, that there are no default on the debt and how we go forward. we will send a message of confidence out to the market that we can have a budget arrangement that is balanced. that is by preserving medicare. >> the head of moody's told to last week that they would not likely downgrade? [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] [laughter]

>> who now a debate on military sconstruction. here is some of thursday's debate, beginning with the appropriations subcommittee chairmen congressman kolbe persocolbertson. 's my privilege to lay out tonight for the house for consideration the appropriations bill for the -- for military construction and veterans affairs that my good friend, mr. sanford bishop of georgia, we have worked together arm in arm to make sure our men and women in uniform have everything they need to do their squob. we're the peace of mind committee for the united states military and for our veterans. we have an obligation as congress this government has an obligation first and foremost

to provide for national curt to make sure our men and women in uniform, not only in -- here at home and overseas have everything they need to do their job. the scope of our appropriations bill today includes construction of all the military basis here -- bases here and overseas. we have fully funded in this bill all the requests of the branches of the military for our men and women in uniform on active duty. we've made sure that all the retired men and women who have served this nation have everything they need when it comes to their -- to the veterans' hospitals, the department of veteran affairs. we are laying before the house tonight this funding bill as part of our nation's -- i would also like to think of it as part of our nation's mortgage payment, one of our nation's obligation as a government to ensure that our military is fully funded, that they've got

the equipment, the logistical support that they need, that their housing is the best it can be, that they've got the facilities are the very best they can be, and this is one of those obligations we've got to take care of. we are in this bill, in all the appropriations bills, mr. chairman, brought to the house for the first time, this new republican majority, this conservative majority is for the first time, money that has been left in the treasury unspent in previous years was just spent in other areas. for the first time, under the leadership of chairman hal rogers of kentucky, our subcommittee and other subcommittees are returning that unspent money back to taxpayers to reduce the deficit. chairman rogers and the leadership of the house, speaker boehner, our republican leadership, all of us are committed to bringing the

nation -- doing everything in our power to get back to a balanced budget, to reduce federal spending to bring the size, scope, and cost of the federal government back under control. while we recognize our responsibility to fully fund and take care of our troops in military construction of our veterans through the veterans' affairs, through the hospitals, through the v.a., we also have an obligation to manage the money in a way that's fiscally sound. we've identified rescissions, unspent money, to taxpayers in the amount of $388 million. again, the first time that's ever been done. we found money in -- and then again, these savings don't impact in any way the level of services provided to our veterans. this in no way impacts or diminishes the quality of housing or the level of service necessary to -- on bases here

in the united states or overseas. but we have found savings, for example, $100 million in planning and design money that was left over from previous years, we found $100 million in unspent funds from the base realignment and closure commission, money that was unspent and left over, we found money in a variety of accounts that in previous years would have been respent elsewhere and under the chairman of chairman ronellers and speaker boehner, our subcommittee, every subcommittee of the appropriations committee, is committed to return that money to taxpayers and to find savings everywhere we can that will not diminish again the level of service provided to our military. we have to make sure they have absolutely no worries as they stand on the wall defending our free come every night, every day, 24/7. we have also incrementally funded, mr. chairman, five projects and found savings of

$304 million, that we have been able to return to taxpayers and in three cases, we found -- there's three projects which we did not fund for the f-35 aircraft facility at the air force base in nevada because that aircraft is not ready to be fully deployed, there's central distribution facility in germany a commissary building a variety of savings we looked for, not just unspent money but ways to save money for taxpayers while maintaining the high level of service for our men and women in uniform while being good stewards of the public's precious tax dollars. we in the area of veterans affairs, michigan, were able to find savings of $25 million and we also found savings of $136 million in technology and a whole separate category of accounts for minor

construction, we saved about $ 5 million there. all this money has been returned to taxpayers to reduce the deficit to do everything we can within our power to reduce the level of obligation that our children and grandchildren are going toin heart. finally, i want to point out, we found savings, the u.s. court of appeals for veterans claims, had asked for a new courthouse and in light of the debt an deficit, we did not recommend that that new courthouse be built. the court of appeals for veterans' claims does a great job, they're working out of -- they're work in a leased fa ill isity right now and we -- a leased facility right now and we recommend that be continued. mr. chairman, we have in the situation the nation faces today is truly unprecedented. we calculated that about $2.2 trillion in revenue come into the treasury every year yet the existing only fwations of the

federal government to pay the current liability of social security, medicare, medicaid, interest on national debt, our veterans' benefits, all programs that have to be funded up front that serve our national mortgage payment. those programs alone consume $2.3 trillion. so if you just look at the math, right out of the gate, the nation begins the year at the stroke of midnight on the first day of the year, american taxpayers are already $105 billion in debt. so every dollar the appropriations committee spends all year is borrowed. this is why you see fiscal conservatives, all of us, constitutional conservatives are so passionate so determined to get us back on path to a balanced budget to do everything we can within each of these subcommittees to find savings. i'm so grateful to chairman rogers and speaker boehner, for the first time returning unspent money to reduce the deficit.

we had to reduce the overall amount of money available to every sector of the government dramatically. it's tough. we've got a lot of tough savings. but in the area of supporting our military, when it comes to making sure they've got the best equipment, they've got the absolute best in their housing and hospital care, whether you are active duty military or if you are retired and in the care of the veterans' admgs, you can be sure the united states congress stands behind you. we're proud of you. we made sure we have fully funded every need that you've got. we made sure you are given the best medical care. and all of the family members out there who have sons or daughters or fathers or mothers serving in the united states military need to know that despite this tough budget environment, this congress stands behind your father, your mother, your brother, your sister, who serves in the military and we are committed to ensure that they've got the

very best equipment possible on the face of the earth, that they've got everything they need to do their job, to stand on the wall defending this great nation, 24 hours a day, seven days a week, as they do so beautifully. we are very fortunate on this subcommittee, mr. chairman, we've got an extraordinary group of people working behind the scenes who have for years to make sure that this subcommittee has produced a bill that the house can support in a bipartisan way with great pride. i want to make sure this to thank our extraordinary staff, tim peterson, our chief clerk of the subcommittee, serbed the appropriations committee for 22 years, served on the staff of the secretary of the navy for nine years. he's done an extraordinary job, we're grateful to him for the time and effort he put into this bill. to sue qan timbings as for her

her work and eblings per tees. to sara young, who has done an extraordinary job as well, they've all done a magnificent job. on the minority side, matt washington has done an extraordinary job. danny cromer, all of us worked together arm in arm my good friend, mr. bishop from georgia, this is one bill i know the members of the house will be able to support in a bipartisan way with great pride pause our subcommittee has produced this bill in a bipartisan way without regard to party label, our entire focus has been how can we make sure that our men and women in uniform, active duty and retired have got everything they need? how can we be better stewards of the taxpayers' precious dollars. we identify things, for example, the -- we share concern for money that was unspent, veterans' hospitals, and giant facilities like the new one in denver that i understand had $97 million, tim, i believe?

$978 billion unspent for years. we put language in this bill saying they're going to lose the money after five years unless they get it obligated and get the hospitals built. had great support from mr. bishop ensuring that our veterans with claims for disabilities get those handled in an expeditious way. we want to make sure we identify efficiencies, how can we make sure our men and women in uniform not only have the best housing but that our veterans who have retired are given the best possible service. we have on every occasion throughout the year working on this bill, found that we have -- found areas of agreement in this bill, produce it in a way that is unanimous. it's a real privilege to work with mr. bishop, with our ranking member from washington state, mr. dicks, been a real privilege to work with you on

this. but above all, extraordinarily proud to serve as subcommittee chairman under my chairman hall rogers of kentucky. -- hal rogers of kentucky who i count as a role model and mentor to me. he's been a good fren and great leader for this committee and is a stalwart fiscal conservative, committed to make sure our men and women in uniform are -- continue to be the very best military in the world. it's my privilege to be here tonight to present this bipartisan bill to the house. i reserve the balance of my time. happily -- the chair: the gentleman reserves. the gentleman from georgia. mr. bishop: thank you, mr. chairman. i yield myself such time as i may consume. i am pleased to join chairman culberson as the house takes up the fiscal year 2012 appropriations bill for veterans

construction, veterans affairs and related agencies. the v.a. bill is critically important to the strength and the well-being of our military, our veterans and the families who sacrifice so much to defend our country. working with chairman culberson and the members of the subcommittee, we've crafted a bill that will address the funding needs for military construction and family housing for our troops and for their families as well as other quality of life construction projects. in addition, it will provide funding for many important v.a. programs as well as agencies like the veterans court of apeels and the american battle monuments commission. the bill before us today touches every soldier, every sailor, every marine and every airman. in addition this bill will also impact military spouses, their children and every veteran that participates in veterans programs. i want to commend chairman

culberson for his hard work, he's done his best to hold hearings that he believes are important to the work of the subcommittee, together we sat through 12 hearings, gaining valuable insight into the workings of all of the agencies under our subcommittee's jurisdiction. i'd like to thank all of the subcommittee members and recognize them for their hard work on the bill. i believe that the minority was treated fairly during this process and i want to thank chairman culberson for that. we worked very well in a very collegial fashion and i think that that is the way that this institution should work. chairman culberson has already provided the funding highlights in the bill and i want to repeat the law but i'd like to point out a few items that i believe are extremely important. the department of defense schools. the bill before us today includes $483 million for the renovation and replacement of 15

department of defense schools. six schools here in the united states and nine schools overseas installations will be refurbished with this funding. mr. chairman, i believe that providing the funds for these schools will not only help our service members' children get a quality education in a safe facility, but will also give our service members some peace of mind. medical center replacement. mr. chairman, i was pleased that the bill includes $1.1 billion for the medical center replacement in germany. as you know, a large proportion of the serious casualties from iraq and the afghanistan theaters are treated there and i'm pleased to see that we're making this very, very important investment. regarding veterans affairs, the bill contains $52.5 billion for

advanced appropriations for medical services, for medical support and compliance and medical facilities at the v.a. which is $1.8 billion above the amount that was included in the f.y. 2011 continuing resolution. mr. chairman, i strongly believe that advanced funding provides timely and predictable funding for the veterans health care system. for example, during the delay in the f.y. 2011 funding, veterans health care funding was already in place and veterans health care programs were not subject to the continuing resolution process and our veterans did not have to go without their health care. mr. chairman, overall the bill provides adequate funding for programs included in this bill, but i'm troubled by one item. unfortunately during the full committee markup an amendment was adopted to eliminate funding to implement executive order 13502 which was issued in

