<div> <div> <div> From Ranking Member Wyden:   1. Preventing tax avoidance. Mr. Rettig, during your 35 year career as a tax controversy lawyer, you have defended many wealthy individuals. Your firm even describes specific services for “high net worth individuals and their closely held entities,” noting that “If you may be subjected to a Wealth Squad examination, we can help.” The “Wealth Squad” refers to the global High Wealth Industry group of the IRS Large Business and International division. In a 2007 article in the Journal of Tax Practice &amp; Procedure, you expressed concern over IRS procedures related to listed transactions—transactions the IRS has highlighted as potentially abusive and specifically designed for tax avoidance.[1]   <div class="indented"> During meetings with members of the Finance Committee, and during your nomination hearing, you noted a desire to rebuild trust and faith in the IRS for the “everyday guy” and “the guy on the street.” </div>   <div class="indented"> The new Republican law did little to simplify existing law and added new opportunities for tax planning and tax avoidance. The new passthrough deduction is just one example of new areas of complexity created by the new tax law. Without guidance from the IRS, small business owners will struggle to accurately determine what they owe, and bad actors will be able to abuse the system and avoid paying their fair share. </div>   a. Given your professional history, how can regular taxpayers—those without high-priced accountants and tax attorneys—have faith that you are acting in their interests, and not in the interests of your former, wealthy clients?   <div class="indented"> Response: Through decades of experience working with the IRS, I have seen the difficulties faced by taxpayers of all kinds— from large taxpayers, to small businesses, to low income taxpayers. I’ve also devoted a significant amount of time to assisting taxpayers who can’t afford professional help on a pro bono basis. </div>   b. In your meetings with Members and staff prior to your nomination hearing, you noted that high-profile tax enforcement actions can raise awareness and potentially increase tax compliance. However, in your 2007 article, you bemoan IRS officials who have “trumpeted the success of collecting tax liabilities and penalties in connection with so-called abusive tax shelters.” How are Members of the Committee supposed to reconcile your more recent statements, made in connection with your nomination, with your past professional writings and actions?   <div class="indented"> Response: I believe that every taxpayer, high-profile or not, has the right to be treated impartially by the IRS. If confirmed, I will work to ensure that this is the case. </div>   c. Given the ripe opportunities for tax planning created under the new Republican tax law, as Commissioner, how would you combat aggressive tax planners? How would you continue to monitor tax-avoidance strategies over the next few years as the law is implemented?   <div class="indented"> Response: The IRS has a responsibility to enforce all tax laws in an impartial and unbiased manner. If confirmed, I will review the IRS's approach to enforcement to ensure it reflects this responsibility. </div>   d. What kind of message would it send if the IRS failed to go after a high-level government official if there were credible allegations that the official had failed to comply with the tax laws? Wouldn’t that do serious damage to our voluntary tax compliance system, especially if there were evidence the violations were knowing or willful?       [1] Kathryn Keneally, Charles P. Rettig, “IRS Enforcement: The Pendulum has Swung Too Far,” Journal of Tax Practice &amp; Procedure at 19-22, April-May 2007.   <div class="indented"> Response: The IRS has a responsibility to enforce all tax laws in a fair and unbiased manner. If confirmed, I will work to ensure that the IRS treats all taxpayers equally under the law. </div>   e. If career IRS officials come to you recommending enforcement action against an Administration official, how would you handle the situation?   <div class="indented"> Response: It is my understanding that the Commissioner does not get involved in individual taxpayer matters—including enforcement actions, If confirmed, I will work to ensure that the IRS treats all taxpayers equally under the law. </div>   <div class="indented"> f. What would you do if Administration officials at the Treasury Department or elsewhere in the Administration urged you not to pursue an enforcement case? </div>   <div class="indented"> Response: It is unlawful for the President, Vice President or any employee of the Executive Office of the President or Vice President to request directly or indirectly any officer or employee to conduct or terminate an audit or other investigation of any particular taxpayer. If confirmed, I will work to ensure that the law is upheld and appropriate steps are taken if it is violated. </div>   2. Taxpayer Assistance. Many provisions of the new tax law are complicated and confusing, especially for small business owners. I have been pressing Acting Commissioner David Kautter to provide guidance for these taxpayers, but, to date, little guidance has been issued.   a. In the hearing, you mentioned the need for clear, timely guidance. How will you make sure taxpayers, in particular those who cannot afford to hire the top tax consultants, receive clear guidance in a timely manner?   <div class="indented"> Response: If confirmed, I will work to ensure guidance is clear and consistent, and available to all taxpayers in a timely manner. </div>   b. Do you think it is important for IRS to conduct greater outreach to traditionally underserved groups like low-income families and immigrant communities? If so, can you tell us how you would improve IRS outreach efforts?   <div class="indented"> Response: If confirmed, I look forward to reviewing the IRS's current outreach channels and exploring new ways to deliver information and strengthen outreach, including in underserved communities. </div>   3. Conservation Easement Syndication. Mr. Rettig, on March 29, 2017, I wrote to IRS Commissioner John Koskinen about the growth in abusive tax shelters involving the syndication of conservation easements. I asked the IRS to provide a report on the nature and scope of this problem. On July 13, 2017, the IRS provided a partial response that revealed participants in these syndication deals claimed deductions that were nine times the amount of their original investment. Subsequent preliminary responses indicate IRS may have lost billions of dollars to this tax shelter in hundreds of tax shelter transactions.   <div class="indented"> The Treasury Department issued Notice 2017-10, identifying these syndication transactions as abusive tax shelters and requiring participants to disclose their involvement to the IRS. The Notice was also intended to deter future deals; however, media reports suggest these deals are still taking place.[2] Historically, when the Treasury Department and IRS issue a Notice “listing” a certain transaction as an abusive tax shelter, the promotion and use of such schemes stops. Are you concerned by the apparent continued use of these tax avoidance techniques? Please describe what actions you would take as Commissioner, if confirmed, against the promoters of these abusive shelters identified in Notice 2017-10. </div>     [2] Peter Elkind, “The Billion-Dollar Loophole,” ProPublica, December 20, 2017   <div class="indented"> Response: If confirmed, I will work with IRS officials to ensure an appropriate enforcement strategy is in place to uphold the law as Congress intended. </div>   a. Enforcement actions against illegal syndicated conservation easement tax shelter transactions have proven challenging and time-consuming for the IRS. For example, earlier this year the Tax Court issued a ruling disallowing tax write-offs from a sham conservation easement transaction that occurred more than a decade ago.[3] While Notice 2017-10 may have extended the statute of limitations period for certain transitions, the time in which IRS can take enforcement actions on those tax shelter transactions grows shorter by the day. If confirmed, will you commit to developing and carrying out a strategy to ensure that promoters of syndicated conservation easement tax shelter transactions are held accountable before the close of the statute of limitations?   <div class="indented"> Response: As noted above, if confirmed, I will work with IRS officials to ensure an appropriate enforcement strategy is in place to uphold the law as Congress intended. </div>   b. Do you believe the IRS currently has the tools needed to put an end to this abuse? If confirmed, will you recommend regulatory or statutory changes to address these abuses if Notice 2017-10 and other tools are shown to be insufficient to curb the use of these tax shelters?   <div class="indented"> Response: If confirmed, I will assess the situation and work with Congress to ensure the IRS has adequate tools to complete its mission and uphold the law. </div>   <div class="indented"> c. If confirmed as Commissioner, how high of a priority will you place on stemming this abuse? </div>   <div class="indented"> Response: If confirmed, I will discuss with IRS Chief Counsel and the Treasury Department the rationale and basis for the transactions described in Notice 2017-10. I look forward to working with the Committee on this issue. </div>   <div class="indented"> Do you believe the transactions described in Notice 2017-10 are abusive on their face? </div>   <div class="indented"> <div class="indented"> Response: I do not currently have access to the information that served as the basis for the decision by the Treasury Department and IRS to list these transactions. </div> </div>   i. If confirmed, what actions will you take to ensure IRS challenges the tax benefits of each and every transaction covered by Notice 2017-10?   <div class="indented"> <div class="indented"> Response: If confirmed, I will work to ensure an appropriate enforcement strategy is in place. </div> </div>   <div class="indented"> <div class="indented"> ii. If confirmed, will you support Notice 2017-10? </div> </div>   <div class="indented"> <div class="indented"> Response: As I have noted, if confirmed, I will discuss with IRS Chief Counsel and the Treasury Department the rationale and basis for the transactions described in Notice 2017-10. I look forward to working with the Committee on this issue. </div> </div>                           [3] T.C. Memo. 2018-45 </div> </div></div>

Wyden Questions Rettig on Tax Avoidance, Taxpayer Assistance

U.S. Senate

U.S. Senate Finance Committee

Internal Revenue Service

Senate Finance Committee ranking minority member Ron Wyden, D-Ore., in questions presented at a June 28 hearing, asked IRS Commissioner nominee Charles Rettig about high-income tax avoidance, increased complexity, taxpayer assistance, and cracking down on the use of conservation easements as abusive tax shelters.

Senate Finance Committee ranking minority member Ron Wyden, D-Ore., in questions presented at a June 28 hearing, asked IRS Commissioner nominee Charles Rettig about high-income tax avoidance, increased complexity, taxpayer assistance, and cracking down on the use of conservation easements as abusive tax shelters.