of to demo their colors talked about biracial. unfortunately, in america, you can be biracial, but you are considered black or white. you can see that procedures what they want to be. right now, the president considers itself to be african-american. getting to the latter, basically goes to what runs to foreign policy. the senators know that. for rand paul to sit up there and say to secretary kerry -- come on. if you want to write a letter to the president and secretary of state, you can easily write want to them. the sad part about it is that if they sabotage of this deal which they probably will, there are five other countries that are still in with this. if they sabotaged this deal, one of the earlier guess was talking about well we can get more

sanctions. we will not get any sanctions because the other countries will not go with it. host: ok, we are all out of time on capitol hill right now. before the senate finance committee testimony to be had about protecting taxpayers from schemes and scams during the 2015 tax filing season. that is the topic. we will bring you live coverage on c-span. >> welcome.

the committee meets to talk about growing criminal activity that is threatening taxpayers across the country. these criminal acts are prevented by themes hiding behind telephone lines and computers, preying on august taxpayers -- on august taxpayers and robbing them of tens of billions of dollars a year. we are here to hear about federal and state officials on the fight to catch these crooks and protect taxpayers. first, i would you talk about one case in particular. in one very large number, by the way. this is a hearing that is long overdue as far as i am concerned. we will get into it. i have to apologize that a senator is not. , but he is coming. -- not here yet, but he is coming.

on this committee, we often talk in terms of hundreds of millions, billions, or even trillions of dollars. some joke about a number being referred to as budget dust, even if that number has nine or 10 zeros behind it. let me tell you about a number that is stunning, $15,800. that $15,800 saves hard work, sacrifice, and honest living. that is saved for the down payment of a new house for a growing family. that is $15,800 in savings that has been wiped away by criminals who use fear, confusion, and intimidation as their weapons. this is a story of a family from taylorsville, utah. i would like to play and use clip of a utah affiliate who tells their story. >> these crooks have gotten a

lot more sophisticated and a lot more aggressive. this family learned that the hard way, one week ago. brenda and melissa dagen are excited for christmas but only have a few christmas presents under the tree. melissa got a phone call saying she owed taxes from 2009 and was about to be arrested. melissa: i was like, what can i do to fix this? i can't be arrested. i have no one to watch my kids and they would not let me get off the phone. anchor: another scammer was calling her phone with the bogus caller id -- 911. melissa was convinced they were on the way and withdrew $15,800 which he used to pay prepaid cards and gave the code numbers to the thieves. that money was gone before she realized she had been victimized. melissa: i have not been able to stop crying. i cannot eat. i am sick to my stomach.

embarrassed, just lost that all of this money we were trying to save for a down payment on a home -- because we need a bigger home to take care of three kids -- and my heart has been totally ripped open because of this. anchor: the story is too familiar to lieutenant doyle of the unified police department which is investigating dozens of these cases. lieutenant coil -- lieutenant: they are demanding people pay and get prepaid debit cards, and they are telling them they have outstanding warrants for the arrest. anchor: for the record, neither the irs or police collect payments over the phone. melissa wishes she had known that one week ago and has a message for the people who did this and alyssa: i forgive you but it is sick and wrong and i do not have they can live with themselves. i do not know how they can make phone calls and her people. not any time of the year, but

especially during christmas. anchor: melissa's cousin has started a go find me page where they can recoup some of those losses. total strangers are giving whatever they can to melissa and brendan's funded to help the family recover. we have put a link to melissa and brendan's go find me page on our website good fforutah.com. >> that is one family out of millions of that have been targeted and thousands victimized. this is one scam. make no mistake, taxpayers across the country are facing identity that in record numbers. once again, we have to stop this. taxpayers must be more aware of the risks and better protected from attack. these criminals must be found and brought to justice. we looked over to the testimony of eyewitnesses on today's panel. we will be hearing more about how to accomplish these goals.

let me turn the time over to senator wyden. senator wyden: thank you, chairman. i appreciate the chance to talk and work on these issues in a bipartisan way. since the days irs opened their doors, scam artists have been hatching up slick new ways of stealing taxpayer dollars from the treasury. what is it you is that the ripoff artists are now stealing americans identities and personally threatening them on an industrial scale while directly robbing them of their hard earned money. the fraudsters constantly dreaming up new tactics, and then they milk them for all they are worth the four they start getting caught. then it is lather, rinse, ansd reapeat. onto the next scam and always

one step ahead of the law. today, the committee will examine several of the fraudsters latest strategies that are plaguing taxpayers. the one that is hitting oregonians hardest is the fake phone call demanding money or personal information on behalf of the irs. in fact, these calls were the number one consumer complaint registered with the oregon department of justice just last year. not everybody knows that the irs simply does not cold call individuals making demands or threats. it is pretty clear from my vantage point, there is a lot more work to be done to defeat this scourge. given the sophistication of this criminal act to be -- activity and the fact that a lot of it comes from overseas, this sure looks to me like an emerging type of organized crime.

so the real question is what is it going to take to root it out and get the bad actors on the sidelines? what is the role for more prosecutions, stronger deterrence, more cops on the beat? and what is the best way of getting the word out so taxpayers are not tricked into surrendering their life savings to some intimidating voice on the other hand of the phone line? even if our people managed to avoid the phone calls, you can bet that the critics find other ways to profit. tax preparation software has become the scammers new -- scammer's new fast lane. the chance to acquire data from the black market or hack into commercial databases, and then they filed false returns electronically. the victim's -- the victims the

night found out -- may not found -- find out until too late. there have been reports of this in 2015. we will hear some software vendors are not doing enough to prevent fraud. in my view, part of the challenge is getting the state' s internet tax services and irs on the same wavelength. they have to work together to make sure the criminals cannot just in a nimble fashion slide from one jurisdiction to the next, as they rip more unsuspecting americans. so taxpayers may choose to avoid the software, but not even a paid tax preparer is guaranteed to be safe. in fact, many of them do not meet any standards for competence. there are far too many of these con artists out there who are willing and able to pray on the people who come through their doors. some of the most offensive cases, they secretly falsify their victims returns to boost the refunds and then they pocket

the difference. once the tax season ends, the crooks disappear from storefronts they occupy, and there is no trace on where they have gone. a few states like mine have rules in place to help shield taxpayers from this kind of the above. most states do not. senator cardin and i have introduced a taxpayer protection and prepare proficiency act at the beginning of this congress to give all americans the security they deserve. our colleague, senator nelson is also a leader on this issue of keeping taxpayers save from identity that and fraud. all of us wish, as i indicated to chairman hatch, to work on this in a bipartisan way. the bottom line there is no end to the ingenuity of the con artist, so my hope is that we will get some fresh ideas for catching up to this wave of fraud and stopping. obviously, it cannot come soon

enough. we have a distinguished panel here today, especially pleased that the director of consumer outreach and education and -- in the oregon attorneys general offices here. thank you to all eyewitnesses. we look for to working with you on a bipartisan way. chairman: our first witness is attorney general caroline cirillo of the tax division of the u.s. department of justice. she was appointed attorney general of planning and policy of the tax division in january of this year. prior to that, she was chair of the tax and litigation group in baltimore. we welcome you to the committee on the forward to hearing your testimony. cirillo: thank you. members of the committee, thank you for the opportunity to appear but are you to discuss

the department of justice effort to combat identity that and tax refund fraud. the department greatly appreciate the commitment that the committee has brought to this very important issue. combating the theft of personal information to file fraudulent tax we come -- we claim -- refund claims is a problem across the country. your efforts to bring attention to this growing crime will help educate taxpayers about the importance of detecting and reporting identity theft and fraud. today's hearing also sends a strong message that the government is determined to identify and prosecute individuals behind these schemes and in doing so, will bring all the resources to bear. the department tax division, which i have the privilege of meeting as acting assistant attorney general, has one purpose. to enforce the nation's tax laws fully, fairly, and consistently through civil litigation and criminal prosecutions.