february, 2009, which addresses project labor agreements, p.l.a.'s. if you're owe polesed to that executive order, that's -- opposed to that executive order, that's fine, but using the milcon v.a. bill to address this issue is i believe the wrong place. the language is purely an ideological political provision that really is beyond the scope of this bill. if you want to deal with this issue we should deal with it on a labor bill and not on the military construction v.a. bill. the milcon v.a. bill has always enjoyed broad, bipartisan support and has avoided divisive issues like this, no matter which party held the gavel. i believe that including this language only causes unnecessary complications and does nothing to help our service members or veterans. mr. chairman, please know that as we continue through the process, our work to address this issue because an item like

this really has no place in a bill that is always placed our troops, their families and our veterans above ideology. before i close, mr. chairman, i'd like to recognize the staff for all of the work and the time that they have put into this bill, from the minority committee staff i'd like to thank danny and michael and gregg from my personal staff. from the majority committee staff, i'd like to thank tim peterson, sue, siri and tracy as well as alec and evan. from the chairman's personal office. i'd also like to thank mr. dicks, ranking member, and mr. rogers who set the standard for the committee and for the subcommittees in their collegial relationship and they've worked together and their effort to

make sure that we move these appropriations bills through regular order. i appreciate that very much and i reserve the balance of my time, mr. chairman. the chair: the gentleman reserves the balance of his time. the gentleman from texas. mr. culberson: mr. speaker, it's my privilege to yield such time as he may consume to the distinguished chairman of the full committee. the chair: the gentleman from kentucky is recognized for as much time as he may consume. mr. rogers: i thank the chairman for yielding this time. i want to at the outset congratulate him on a great job on this bill. he and his terrific staff have worked long and hard along with the subcommittee members to produce, i think, a star of a bill. so on your maiden voyage, mr. chairman, congratulations on a good job. and to mr. bishop and the minority members of the subcommittee, including my distinguished cohort, mr. dicks, ranking on the full committee, we've all worked together on

this and we appreciate the collegial atmosphere as mr. bishop has said that has governed this proceeding. so i rise in support of this act . colleagues on both sides of the aisle agree that our nation's service members, their families, our veterans deserve the greatest quality of care and support for their service and their sacrifices. this bill funds the most pressing needs in a timely manner while also acknowledging the urgent need to reign in federal spending -- iranian in federal spending during a time of historically high and dangerous deficits. this legislation provides $72.5 billion in discretionary funding for military construction projects, veterans programs and other agencies that support the quality of life of our war fighters and veterans and

families. this funding level represents a $615 million cut from last year's level and ads 1.2 billion reduction from the budgetary request. the bill fully funds the construction of department of defense hospitals and clinics, schools, family housing, providing our military personnel with the resources to effectively advance u.s. missions abroad and the support they need here at home. the bill also protects the health and well-being of our veterans, funding medical care, disability benefits and education benefits. but in addition to adequately funding these programs, the subcommittee also made difficult but responsible choices that eliminate excess spending wherever appropriate. much of the reduction in this bill comes from savings related to the black process and from rescissions of previous year

funding left over from lower than estimated construction costs. the bill also includes provisions for strong oversight, overspending. mr. chairman, cleaning up the way we spend taxpayer dollars will help balance our nation's budgets and will show the american taxpayers that we can be trusted with their hard-earned money. we can restrict cuts to only some areas of government, all agencies and programs must be held accountable to tighter budgets with more stringent supervision. chairman culberson and members of this subcommittee have shown great fiscal restraint and a commitment to real savings in reducing the discretionary spending in this bill below the 2011 levels while providing the resources our troops and our vets deserve. so again, mr. chairman, i want to congratulate chairman culberson, ranking member

bishop, all the members of the subcommittee and my ranking partner, mr. dicks, for great work on this bill and of course to again say how much we appreciate the work of this fine staff. both on the committee, both on the minority and majority level. a great work. i believe this bill is an excellent representation of the good work that we can do in congress, when we work together. both as we support our troops and veterans and as we work in regular order to fund our government responsibly. i urge colleagues to support the bill. and yield back. the chair: the gentleman from texas reserves. the gentleman from georgia. mr. bishop: mr. chairman, i am delighted to yield four minutes to the distinguished ranking member of the defense subcommittee and of the full appropriations committee, mr. dicks. the chair: the gentleman is recognized for four minutes. mr. dicks: thank you, mr.

bishop, and i want to congratulate you on -- -- on being the ranking member and also chairman culberson who is -- has i think done an outstanding job and of course my good friend and colleague, hal rogers, the chairman of our committee, and i would also congratulate the staff. the staff has done an amazing job considering we had to go through the 2011 episode and then come right back and get the 2012 bill out. the milcon-v.a. subcommittee has always had a strong reputation for common ground and bipartisanship as members traditionally worked together to find construction of military facilities and strive to improve the quality of life and care afforded to our veterans and family military. many years ago we got during the reagan administration, we got david stockman to allow us to do

incremental funding on military hospitals. i'm glad the committee has gone back to an incremental funding approach. i think it's the only way we can do these major projects. we all acknowledge the challenge facing the nation today with respect to the debt and deficit and i believe this bill has done a commendable job addressing these fiscal challenges while ensuring that we are not impacting the level of care and benefits that our service members have so rightfully earned. military construction is funded at $14 billion which is $2.6 billion below the 2011 enacted amount and $752 million below the president's request. the subcommittee achieved those cuts through incremental funding of projects and by eliminating funding for several projects that were ahead of need. as ranking member bishop noted this bill makes a strong investment in the defense department schools by investing

$483 million for construction and replacement of substandard facilities. i have been a strong advocate for the modernization of schools serving the children of our nation's servicemen and i commend the chairman and ranking member on their commitment to this effort. the department of veterans affairs would be funded at $58.3 billion in discretionary spending which is $1.85 billion above the f.y. 2011 enacted level and $476 million plo the president's request. most of this funding is for veterans medical services. the recommendation provides full funding of $69.5 billion for the mandatory v.a. programs providing compensation and pensions, educational benefits, vocational rehabilitation, life insurance and housing loan programs. i'd like to commend the chairman and ranking member for their efforts to ensure that our nation's veterans are well taken care of by maintaining adequate funding for veterans' health care under the benefits on which

so many have come to count on. again, i'm pleased overall with the funding levels proposed in this bill today and i'm pleased that during the full committee markup we were able to move a contentious and divisive restriction on implementation of davis-bacon wage requirements but unfortunately there's one item that i believe will complicate the bill, passage of this bill. i'm troubled by the inclusion of a provision that prohibits the use of project labor agreements for any project in this bill. this divisive policy writer should not be included in an appropriation bill and the decision to implement p.l.a. -- p.l.a.'s should remain at the discretion of the agency. the inclusion of this provision unnecessarily complicates the support for a bill that would otherwise pass with wide bipartisan support. i expect the amendment to be offered that will remove the restriction on p.l.a.'s and would further improve the bill. i would like to urge my colleagues on both sides of the aisle to support the amendment.

regardless, i remain commitmented to working with my colleagues to respectfully work out any differences on the floor so that we -- can you give me another 30 seconds? mr. bishop: i yield the gentleman another 30 seconds. mr. dicks: so we may pass a bipartisan bill that adequately provides for our troop, veterans and military families and again i want to -- i intend to support this bill and i wish we could finish tonight but i understand we can't and i look forward to seeing this bill done and i commend again the chairman and ranking member for their good work. thank you. the chair: the gentleman reserves the balance of his time. the gentleman from texas. mr. culberson: i want to say again how much i appreciate working with all the members of the committee, mr. dicks, mr. bishop, we have worked with one goal in mind, to ensure the peace of mind of our men and women in uniform and retired military members to ensure that no matter where they go, what

they're doing, they don't have a worry in the world. we want to make sure they're taken care of. we've done so in a way that's fiscally responsible. we've done so in a way that's ever mindful of the record debt, record deficit and many of the projects the v.a. has done before getting done on time or even getting started. we're making sure claims are paid on time. we're also giving any member of the house an opportunity to file an amendment and be heard. in an open and transparent way. something we in the majority committed to do, that every american would have the opportunity to read the bill online at least 72 hours in advance. it's important that we, doing the nation's business, do so in a way that's transparent and open and straightforward, especially when it comes to supporting our men and women in uniform and making sure they are taken care of and have no

worries, there are no party labels. i see my good friend, mr. farr, of california, is here, he's been a particularly valuable member of the subcommittee. he's brought great expertise to the committee and i look forward to hearing from him tonight as well. i reserve my time. the chair: the gentleman from georgia. mr. bishop: thank you very much. at this time, i am delighted to yield to mr. karr of california -- mr. farr of california. i'm happy to yield to mr. farr. the chair: the gentleman yields as much time as he may consume. mr. bishop: two and a half minutes, excuse me. the chair: the gentleman yields for two maff minutes on the me -- two and a half minutes.

mr. farr: it's always a pleasure to serve with mr. dicks and mr. ronellers, the ranking and chair of the major committee. this committee is unique in congress. it's the only committee where both active duty military and veterans are dealt with in the same policy. there's no other committee in this house or in the senate that has the one stop that this committee has. it's a pleasure to be focused on the continuum of care for active duty and reservists and veterans. this past weekend, we remembered patriotic sacrifices of those who lost their lives in service to our country. today, we renew our commitment to keep our promise to our nation's more than two million troops and reservists and families and 23 million veterans. this committee has a strong history of working in a bipartisan way to produce a bill that supports our active duty service members and our

veterans. i'm proud to support some much-needed increases in the veterans affairs department and would note that while this bill is $1.4 billion above last year's level, it is also $1.2 billion less than what the president requested. additionally, i'm pleased to see that this bill emphasizes the need for veterans in rural areas. the national cemetery administration anticipates that 10% of all the veterans will not receive access to burial options in a national, state, or tribal cemetery within 75 miles of their home. i am pleased that this bill directs the national cemetery administration to develop a strategy to serve our rural veterans. this language is important because it recognizes that veterans who live in rural communities should be treated on par with those who live in urban areas in all services provided by the v.a. in my district on the central

coast of california, veterans are moving a step closer to achieving a dream of a veterans' cemetery at the former ford military base. i commend the chairman and ranking member for their hard work in ensuring that this bill is another significant step in fulfilling the promise our country has made to leave no veteran behind. i urge support for this bill on one condition and the condition is that the davis-bacon prohibition needs to be taken out. with that, i yield back. the chair: the gentleman continues to reserve. the gentleman from texas. mr. culberson: mr. chairman, i reserve my time. the chair: the gentleman continues to reserve. the gentleman from georgia. does the gentleman from georgia have additional speakers? mr. bishop: we have no further speakers. mr. culberson: mr. chairman, i want to say briefly, one of the

reasons we're trying to move expeditiously on this is we want to make schauer our men and women in uniform have everything they need as soon as possible. we want to make sure we get it -- that we get it done in an expeditious fashion. i reserve my time. the chair: does the gentleman from georgia continue to reserve or yield back? mr. bishop: we're prepared to yield back. the chair: the gentleman from georgia yields back. the gentleman from texas. the gentleman from texas is recognized. mr. culberson: the chair: the gentleman has yielded back. do you yield back your time? mr. culberson: mr. speaker, i would like to -- we are waiting for an amendment to be completed drafting but it's important i think to re-emphasize -- the chair: the gentleman is recognized.

