Managers at the IRS have definite hopes and expectations for the coming year, now that they have a confirmed commissioner and the expectation of extra money thanks to the Inflation Reduction Act. Just before the Senate confirmed Commissioner Danny Werfel, the Federal Drive with Tom Temin  spoke Chad Hooper, the president of the Professional Managers Association.

Interview transcript:

Chad Hooper [Werfel to be successful] must be a partner to the work force to lead us, as an agency, through the modernization and reform initiatives that are ahead of us. A future IRS commissioner has to communicate with frontline employees, managers and supervisors at all levels of the agency. The transformation isn’t going to be successful if it happens from the top, but it’s also not going to be successful if it happens from the bottom. So we feel, very passionately, that frontline managers must be included in that conversation, because they’re aware uniquely of what their teams need and what barriers to success exist. And so it will prevent the agency in this time of rapid transformation, after so many decades of inertia, prevent us from reinventing the wheel or proposing reforms with no practical chance of proper implementation. And we want that next commissioner to understand the value of and commit to working closely with front line IRS management associations, particularly like the one that I lead here at PMA, where we already have a formal consultative agreement with the service that centered on enhancing agency operations.

Tom Temin Because there is some evidence coming out that, because of the money they got under the infrastructure bill, this $80 billion, a lot of it has initially been used to just get out of the emergency they’ve been having in customer experience. Answering the phones and so forth. But at the cost of some of the long-term modernization efforts that were ongoing, such as the software that controls the master file system, which is really the linchpin to all of the other modernization they want to do, that’s been put on hold or pushed back for the umpteenth time. What are you hearing?

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Chad Hooper So from our perspective, we knew that there would be an immediate need for the agency to make investments right away to turn around this backlog. But I know publicly they’ve been attributing to the pandemic. We feel it’s more appropriate to attribute it to the 2018-2019 government shutdown, that then was exacerbated by the pandemic. But that’s neither here nor there. The good news is that we seem to be on top of it now. That immediate demonstration of ability is necessary politically, unfortunately. If we got all of this, $80 billion, and then in the immediate aftermath of the very next tax season also showed we were slow to react or slow to dig out, there is a very real risk that a new Congress would take that money away and say we weren’t implementing it properly. So those priorities are kind of set by the political winds, and that isn’t me minimizing, of course, the very real need of us to provide adequate service during the filing season. I’m thrilled to know that we’re able to answer more than 90% of the calls and respond to people’s inquiries and process their tax returns. That’s a phenomenal improvement.

Chad Hooper But as you mentioned, the elephant in the room is getting ourselves off of the 65 year old computer system. And that is the real work ahead. But right now, for me, I think that kind of prioritization does require a confirmed commissioner going into this kind of a filing season. And these and thinking of these kinds of changes is like going into the playoffs without a coach. And I don’t think like any pro team would recommend that. So we have our committed employees at the IRS like working to execute their responsibilities to have a filing season. Those are the things they know how to do very well, but without like real leadership at the top to make and support management decisions, to instill a productive work culture and to manage these critical modernization efforts, I just I don’t know. One example I had, I felt like where this was already evident, was how the agency missed its own deadline to produce a plan of how it was going to over the next ten years use the $80 Billion appropriation. We were really disappointed to see the agency missed that deadline, but that deadline did fall in between, Rettig’s term limit and the appointment of a new commissioner. And in some ways, I wasn’t surprised, disappointed, but not surprised that the agency would miss that.

Tom Temin We’re speaking with Chad Hooper. He’s president of the Professional Managers Association. What should the first thing Danny Werfel does be, do you think?

Chad Hooper I believe that, the first thing that Commissioner Werfel would need to focus on, is meeting with us and our, we have a sister group at the Federal Management Association that advocates as well to understand the lay of the land. We also want to be sure that Commissioner Werfel is unique in having prior experience. We don’t often get a commissioner who was an acting commissioner in the past. And there are some things that have changed in the last 13 years since Danny was here last. However, at the IRS, there’s also a lot of things to say the same, and we want to be sure that we have an opportunity to read Commissioner Werfel in on those issues and on those intractable problems. Because we are not currently confident that the senior executive team necessarily has an unvarnished view of what’s going on under the hood. And we want the current future commissioner to have a full awareness of what they’re facing, while trying to implement a major transformation so that they can have a clear view of roadblocks and possible issues in the next five years.

