Tax News

CCH (cch.taxgroup.com) reports:

Ending months of speculation, President Bush announced on November 21 his intention to nominate Douglas H. Shulman, a securities regulator, to be the 47th Commissioner of the Internal Revenue Service. Shulman's name had been floated as a possible candidate in October and, if he is confirmed, he will take charge of an agency that has been without a permanent leader since the departure of Mark W. Everson in May (TAXDAY, 2007/05/04, I.3). Depending on how quickly confirmation hearings are scheduled and if he is confirmed, Shulman could start at the IRS during what is projected to be one of the most challenging filing seasons in recent history.
CCH Comment. CCH contacted the top tax-writers in Congress about the president's nomination but, by press time, only received a response from Sen. Charles E. Grassley, R-Iowa, ranking member of the powerful Senate Finance Committee. "The position of IRS Commissioner is critical and shouldn't be vacant at all. At least 50 million taxpayers are looking at a filing fiasco next spring because Congress has not acted in a responsible time frame to protect them from an unintended liability from the alternative minimum tax. Any patch that's passed now may be too late to avoid delays in refunds that are due and a lot of other paperwork confusion. The next IRS commissioner needs to be ready to get on top of these problems and provide whatever leadership is possible for taxpayers, in the absence of Congress getting its job done." Grassley said. "I'll be reviewing this nomination closely as ranking member of the Senate Committee on Finance," he stated.
CCH Comment. CCH asked the IRS if Linda Stiff, the current acting commissioner, will continue in that role until the Senate confirms the president's nominee. An IRS spokesperson told CCH that the Service had "no comment." It is unclear from the president's announcement if Shulman would serve only the remainder of Everson's term, which ends in 2008, or a full five-year term.
Securities Regulator
Shulman is currently vice chair of the Financial Industry Regulatory Authority (FINRA), which oversees all securities firms doing business in the U.S. FINRA is a new entity formed in July by the merger of the National Association of Securities Dealers (NASD) and the member regulation, enforcement and arbitration functions of the New York Stock Exchange. At FINRA, Shulman directs technology, registration and disclosure, industry testing, and continuing education. He also leads strategic planning and international efforts for the organization.
Shulman began his career at NASD as executive vice president in 2000. He was quickly promoted to a succession of top leadership positions, culminating in his appointment as vice chair of FINRA.
In addition, Shulman co-founded FoundryOne, Inc., a technology and innovation advisory and consulting firm. In a written statement, Treasury Secretary Henry M. Paulson, Jr., praised Shulman's "extensive management experience and proven ability to provide innovative leadership to a large organization."
IRS Reform
Shulman is familiar with the IRS. He was senior policy advisor and later chief of staff of the bipartisan National Commission on Restructuring the IRS. The commission was formed in the late 1990s after public outcry about alleged heavy-handed tactics by IRS agents. Congress ultimately passed the IRS Restructuring and Reform Act of 1998 (P.L. 105-206) to correct many of the abuses uncovered by the commission.
Immediate Challenges
If Shulman is confirmed quickly, he may have a baptism by fire at the IRS dealing the 2008 filing season. Stiff and other senior IRS officials have been warning for weeks that the Service will need 10 weeks to reprogram its computer systems for the expected AMT patch (TAXDAY, 2007/11/06, I.4). Return processing and refunds could be significantly delayed while the IRS reprograms its systems (TAXDAY, 2007/11/19, M.2).
Robert Kerr, senior director of government relations for the National Association of Enrolled Agents, told CCH that enrolled agents are preparing for the likely challenges in the upcoming filing season stemming from the lateness of the AMT patch. "The enrolled agents look forward to working with the new commissioner once he is confirmed," Kerr said.
Shulman will be under intense pressure from Congress to close the tax gap, the $300-billion difference between what taxpayers owe and what they pay. Under Everson, the Service switched its focus from customer service to enforcement. Everson spearheaded a number of high-profile enforcement initiatives, especially in the tax shelter arena, that recovered billions of dollars in lost revenue (TAXDAY, 2007/03/21, C.1). The IRS has also pledged to step-up audits of high-risk taxpayers (TAXDAY, 2007/08/03, C.1).
Shulman also must address an aging workforce and the recruitment of new talent (TAXDAY, 2007/08/29, I.3). A large number of the Service's employees, especially managers, are or will soon be eligible to retire. The Service is expected to unveil a human capital strategic plan in early 2008.
Additionally, the Service must deal with a rise in cyber-crime (TAXDAY, 2007/11/12, M.4). Criminals world-wide are targeting individuals and businesses with emails purporting to be from the IRS. The IRS's computer and information systems, which are decades old in some cases, must be updated and protected from cyber criminals.
Legal Background
Shulman, unlike the past two commissioners, is an attorney. He received his law degree from the Georgetown University Law Center in Washington, D.C. He did his undergraduate work at Williams College, Williamstown, Mass., and earned a master's degree from the John F. Kennedy School of Government at Harvard University.
By George L. Yaksick, Jr., CCH News Staff
Treasury Department News Release, TDNR HP-693
SFC Release: Grassley Comments on IRS Commissioner Selection