mr. culberson: in the time i have remaining, it's important to emphasize the scale of the problem the nation faces. this is not just a record deficit and record debt we face. it's actually a whole lot bigger than that. as we make sure our men and women in uniform are taken care of, with their housing, we made sure the marine -- the marine -- all the b.e.q.'s for the bachelors' enlisted quarters are funded, the army, navy, air force are fully funded, we've had to do this in a way that's fiscally responsible because we are ever mindful of the scale of the problem the nation faces financially. it's difficult to even begin to comprehend how huge the problem is that's been created by so many years of previous congresses, previous administrations too many promises, too many people, on too many occasions on money borrowed from future generations. the result has been that today, the unfunded liability facing the taxpayers, the nation, are

about $49.6 trillion. those are liabilities for the -- at present value, for example, the publicly held debt which military and civilian pensions, retiree health benefits an other explicit, direct liabilities of about $16.9 trillion. now the entire u.s. economy is about thrs 13 trillion. our gross domestic products right at about $13 trillion system of just the explicit liabilities we have to pay already exceed the size of the entire u.s. economy. now we've got long-term contingencies and implicit liabilities, for example, the future cost of social security benefits. $31 trillion. future medicare benefits under part a, part b, and part d, all added together, create, this is

unfunded liability, for which there's no source of revenue lined up to pay for this, of about $50 trillion. $49.6 trillion. to give you an idea of how big that number is, norled to pay that liability off, every living american would have to write a check tonight for $ 159,000 to pay off that future unfunded liability. i've had constituents ask me if they just write that check, can they be done? is that it? i wish it were that simple. but we in the appropriations committee, this vast amount of money we spend every year, this extraordinary responsibility with which we have been entrusted by our constituents, is -- the am of money we spend every year is -- pales in significance to the unfunded liabilities in the future. the amount of money we spend every year in the appropriations committee, a little over $1 trillion, an

extraordinary amount of money, one thousand billion dollars, it is dwarfed by the size of the unfunded liability we face in the future. it is important to remember for everyone, mr. speaker, listening to this debate tonight, that the money we spend here tonight in support of our troop, the money we spend in support of our troops, to pay for all the things the federal government does, it's all borrowed. the hole is so deep that's been cug dug by our predecessors and again, too many promises to too many people on too many occasions, too many big government promises, still worried about lyndon johnson's war on poverty, how many trillions of dollars later and that hasn't worked out. we in the new constitutional conservative majority are committed to getting us back on track to a balanced budget. we recognize the scale of the problem, the urgency of the impending, these unfunded liabilities. this massive bill that's going to come due to our children and

grandchildren. that is a -- in fact, the joint chiefs of staff do an analysis about every five years on the strategic threats facing the united states and analyzing all the threats facing our nation, the joint chiefs concluded that one of the greatest threats to america's strategic, one of the greatest stratenalic threats america faces, is our national debt. this unfunded liability, these crushing obligations that our kids are going to inherit if we as a congress don't work as we have on this subcommittee in a way without regard to party for the benefit of the nation to find ways to make sure that social security, medicare are solvent that we get the entitlement programs under control because they're going right off a cliff unless we make sure we rescue them and make sure they're solvent and there for our kids. we've got to make sure that we're doing everything within our power in the annual appropriations process to save

every single dollar that we can. now -- there's been some debate, mr. chairman, some members of congress in the past have said, we just need to raise taxes. my predecessor, bill archer, chairman of the ways and means committee, had an analysis done that showed that even if you were to confiscate all of the corporate income, 100% of the corporate income in america, that would generate about $1.3 trillion. if the government were to confiscate 100% of all individual income over $200,000. that would generate about $2.1 trillion. 10 you can see that it isn't possible to solve this problem by raising taxes. that is something we also understand instinctive -- instinctively as conservatives, if you get the government out of our lives and leave us alone to raise our kids and run our businesses and run our lives,

let texans run texas, let georgians run georgia, if you unleer the entrepreneurial creativity of the people, people will invest and save their money far wiser than the government will and we'll begin to dig out of this hole we're in. we're committed to not just saving money year to year but to ensuring that medicare, social security, that these social safety net programs that are so essential to our nation are there for the future, for our children and grandchildren. we're going to do everything in our power to make sure that we have done our job in a fiscally responsible way this year when it comes to military construction and veterans' affairs or homeland security or transportation or labor health and human services, all the various subcommittees of appropriations, that's year-to-year dollars that we have direct control over right now but we're also thinking long-term. we also want to eliminate that threat that the joint chiefs of staff identified, the greatest

threat to our long-term national security, they identified as the national debt. much of which is held by nations hostile to the united states. deeply, deeply disturbing, mr. chairman, that the -- that the communist chi meeze government buys so much of our debt, they're the largest purchaser today of gold. the chinese economy is thundering, they have a very aggressive campaign under way to acquire as much intellectual property as they can through espionage and acquisition. we have as a nation in ahouring this debt to be created, allowing so many of our -- so many nations that are hosstilte united states to buy our debt, have placed too much power in the hands of the chinese, of sovereign wealth funds and we here tonight when it comes to supporting our military through this construction bill, through the veterans' affair we made sure that our men and women in uniform have everything they

need in a fiscalry responsible way and this is just a first step we'll take to get america back on track to a balanced budget. i think that the members of the minority and our staff have been working to put together an en bloc amendment so we can attempt to continue to expedite this process and ensure that this bill is done as quickly as possible in order that again our men and women in uniform can have the peace of mind to know when they're taken care of and there's no bubble in the low jissitycal supply chain and they won't have to worry about disability claims, if they go to a veterans hospital or make sure their housing needs are taken care of on bases. we have an en bloc amendment, mr. chairman, i think that should be, i believe, on the brink of being ready for consideration so that we can move very rapidly to passage of this bill and get it over to the senate because we know how long it sometimes takes the senate to get things done.

the chair: does the gentleman reserve? mr. culberson: i believe i can yield back my time at this point because i think we're very close to getting the agreed to group of amendments done. the chair: would the gentleman like to yield into a colloquy? mr. culberson: i'd be happy to ender -- enter into a colloquy. mr. bishop: i thank the gentleman for yielding. we have i think presented a good bill with the caveats that have been stressed by ranking member dicks and myself, along with mr. farr and at this time i think we're prepared to entertain the amendments. i think the chairman has some en bloc amendments that he will like to offer and we're happy to entertain those and move forward at t t t t t t t t t t t t t t t

>> but are glad to have received the written testimony from all of our witnesses and again, we appreciate everyone's patience

and flexibility as we juggle the schedule. we have the commissioner of the irs douglas ace shulman. we appreciate your work and the work of your department. and you're working with this committee and members and staff as we try to address this very important issue of how better to protect american taxpayers from being defrauded collectively by tax identity theft -- or identity theft that's tax related. and also to protect each and every citizen who's victimized by these criminals when such fraudulent conduct occurs. i'm not going to go through your whole bio in the interest of time. you've been very patient as we juggle the schedules as the other witnesses have been so we'll go right to your testimony. it is the practice of the oversight committee to swear all of our witnesses in so if i could ask to you stand and raise your right hand. do you solemnly swear or affirm

the testimony you're about to give this committee will be the truth, the whole truth and nothing but the truth. so thank you, commissioner. and the record reflect that the witness affirmed that oath. and with that, i'll turn it over to you for your statement. >> chairman platts, thank you for the opportunity to testify before the committee on the important issue of identity theft. before i discuss the efforts the irs has taken to combat identity theft, and to assist its victims, i just want to personally apologize to the taxpayers sitting behind me. i had a chance to talk with them and apologized to them personally. i know that they had a frustrating experience with the irs. as the head of the irs, which serves 140 million individual taxpayers, i always stress to our employees that we need to

walk in each taxpayer'shoes. and while most taxpayers have a smooth seamless experience with the irs, we obviously need to do better with the taxpayers who are here today. on behalf of the agency, i apologize and i've asked my staff to follow up immediately with each one of them to make sure all of their issues have been resolved. let me talk about identity theft for a minute. first i want you to know that we take the identity theft issue around the tax system very seriously. regrettably by the time that we detect and stop a perpetrator from using someone else's personal information, that victim's data has already been compromised outside of the tax filing process. i think it's very important to state for the record that all of the examples here today, the irs

is not the cause of the identity theft. rather, the terry sensitive information was stolen outside of the system and they use that identity to try to get a tax refund. it's a growing problem nationwide identity theft and we've seen a five-fold increase of tax-related issues around identity theft in the last five years. in 2007 because we saw this as an issue we created the office of data -- information protection and data security. let me briefly highlight some of the actions we've taken to try to get ahead of this. first of all, we set up filters and we stopped about a billion dollars since 2008 of potentially fraudulent returns coming in due to identity theft. we've also tried to set up ways to assist victims of identity thefts. we put markers on accounts which

puts heightened scrutiny on those accounts when they came through. the key to those markers is setting up the right filters that block the criminals and don't put too much burden on the victims. while not perfect, we've gotten a lot better. two years ago, 80% of the returns that were tripped by our filters ended up being legitimate taxpayers. this year that's almost reversed. 75% of the tripped returns ended up being the fraudulent taxpayers. so we're going to keep getting better every year. we've also this year launched a very promising program which is we've given 56,000 taxpayers a p.i.n. when they file the return, it will go through, if you have the p.i.n., if a return comes in with that social security number with no p.i.n., it will be blocked. i really think this is the future and i commend my staff for being in front of this and working on it although it didn't help the folks who did not have a p.i.n.