Tom Temin And what might some of the roadblocks be to the reforms needed, do you think? You’ve got a lot of unionized employees, but they say the right things about wanting to move the agency forward and be a high performing 21st century tax organization. So what’s buried there under the seemingly calm waters right now?

Chad Hooper And we agree with our union partner, [National Treasury Employees Union (NTEU)], that there is an appetite for that. And we do believe that, having that modernization would improve the employee experience. What we’re not seeing is a skilled executive in management cadre, that we think can lead a workforce of tomorrow. And we are also concerned that with a huge influx of new hires currently, as we’re trying to rebuild some of what we’ve lost over the last 10 or 15 or 20 years. But then also, the IRS workforce is older than the rest of the civil service. And during commissioner Werfel’s term, should he be confirmed, we’ll see a great amount of generational turnover at the Internal Revenue Service. The IRS culture, internally is not prepared to onboard a lot of new talent. It’s been a very long time since we’ve seen a lot of fresh faces. There’s a lot of tension among the workforce when they see someone new come in at a higher grade. Because you have to remember, for 30 or 40 years, the only new faces you usually see are at the entry level. So seeing someone walk in to a grade 13, a grade 14 job, that was always usually like an internal hire. And the IRS doesn’t have a great way right now to onboard folks into those roles. They don’t have a great way to train folks and to keep their continuing education skills up. And we don’t believe, I know that that’s like very wonky, but we want to be sure that the managers have the tools and the resources that they need in order to lead. And sometimes we don’t think that the current leadership, particularly and just in the senior executive service like hears that or really appreciates fully the risk to the agency that’s on the horizon, I guess I should say.

Tom Temin So ultimately, all of their issues revolve around human capital at some level.

Chad Hooper I would say that the biggest issues are in human capital right now.

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Tom Temin And just finally, the new commissioner will have a five-year term, and yet there’s a 10-year modernization and transformation plan. So what should that plan look like and what transformations should happen in the next five and 10 years? Looking taking a long term view here.

Chad Hooper I’m really fortunate to not be the person who has to conceive of that myself. And I feel for the next commissioner, because the hard work of developing a 10-year modernization plan for the world’s most complex and efficient tax collection mechanism, in humanity’s history, is quite an undertaking. And then when you think about the IRS commissioner’s term being limited to five years, then you have to leave when it’s only half baked. So Commissioner Werfel will only get to see half of that take place and build the mechanisms to see it through to the end. Not only does that funding, the 80 billion, transform taxpayer service, and you can see that dividend being paid, as we mentioned earlier. We also think that there’s space for, in this plan, our government taking a more active role in improving tax administration and increasing equity in the tax system. You may have saw in January, Stanford and the Treasury Department together put out a study further implying that the over selection of black taxpayers in our audit system. PMA has spoken out about this and our former commissioner didn’t really agree with that. Now we have additional data that suggests that there’s more the IRS can do there. And I think that would be an important thing for a future commissioner to focus on in these five years. I also believe that, ensuring that the $80 billion that there are structures and accountability structures in procurement, to be sure that money is spent properly, that we’ve we’ve struggled historically in IRS procurement spaces. And I know, again, that that’s like a little bit wonky, but we want to be sure that we’re contracting those dollars out in a way that is efficient and spent well. And for me, that means trying to find ways to implement commercial off the shelf software solutions, where we currently have handmade or hand grown databases. That makes it very complicated for the IRS to recruit a workforce externally.

Right now with the IRS does it’s sort of trapped. Their union contract requires them to bargain whenever there’s new technologies that are brought into the workplace. And so that causes management when they want to upgrade a system, to then request that system be custom built to look as much like the old one as possible. When we do that, it means that there’s a benefit to, quote unquote, growing up in the IRS. You have to like understand what it was like on paper, to understand why it looks like this in the computer, to understand why the second computer looks like the old computer system. And it means that you can’t just hire like an HR person from another company, because we don’t use some HR systems that you can just buy. You can’t use a ticketing system to file facilities requests, because we don’t use one that you can just buy. Even the way that we record our phone calls for quality purposes, we use an off the shelf system, and then we have to do all this stuff on the back end to make it our own. We hamper our own ability to recruit a workforce, and then we have to make all of this custom training. And we don’t have the capacity to do that. We need to think about how procurement ties in to efficiency and how that hampers or helps our ability to recruit and retain a workforce. That’s a big amount of thinking, and I’m confident that someone who has expertise in public service management consulting can think in three dimensions that way. In that way we are excited to work with the Commissioner Werfel in the future. That’s my one big take home. I appreciate you talking to me about that.

 

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