our close working relationships with iris criminal investigation tigda the fbi, the u.s. personal service, and other federal state and local law enforcement continue to attend the government possibility to respond quickly, efficiently and forcefully for changing patterns of criminal conduct. stolen identity, is an example of this type of challenge. i n surf crimes, they filed a false refund claim and have the refunds of electronically deposited to a bank card -- bank account or mailed to an address where the wrongdoer can access a check. serve crimes involve multiple vendors -- sirf crimes involve multiple vendors who have large

flames of information. sirf crimes hit vulnerable members of our society. these include, and are not limited to, the elderly, the hospitalized students and members of our military deployed overseas. while the irs will make good on any refund due to the taxpayer, there are inevitable burdens and delays of the matter is addressed. the victims often experience a profound sense of violation. moreover, we are all victimized by loss of the worst treasury. -- in the u.s. treasury. to this end, the tax division expedites the review procedures in sirf cases. the authority to initiate tax related jury investigation and to charge those involved in

complete without prior authorization. the collaborative efforts of the tax division and the law enforcement partners have strengthened the response to the crime. through december 31, 2014, they prosecuted over 40,000 individuals" are imposing substantial sentences. to further leverage from its investigation, in february, the assistant attorney general created sirf advisory board. the board works to develop and implement a national strategy to ensure consistent and infected nationwide and prosecution of sirf crimes. for example, they conduct sessions for fraud analyst, they provide training and resources to prosecutors across the country. it works of u.s. attorney offices to develop local task forces.

these initiatives enable prosecutors and law enforcement agencies to work together to identify schemes and to pursue the most culpable offenders. while providing the irs with real-time information that can be used to improve its filters and stopped the issuance of fraudulent refunds. the prosecution of sirf crimes is a national priority, and together with our law enforcement partners, we will continue to look for the most effective ways to punish the offender's and bring this conduct to an end. thank you again for this opportunity to provide the department's perspective on this issue. i look forward to at -- to answering any questions. chairman: thank you so much. our next witness is timothy, the deputy inspector general at the treasury. timothy camas has concerned -- has served at the inspection service for over 23 years.

he has a long career of having successfully investigated cases of domestic terrorism, bribery and fraud. we certainly welcome you and we look forward to taking your testimony at this time. camas: thank you for the opportunity to testify on the topic of the tax schemes and scams during the 2015 filing season. by raising public awareness about criminals efforts to swindle honest americans out of their money, we may provide the next person from becoming a victim, which is a very good thing. each year, the irs compiles what it sees as the dirty dozen tax scams on its website. many of these schemes take during the filing season as people repair returns or utilize the service of paid preparers. my statement today briefly outlines the top schemes and scams currently affecting taxpayers as they have proven to be surprisingly effective ways to steal money, in many cases

before the victim realize they have been scammed. the first scams, the phone impersonation scam which latter -- which landed on the top of the dirty dozen list. it is the largest and most recent impersonation scam we are aware of. it has claimed thousands of victims. here's how it works. the intended victim receives an unsolicited -- an unintended phone call from a person claimed to be an irs agent. the caller uses a fake name and tells the victim a meetup -- number -- i made up badge number. the callers may note the last four digits of the victim' social security number. sthey say that if they fail to pay ultimately, they could lose their drivers license, or be arrested. i received one of these calls at my home on a saturday. tgigda has received many reports

of these calls averaging between 9000 and 10,000 calls coming to my agency. as of march 9, two thousand 15 over 3000 individuals have been victimized by this by paying a total of $15.5 million for an average of $5,000 for the. the highest reported lost by one individual was a staggering $500,000. in one particularly exciting story, a member of this committee forwarded a letter to us from a constituent whose close relatives suffered a tragic death after receiving harassing phone calls from this. we are reaching out to the media, irs, national trade commission, and providing testimony to this committee it helps to eliminate this type of abuse and to prevent vulnerable individuals from becoming victimized.

they use the story the victim has won the lottery. this is a continuation of an old scam and starts with an e-mail or telephone call out of the blue, declaring that the victim has want a lottery. in order to declare the winnings, they must first pay the tax to the irs. the lottery scam often, but not always originates from outside of the united states. in the end, the victims pay the money, but they never received any lottery winnings. just as serious as these scams, the risk of taxpayer refund identity theft. the irs has made improvements in identification of identity theft returns before fraudulent tax refunds are released. they can -- continued attention is needed to effectively combat this crime. for example, the irs still does not have timely access to third-party income and withholding information. most of the third-party information is not received by

the irs until well after the taxpayers begin filing returns. the deadline for most information returns with irs is march 31. yet, taxpayers begin filing returns, this year, on january 20. this gap in time to prevent the irs from conducting validity checks. legislation would be needed to accelerate the filing of the information returns. the irs has taken steps to effectively prevent the filing of identity theft tax returns by locking the tax accounts of deceased individuals to prevent others from filing returns using the departed's name social security number. for processing your in 2014, the irs rejected over 338,008 file returns and stopped paper returns through the use of these locks. just 11 days after the filing season began, the irs reported

that it had prevented the issuance of more than $2 million in fraudulent refund -- refunds as a result of filters. other schemes, such as prisoner fraud, this could be as tax preparers, and phishing scams, are discussed in depth in my written testimony. much work is being done on multiple fronts to address real activities. we hope this work will reduce or eliminate their impact on taxpayers. chairman hatch, ranking member whited, thank you for the opportunity to share my views. i look forward to questions. chairman: thank you so much. i will turn briefly to introduce our next one. >> thank you very much. thank you to the leadership of mike pence and our department of revenue. they developed a plan that stopped $88 million in attempted

identity theft in the last filing season. this involves 78,000 fraudulent returns in 12% of all the refund of dollars that were requested. the cost to that, as mr. aly will explain, he cost the state $8 million. the return of the investment was $88 million. compared with some of the things we do around here, which is usually the opposite, spend 88 and get a, we spent 88 and got eight back. we are currently bringing the needed changes to our state. the commissioner brings a wealth of private commissioner experience and has worked for decades in the banking industry. he is a cpa, he has started businesses, so he understands firsthand how important customer service is for the department of

revenue. chairman i thank you for inviting him to testify and look forward to his testimony. chairman: thank you for inviting me to discuss this important topic with you today. on behalf of governor pence and the citizens of indiana, it is our honor to be here and share our story. i would like to share the points with you today. first, the nature of the problem and overall breadth. this does indiana has taken recommendations to fully and effectively address this epidemic problem. tax refund fraud is one of the most lucrative platforms for criminals to monetize the volume of stolen identity information. the advent of electronic filing and processing, that has only enhance the ability for us to file large volumes of fraudulent returns at nominal cost. as senator indicated in 2014 12% of the total refund dollars

that were requested from indiana were thought to be fraudulent. fortunately, we were able to stop them. it represented 78,000 fraudulent returns that we stopped that contained manufactured or stolen ids. again, we saved the state $88 million in the process. it is still early in the 2015 filing season. we are already seeing a dramatic increase in the use of valid ids, which have been stolen. with the increase of the reporting successful hacks across the united states of u.s. companies, we believe the availability of valid stolen ids has never been greater. the fraudsters have clearly popped -- upped their game and we must do the same. in 2012, we realized we were suffering of stencil losses from refund fraud. accordingly, we worked with governor pence and his team to effectively identify a program that we could begin building. we knew that we needed to take

significant, systemic modifications and we needed to do it before the next filing season. our staff reach out to below states through the federation of tax administrators and also our partners at the irs, to see if there were some ideas we could borrow and implement rapidly. the response was very supportive and we noted partial solutions and fragmented efforts across the group. with strong support from governor pence, we initiated a program to screen all returns for suspicious identities. this program used lexis-nexis, a third-party, to screen returns and no identity theft information such as name address, social security information, and other identifiers,. we would tell the ones that proved to be suspicious and sent a confirmation letter to have them confirm identities. again, this had a dramatic impact in our ability to recognize fraudulent identities and stop those refunds. the identity confirmation quiz is only part of a larger process. it became very clear in the

beginning that the department would need to make some systemic changes by making significant investment in both staff technology, and further, we needed to change our approach to how we deal with fraud. for the 15 -- for the 2015 filing season, we have implemented new pre-filter platforms that include decision-makers that will allow us to better identify those valid ids. we have also defined great expectations from our certified software vendors as to the information they will provide to us in the level -- and the level of fraud they send our way. we are still battling this problem, but a few key lessons have been learned. first, it must be a strategic priority. identity theft and refund fraud is here to stay away to address it. it requires leadership staff technology and third-party resources. second, collaboration. no one has all the answers and we cannot solve this problem by ourselves. sharing data, best practices, experiences, among all the revenue agencies across the

states as well as the federal and software vendors, is going to be important. having access and ability to communicate on a timely basis is critical. we have got to develop targeted solutions. we will can -- fraudsters will continue to change approaches and we have got to stay ahead. finally, note that prepaid debit cards is an issue that needs to be addressed. it is a preferred tool of fraudsters and receiving refunds. we found that over 50% of those returns with prepaid of the cards are fraudulent. in terms of some recommendations on things we can do, we consider that the solution really encompasses of related -- three legged stool. each has unique data perspectives, and capabilities of the system requires in order to make better decisions. the irs is sturdily in a great position to help us manage highly sophisticated fraud. state's must work together.