i could go on and on. we do a number of other things. we have criminal investigations. we coordinate with the justice department, the fbi, the federal trade commission and i'm happy to talk about it in questions. before i conclude, let me just turn to the written testimony of the witnesses who experienced unprofessional behavior on the part of some of the sisters that they encountered at the irs. i must tell you in all candor that all of my personal experience and the data that i review on a regular basis suggests that our telephone representatives on a whole are extremely professional and courteous. all of our customer satisfaction measures, those measured both by the irs and by external third parties show that while we run one of the largest phone centers in the world, the irs manages to provide high quality of service with a high degree of accuracy. with that said, i take these

taxpayers at face value that they had a bad experience with the bad irs and i take this very seriously. i believe the conversations we have with victims of identity theft present unique challenges to your assisters. often, it's during the initial conversation with the irs that the taxpayer is told that they've been victimized. as we've heard, these can be very emotional conversations and they're very unlike the majority of calls that we receive on a daily basis with specific questions about your account or the tax law. and so for many of our assisters, especially the ones on our general toll free line, this may be the first time that they've received a call from a victim of identity theft. so based on this testimony and what i've heard, i'm initiating a thorough review of the training provided to all of our phone assisters to ensure that

they have the tools and the sensitivity they need to respond in an appropriate manner to victims of this heinous crime. let me conclude by telling you that i realize that in the process of increasing our efforts to block attempts by identity thieves to exploit the tax system, there have been inconveniences and frustrations created for honest, hard-working american taxpayers. for that, i'm deeply sympathetic. as identity theft continues to grow as a problem for our country, we need to do our part in the tax system to assist innocent victims. we dedicated significant resources over the last few years, streamlining the processes for innocent taxpayers caught up in an identity theft. these efforts are starting to pay off but we're going to need to keep working on it and you've got my commitment that we're going to be focused from this day forward on continuing to improve our operations in this

area. >> i thank the commissioner for your statement. and the commitment you've made as far as going forward. certainly, i'm grateful for your apology for those witnesses here today and all those who have been victimized and perhaps have believed they've not received the level of assistance that they should have received, whether they're here today or around the country. and, you know, i think what you said here as far as going forward, you all captured in your april 6th address at the national press club and it was about continuous improvement. that since you joined the irs in 2008 and in your own words, i've made it one of my top priorities to put the irs on a path of continuance improvement to get better. i believe we should perform the best we can today while embracing change that we can perform better in the future and i think this is what this is about. especially when we look at the numbers in this area where we

see identity theft-related tax issues jumping about 500% in roughly 2.5, 3 years, 50,000 or so that we're aware have to over 250,000 in the most recent year. and i think that goes to your other statement about the training of the staff who are on the 1-800-number that is for most constituents that will be their first point of contact. that the committee made to go back and evaluate and strengthen that training because as we get more and more of these cases, as we're seeing, that's who's going to get that initial call. and as you reference the written statements of the citizen witnesses who will be testifying a little later today, yeah, their description of the treatment they received is pretty outrageous.

and, you know, not putting words in the mouth but quoting them, as we'll hear from lavona thompson. i spoke with the most rude and discourteous person i've ever spoken with in my life. another witness after dealing with an irs agent in person, in a local irs office, and feeling so frustrated and how the engagement occurred, i went out to my car and cried. i was very overwhelmed. this is a case where we have individuals who were victimized and, in essence, feeling victimized the second time and your acknowledgement of that and your commitment to go forward to improve the training of your staff is much appreciated. and i'm one as we talked about before, yes, believe in the ideals of public service and am grateful for the work of all

public servants and that includes all of the personnel at the irs who are out there in the irs and trying to do a good job and the misconduct of certain individuals to paint a bad picture of any and all irs agents personnel. we know that's not the case. so as a committee we certainly will be grateful to be kept in the loop as you move forward with these training changes or upgrades so that we can make sure we are doing better with the assistance provided to the victims of identity theft. a number of issues i would like to address with you -- you mentioned the -- the -- about a billion dollars in savings that you prevented from being fraudulently paid out. and the filler system is now identifying of those that it kicked out, about 75% were

fraudulent and that would have otherwise been paid out but for being caught. do you have a number roughly in, say, the last three years the best estimate of you've identified what was paid out fraudulently and what, if any, of those dollars have been recouped since being identified? >> let me address -- we have the specific identity theft maneuvers that were moving and we have very sophisticated algorithms that block out fraud. we block out 2 million returns every year that never go out. and a bunch of those are probably identity theft 'cause they can be duplicate tins but they haven't gotten an identity theft marker so we don't know what that is. so we don't have a good number as of today how much potentially that went out that we know was identity theft, but, you know, it's something that we're going

to work on going forward. the other thing i just would mention -- there were a bunch of statements in the testimony that assumed just because the innocent taxpayers refund went out and that means the perpetrator's refund went out. that's not the case. there's a bunch of cases where we get a flag on the first one and we're working that and a second one gets a flag because it's a duplicate. and we have someone who has a purse stolen. someone gets their identity. they sell it to 20 people so we could get multiple filings with the same -- it doesn't mean that any of those necessarily go out. a lot of times we're holding them all trying to sort out exactly who's who and who deserves the refund. >> i understand you don't have the exact amount perhaps that's identity-theft related in the recent years, is there a number

that you have at this point of how many returns were filed that are identity-theft related, whether you know -- >> our cumulative number is a little over 400,000 since we started tracking those but those are the ones that we put the marker on. so, for instance, the ones that are coming in this year until the case is resolved, you know, the markers are not on it 'cause sometimes, you know, the most common mistake in tax filing is someone not transcribing their social security number so sometimes it's literally is a number. it's not an identity theft it's called a duped social security filing. but the cumulative number over three years has been 400,000 that we've marked as having some identity-theft related. some there's never been a return but we found through other criminal investigation, a cache of information that has a bunch of social security numbers so we'll mark that. and some, the taxpayer identifies some we find the way most of the people who testified

found out, which is when they filed they realized somebody else had filed. >> i know one of the issues that you kind of touched upon that comes through in the testimony where a fraudulent return was paid out, and then the law-abiding citizen submits and, you know, is told it's going to be four, six months or longer. can you address that -- you know, we have cases that have been brought to our attention where a fraudulent return was paid out within two weeks of an e-file being submitted in, say, january or february, then the law-abiding citizen -- and that was based just on the name and social security number and no supporting documentation done in the e-file. they created an employer id and income but then the law-abiding citizen comes forward with all the documentation, w-2's, you

know, all the proper id to show that they are legitimate taxpayer -- you know, why is it four, six -- or i think in the one witness used, it was about a year and a half till they got their legitimate refund. i know there's a man power issue here but that seems pretty extreme that the victim has to go that long, you know, given how quickly we paid out the fraudulent payment. >> so one thing i just really want to verify because i think there was confusion in both a bunch of the press reports and other things, the first return that came in was received and put into our system. that doesn't mean the refunds were paid out. and so the refunds weren't necessarily paid out in all those but then to address the question of when the real person comes in what would take it so long. one there was a staffing issue

and i told you we more than doubled the staff so that we can get this addressed. frankly, we didn't know there was going to be this explosive growth and we were trying to balance budget cuts and potential government shutdowns and once we found out there was more growth, we threw more resources in this. >> is this just in this current calendar year. >> yes, this current calendar year. we're trying to balance resources as we go. second is, there are cases and one of, i think, the witnesses described a case where the person had, you know -- had their w2, had their employer, had their dependent, all those things -- when you get all of that, identity theft has become a very serious organized crime. and it's one thing -- you get a social security number you file, you probably will trip a filter and get blocked. and if you don't, when the real person comes in, they're obvious but sometimes we write to both people and both people come back

with a driver's license, with a social security number on it. maybe they've gotten a passport. they know the names of all the dependents. they know what the agi last year was. that usually means that there's some sort of work-related crime or someone has gotten into some sort of payroll processing system where they get information, and when that happens, it can take a while to sort through. some of the delay was we had some things sitting on the shelf waiting for people to get to it. we think we've addressed a lot of that by putting more people but sometimes when our analysts get there, they have to start making calls to employers. they have to ask for more information. and again, this can be 30 people all that they're trying to unsort those cases so those will always take really long. >> understandably. >> and i guess the other thing i would say is, you know, i did -- i looked into -- there were a lot of public accounts about people and without getting into any taxpayer, there were lots of public accounts that i saw where someone said someone told me it would take six months but we

know for a fact they got their refund within a couple months and a lot earlier than that. i think it depends on circumstances. with that said, you know, it shouldn't take nine months. it shouldn't take a year and a half. and we should get better at sorting this through. i think the p.i.n. i mentioned is going to be one of the real solutions. everyone testified here want to make sure the p.i.n. here assuming the pilot will go, their refund will fly through. anyone trying to use their social security will just be blocked. much better than the flag and the filter, which is a step in the right direction but the p.i.n. could be the real solution here. >> and i certainly understand where you have a fraudulent claim, where they didn't just get a name and social security but they got access to, you know, all that information. you know, so they're filing correct status, you know, everything is good other than where the money is going. and i understand those are going to take a lot longer. those where it is just a name and social security number and

this kind of comes back to the issue of the training of your staff and how they handle it. that initial saying we're going to do this as quickly as possible, hopefully, it will be, you know, you know, a month or whatever you think is the best case scenario but it could be six months but please know, you know, we're going to be giving you regular updates. and that is part what i would call an internal control on the training side and the follow-through. i really -- when you and i talked yesterday, my wife served on the victims assistance board in why can in her home community a number of years back. and, you know, there's -- when you're dealing with victims of crime, you know, it should be one of our highest priorities in how we handle them because it's not just what they, you know,

lost and here the taxpayer loses the money ultimately collectively, the american taxpayers, but it is a financial impact on the law-abiding citizen who has been victimized and for those who especially are really looking to that refund to pay, you know, whatever pressing bill they have, whatever there may -- maybe it will be a financial impact and there's a mental health aspect to it as well. and i think that's what came through to me, not just again in the witnesses we're going to have here today but the other cases, i think, we have 12 cases that we're currently working in my office. and i haven't talked to my colleagues, mario-diaz in florida and around the country, is that, you know, we really look at those individuals appropriately. that they've been victimized by criminals and so, you know, we really need to prioritize how we held out and one of those

regular contact between your agency and those individuals once they've been identified so they're not sitting out there waiting so to your knowledge but kind of get those regular updates. i'm going to touch on one other area that you just mentioned before i turn to the ranking member, and that is in trying to prevent it, and i appreciate that preventive approach, in fact, in your april 6th statement at the national press club, i appreciated that you're looking at how to be proactive and not just catch them after the fact and do something but to prevent fraud and other misconduct, and i think one of the things you mentioned about trying to have the employer's identification number and that w2 data up front rather than getting it in a sense after the fact and then trying to play catch up. and i realize that's a substantial engagement to pursue

