IRS nominee faces herculean challenge of modernizing agency

Feb 14, 2023, 8:56 AM | Updated: 8:58 am
FILE - A sign hangs outside the Internal Revenue Service building in Washington, on May 4, 2021. Th...

FILE - A sign hangs outside the Internal Revenue Service building in Washington, on May 4, 2021. The IRS issued guidance Friday, Feb. 3, 2023, recommending that taxpayers hold off on filing their tax returns for 2022 if they received a special tax refund or payment from their state last year due to the agency’s uncertainty about the taxability of the payments. (AP Photo/Patrick Semansky, File)

(AP Photo/Patrick Semansky, File)

WASHINGTON (AP) — Even in the best of times, the IRS is the agency Americans love to hate. And these are hardly the best of times.

The nation’s tax-collecting agency is a villain to many a taxpayer. It’s a magnet for GOP criticism. It’s woefully understaffed, and the new Republican House would like to claw back a big infusion of money meant to help fix things.

So why would a business consultant who earned a $6.6 million paycheck last year possibly want to take charge? It turns out Danny Werfel has a serial relationship with the federal bureaucracy.

The 51-year-old, whose Senate confirmation hearing is set for Wednesday, has already held multiple thankless jobs in government, in both Republican and Democratic administrations.

He led the cross-government effort under President Barack Obama to dole out $700 billion in stimulus money following the economic meltdown of 2008. He played a key role in the George W. Bush administration’s effort to purchase toxic assets from banks as the subprime mortgage crisis grew.

And he was temporarily put in charge of the IRS in 2013 to clean up a controversy involving allegations that the agency improperly targeted certain groups applying for tax-exempt status.

Werfel even hosts a podcast called “Gov Actually,” a play on the rom-com “Love Actually.”

IRS commissioner is historically a hard post to fill, in part because of the skill set needed to head an agency of roughly 80,000 employees responsible for collecting the revenue that funds the federal government. Werfel would replace Charles Rettig, who was appointed by President Donald Trump. An acting commissioner has been filling the job since Rettig’s five-year term ended in November.

Dan Tangherlini, a former senior official at the Treasury Department and now podcast co-host, says Werfel’s experience with past IRS controversies will be an asset as the agency faces continual threats.

“He’s seen divided government and deeply divisive views, and has been able to successfully navigate through them,” Tangherlini said. “He understands the challenge it faces and saw that the first time around. If he would’ve had enough then, he wouldn’t be up for the job now.”

Ahead of the hearing, GOP criticism seems more directed at Biden administration plans to bolster funding for the agency than at Werfel himself.

“Under Democrat administrations, the IRS has become a partisan weapon used to target conservatives and treat law abiding business owners like criminals,” Sen. Ted Cruz, R-Texas, said in a statement. “The Democrats want to use the IRS to go after hardworking Americans who just want to earn a living and put food on their tables.”

In 2013, as acting director of the IRS, Werfel told members of Congress that taxpayers had lost faith in the agency and pledged that he was “committed to restoring that trust.” A decade later, he’s positioned to take another run at fulfilling that pledge.

When President Joe Biden nominated Werfel, Treasury Secretary Janet Yellen praised his “deep commitment to fairness” and said his background made him “uniquely qualified to lead the agency at this critical juncture.”

Max Stier, founding president and CEO of the Partnership for Public Service, said Werfel’s work outside government is a big asset.

´´He’s seen not only in our country but around the world, the attempts to reform public sector entities,” Stier said. “He’s going to come to the table with experience and a knowledge base that makes him the best choice.”

Werfel, who lives in Washington with his wife and two children, has a law degree from the University of North Carolina, Chapel Hill, and a master’s degree in public policy from Duke. He declined to comment for this story.

He’s spent the last nine years at Boston Consulting Group, where he helped launch its U.S. public sector practice, working on organizational change, risk management, IT modernization and business process improvements both in the U.S. and internationally, according to the group’s website.

Last year alone he took in $6.6 million, according to a financial disclosure document he submitted to Treasury in November. At the IRS, the top salary is roughly $255,000.

If confirmed, Werfel will manage the $80 billion infusion of funds to the IRS approved in the Democrats’ flagship climate and healthcare law. Roughly $46 billion was allocated for enforcing tax laws and the remainder will go toward taxpayer services, operations support and updating business systems.

He’ll have to modernize, boost morale and improve hiring, among other major tasks.

Tony Reardon, president of the National Treasury Employees Union, which represents IRS workers, said he has already spoken with Werfel about a need to retain current employees, improve hiring and maintain open lines of communication between management and the union.

“It is my hope,” Reardon said, that “the next commissioner will be focused on investing in the workforce and rebuilding the agency in a way that ensures the tax code is enforced fully and fairly and Americans can get their tax questions answered in a timely manner.”

House Republicans’ first move as a majority was to vote to take back nearly 90% of the new funding. Republicans have suggested without evidence that the agency would use the new money to hire an army of tax agents with weapons.

“The last thing (Americans) need is more IRS agents knocking on doors to conduct audits, yet this IRS funding is part of the broad Biden administration strategy to tax, audit exponentially more Americans,” Rep. Adrian Smith, R-Neb., said in his speech introducing the bill.

The measure is likely to die in the Democrat-led Senate, and Biden has said he’d veto it if it reached his desk.

Werfel is used to political controversy. In 2013, he was named the acting head of the agency, tasked with cleanup of a controversy under the Obama administration when the IRS was found to have used inappropriate criteria to review tea party groups and other organizations applying for tax-exempt status. A subsequent report found that both conservative and liberal groups were scrutinized.

Nina Olson, a former head of the Office of the Taxpayer Advocate, said that when Werfel came into the IRS in the summer of 2013, “he walked into a hornet’s nest.”

“He was under fire even though he had nothing to do with the controversy and he handled the barrage of questions extraordinarily well,” Olson said.

In the Bush administration, Werfel oversaw the efforts of the Office of Financial Stability to achieve a clean financial statement audit in its first year of existence, a key role in the efforts to ease the subprime mortgage crisis. He was later named Obama’s Office of Management and Budget controller, tasked with implementing the $787 billion American Recovery and Reinvestment Act.

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IRS nominee faces herculean challenge of modernizing agency