finally, software vendors also have the information and can be helpful in providing and sharing their intelligence. in conclusion, i just want to summarize that the problem is here to stay and we got to address it the iris and state reducing barriers to share anonymous aggregate information is critical. third, we have to make investments. we made an investment that yielded a 10 times return. i am confident that providing continuing investment is the only way to get out ahead of this and beaded. on behalf of the citizens of indiana, thank you for allowing us to share our story. thank you for allowing us to be here. >> thank you, we appreciate you making an effort to be here. our next witness is john valentine with the united states tax commission.

he was a member of the state senate for he served with distinction until 1988 until his commission as the tax commission chair in 2014. before that hughes and the utah house of representatives and was an attorney in private practice. chairman valentine, we are grateful you have taken time out of your schedule to be with us today. and for joining the hearing this morning. >> thank you chairman hatch. and member wyden, thank you very much. i'm here to discuss ways to reduce the tax frauds that we are seeing develop. there are issues you need to consider. first, strength and information sharing between the irs and states. second, stricter regulation of the financial prepaid debit cards. three, regulate the practice of

applying refunds to payment of fees for filing services. a practice in the industry called refund transfers. four, a third-party funding services tightening front insecurity using multifactor authentication and other measures to secure data from unauthorized disclosure and identity theft. fire to the commencement of the 2015 filing season, utah installed a state of the art software system to identify fraudulent returns. on january 20, tax commission had open funding of tax returns and employment system. as we process returns, the system started sending out error notices saying these were fraudulent. we followed up with verification letters of the suspicious returns to the taxpayers. within 10 days of opening the filing season we received calls

from taxpayers saying we have not filed returns yet. we initially thought these were isolated incidences, but it was clear they were not. we found several factors that were common in all of the calls. one, the returns had direct deposit information from previous years think accounts to a debit card. the returns contained routing numbers that were different from the federal and state returns. most of the returns appear to have the exact 2013 return data populated in the 2014 return. the next issue that was common with the address on the returns that was the same as the address on the 2013, even when there were errors in the address.

finally, since most were made through one vendor, it appears something in their process was compromised. after communicating with that vendor and notifying other states we talked with the internal revenue service saying we think there may be a compromise of the modernized electronic finance system. the accounts in question that we identified were sent to the service center. 31 returns in the first week were confirmed suspicious. we asked in a phone conversation to confirm on their side, we are waiting to hear from them. any have asked what actions were undertaken when we discovered the attack. we hurried. we stopped refunds until we could get our arms around it. during the first week we found 5 fraud schemes. four we had seen before. the institutions and preparers. one was new. someone had actual tax returns.

not identity thefts, but tax returns from prior years. as we continue to prevent the outflow of fraudulent refunds we had difficulty determining the nature of the financial institution and account information. specifically, we found there was no uniformity and numbering to determine traditional debit cards from additional bank accounts. we could not tell whether we were refunding to a prepaid debit card or funding to a legitimate bank account. there is an easy fix. it is to require the financial industries to have identifier numbers in the routing number or account number identifying this as a prepaid debit card. we do that with checking and savings accounts already, not with prepaid debit cards. in the investigation we found a practice perpetrating fraud without anything at risk to the

refund transfer. the fraudster deducts the third-party funds from the refund. the third party gets paid, the fraudster gets the cash, the state is out the money. third-party finance services lack front end security measures. quality firewalls need to be installed by third-party vendors. both for the irs and state tax commissions. thank you chairman and ranking member wyden. >> finally, i welcome ellen clem. she serves as a director of consumer education and outreach at the attorney general's office working to protect oregon residents from financial scams including the scams and schemes we are working on today. we welcome you here and look

forward to taking your testimony. >> thank you senator hatch and ranking member wyden. every day i are stories from oregon residents about a wide variety of prods and scams. these stories have focused exclusively on the irs in posture scam. that is because as senator wyden mentioned, in 2014 this scam topped oregon's list of consumer complaints. last year we received more than 1300 twice the number as the next highest category. what is worse, the victims reported losses more than $75,000. we know from testimony presented today, that is the tip of the iceberg. that is why i hear today, to tell you the story of two victims, and to talk about what the oregon attorney general is doing to prevent this from happening to others.

the first story is of a woman i will refer to as to high-end. in august she lost $15,000 to an irs imposter scam. this is the largest individual loss reported to the oregon department of justice in 24 teen. like many victims she had a message on her answering machine from a man claiming to be from the irs directing her to call him back at a 202 area code. the person who answered let her an affidavit for her arrest, threatened her with a $25,000 fan\\ -- fine and 18 months in prison and told her she would be arrested later that day. diane was terrified. the scammer said he could settle the matter for $15,000 on

prepaid money cards. diane made the only choice she thought she had. she confide with the request and was out $15,000. individuals like diane, who send money to the scammers, i'm not the only victims. in september of 2014 marissa phillips contacted me. her employee, lender, was victim to an imposter scam. after sending a small amount of money, linda realized she had been had and did not pick up the phone. when it was clear they would not get a hold of linda, they called marissa's small business that provides an hair home services for seniors -- that provides in-home care services for seniors and those with disabilities. they called at a rate of 100 phone calls per minute for 20

minutes. the calls prevented her from providing help to those who needed it. the seniors their families, hospitals, and staff. marissa was forced to change her phone number and all of the marketing materials. thankfully, not everyone in oregon who receives a phone call from an irs imposter becomes a victim. i would like to think that is because we are working hard to educate oregon residents. the oregon attorney general has several educational tools aimed at scam prevention, because she and i know that well-informed oregon residents are more likely to recognize broad and less likely to become victims if they are educated. we know the scams can be hard to track and prosecute. the oregon attorney general has invested in strong partnerships with federal state, government

entities, community organizations, advocacy groups and members of the media. through these partnerships we share complaints, coordinate investigations, and disseminate investigation to the public. our partners give us a stronger voice to share information and keep oregon residents like diane, linda and marissa safe. thank you chairman half and senator wyden for the opportunity to share the stories. >> we want to thank you and the witnesses. i think a lot of people will be surprised at how this is. let me turn to you commissioner valentine. i want to thank you for coming back here to testify in the midst of filing season. i applaud the innovative approaches you are taking, you and other state commissioners like you and commissioner ally are taking. in your testimony you said you

would like to strengthen information sharing between the irs and the states. i would appreciate it if you could elaborate to explain what information would be useful, and what information you could provide the irs that would be of use to them. if you have suggestions about how the finance committee could facilitate that, i would also like to have your information on the. >> as a background, we have a great working relationship with the irs, especially the ones we deal with. we share information. the trouble is it is not being shared in real time. the information is very delayed. sometimes, we are not doing given information we could use to look at the returns as they

are coming. one thing that the finance committee may consider is the idea of moving up the filing deadline for the w-2s for employers. as senator wyden indicated we have a problem. as w-2s go out to the individuals on the 31st, we have a cap. -- a gap. employers do not have to have them out until march 31. there is pressure under the federal government to make the refunds. yet, we cannot give them the refunds without knowing for certain that the right person is getting the refund. that gap is a big problem. that would help a lot. another is for the senate and house to encourage the irs to have a more formalized sharing of information. i gave you the information of the 31 returns six weeks ago.

this should have a quick response. we have identified them as fraudulent confirmed that they had not been filed by the taxpayers, yet we do not hear back in real time. those are things that could really help. >> thank you very much. let me ask you this. i want to thank you and the inspector general for all of your efforts to catch the criminals and to educate the public about these scams. in my opening statement i showed a video about the family. -- a family. the same criminals are targeting other americans. is your office doing everything in their power to track them down and stop them? can i have that commitment? >> you more than have that commitment. those who work at the tax administration are working day

and night, and partnering with other law enforcement agencies as well. it hurts us when these victims are victimized as described. we instruct our agents when you hear from a victim who has lost money, we spend time with them and hear their story, and attempt to get as much information as possible. we have an aggressive ongoing information -- ongoing investigation at this time. i hope we can describe the success of that investigation in the near future. >> the scam that worries me is the stolen identity refund fraud . it was calculated the irs paid $5.8 billion in fraudulent refunds to identify the use in 2013. -- two identified the use -- two identified theives in 2013.