and i think maybe it was good congressman diaz balart being here as an appropriator on the subcommittee that directly overseas irs, you know, as you looking to make those type of improvements that will prevent fraud up front that we engage him in what those financial aspects may be as far as making those improvements. but you mentioned the p.i.n. -- you know, the filler system and putting flags on, and i think at least one of our witnesses in the next panel testified that they were supposed to have been flagged and apparently were not properly flagged so they were a victim of identity theft a second time regarding their refund. whereas, the p.i.n. approach seems like it would more than likely prevent that. where do we stand in that pilot program? and i think it was 50-some thousand individuals in the current year and how quickly do you envision anybody identified as even a possible victim of identity theft being able to get that p.i.n. to try to make

certain that only they will be receiving their refund? >> so we're really -- we've got all the data now. although people still file after april 15th. they just -- they've gotten themselves an extension but we've got most of the data in. we're looking at it and are parsing it. like i said, i think it's very positive. my desire would be to expand it dramatically. and potentially give it to anyone who's been a victim. we for next year we got to balance that against, you know, all of the demands but i think unless we see something we're not expecting to see, by next year, we're going to try to dramatically increase that. >> you know, my hope is that we can move that -- that direction. in fact, you know, not a witness here today but one of the victims that had submitted a written statement, pamela eslee from york and without objection, i'm going to submit her statement for the record and in the name of full disclosure as i

shared with you before, it is a family member -- i'll say my big sister, although she's in the audience. she stands 4'10", maybe that. she's one of these victims. and, you know, because of it being a family member i'm most familiar with how her case played out. and the filter system, you know, is what really worries me. that if we rely on that, while i'm glad it's getting 75% of those that are kicked out are ones you want to catch, is how many we're not catching with the filter system because as in this case where my understanding, you know, it was a different filing status, a different employer, you know, a different address, a different dependents. i mean, there was one -- what i would call that mario referenced earlier, one red flag after honor that i thought that filter system would have caught and kicked it out, hey, something is askew here.

unfortunately, it didn't. and when the written returns were received by irs, about a month after the fraudulent returns, nothing happened for another two months until the taxpayer, miss lee, then contacted irs saying where's my refund? so now it's three months after the fraudulent return was submitted and paid out in january, two months after the irs received paper documentation that, hey, there's something wrong here. yet, even then nothing had been done. and so that's why i do worry about the filter approach versus getting to the p.i.n. and as a way to maybe better protect. and this may be too broad a sentiment or thought. is there -- the possibility of getting beyond just a social security number for each and every taxpayer. you know, what would be the cost

of, you know, the p.i.n. being sent out annually that here's your p.i.n. not just, you know, the half million or so that have been possible identity theft. is that something you're even considering or is that because of the additional cost and, you know, would it be effective or not? >> if you don't mind, if i could just address the two things about that you had mentioned. one is the -- that series of filters you said, why didn't it stop someone? >> yeah, yeah. >> i just learned of the taxpayers and obviously i can't discuss individual taxpayers publicly but there's nothing to say it didn't trip a filter or that that refund didn't get stopped. and so we're going to look into all of these, but i will tell you, like i said, there's 2 million refunds that gets stopped and there's enough indicia there. we change these very year. they're very sophisticated and the crooks keep testing all our

tolerance levels but we're very serious of stopping refund fraud. >> and i don't want to imply otherwise. as i've said to you, i know you want to prevent every fraudulent filing and payment as much as i do. and i know your department across-the-board shares that and that's why the purpose of this hearing is how do we partner here with you to help you do just that? >> on the -- on the p.i.n. -- i mean, it's an interesting idea. we're, as you know, everybody is in very tough fiscal times. my guess it would be very expensive. we're looking first to expand the p.i.n. to make sure it works. second expand it to the group of people most likely to have one of these problems. right now the social security numbers is what's used. i think it's been an overstatement in some of the testimony submitted today that all you need is a name and a social security number and you automatically get that refund. there's a lot of things that go

into looking at that. with that said, you know, i'm very open -- you know, as you quoted from a speech earlier this year, we should always be looking at how we do it better. and it's certainly something as identity fraud grows, we're going to have to figure out how to stay on top of it. >> i do appreciate that it's not necessarily that simple, but i'm looking for -- yeah, i've got too many pieces of paper in preparation for today's hearing. but that is a statement from a conference call with an irs employee stating to committee staff that social security number and name is all you need. you know, the e-file and that it is that simple so that's not just citizens, witnesses making that statement. that is one of your employees saying that to my committee staff. >> well, i'll look into both the employees who are rude to people on the phone and that employee

because there's a lot more that goes into issuing a refund than just a name and social security number. >> yeah. it was -- yeah, you know. we won't identify the individual here -- >> no, i take it at face value that i'm glad to share that information with you. >> but i'm finding my place here. i'm not finding the exact one but we'll get it to you 'cause that seemed to be what was being conveyed to us. a final question there and then i'm going to yield to mr. towns, is there any conversation -- again, we're looking at ways how to prevent this wrongdoing, to stop the criminals, protect the innocent. you know, i know in some of these cases -- and i don't know if it's consistent or something that you've identified as a consistency in the fraudulent claims, they were filed in january electronically, which is

before most americans -- i know i never get a w2, you know, till the end of january -- the last minute from current federal government as my employer or from previous employers. is there any consideration that that is a specific red flag? that anybody who's filing electronically in january that we look at with extra scrutiny because, you know, of -- the propensity, you know, they're trying to beat the law-abiding citizen who hasn't yet got their w2's so they have not yet -- or not yet -- i think, i'm generalizing here and i may be wrong that most americans are not able to file till at least the end of january or the end of february until they get their employer information and then go forward and submit everything, that that would be a specific red flag that anybody filing electronically that earlier, you know, would get extra scrutiny?

is that something you would consider? >> you know, i guess there's two things about that. one is a lot of the people who are -- you know, the common perception is april is when everyone files. the reality is, you know, our peak starts january/february and there's a lot of people who file who are as you discussed earlier, people who are really counting on that money and to go get from their employer because most employers, especially large employers who employ, you know, large chunks of lower income workers can make the w2 available earlier. and so there's a lot of people who file who are some of the neediest taxpayers who really need the money. second of all, as we talked about yesterday, i just want to be -- we have seen no nexus between electronic filing and this identity theft-tax related fraud because you can get your return in just as quickly by sending it overnight mail to us. and the speed issue a lot of times is about, you know, whether you get a check or direct deposit and we have to send something to fms.

so it's again -- everything is on the table and i would certainly look at anything. but usually the time is not the issue because we actually -- the thing that nobody wrote about and, obviously, there wouldn't be a hearing and a lot of interest in it, but we stopped lots of people who -- the legitimate taxpayer filed got their refund and never knew anything had happened and then the crook comes in later and we block those, too. obviously those ones aren't devastating to the victims. so but it certainly is something we look at. what i will tell you is we have technologists, statisticians looking at our screens, refining them year after year, working with our criminal investigators and other people and these -- and i get brief on them all through december to make sure we test them. we test them gets last year's data. we test them throughout the year

and so we're looking at these filters very carefully and we're trying to get as jim white from gao testifies, you know, the key to these things is, stop the bad returns and don't burden the honest taxpayers. >> am i mistaken that if you file a paper return then you do have to have your w2's -- i thought when you file an electronic return you don't send any w2's in, you know, with that because you're dealing electronically but if you file by paper i thought you then had to file your w2's with the return. >> the electronic return usually has -- you can do it electronically next year. we've been working on our e-file. next year we'll be able to actually pdf any attachment to an electronic return. >> but i meant as far as -- that identity theft is paper or electronic, isn't it harder to do it with paper because you have to have those w2's

attached? >> a lot of people get them late. what i can tell you is we look -- we screen with the same material on paper and electronic. >> okay. that's what -- i'm looking for that nexus that you referenced. and i would encourage you and if you see anything with the -- with that 75% of those that you did kick out and were fraudulent, you know, that analysis, you know, was a large percentage of them in january, you know, and what percentage of them was electronic if your staff could follow up with the committee on those two specific issues. that would be great and my ranking member has been very tolerant of me going very long here. i yield to the former chairman of the full committee and the ranking member of the subcommittee, the gentleman from new york, mr. towns. >> thank you very much. no, i think, you know, your questioning, you know, i think is just so important to try to get to the bottom of it. and not get involved in terms of

a blame game because we're all in this together. i think so your questions i thought were really right on point. and to the point. you know, because i'm always concerned about if people do things and get away with it, you know, then they will almost encourage them to do it again because if nothing really happens -- and then, of course, others hear that they did it and nothing really happened so i guess the point i want to ask you -- since 2008, how many prosecutions have there been? >> so i actually don't have -- i don't have the cumulative number, but i nut my testimony and mentioned earlier, >> can we keep the record open so that we can receive that?

>> just last year, we took to full investigation and recommended to prosecution and we don't do that unless we've coordinated with the justice department prosecutions of people who had stolen 50,000 identities that had been used in tax crimes. so when we prosecute we obviously like any other agency, you know, we've got a very small part of our operation that has a criminal investigation division. we have to spread it across terrorist, financing, offshore tax evasion, any number of things. as this problem has grown, we put more resources and plan to continue to put more resources into it and we try to find prosecutions, a, where we can get the proof. but importantly, that the ones that impact large numbers of taxpayers is, frankly, the ones that u.s. attorneys will take and work with us on, et cetera. and so if you look at 50,000, i think the number was actually 56,000 taxpayers who are

affected with the prosecutions that we took all the way through our criminal investigation chain, that represented, you know, more than a quarter of all the identity thefts that was identified, which is a pretty high number for any federal or frankly state or local investigator to be able to follow up on that percent. >> would you know the rate of conviction. >> what's that? >> would you know the rate of conviction? >> a very high rate of conviction. i believe it's 95% but let me get back for sure on the record. >> right. how much of the fraudulent paid money has been recovered from thieves? >> so every year we block billions of dollars of fraudulent refunds. we blocked about a billion over three years with identity theft. i mentioned to the chairman, we haven't tracked specifically identity theft numbers related that has gone out and what we've gotten back. we haven't started tracking that. we plan to as this problem grows so i don't have a number for you, mr. towns.

