Michael Brochstein/Sipa USA via AP Images
Sen. Elizabeth Warren (D-MA) speaks at a congressional hearing, July 20, 2023.
Today, Sen. Elizabeth Warren (D-MA) and Rep. Pramila Jayapal (D-WA) delivered a letter to the Internal Revenue Service (IRS) after the Treasury Inspector General for Tax Administration (TIGTA) issued a final report about allegations of conflict of interest at the agency. The report, undertaken at Warren and Jayapal’s request, came from a September 2021 New York Times investigation which found that tax lawyers from the nation’s largest accounting firms went on to take senior positions at Treasury and the IRS.
During that period, those tax lawyers wrote policies “frequently favorable” to their former corporate clients. After their public-service stints, those lawyers returned to their former employers, rewarded with more senior titles and greater compensation. After the Times’ investigation, in February 2022, Warren and Jayapal requested TIGTA to “use your authorities to open an inquiry into the revolving door between the country’s top accounting firms and the federal government.”
More than a year later, TIGTA’s report discovered that 496 employees received income from the largest accounting firms and corporations before entering the government. TIGTA’s report, however, “found no direct correlation between the employees’ work assignments and the company or firm from which they came or left for in the private sector.”
In addition, the report noted that four employees worked on private letter rulings—legal-speak for federal tax administration guidance—for taxpayers represented by firms they had recently left or joined after leaving the IRS. “While not a direct correlation,” TIGTA cautions, “this can raise impartiality concerns.”
The report comes at a time when the IRS is implementing new tax laws and bolstering its enforcement capabilities after an infusion of tens of billions of dollars from the Inflation Reduction Act. That law added a number of new tax credits, and Warren’s corporate minimum tax. With all the implementation, having a workforce that isn’t compromised in some way could mean the difference between effective and ineffective enforcement.
Despite TIGTA’s cautious language, the new Warren and Jayapal letter explains how this dynamic of moving between the private and public sector undermines the IRS’s initiatives on implementing a Direct File tax return system and the Corporate Alternative Minimum Tax. The duo state: “We believe that it is critical that these important new initiatives are successful and not marred by revolving-door influence peddling and ask that you take additional action to address our concerns.”
Warren and Jayapal further note three primary concerns from TIGTA’s findings. First, an undisclosed number of IRS executives did not properly disclose post-public-sector job searches when working as a federal employee. Second, TIGTA was unable to determine whether 232 employees at the IRS with previous employment experience at large accounting firms “had improper conflicts while serving in the federal government.” When Warren and Jayapal reached out to the accounting firms for this information, their requests were denied. Lastly, at least 18 employees at the IRS worked on private letter rulings “in which the accounting firm they worked for, either immediately before or after their time at the IRS, was the taxpayer’s representative.”
Warren and Jayapal importantly note that private-sector experience is not an inherently disqualifying factor for federal employment. As the Prospect reported earlier this year, the most complex tax returns require professionals who’ve worked on the other side of tax administration.
In response to TIGTA’s report, the IRS agreed to implement two of its recommendations: to improve employee training on ethics and impartiality and devise better data collection points to identify potential conflicts of interest. Warren and Jayapal finish their letter with a set of questions that go beyond TIGTA’s recommendations. They concern the agency implementing stricter standards for employees with potential conflicts of interest, including those who receive outside income during their time in government, and redoing previous private letter filings where a conflict of interest was identified.
Today, the Senate Finance Committee is holding a hearing for the consideration of Marjorie Rollinson as the IRS’s chief counsel and an assistant general counsel at the Treasury Department. And she took the rare step of vowing to hold herself to a higher ethical standard than required by law.
Ahead of the hearing, the Prospect obtained a letter to Warren from Rollinson, who explained that, if confirmed, she would extend the two-year recusal period over matters concerning previous clients and employers, laid out in a presidential executive order, to four years. After public service, Rollinson promises not to lobby the agency or Treasury Department in any way for four years after leaving office. That four-year self-moratorium extends to not seeking any form of employment or compensation with companies she interacts with while working at the IRS, and that also goes beyond the presidential pledge.
Taken together, the agency internally adopting higher ethics standards and prospective nominees committing to standards exceeding what’s already on the books suggests a real culture shift for the agency. That’s critical because of the moment the IRS finds itself in. After receiving the IRA’s supplemental funding, the agency needs to do everything it can to prove that financial lifeline wasn’t a wasted opportunity.