to get money that has been given to a criminal is no easy task. you have suggestions on how the irs can detect this type of fraud earlier and a stop fraudulent payments from going out the door? >> as was noted by the opening statements of the witnesses and committee members, one of the challenges is the criminals are watching the internal revenue service. they know one point $3 trillion go through the irs one $.7 billion in refunds. as they irs continues to advance filters in response to the approaches, the criminals change because it is such a lucrative environment. our audit staff is looking at the filters and recommending additional and approved filters. we have seen improvement in some but it continues to be a major challenge to keep up with a criminal enterprise. >> this has been a suburb panel.

thank you for the wonderful work you are doing in our state particularly for older people. i am really glad you're out there on that beat. very important. let me ask you about the question of the foreign government. it looks as though, and you mentioned in your testimony, and it is clear that the phone's dams are originating overseas. it looks to me like this is essentially an emerging form of organized crime. you are conducting an investigation, and i realize there are things you cannot say but let's talk about the things we should look at from a policy standpoint. the question of whether we should initiate efforts in terms of work with foreign governments. and what they can do to assist

us. the second, what is the rule for local law enforcement? you can go after the money runners who collect the payments, in other words the ripoff artists overseas, they need money runners to collect payments. when start with those and other opportunities. i know we have strike forces for medicaid. tell us about, and nothing will compromise your investigation, but tell us about what we can -- what we can look at those give you more tools to fight the ripoff artists that have done so much damage from overseas. >> thank you for the opportunity. the challenge is getting our hands on these people. the relationship with various foreign governments can create

issues. the problem that we are seeing is that because there has been money paid, we are seeing spinoffs of this crime. although we are focused and think we know where it originated to start, we are seeing indications that other criminals have ripped off the original idea, and are launching these types of attacks. it continues to be a challenge, but i think we are onto something. it would be something we could use help on down the road, in terms of getting our hands on a foreign national and bringing them to justice in the united states for a white-collar crime. senator wyden: can you give us an example of those problems? camus: the integrity of the

financial system is suffering his types of scams. that is why my agency takes these so seriously. there are those out there that do not feel bad for the united states and are not interested in helping us bring these types of criminals to justice. wyden: let's move onto the anthem case. this shows the industrial scale on these ripoffs. 80 million people. a cyber identity theft. they are one of the biggest health insurers in the company -- in the country and have indicated 80 million americans may have been hacked. opening the door for fraudulent health claims and criminal enterprises that we are talking about today with identity theft including tax fraud.

a question i raised with the inspector general in the past. it appears to me that blocking this type of tax fraud, is increasingly falling on the shoulders of tax collectors, both in the irs and the state. i am interested in the panel's recommendations on what else we need to do to give you the tools to fight identity theft from cyber attacks. any of you that would like to get into it. i saw the state officials nodding their heads. it's here from indiana to keep things in the center. i like to get to the center before the far right and far left. alley: thank you, senator wyden. we are seeing the impact of that. many of the steps they are taking, corporations across the country are taking, are doing

more multifaceted authentication. i think many companies have not invested adequately to prepare for that and allow themselves to be vulnerable. that is one thing that corporate america, and all of us in the government level need to focus on. in terms of what we can do as a group, it goes back to the three like its zoo. -- three like it's too. -- three legged zoo. we get a lot of information that we share with each other, but it is not on a timely basis. i would like the irs to take a greater role in driving the standards and expectations. we have 50 states. many have taxing mechanisms. they're all doing disparate things. if we could have the irs help to

bring everyone together to establish a coordinated collaborative set of standards and expectations from software vendors, financial institutions, i think that could be a great deal in bringing everyone together on the same platform. senator wyden: that sounds too logical. we will have to pursue it. >> thank you for holding this hearing, and thank you for the panelists for being here and testifying. i think every taxpayer should feel confident knowing their information is secure when they file with the irs, and there will not be a false return fraudulently filed in their name. i think we have seen the impact that identity theft could have on a family's well-being. and hopefully we are able to move legislation forward in

congress. one measure for preventing identity theft has been recommended by number of commentators. that the irs identify information from a third party like the social security administration. i'm wondering, what are your thoughts on how much fraud that would prevent, and are there for 10 -- are there potential downsides? mr. camu? camus: generally speaking, as mr. valentine pointed out, the fact the irs does not have a w-2 and its automated system to match at the same time the tax fight -- the taxpayer files their return that inhibits their ability to do a simple solidity check before issuing a refund. there's a great expectation to

get the refunds as soon as possible. anything we can do to increase the timeliness, or two get the time the taxpayer can file the return, this year it was january 20, to jive with the time the administration has the information that is not due until march 31, that will help. senator thune: any downsides? camus: there are three points that can affect the fraud issues. one on the front end. the authentication issues. the next on the discovery phase. the transfer of information back and forth between the different tax agencies. the third is the method that you pay. that is why my comments try to affect all three. any of those are helpful.

in all three areas, you have a better chance of cutting down on fraud. >> it has been a number of years since congress enacted a taxpayer's bill of rights. on a taxpayer has a fraudulent return filed in his name, is the recourse with the irs sufficient? camus: our audit staff looks at that. what they can do to help the victim. we continue to look at that and recommend changes or improvements in the program. senator hatch: thune: are there additional measures to get them the assistance they need? camus: it is traumatic for the victim. any time identity is compromised

they are very upset. i'm not going to comment on where we are at, but from our auditors i understand there has been an improvement, and they work to make that experience better for the victim. >> we have a focus on that issue. a way to process quickly without having to go through the bureaucracy. we have done that with our services division in a letter that we sent out to authenticate that the person who's calling is the right person. that type of thing may be something service could consider, as well, as a way to expedite a particular complaint of identity theft. the recent -- senator thune: the recent hack on turbotax has made

headlines. how preventable is this? >> i'm not sure others have not been impact it. we identify the breaches that have occurred with one vendor. that they have taken additional steps to try to mitigate, that i think we are finding, in indiana, it is not just them that has been impacted. the fraudsters are moving with great agility. as they impact one with success and those doors close, they moved to another open door. i think it is a systemic issue and is very broad across the industry, not limited to any particular vendor or party. senator thune: thank you very much. chairman hatch: senator warner. senator warner: we have the same

stories in virginia. one of the things that has come to my attention, and we might have some legislation, the irs currently interprets the law saying that they do not believe that if they find out if you have been the victim of identity fraud, they do not tell you as a citizen that you are the victim. they do not know -- they do not notify law enforcement. the notion that i believe they could do it administratively, we have written them, perhaps you the ranking member, could shake them up more but if we cannot get it administratively, one step we could take is making sure the irs is a partner in the effort and identification when it comes to their attention that someone has been the victim of identity theft. to notify the victim and law

enforcement. i think we see some nods from the panel. again, the numbers are huge as you pointed out in your testimony. one billion 's second item that i think we are to consider, and this is something i have been working on the banking committee. but some level of mandatory data breach reporting. we now have -- it is a very gray and developing area. when, particularly on the retail side, they have a data breach. we have seen it. we have seen indications of data breach. but there is no obligation. there is no standard yet about when a company needs to report this information. and i think there needs to be such a standard. and one of the things we have heard from the banking committee side is that this is an area

where there is a lot of finger-pointing between the retail sector and the financial sector. and rather than crating another interchange battle, trying to have the -- the financial sector in the retail sector actually collaborate better -- again, i am going to get to question here -- you know, it would seem to me -- and one thing that i would like the panel's comments on is that, you know, is there not a way, either through the irs or in collaboration with the private providers -- the turbo taxes, i agree with the panel's comments that this is just not a turbotax problem, we need the private sector who's got a very vibrant sector -- why haven't we created a single, easy-to-use portal so that when mrs. smith

or the lady on utah, there is a single place we can at least check that whether this is a real claim or not? do all want to speak to that notion? and why we haven't had the irs more active and perhaps with collaboration with state tax department and others, a easy to find site and, frankly, what would be the responsibility of the private sector providers to collaborate with that one single port? mr. valentine: there are two issues you identify. we have identified when information -- we actually tell them.