>> you know, my concern is that, you know, sometimes when we don't have the resources, you know, we know there are things that should be done, you know, but we don't do them because we don't have the resources to do it and, of course, sometimes in that process, you know, the wrong kind of message gets out. i know that, you know, as the commissioner that you just can't come up here and bang, bang, bang saying you want money, money, money. but the point is i think that when you see a problem that, i think, that it becomes our responsibility here to give you additional resources to be able to go out there and fix the problem because if a person is expecting his or her return and then they don't get it, and then all of a sudden they can't get an answer because really somebody else has gotten it and the frustration around that and the problem, you know, to me is something that we need to really

take very seriously, i'm talking about members of the congress as well, and i agree with the chairman. i was so happy that we had one of the appropriators here today because, you know -- and i think if you feel that you need additional resources, you know, don't hesitate to make that case because i think at the end, we're going to save money by you doing that at the end of the day. based on what i'm hearing and what has been said here. that if we spend it to fix it, then in the long run, we'll be much better off. and i know how difficult it is to make the case for resources especially in this atmosphere and climate. but sometimes we have to do that in order to be able to correct the situation that we now find ourselves in and to make certain that people have the confidence and not to be worried about

whether, you know, somebody is going to get my return because of my identity. let me ask you, what department really covers this in your shop? what department -- the name of the department that handles this? >> handles, i'm sorry? >> that handles the claims in terms of the identity -- you must have a department that handles that and looks at identity theft. what's that called? >> we have the centralized office of information protection, privacy and security that sets all policies and cordinates. the fraudulent -- most of it is in our wage and investment division that deals with individual taxpayers. that's where all the service officers are, where we talk with the victims' testimony and our criminal investigation is the arm, obviously, that follows up on fraudulent schemes that we see. >> right. now, was that the department -- i know there's some cutbacks, was that department had some cut

back. >> we had some cutbacks in every department of the irs this year. >> because i'm really concerned about making certain that you have the resources that do the job that needs to be done. and that's really -- i think sometimes, you know, we are involved in situation where is we have a problem and we know that resources are actually needed to correct the problem, but we do not deal with it. and we're guilty of that here in the congress. so i want to let you know that i stand ready to push to be able to assist you to get what you need to be able to correct the situation because, you know, it's going to grow if you don't. and that's the problem. you see, when people do something they get away with it, they tell others. and then it gets bigger and it gets bigger and bigger. and then the problem, you know, becomes one that becomes a lot more costly to be able to

handle. so i think that if we can move forward now and correct some of the things that are going, and send a message forward that this is not something that you do. you know, if you do this, you're going to spend time in jail because -- and i think that point has to be made because if people do it and they get away with it, they're being encouraged. >> yeah, i couldn't agree with you more. what i'll say and i'm biased because i'm the commissioner of the internal revenue service and responsible for this agency, but this problem is a good illustration of why, you know, i advocate for the right resources for the irs because on one side we need to have the service resources to quickly process the returns and the refunds for the victims and on the other side, we need to get the enforcement resources to pursue this kind of crime. the service resources i think

are fundamental because every american is expected to pay taxes so this isn't a choice. this isn't an optional department and we owe it to the american citizen to see treat them right. the enforcement resources are just obvious from an economic standpoint where there's a huge return on investment. you know, we return for our enforcement from 8 to 1 to 23 to 1. $23 for every dollar we spend and that doesn't count -- that's conservative accounting that omb and pbo has come up with. that doesn't count the deterrent effect of people seeing it and never doing it to begin with. this is a kind of microcosm of why, you know, we always argue this agency is a little different, collecting the money for the government because it has a huge return on investment and a real obligation to serve every taxpayer in a way that's dignified and respects their own individual situation. >> but the problem, mr. shulman, is that people compare you with

other agencies in terms of american express -- and they say well, this person went to purchase something with his american express card and they called me, you know. but the point is that they can do that because they have the staff, and they have the system in place that they pay for to be able to raise these kind of flags so that's the point i want to make and, you know, because you're going to be compared with them, you know, and, in fact, some of our colleagues have already done that today. and i was on the nor of the house and a guy came over to me and says he doesn't understand the problem because of the fact that he won't talk about in terms of how the credit card -- that company woke him up. he was asleep at 2:00 in the morning and they called him and said, are you making this purchase, you know? but the point is that in order to do that you have to have staff. you have to have resources.

and that's the difference. and i told him there's a big interest on that card, there's a big interest on it so, therefore, they can hire staff and do things and say things and we just want you to know that we sit here -- we're not just going to blame, but we want to work with you and we think together that we can do better. that's what i'm saying. and i know that in order to do that, we will have to do some things on this side of the aisle. and other than just saying you got to stop it. you know, we have to help you stop it. and i'm prepared to do that. >> i appreciate it. >> on that note i yield back. >> i thank the gentleman. and i'll wrap up quick for you, just a couple of quick follow-ups. one is on the issue that the ranking member raised on the prosecutions. there was a press story in the

"sun sentinel" in florida, end of april, that identified -- and i'll read it verbatim, prosecutions for identity theft-related tax fraud are rare, agents for the internal revenue service who are responsible for criminal investigations have pursued just 412 such cases nationwide since 2007. now, there's specifically referencing identity theft-related tax fraud. i take it that you believe that's an inaccurate number? >> as i told mr. towns, i don't have the cumulative number with me but i'll get back for the record. >> if you could. >> but i think the important thing is a lot of these people are committing -- there's one criminal with thousands of taxpayers. that could represent a lot. thathat's not one victim that could be 100 victims. >> but that very well may be the number but what i'm telling you as this problem grows, we're going to devote more resources and, you know, our prosecutions will -- or our investigations will continue to grow and our recommendations to justice for

prosecutions will continue to grow. >> and that kind of follows up with what ed just said. we're an authorizing committee, we're not an appropriation but we're glad to work with our friends on appropriations in kind of two areas that i think you're looking at doing. one is your manpower commitment to the victims so that after being victimized by the criminal, that the government does right by him so it's not six months or nine months till they get their legitimate -- that's a man power issue but also a man power issue of going after the criminals and -- 'cause if that number is accurate 412 cases going from 50,000 to 250,000 obviously that's a very small percentage of prosecutions if we're accurate in those numbers. that question on these prosecutions, i know, excuse me, on statute -- the irs -- you're

understandably restricted pretty significantly in what information you can share with anybody because you're protecting very personal data. and are there statutory restrictions on you that in some way are preventing your criminal investigation division in working not just with justice but with local law enforcement because i understand that as with some of the cases, you know -- i've heard about or we're going to hear about today where it's a 3,000 or 4,000 and it's not multiple but one person defrauding using one, you know, name and social security and information, when that goes into the department of justice and they prioritize all these criminals are going after, that's probably going to go pretty well in that totem pole because of that amount. because for local law enforcement they prosecute shoplifters who maybe stole $100 worth of goods. it's something they know how to do. is there anything that prohibits the agency from working with

local law enforcement so that we can -- we know who the person is, they don't get the message as mr. towns mentioned, as long as i don't ask too much each i can prospect 3 or $4,000 because they're never going to come after me and we're sending that message, hey, you know, i'm good to go. and just don't get too greedy, as long as you don't get too greedy you're safe, i think to combat that we've got to engage, i would contend, local law enforcement. i don't know if here today, you know, if there's anything that prohibits or restricts it or hinders it? >> what i will say is i think some of the articles might have overstated the restrictions but there are some restrictions around specific information. we need to give information that's pertinent to the investigation to know where the investigation is going, et cetera. you know, i always people i got sworn in as irs commissioner when i came back to the office the people who talk about the laws around taxpayer privacy were in my office. just as an example of how

seriously this agency takes data protection. and there are very restrictive laws because we're holding very sensitive information about taxpayers. we can, though, do coordination with other law enforcement agencies. it's not always just, you know, look at our databases and we'll share everything that comes in but there's specific things we could do. i'll be happy to have further conversations about exactly -- where there could be some restrictions. if you don't mind, i also just want to be clear because i've not been clear earlier, when you said 250 cases of identity theft with only 400 prosecutions. >> 250,000 -- >> and those numbers seem skewed, one, is 250,000 was the flag that were put on. we put some of those on because we happened to find, you know, a database. or someone called and said, my

wallet was stolen and so those aren't necessarily anything. there hasn't been a crime committed. it's just a flag so that we can put it through more screening. >> okay. >> and second of all, you know, even though last year it was 116 investigations, 41 of them ended with recommendations for prosecutions, that was still 50,000 taxpayers. so the number was more like 50,000 for 200,000, just -- and i don't know that i was clear earlier. >> right. >> 'cause again because of the likely prosecutions at this point are those more large schemes involving laudable or significant number of taxpayer id's being taken so the number of cases might be small that you're prosecuting but the impact is that 50,000 number >> yes, i want to be clear in my explanation number earlier. >> one other item if you could follow up on the record, my earlier questions of those identified in, you know, and kicked out as being fraudulent,

you know, that -- how many were e-filed, how many were in january and the issue of how many were asked to be refunded in the form of a debit card versus a check or a direct deposit, again, i'm looking -- trying to help personally so i can, you know, better work with you and your agency, you know, what is a common issue that comes to the broad issue of internal controls and how do we ratchet up our controls to address whatever is most common. and knowing as you well stated that the criminals are always going to try to stay -- whatever we do they'll try to get a step ahead of whatever we did. if we could have that information about the debit card refunds that are identified, that they were asking for refunds and you caught them. but they were looking to get it on a debit card. and again, the belief that that maybe is easier to get away with

it versus if they know they got to go to a bank and have some kind of contact with a bank to get that fraudulent refund from that bank. with that, mr. towns, do you have any other questions? i'm going to thank you for your testimony. conclude by saying, you know, while i think as you've referenced and in a written testimony and we're about to hear from our other witnesses, we do have a lot of progress to make, work to do. i also want to recognize the progress you have made and the commitment that you -- your understanding of this is a growing problem isn't because we asked for this hearing. it's because you're seeing the data as we're looking at it and are out there, you know, trying to lead the effort forward in a positive way. and for those hard-working

employees, we're grateful for them and hopefully those who haven't provided that level of service you clearly want to be provided that, you know, they'll learn from their mistakes and do a lot better in the future with the american public that they interact with. so i thank you again for your testimony. i look forward to continuing to working with you and your staff and our thanks for being flexible here today with the schedule. >> thank you. and if you wouldn't mind, since i was up here at 12:00, and i hoped to be here when the other witnesses spoke, i'm going to have to step out but my team is going to stay to follow out. >> and we shared -- >> you do all have my apologies again with having a frustrating experience with the irs. >> and, you know, we appreciate your understanding of their testimony from the written and as we discussed yesterday, you know, at pretty good detail the subject -- the message of their testimony and your staff's willingness to stay with us is also appreciated. thank you, commissioner. and we'll take about a 2-minute