we don't have the impediments the irs has on that regard. the second one is that we have an easy system now for taxpayers to check if a return has been filed or not. you go to our website, you fill out the authentication issues, what you have done that come you can determine whether your return has been filed. we have been doing public service announcement saying to please check. if it has not been filed, here is your number to call. senator: wouldn't it the potentially better to have some national education process here? since, again, that majority fraud is taken lace at the federal level? mr. valentine: i would agree. mr. camus: i would agree, as well. i think it represents an ideal scenario that we need -- that needs to play out.

we just have to get started and get the leadership. senator: i know my time is up, mr. chairman, but i would say that when we are looking at $5.8 billion and fraud, the "washington post" says we have seen a 37 fold increase and potentially fraudulent claims. the ability to have a little bit of resources to have that, site, number one. and two either by legislative change, wreckage of the irs actually informs people when they know they have been the victim of identity theft i think would be steps in the right direction. thank you. chairman hatch: thank you so much, senator. i might add that senator grassley is the chairman of the judicial committee. he asked that i would ask this question. on behalf of senator grassley as the treasury inspector general for tax administration, they have detailed how the irs is due more to reduce improper

payments for the marriage income tax credits, and the child tax credit. for 2013 about $14.5 billion in improper payments were made. and between $5.9 billion and $7.1 billion for the child tax credit. both of these credit pay cash benefits for exceeding any tax paid, making them a prime target for anyone looking to engage in tax scams or id fraud. at the same time, the rules governing how these credits -- the rules governing both these credits are complex, opening them to human error. so the question is this. in your opinion, what amount of improper payments would you attribute to fraud versus innocent taxpayer air? and you expect that at least the significant amount are a result of fraud? mr. camus: it is clear that the fraudsters look for any

opportunity to get that money. and they are ruthless in their attempts. the fact that they would use credits that are legally available to folks filing tax returns is not a foreign concept. i just have that information available, but out of the habit of meet with my audit staff and try to get a response to senator grassley. chairman hatch: if you would, i would like to have that response. mr. camus: yes, sir. senator: thank you, mr. chairman. last week, i returned home to atlanta from a week in washington. when i walked in the back door, my wife, whose name, by the way, is diane, she said i need to listen to the voice of it it was precisely the call you talked about where a woman with a very convincing voice informed that i would owed a substantial amount of money, and i was to call a tool to -- 202 number readily. the next morning, ironically, i was doing an event with the director of the rs and the

atlanta region and gave him the telephone number to follow up on. he told me, well, this can't be real because we do not make any solicitation i telephone. i thought to myself, i should know that. but the american public to know that. there seems like there ought to be more ombudsman ship on behalf of the irs, and maybe even the treasury, to let people know that there are no solicitations by phone. they are all done by mail because that is a real problem and it is a very convincing phone call. ms. klem: yes. thank you, senator. it is very common and it is very upsetting when that call comes in. that is precisely why the stamina so successful. we do have partnerships on the local level with our counterparts at ftc, the irs and others, and reduce your information like this graphic that is in front of me right now. happy to share it with the committee about the irs impostor

scams. it says warning signs, how will the irs first contact to? by phone? no. by e-mail? no. by mail? yes. we need to do a better job of getting that into the hands of the general public. senator: that is the point that wanted to make. if the chairman and listen for a second, i want to make a point. one of the problems is that we don't have a game plan to get there consumer information out there. we have a department that was committed by the department called the consumer protection bureau. it would seem like the secretary treasury would contact richard and this would be a perfect way to take them investigatory and solicitation and try to save and help you book who are victims of business fraud. i think that is something the treasury could do.

mr. camus: the majority of our focus has really been with the federal trade commission and the irs. i, myself, have been interviewed. i'll take any vision -- any television interview, not because i am a ham, but i believe in my heart that if we protect one taxpayer, that is a good day for us. and i am so happy about this hearing because i am hoping that this will also help get the word out that when you get those calls, please hang up the telephone. i really appreciate it. we are try to work with that bureau. senator: the director will be as aggressive as protecting people from tax fraud as he is other parts in the society. i represent georgia. i noticed in her testimony that a member of the medical team stole the information and identification of a number of soldiers at fort benning. did you coordinate with the department of defense ones that was determined?

that they need to watch out for those that would take advantage of their position with the government to steal the identity of the soldiers? mrs. ciraolo: ok. senator, thank you for the question. i joined the department two months ago, so i was not involved in those types of discussions. i can certainly report back on what efforts were made with the department of defense. we certainly take seriously any allegation and efforts by senators to -- and we are particularly focused on the vulnerable victims of our society, including our military members. senator: as chairman of the veterans committee, i'll take the initiative to do the same thing, too. my last point is this. each of the state directors made a comment about information sharing. if i'm not mistaken.

that would be a key to stopping this. one of the problems that exist is the senate and house has not -- have not done a cyber security bill. there are provisions for sharing and the antitrust laws that protect information so i can flow to the government to protect against tax fraud and that nature. i hope we will get the message that we are part. our cyber laws are way out of date with our cyber criminals. and the quicker we can congress act on that legislation, the more taxpayers will be safe on fraud. that is my only editorial comment. chairman hatch: thank you senator. senator casey, you are next. senator: mr. chairman, thank you very much. i want to thank the witnesses for your testimony, your presence, and your commitment to stopping this crime. i am struck by what i have seen in pennsylvania. i am sure this could be replicated in many states, but i'm just looking at a small sampling of headlines. this is from a television

station in very, we have in the northwest corner of our state. the title of the news article about which they are reporting is irs scam funds ramp-up and yuri -- in erie. irs fund scam breaching more in northeastern pennsylvania. a lot of what you have heard and a lot of what you have had direct experience with trying to stop. i guess i would start with the assistant attorney general. a particular question about your assessment of where we are in light of what i have seen. i was in berks county, which is in the eastern side of our states, a number of months ago with the district attorney. mr. adams kind of walked me

through the basic challenges from a prosecutorial standpoint. he emphasized, among other things, that the perpetrators were, first, highly organized. number two often reside in jurisdictions faraway from the victims. and also beyond the reach of local authorities. and even pointed to perpetrators resigning and ford -- residing in foreign countries. those are among the challenges that much of your testimonies pointed to. i don't want to be pessimistic because i do want to get to part of your testimony where you talk about what has been happening with the justice department and some of the success you have had, but there is a sense, i think, because of the scope the gravity of the problem that we are not winning. and i want to just, from a national perspective, ask you how you would assess the war or the battle?

mrs. ciraolo: thank you senator. we have a dual role. we prosecute offenders. and we are receiving substantial and increasing -- in addition, we share information we obtain from these cases in real-time with the irs. they are working very hard to improve its filters to identify fraudulent returns and prevent the issues of fraudulent refund. so, that is the tax division role. we will continue to devote our available resources in this area. senator: and i guess i would ask , starting with you and going down through your colleagues and others, and i know much of what you might say in a short answer has to be short because of the time, but is there -- but if you had to itemize one or two or

three actions that we could work on -- resources or other tools that you need to do your job and i'm sure others could play a role in this -- what do you hope we would do by way of authority or authorization or by way of appropriation? mrs. ciraolo: senator, i think that holding hearings like we are having today are critical to getting the word out to the american public. our -- all over the representatives taking the message back to their states and making sure the information is out there as often and as loud as possible. many of these scams can be stopped if the american public is educated. and having a centralized location for that information i think is a wonderful idea. i am very happy to see the representatives here on the panel from across the country. it gives me hope that we will see further information in the future. senator: thank you.

maybe i would ask each of the remaining witnesses to do a 15 second. what should congress do? mr. camus: i echo. this dam is so simple. the irs would never pick up the phone and demand my. when the money goes off the criminals will go away. by getting our hands on them bringing them to justice is one of the things we want to do because we want people to pay for this. but it is not a solution to the crime. it is people hanging up the telephone and not being victimized. mr. camus: the criminals are -- mr. alley: the criminals are going to continue to be -- we should ensure that that collaboration should take place. senator: thank you. mr. valentine: my comment is that you still have to cut off

the vector that is used to receive the money. i think the identification of it is something congress can require the financial industry to do to say, you know what, we just have to note that we will not refund it that way. we will refund via check at that point. senator: thank you. ms. klem: and senator, i would echo about raising the issue. i travel this date everyday and talk to adults about this front. there's just devastating to hear their stories. frequently they say, gosh, i wish i had talked to you last week. if we can get more awareness more education, more media spotlight, that would be great. senator: thank you very much. thank you, mr. chairman. chairman hatch: thank you. senator: thank you, mr. chairman. i would like to join my colleagues in bringing up these issues about identity and fraud but specifically to point out that the 111th congress increased the irs's

responsibility while decreasing the fight. so the irs is now responsible for implementing the compliance act. in addition to the additional legal required tax law, they will have -- the irs is being urged here, which we really want to do to combat identity threat reduce errors, and generally reduced tax fraud. so i think we need to take this into consideration as it relates to the budget this year and mixer that there resources are there. i'm concerned that taxpayers will, ultimately -- we need to get a handle on what has been happening with identity theft. it was found that 22% of the identity cases, the irs closed without taking the appropriate steps to fully resolve the victim's house accounts. the irs failing to update the victim's address, so during fy

2014, identity threats were close. at that reported rick, 20 2% of that group, about 60,000 taxpayers were burdened by having their cases closed in a premature fashion. what we need to do to fix that? mr. camus: that is a job that would fit in our audit staff portfolio. one of the things i always look at is the victim interface and how the irs is processing the victim's claims and correspondence. i know that the auditors are doing work in that area as we speak. senator: when we have this resolved for this tax season so we are not prematurely closing cases? mr. camus: unfortunately, it is always in hindsight. so the audit team looks at the

work that was done and the particular filing year because they need to wait until the cases are closed before they can look back and see how they were handled. so i will share the sentiment. senator: anybody else? it seems, i mean, why would -- we need to do something better than having these taxpayers affected this way. mr. alley: i agree. it creeps a tremendous amount of anxiety among the taxpayers. we also have taxpayer administration services to work with our taxpayers that have been compromised with their identities to each are they receive the comfort and knowledge that the return has been properly reflected in the account, properly accounted for. we need to do the same thing at all levels. senator: mr. chairman, i know that practically every committee has been asked to address ideas of seven security and before. i think our committee said -- should certainly look at this particular aspect to mixer are tax filers are also secure.

thank you. take you, mr. chairman. chairman hatch: thank you senator. senator wyden. ranking member wyden: thank you. i didn't want to wrap up without giving you a chance to talk about seniors because i think we know how outrageous it is that seniors get ripped off this way. i mean, we have millions of older people in this country who are walking and economic tightrope every single day. they balance their food bill against their fuel bill, their fuel bill against housing costs. they get ripped off this way. it is not some obstruction. they really suffer. as we wrap up, and i just want to finish with this, what else do you think this committee can do to help beef up the fight to protect seniors? ms. klem: senator wyden, that is a great crested -- question. it is true that this particular scam disproportionately affects a vulnerable adults, especially

older adults. their home during the day. they answer their phones. and that is because they grew up in a time where they were taught that it was rude not to answer the phone and listen to the caller on the other and -- end. so i think some of the suggestions we have heard today are wonderful, but i'm going to keep beating the drum of education and awareness. i think that is really key. i think if we can let people know that this is a notoriously awful scam, and that they should be alert to it. and it is not rude to hang up the phone in this particular case. i think that is a wonderful educational tool for people, especially older adults. it is very tough. i talk to them every day. and it is going to be a struggle, but i think the more information and awareness we can get out there, the better. i always tell people who come to my presentations or call me on the phone to share their stories with one or two other people because i think that personal

story, that personal touch from somebody who may be got that will call and almost fell victim or did fell victim lets others know it is important. ranking member wyden: thank you for the good work you are doing. chairman hatch: thank you senator. senator menendez? senator: thank you, mr. chairman. and thank you to our witnesses. they give for your testimony. as many have noted, identity theft and tax schemes i wanted the fastest growing crimes in the united dates. not only do the victims, who are desperate ocean at lilo income and volatile follow populations, lose millions of dollars to the schemes -- disproportionately low income and volatile populations, lose millions of dollars to the schemes -- one constituent of mine, who i shall refer to as sandra, experienced this nightmare firsthand. she contacted my office in march of 2013 to request help in order to restore her identity which

had been stolen in 2010. she did not receive her tax refund for 2010, 2011, 2012. she was getting nowhere with the irs. finally, after an additional two years, two years of working with her, the irs and the taxpayer advocates office were finally able to resolve the situation earlier this year. so, is the irs by the way, your name is one of my favorite ones -- is the irs doing enough to resolve cases of identity theft in a timely matter? is a four to five year waiting. acceptable? mr. camus: in my personal view no because i am a criminal investigator and i know how horrific that type of experience is for an individual. but i can tie you that the irs has made great strides trying to be better, faster, and more

responsive to the victims. one of the things that have put in place is in identity theft victim. -- theft victim pin. in the future years, the use that pin number, and that helps validate their identity. my observation, from reading the audit reports that the audit staff has done, is that they are making great strides. senator: what would you say is the status now obsolete who finds himself in a situation like senator? what would be the reasonable. of time? mr. camus: my understanding is that it would be much better than it was in 2010, 2011 and 2012. whether or not it is up to par -- senator: four to five years was her expense. what is the average? a year? mr. camus: yes sir. i wish i had that information available, but i do not. senator: ok.

well, i would love to get it from the irs at the end of the day. let me ask this. the commissioner testified before this committee in february about the issue of tax preparers. in responding to a question i raised, he said, and i quote the irs is vague concerned about unscrupulous taxpayers. ". and that there is a percentage of cooks, and there are ones who are major part of the problem of fraud across the board. i know the irs tried to regulate paid taxpayers a few years ago. they argued congress is not especially authorized. i personally find it exceedingly inappropriate that many states require barbers to have a license, but somewhat halle berry, get a tax returns do not need a license -- but someone filing tax returns do not need a license. would doing so removes -- reduce

the amount of identity theft? mr. camus: i think it is important that anybody who does an important job in such an important area that there is training available and they are held accountable. and there are standards that have to be met. i know we work closely with our partners in the irs criminal investigation and the department of justice tax division. when we come across an unscrupulous taxpayer to bring them to justice. i think it is actually important that those individuals who filed her, get it forms because they don't understand that they don't become victimized by the very people that they trust. senator: well, let me ask you this. can you or -- is that the correct pronunciation? mrs. ciraolo: yes, senator. thank you. senator: can you quantify for me in anyway how much is remitted -- related to us kabila's tax preparer -- to unscrupulous tax

preparers? mr. camus: senator, we believe the u.s. tax preparers should be able to trust that person to be competent and qualified to prepare the returns, and to prepare an honest and accurate return. in the last year alone, the tax division has attained injunctions against more than 40 tax preparers and promoters. and will continue to prosecute those individuals willfully assist in the process of filing those returns. senator: so, do you have any idea how many tax preparers there are? mrs. ciraolo: senator, i don't have that information in front of me today. senator: is that based on complaint? or is that based on the -- it sounds i got small number compared to the universe of preparers that i assume would be out there. is that based on complaints? or is that based on the services owns -- own investigations?

mr. camus: they work with the internal -- mrs. ciraolo: they work with the internal -- internal revenue service. based on the evidence we receive, we follow that evidence where it leads and pursue injunctions where appropriate. senator: do you have a number of complaints filed with the? mrs. ciraolo: i can tell you that since 2000, we have found over 500 injunctions against fraudulent preparers. senator: thank you, mr. chairman. chairman hatch: thank you senator. i want to thank all of our witnesses for per -- appearing here today. i think this has been a very good hearing. hopefully we can move on from here. any questions for the records should be submitted no later than thursday, march 19. so this hearing will be adjourned at this point. thanks so much. and thanks to all of you. we really appreciate it. i like to come down and say hello to all of you.