recess while we get the next panel situated. and then begin. [inaudible conversations] >> we will continue with our second panel. and we are honored to have for individuals with us. first, mr. jim white director of strategic issues at the government accountability office. we appreciate not just her presence here today but you and your colleagues at gao,he important work you do for all of

our nation, but especially for congress and the resources that you bring to are working on the the hill. as well as three citizens witnesses. unfortunately, who have been victims of identity theft as it relates to the tax filings. we have first, sharon hawa, is that correct? from the bronx. we have lori petraco from york, pennsylvania, and ms. lavonda thompson also of new york. will also grateful of you being here. and as i said a number of times now, you have been very flexible with us and very patient as we try to figure out meeting schedule around floor schedule and full committee. so we are grateful for the. if i could ask all four of you to stand, and again so i can swear you income if you would raise your right hand. do you solemnly swear or affirm

that the testimonyyou're about to give to this committee will be the truth the whole truth and nothing but the truth? and the clerk will reflect that all four witnesses affirmed the of. and we are going to set the clock at five minutes but if you need a little more time, we want you to be able to give your testimony as you see fit. and we are glad to hear. so mr. white we will start with you. >> chairman platts, ranking member towns, i thank you for inviting me. if you hear from the victims, id related tax fraud is a hideous crime. to begin i want to describe hypothetical and simplified example of refund faud which is illustrate on page three of my statement. i think up on the screen. first, thieves steal the taxpayers identity. this happens outside of irs. second, if he files a tax return come -- claiming the name and

social security number of the taxpayer. after verifying that the name and social security number match, and this again may be simplified, then irs issued a refund to the thief. later the legitimate taxpayer filesa return, at that time diarist discovers two reurns that has been found using the same name and social security number. irs holds up any refund while it notifies the taxpayer of a problem. and investigate. the notification from a irs may be one that taxpayer first learned his or her identity has been stolen. employment fraud is different, also illustrated on the screen. with employment fraud a thief uses a stolen name and social security nber to get a job. the following year when taxes are due the employer reports the income to irs on which statement and innocent taxpayer files a tax return. irs matches the to and discovers income report in the end of the innocent taxpayer that was not

included on the taxpayers return. irs sent a notice of underreported income to the taxpayer and that's when the taxpayer and irs may 1 learned about the id theft. so to summarize so far, irs learns about and identity theft affecting taxpayers long after the theft occurs. and available evidence she just problem is growing. now want to outline what irs is doing to resolve taxpayers idf problems. starting in 2004 in the commission summarized some of us, irs create an id theft strategy set up an office to oversee it, but theft indicators on victim's accounts, screamed some returns for fraud and set the identity protection specialized unit and an id theft hotline. in 2009 we recommend iris develop measures and data for assessing effectiveness of viruses effort. irs agreed and has since taken new actions to help resolve innocent taxpayer's problems,

this identity theft makes it appear to either clims to refund for underreported their wage income. irs is placing a temporary id theft indicator on account while still investigating. the purpose is to alert all irs offices that id theft may be the explanation, what appears to be. to detect id theft related tax on irs screens returns filed in the name of past victims. the screens are not perfect. is for example, iris greens are returned with a change of address it was love refunds with some legitimate taxpayers who moved. if it's greens too loosely, more fraudulent returns get through. this year about 200,000returns failed the screens, 146,000 more fraudulent, 50,000 more innocent. also irs is expanding with screens forthe social security numbers of deceased taxpayers to try to prevent thieves from filing using those identities. another new stp give victims

special pin number to irs screens at returns, and less the p.i.n. is attached. irs is ability to address identity theft and constrained by law, timing and resources. the laws governing the privacy of taxpayer data limits to some extent a the commission also describe, irs facility to disclose information about id thieves, federal, state, or local law enforcement agencies unless certain conditions are met. complicating any investigation is the fact irs typically discovered the id theft long after it occurs. finally, criminal investigations require resources. last year irs initiated about 4700 criminal inveigations of all types including id theft, tax evasion, money laundering and other financial crimes, far fewer than the number of id theft cases. given all of this, can irs do more? options exist but they come with traders. irs screens tax returns filed in

the names of known identity theft victims more tihtly, but that will increase the number of false-positive and delay refunds to those taxpayers. it could also burden employers to be contacted about reported wages. looking forward, irs needs to continue assessing its efforts such as pens and screens for deceased taxpayers to learn what is effective. we have not assessed the effectiveness of these steps. in the long-term irs should be looking at how to take more advanced of new processing system that it is building with better processing irs might someday be able to match tax returns to wage statement before refunds are issued, and thus prevent more refund fraud. however, much prefunded matching would require employers to file wage statement earlier in the year. mr. chairman, that completes my statement and i would be happy to take question. >> thank you mr. white. ms. hawa. >> good afternoon, chairman platts and ranking member towns.

thank you for allowing the opportunity to provide you with my testimony regarding tis atrocious and rapidly increasing identity theft crime. it not only impacts individual livelihoods but it also steals minds of those on the osh treasury year after year and will continue to do so until something is done to prevent it. this unfortunate situation has taken a turn is an emotional toll on me. the stress, fear and anxiety are all compounded by having to deal with terribly organized agencies such as the irs and the taxpayer advocate service which only adds feeling victimized by the inefficient systems and lack of communication. knowing that i and other legitimate taxpayers like me remain foldable, taxis and after taxis and, lease me both infuriated and it also frustrates me. in three years these manages to my tax refund twice by filing fraudulent tax returns in mining. the first time was in 2009 after i found to my local tax preparation offices i had for the previous five years.

two days later i received word that the irs rejected my return because my social security number was used more than once. scared and and shot i took measures to secure all my personal assets, credit reports and accounts. i attended police report, filed with the federal trade commission and mailed in hard pies of my returns to various irs addresses as instructed by different units within the irs. after 12 months of back and forth confusion, the irs is identity protection specialized unit assigning to an incredibly rude and hard to reach taxpayer advocate where i had to explain my situation, resubmit the documents, improve my obscenity all over again. it took a painstaking 14 months until i finally received my $6604 refund. refund. meanwhile, i to take on a second b to support myself and spd a lot of time, money and energy drafting letters and sending in the necessary information. in 2010 i was unaffected by still remained extremely anxious. when i finally received both my 2009 and 2010 tax refund a fw

weeks apart, i hope the worst was over. but this year i learned i fallen vict again and this time they also stole my state refund, together totaling $6335. researchers show me how antiquated the taxpayer system is. i realized the irs has been dealing with this crime since nearly the start of the millennium. so why do these things go in expense and incompetent in handling the matter and why has anything been done yet to combat it? the very process designed to accommodate taxpayers it has also become a windfall for these. there's been increasing tax that as result of e-filing and direct deposit which do not necessitate validating person lays identity went on to a digital signature to e-file senator carson a self selector is less identification number which is the taxpayers number from the previous year to turn the information that is easily obtainable. furthermore, a direct dposit on across the banks running number in oer to release the fund.

no futher vetting of personal information or identity is required. so on two separate occasions identity thieves be filed early in the taxis and if i physically receive my w-2 form and use direct deposit accounts to steal my refund. to make matters worse in 2009, they receive $1895 more than i was due and i received a notice from the irs stating that i owed that amount in overpayment. electronic filing was created to deceive the irs most of dollars. versus a paper return was cost $3.29. but i urge instead to look at the many millions of dollars fraudulently paid out to these criminals. cases jumped 640% from 2004-2007 and an additional 300% since last year and many most of taxpayer dollars are needlessly and disgustingly wasted due to the broken and expose system. in and what technology is still prevalent when the topic priority would be placed on this issue. it is absurd that the government

pays out twice on a single stone refund come a multiplied by hundreds of thousands still of stone refund if you. since the country faced with the worst economic situations in its history, this appalling travesty needs immedte attention and repair. this entire ordeal is a large part to the unacceptable lack of sacred measures that the irs and u.s. government have placed on the personalidentity of taxpayer. and as an outstanding citizen of this country i demand change. i demanfirst that legislation be enacted to force federal estate tax offices to put appropriate measures in place that prevent thieves from taking the people's hard earned refunds away from them, and forcing them to fight for the identity of a tax refund for theest of their lives. i second demand that federal government work more closely with state and local law-enforcement agencies to target and catch the criminals so that victims like me can rest their note that these criminals are serving time. and i 30 minute each day develop and enact the necessary laws to protect consumers from corporate tax preparation offices that

have little incentives and safeguarding their customers personal information. i hope that by getting a testament to take measures will be put in place that will no longer have deal with this nightmare into law. i thank you for your time and effort in making these critical changes happen now. >> thank you, ms. hawa. ms. petraco. >> good afternoon. my story begins on march 15, 2011 come when i retrieve my mail from my mailbox. i received an envelope from the internal revenue service. inside was a window envelopes that by the postal service returned to sender attempted not known unable to forward. inside the window envelope was an irs change of address form, and more poorly a notice cb 12 for tax year 2010, dated february 14, 2011. my social security number, my first and last name which are all accurate but an address of

wardy five, apartment three b., yonkers, new york, 10705. i had never lived at this address, let alone ever lived in yonkers or the state of new york. the form state i had a miscalculation on my 2010 form 1040ez in the area of tax credits and that my new refund amount would be $4552. i read this formed several times in his belief, and called my husband. i nearby joint tax return was prepared by an accountant, that we as a 1040 long form simply two children in college, and finally that we just been a return within the last two weeks. i wanted to believe an error was made that would explain this. i.v. immediately called the irs 1-800 number, but after 20 minutes on hold without being able to speak to anyone, i gave up. the local irs office is about one mile from my home that they

were closed for the day, and so i spent a restless night wondering what this all means. march 16 i arrived at our local irs office early and was asked to step up to the counter. the clerk was courteous, but the cabinet is in no way private. everyone sitting in the shares directly behind me could hear our conversation and the lobby was full. when i shoul the clerk what i had received and that this wasn't my return, she blurted out, your identity has been stolen, i will need to fill out and identity theft affidavit. the entire waiting room heard this. until then i was hoping that this was just a mix of. she asked for my name and for me to recite my social secuty number. just seconds ago, this irs employee proclaimed that i had been a victim of identy theft, and was not asking the to recite, where others could hear, the same sensitive information she concluded had been stolen. i said no comment that sh could

take information from the form inront of he and i would be happy to show her my driver's license. she asked, when did you lose your social security card? i replied, i didn't. she wanted to see it, but i don't carry it in my wallet because i don't want my identity stolen. she completed affidavit until they to come back with my social security card so that she could send the license associates agree number with the affidavit. she also told me because this person found the return as a single person and got $4552 already, my legitimate return would be held up and i would not see my refund until perhaps october or november, roughly eight or nine monthsd file a return and without validation or proof of anything receiving refund? she replied, do you know how may people file electronically? we expedite the return and match up the information later.