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[indistinct chatter] >> keep track of the republican led congress, and follow its new members through its first session. new congress, best access. on c-span, c-span2, c-span radio, and c-span.org. >> we will be light this afternoon with a pentagon briefing at 2:00 eastern here on c-span. arizona senator john mccain, who chairs the armed services committee, has tweeted out south come commander general kelly, sequestration is catastrophe and will essentially put me out of business. we could be talking to feed. we'll have that pentagon briefing live at 2:00 eastern here on c-span. and noting today in a tweet

here are all 400 pages of the fcc's net neutrality rules, which i finally public. by the way, we have posted a link to those rules on a website, c-span.org. a number of republican presidential hopefuls are visiting new hampshire this week. we are going to show you some of the public appearances. senator lindsey graham was in manchester for the politics and eggs breakfast. he talked about how he let diplomacy. senator graham: so i grew up in the back of a liquor store in one room with my parents. they went to work every day, whether they felt good or not because if you don't open up, you don't get paid. and it was a wonderful life. it was the neighborhood bar. people would come in as the ships -- shifts changed. i'll never forget that as long as i live. you get to know each other.

i had a lot of anson uncle's, they were called our customers. and you learn diplomacy. i can remember fred. it has since passed, but his wife called one night when i was about eight years old, and i and to the phone in the back were we lived. i ran up and said, fred, your wife wants to know if you are here. and he said, tell her i am not here. so i went back and i said, he wasn't here. [laughter] so i learned diplomacy at an early age. you don't have to repeat everything you are told. >> that was senator graham monday at the politics and eggs breakfast in manchester, new hampshire. he talked about foreign policy and u.s. economic issues. we will show that two tonight starting at 8:00 eastern here on c-span. following senator graham of the former texas governor, rick perry.

tomorrow evening, former florida governor jeb bush will be in dover, new hampshire. he will be speaking with republicans. we'll have that live at 7:45 eastern. and on saturday afternoon, wisconsin governor scott walker speaking at the new hampshire republican party grassroots activist workshop. we'll bring that to you live at 12:15 eastern. environmental officials from california, indiana, wyoming wisconsin, and new york testified on the hill yesterday of the challenges and successes with regards to the epa's greenhouse gases emissions rules. they convened a nearly two-hour hearing. >> before we get together, let me get a clarification from our armed services committee. we are going to be using it.

that is, when we had the gavel ever is here, we will go by the -- we will go by seniority. those who come in after the gavel, we will get to them after everyone is already taking care of. with that, i will make note of who is here. and we will bring this meeting to order. it is great to have the panel. i have had a chance to meet each one of you. i really do think that the most important thing when the get into these rules and regulations as the state perspective because they are the ones who have to carry these things out and pay for all this stuff. so we are here today with the state officials. on the co2 regulations existing , the clean power plan is unprecedented in scope complexity, and requirements. that is what you guys are going to have to carry out.

the proposal undermines the long-standing concept of cooperative federalism where the federal government is meant to work in partnership with the states to achieve the underlying goals. instead, the rules forces states to redesign the waste they generate, manage, and use electricity in a manner that satisfies president obama's extreme climate agenda. to date, we have 32 states who have opposed this rule. you have that chart? there is the chart. there are 32 states. 12 states, including my state of oklahoma, are suing the agency over a lack of authority to fully propagate the proposal. nine states have passed resolutions in their legislatures that express limits to the proposals. five states have passed laws that would limit the proposal. had the epa engaged in a meaningful dialogue with all of these dates, the agency will not be rushing ahead to impose such

an unfair and unworkable and likely illegal regulation. while the epa is busy selling this as a plan to save the world from global warming, we know that this will will have impacts on the environment. in fact, last week during the budget hearing, the imminent -- administrative mccarthy indicated that the administration has yet to do any modeling that would research the impact. there is a reason for that. the reason for that is that -- very highly respected group on economic modeling and analysis used epa's models and numbers and found that after spending $475 billion over a 15 year. period, we would see reduced reliability resulting in voltage collapse, and cast getting outages.

however, the clean power plant would reduce co2 concentrations by less than 0.5%. global average temperatures rise would be reduced by only 0.01% -- 0.01 degrees fahrenheit. and sea level rise would be reduced by 0.3 millimeters. which is the thickness of three sheets of paper. any perceived benefits will be rendered pointless by the continued emissions growth in india and in china. hold that up a little higher. that is a good chart there. these -- you can see the problems. this is the whole point that administrator jackson was talking about. what we do unilaterally here in the united states is not going to have much of an effect. these results, or lack thereof shows that this rule is not about protecting the environment or saving lives of the local

citizenry, this proposal is about expanding the government's control it to every aspect of american life. as m.i.t. scientist richard linson, one of the premier site is in the country, he said controlling carbon is a bureaucrats dream. if you control covered, you control life. epa's rushed timeline and impractical assumptions -- this will be damaging to state economies and local residents. their proposals are nothing more than a blatant and selfish power grab. we have been through these arguments multiple times before. most recently when the president failed to gather enough support. we were talking about that when nancy pelosi was the majority. they could link it a majority vote in order to support this. so, i appreciate very much all of the people coming so we can

hear the voices from the states. it is nice of you to take the time to be here. :senator: thank you so much. i'm really proud that she is here. she has worked on the environment for her whole adult life. she is now executive director of a resources board. she will describe the successes we are having. i'm also proud that my home state of california has been a leader in this field. here is the deal. we are prospering. we have to reduce co2 omission to address climate change. we cannot remain -- according to nasa, the 10 warmest years on record occurred since the year 2000. in 2014, the warmest year on record. people can put their head in the sand, but that is the fact. and fax are separate things.

according to a new peer-reviewed research, and i trust my colleagues respect the national academy sciences, california's record temperatures are driving the states's extreme droughts. scientists predict it will get worse over the coming decade. just two weeks ago, scientists at nasa and colombia and quit l found that if we fail to act aggressively to cut losing, we have an 80% chance of a mega-drought in the entire west. in the face of all this peer-reviewed science showing the impacts from uncontrolled pollution, states really should be working together to find solutions to prevent climate change. and let me say, we know the american people want action. this is not a gas. in a poll, 83% of americans, including six 21% of republicans say that if nothing is done to reduce emissions, global warming

will be a serious problem in the future. again, you can sit here and say it is not an issue, but the american people are in disagreement with that conclusion. ultimately, climate change deniers in the senate continue to attack the landmark clean air act. just last week, our majority leader senator mcconnell, told state governments to ignore the clean air act. imagine, ignore the law of the land. and one of the most popular legislative actions in our history. so, we know we can reduce carbon while growing the economy. and i want to talk about california and the regional gas house initiative where new york is prospering, as well. we'll hear some of that from our witnesses. california is on a path to cut its carbon pollution i 80% by 2050. as required under our greenhouse gas emissions law. the people who try to overturn that lost at the ballot.

during the first year and a half, the states's program california added 491,000 jobs. a growth of almost 3.3%, which outpaces the national growth rate of 2.5%. we are living proof that growing the economy in a safe environment go hand in hand. and we are very -- a very large date. this has benefited the middle class. the energy information administration found last month that california's average monthly electric bill averaged $90. compared to oklahoma's, which average $110. under california's climate program, many consumers are even receiving twice a year climate credit of $35. that further lowers their utility bill. so, california, new york, and other states should be proud of their leadership in putting forward real solutions to

climate change. and showing that meeting the goals of the clean power plan will benefit our states and our people. i look forward to hearing from today's witnesses. think you, mr. chairman. chairman inhofe: thank you senator boxer. we are going to have some introductions. by the request of some of the members. let's start with senator russell. senator: thank you very much mr. chairman. it brings me great pleasure to bring greetings from the committee to one of our -- those witnesses this morning, todd the director of the wyoming -- he has a long history of working in wyoming, and specifically working in this department. you will remember, mr. chairman, that our former director spoke here a number of years ago. todd has worked closely with him and has succeeded him. he is now our director.

it is interesting, mr. chairman, because today, as todd testifies, he will have worked with a democrat governor, at a republican governor, and wyoming. and has always put wyoming first. he has done what is best for our state and our environment. it is a privilege they for me to introduce one of those testifying. the director. chairman inhofe: thank you senator. we are going to go ahead and start with our testimony. we're like to ask you to do your best to the time required. we will start with you, mr. myers. and then we will work to the and. mr. meyers: thank you, chairman. ranking member and senators for inviting me to testify. i am a go myers from the new york attorney general's office.