finally, she said, don't forget to file a report with the federal trade commission, the social security administration, and the three credit bureaus. again, the clerk was courteous to her matter-of-fact manner and abruptness, that this happens all the time, in front of a roomful of strangers, was upsetting. i went out to my car and cried. i was very overwhelmed. i was so upset that i begin to wonder how far the seafood company. i i went home, signed onto all three credit bureaus on the internet and reported the identity theft and printed my current reports. everything was okay. i pulled out my bank accounts to see if my balances were okay. they were. i was late for work that day in order to protect all that i have worked hard for. i felt the need to report this to my supervisor as well as to the chief, as i work in law enforcemt andid not want someone to jeopardize my job or my good name. that eating about a report with

the federal trade commission, and they requested that i file a police report with my local municipality. i am not sure why because is is cybercrime involving someone in yonkers, new york, and not york, pennsylvania. march 17 i contacted springettsbury township police department as though to detective raymond craul, and explained what had happened and wh the federal trade commission requested. he was somebody with federal trade commission's request and gave me an incident report number, but stated he had no jurisdiction to investigate. i added the police department incident report number to the federal trade commission's website on my incident page. i again had to leave work early to go out to the social security office in york, pennsylvania, to inform them of the identity theft. unfortunately, at that time they still didn't have my 2010 earnings to verify for accuracy. i was resigned to the fact that this nightmare would continue

indefinitely. at the irs would hang onto my tax refund, and that i would have to be vigilant with a credit bureaus for the rest of my life. on april 27, i discovered i was not the only local government employee in york county affted by the identity theft via the irs. one these victims suggested to our local congressm, todd platts, and his office could do. i follow through with contacting the york office in filling out the constituent service form with all related documentation. on april 28, i told my story to two special agents frothe department from the department of the treasury out of philadelphia who are also launching an investigation. i in here today to tell you that i'm a victim of identity theft. i am forever changed. i will always need to check on my credit and be vigilant in what information is shared with others. i am a victim, being victimized by the irs it was only at my refund because they don't hav checks and balances in place to

prevent crimes likthis from happening, to timely verify personal and financial information, or to time and adequately asss people like me who have fallen victim to identity theft. if they did, they would have seen the following things. that i filed my taxes with the same man as married filing jointly for the last 28 years, that i've lived at the same location for the last 12 years and never found any change of address with anyther governmental agency, meaning social security or the postal service. and finally, that we always complete the 1040 long form an that we always filed by mail and not by using the internet. i thank you for theopportunity to tell my story in the hope that changes occur within the irs that would prevent this from happening to others. hopefully, my tax refund will not be delayed until october or november so that this law abiding citizen can get back to living her life. thank you.

>> thank you, ms. petraco. ms. thompson? >> good afternoon. my nightmare began on monday, forever 28th, 2011. that day my account was in the process of e-filing my federal tax return. he ceived a message from a software provider alerting him that a tax return had already been filed for me. he responded by devising that it could not be filed already because he was trying to file it now. he then called the irs and they in fact confirm that a return have been filed in my name. my accountant called me and told me what had happened. he gave me the number to the irs to call and find out what the person ud to file the return because they could not release that information to him. i called ad was told they could not tell me anything. once i get home from work, i called the irs again and spoke with mr. baird. he told me what i had to do as

far as five and identity theft affidavit with copies of my drivers license and social security card. calling the federal trade commission, filing a police report, contacting the credit bureau and social sturdy office. once i finish speaking with him, i call the federal trade commission and spoke with an employee whose name was mark. he took a complaint and gave me a confirmation -- a confirmation number. i called social security and was informed that had called the federal trade commission and i informed the representative that i just talked to someone. she said okay and wished me good luck. that day she said that i was the fifth person that should spoken with who had their identity stolen. onfebruary 28, 2011, i found an incident report with the york county, pennsylvania, district attorney's office. on march 1, 2011, i followed a police report with york city police department. a detective found out who did it

but he could not charge the person because that person is portedly located in the state of new jersey. he was told the irs would bring charges against them. on march 15, 2011, i forwarded a letter to the irs with the following document. identity theft affidavit form 14039, prepare explanation for not filing electronically form 8948, incide investigation information, copies of my social security card and pennsylvania drivers license. on march 16, 2011, at approximately 10:25 a.m., i call to get some information on my case because they would not release it to the detective, and he wanted me to call and get it. ispoke with the most rude and discourteous person i've ever spoken with in my life. when i asked her about my case she proceeded to yell and scream

at me. when i asked for hr name and id number again, because she said ito fast when she answered the telephone, thehone went silent. she had hung up the telephone. i then called the detective and told him what happened. he told m to calm down and call back and hopefully i'll get another person. at 10:30 a.m. i clled back and mrs. bennett answered. i could not stop crying and told her what i just happened to me when i had called a few moments earlier here mrs. bennett kept apologizing for the previous person, which she is not required to do so. she informed me that the person used my social secury number, first and last name, no middle initial, he filed that return. once my return was received, the irs considered it to be a duplicate return. on march 18, 2011, i voted there to the irs about the situation on march 16, 2011, and i did not get a response.

our telephone calls monitored by the irs for the purpose for hearing what is being said? is this unhelpful attitude toward the public a single incident or is it a general attitude? on march 30, 2011, at 11:10 a.m., i called again to get a update and spoke with mrs. dandridge. she informed me that it would take 16 weeks to six months for me to receive my return because of the identity theft. i thanked her for her help. i had to close my checking and savings account and get a new one and order new checks because of this. and added expense albeit a minor one, but one which did not need. i had to bow my credit reports and luckily, so far, there has not been any activity on the part of the teeth. i had to put a 90 day alert on my social security number. on may 10, 2011, i bought a letter to experience, to put a

permanent alert on my social security number. on may 17, 2011, i wrote letters to trans union and equifax requesting the same. you may not be ae to know how stressful this has been. i can't sleep. i wonder what the person will do next as far as a study of credit card or anything in my name. now that this has happened i've told the irs will monitor my social security number for the next three years. when i found my return, it will take them longer to process it because of this. what, if anything can't is a diary doing to rectify that this does not happen ain to me or another person? in my work history, i've had the occasion to see and work with victims of crime. i have seen to call me an encouraging effect a policeman, a prosecutor, or others involved in the criminal justice system have had on victims of crie.

the system i work with make every effort to avoid victimizing the vicim a second time. the way i feel i've been treated by the irs system has made me the victim a second time. i ask and wonder how many people have had t same unpleasant experience. thank you. lastly on to stay may 31, 2011, i received correspondence from the irs dated may 13, 2011, regarding another individual high a tax return using my social security number. this incident started february 28, 2011, and i'm just now receiving correspondence. why would it have taken -- why would it take three months for me to receive this information? thank you for your attention. >> thank you, ms. thompson. and again, my thanks to all for other witnesses, and to our three citizen witnesses, victims

of identity theft, i want to add my words of apology to the commissioners, on behalf of not specifically the irs but on behalf of our federal government for how each f you have been treated as law-abiding citizens seeking to comply with their obligations as taxpayers, and instead becoming victims, not just of criminal conduct, those who soughto defraud you, but also victims of poor service from us, the federal government. and all of us bear responsility for that ultimately, especially as elected representative of two of you, and, i know for our third witness, you know, on behf of all of my colleagues, we want to do better on your behalf. i want to kind of focus a couple of questions, with you three

come in mr. white separately. and maybe, mr. white, actually ask you first. minute year -- my notes here. i apologize. here we go. in the commissioners testimony, and also in your written testimony and your assessment here today, mr. white, you talked about the screening process. and i'm not sure what, if any, detailed gao's review that as far as how the filter prcess works, and whether you're able to make any assssment of kind of relates to my questions earlier to where we have these three witnesse or others, where it was, while wort certainly

the 140,000 or so, clearly others slipped through that seem to have a fair number of red flags they get caught up in an usher if you give an opinion on how to assess that process. >> we have an assessed it ourselves. i can say several things though. one, the filter process does not work perfectly as we have heard. and it does stop some fraudulent returns, some fraudulent refunds from going out the door at irs. however, they are both false positives and false negatives. so far in 2011 there's been about 50,000 false positives. those returns of honest taxpayers that got stopped by the filters, by mistake. so that great a burden on those taxpayers. and then on the other side you false negatives where fraudulent returns slipped through the filters, perhaps because the id theft still so much of the

honest taxpayers identity that they can get through the filters. they had enough information to get through. so you both kinds of problems. the filters don't work perfectly. we've recommended that what irs needs to be doing and they've agreed with a recommendation and started doing this, they need to be assessing every unit the effectiveness of the actions they're taking. theye taken a number of steps. they're taking a number of new steps this year. each year they need to be assessing those steps and then feeding ba. the need to be a feedback. whether they learn from what they've done and correct ad adjust the properly. part of the problem here is these are adjusting as well. so it needs a continuous problem by irs. they have started that. >> and essence what i would call annually auditing internal control system to preent this type of fraud from occurring? >> yes, to learn what's working, what's not working, do more of what is working, pin numbers, for example, turn out to work well in the spirit then that

would be something to think about expanding obviously. >> on a specific, i know they're looking at the results of that. is that anything that gao, that you are engaged with the irs in assessing that that pilot program? >> no, we are not. our sins though based on the work we did in 2009 is that p.i.n. seems to be a promising approach. it depends on taxpayers using it for it to work, but it ought to be an addition. it seems like it has the potential to be in addition to the filter system that would make that system work more effectively than it does right now. >> okay. >> the profit is if an id theft is stolen, a lot of the taxpayers identity, more than just the name of social security number, they can make a return to look realistic prevent have a copy of last year's tax return. so they can get through the filters. that p.i.n. is a number that only the honest taxpayer would

have, unless the thief is hacking into the home computer, for example. there is no perfect solution here, but that's a solution that seems have a lot of potential. >> and from what i've come to learn, seems to be the more we can expand that effort, if the data plays out, it seems like it ma tat that would be one way to really try to crack down and prevent this fraud from occurring. >> than i do think there are someong-term solutions. these are years away, but for example, right now irs does not match tax returns to the wage statements, the wt use that emplers filed out until months after the filing season ends. the first match is done in june. part of the reason for that is employers don't have to send those information returned to irs until either the end of february, the end of march. and irs matches later so the refunds go out the door first