my perspective is slightly different from those of other members of the panel. as an environmental lawyer, i have worked for the past 15 years at the attorney general office counseling and legal issues related to air pollution and climate change, and also litigating those issues in the courts. it is particularly appropriate the committee should seek to hear perspectives because under the provision of the clean-air act the epa is using for the clean power plant, section 111 d, states are in the drivers seat. but for us to succeed, each state has to be willing to take the wheel. from the perspective of state new york has artie taken action to cut greenhouse gas omissions i have good news for other states. you can significantly reduce these emissions from the power sector and do so in a way that helps grow your economy. new york and other states in the regional greenhouse gas

initiative have reduced greenhouse gases on the electricity sector in our region by 40% from 2005 levels. and reinvesting the proceeds from the auction of pollution allowances in renewable and energy efficient projects has kept down electricity costs in our region. epa's clean power plant would build on the work that other states have done in this area. the plan would cut greenhouse gases from power plants by about 730 million metric tons. the equivalent of half the homes in america. the shift to cleaner generation will also result in substantial health benefits, including 150,000 fewer asthma attacks by 2030. back to the point i started with. for this plan to work, states have to be willing to step up. some are discouraging states from doing so on the grounds that the clean power plan is

unlawful. my written testimony highlights why such arguments are meritless. first, under section 111 d to address greenhouse gases from fossil fuel power plants is required under the clean air act. the law requires epa to ensure that states achieve emission reductions from power plants necessary to protect human health and welfare from the harms of covered pollution -- carbon pollution. second, the hazardous air pollutants from existing power plants under one provision of the clean air act does not preclude the use of section 111 the to require those plans -- d to require those plans to cut their greenhouse gas emissions. the epa had a choice. it could ease her use the hazardous pollution program to cut power plant mercury or to combat climate change by using a

provision the supreme court said speaks directly to power plan carbon emissions. that only does this interpretation defined common sense, it is wrong. it is a matter of law. third, it is clear that epa has the authority to set substantive limits for states to meet. in the absence of such the benchmark, state plans could very widely in terms of their stringency and effectiveness. states have a lot of flexibility, however, on how to achieve the emission targets in a way that best suits their respective circumstances. fourth, it is also clear that epa has the authority to interpret the best system of emission reduction to reflect various ways in which states and utilities have reduced greenhouse gas omissions from the electricity sector. epa's building blocks approach appropriately recognizes successful strategies, such as

cap and invest programs, renewable portfolio standards, and energy efficiency, that states and utilities have already shown continued of italy reduce carbon emissions -- here is what i would consider state legislators to consider. we need to act now if we are to have a chance of avoiding catastrophic harms from climate change. our faith leaders are telling us we have a moral imperative to act. the law, the clean air act requires us to act. and epa's plan for cutting greenhouse gases from existing power plants is on sound legal ground. both the epa and if those dates are open to working with you on how best to cut omissions in your state. the time is now for state leadership, so take the wheel. thank you for the opportunity to testify. i look for to answering your questions. chairman inhofe: thank you. mary nichols is the chairman of

the california air resource board. you are recognize. ms. nichols: thank you chairman, ranking member members of the committee. i am mary nichols, and i am honored to be here to support epa's proposed clean power plan, which we believe will unlock state innovation across the country to protect our people and grow our economies. the framework proposed by epa is a workable, practical plan that will cut carbon solutions along with -- pollutions along with other forms of pollution, as long as increasing efficiency. it provides an opportunity for a better future. this is a future that we are already working to create in california. our success story has been one of bipartisanship. the 2006 california warming -- global warming solutions act was

signed by our republican former governor, shorts and dagger -- arnold schwarzenegger who appointed me to this position and by jerry brown, who has reappointed me and has placed climate change at the core of his agenda, championing our enormously successful carbon market wrapping up green energy programs, and working nationally and internationally to spread solutions that will protect our vulnerable citizens our extremely valuable agricultural industry, our coastline, and our forests against the already growing reality of climate change. californians overwhelmingly support our boards efforts to move california towards cleaner and more efficient sources of energy, and to address the grave threat that global warming poses to america and to the world. i am here today to share some of our successes with you, and to emphasize the epa is using its

clean air act authority in the way that it was meant to, to spread success across the country, and to encourage each state to develop its own plan to cut carbon pollution and to grow its economy. i am going to skip some of what is in the prepared testimony because i really want to focus on the fact that we believe that working together, not just as an environmental agency, but under the direction of our governor with the public utility and are energy commission, we can deliver not only a more resilient energy system, but we can also meet and even exceed the targets that -- the epa has set. we are on track for a third of our state's energy needs to be met by renewable energy by the

year 2020, and governor brown has established a goal of eating to 50% of our energy from renewable resources by 2030. our carbon wide carbon intensity has already fallen by nearly 5% since 2009, and it will keep falling. that is not only do two electrical -- only due to electrical power plants, it is also due to cleaner fuels and cleaner via calls. -- cleaner vehicles. the main thing i would to emphasize that this is happening at the same time that california is prospering, we are growing jobs, we are growing our economy faster than the rest of the country. we have grown our jobs since the covered market has gone into operation by 3.3%. personal income and wages are up. again, growing at rates well above the national average. our electric power grid delivers

power reliably, resiliently, and efficiently thanks to the continued stewardship of the transmission operators and as senator boxer indicated, power bills are actually down. californians pay the ninth lowest electricity bill in the country. states all across the country, and we do talk to many of our colleagues, i discovering that clean energy pays big dividends. for example, oklahoma is on track to exceed its 18% target for 2015 thanks to a very successful wind energy industry. a policy that has yielded billions of dollars in investment in that state, and helped to cut pollution. and of course, california and oklahoma are not alone. we know that texas, often billed as our arrival in many ways, leads the nation in wind energy. in many states are taking action to ensure their ratepayers and their citizens against risk that

comes from dirty and inefficient coal plants by replacing them with cleaner power and energy efficiency investments are being used, again, in states red and blue to cut power bills. we think that the clean power plan will encourage states to take broader advantage of strategies that they are already using, saving money, and invigorating economies across the country. and, of course, to the extent that they choose, to work together around their regional grids. they will do even better because we all know that a regional approach will be more cost effective for all. as a result, we believe the net benefits of this plan amount to something like $48 billion to $82 billion in 2030, representing lives saved and climate risks evaded. as well as greater productivity, lower costs, and a more

efficient and secure energy system. clean power plan bills on 40 years of clean air act success and federalism, as the chair indicated, no presents us with the opportunity to address one of the most severe challenges of our time in a way that can also great new jobs and increase our energy security. they give a much. chairman inhofe: thank you. thomas easterly's commissioner of the indiana department -- you are recognize. mr. easterly: thank you, mr. chairman. good morning. i am the commissioner of the indiana department of environmental management. i bring you greetings from governor pence of indiana, and i appreciate the opportunity to share with you indiana's current perspective on the proposed 111 d regulations. the proposed regulations will detrimentally impact indiana for

a number of significant reasons. we are the most manufacturing intensive state in the united states. more than 80% of indiana's electricity comes from coal. we have a 300 year supply of coal in our state, and 28,000 hoosiers are employed in the coal industry. we recognize that we need all forms of energy to power our economy, and the pence administration is developing an updated plan that will continue to foster greater use of renewables and other energy sources. we know that coal is a crucial hearing -- hoosier resource. our mission is to protect hoosiers and our environment. following the release of the proposed rule, my office repair -- carefully examines the proposed rule. we also talk to other state agencies in it an extensive -- in an insensitive review. our analysis can to only one conclusion.

this proposal will cause significant harm to hoosiers and most residents of the united states without providing any measurable offsets. for those reasons -- we found joint comment urging the epa to withdraw this proposal. the copy of the joint comment and a letter from governor pence has been shared with the committee. the most ironic impact that the proposed regulations is that they are likely to increase worldwide renounce gas emissions by decreasing the international competitiveness of u.s. businesses to increased energy costs. competitive businesses have been investing in energy efficient technology for decades. the total cost of the products produced in the united states we need to increase, a road in our international competitiveness and resulting in the loss of manufacturing jobs in indiana and across the nation.

when these businesses close, u.s. emissions will decrease. indiana once held a competitive advantage due to a low cost of electricity, but not anymore. indiana's low cost of electricity advantage has slipped, and epa regulations have significantly contributed to that change. the state utility forecasting group in indiana has forecasted a 30% increase in indiana electrical costs in part from new regulations. at the 111 d proposal will add additional costs. they predict that the 111 d proposal will increase the cost of gas and the cost of camelot per hour electricity by about 10% in the next six years.