Trump's IRS Nominee to Face Questions on Management Experience

(Bloomberg) -- President Donald Trump’s nominee to lead the Internal Revenue Service, Charles Rettig, has spent decades helping wealthy and famous people fight the agency’s efforts to collect taxes.

At a Thursday confirmation hearing, the criminal tax lawyer from Beverly Hills, California, will face questions from lawmakers about whether he’s qualified to run the IRS. Democrats will question whether he has the management skills to run an agency struggling to implement the biggest tax overhaul in a generation.

"I’m certainly going to be asking about that," said Senator Ron Wyden, an Oregon Democrat.

Rettig, 61, who has represented the estate of Michael Jackson and the creator of the "Girls Gone Wild" video franchise, probably will win the 51 votes needed for confirmation in the Republican-controlled Senate.

Rettig would be the first practicing tax lawyer to lead the IRS in two decades -- a departure from prior commissioners who held high-level posts at private companies and regulatory agencies. He’d go from running a law firm with 12 attorneys to a perennially despised and underfunded bureaucracy with nearly 77,000 employees.

Management Experience

Even some Republicans have concerns. Rob Portman of Ohio said after Rettig’s name became public in January that "you’ve got to have a manager, because it’s a huge service organization." He added that Rettig’s career as a tax litigator is "good as long as he has management skills."

Rettig declined to comment. If confirmed, he would serve the remainder of a five-year term that began in November when the last commissioner left office.

The agency has been reeling from budget cuts. The current budget of $11.43 billion is less than in fiscal 2008, and the IRS pared some 15 percent of its workforce over the past five years. The enforcement staff has plunged by more than 25 percent since 2010, prompting tax lawyer Robert McKenzie of Arnstein & Lehr to tell Bloomberg in April that "it’s one of the best times to be a tax cheat in this country."

"This agency is not beloved by this administration, and is not beloved by the public," said Paul Light, a professor of public service at New York University. "They desperately need management, planning, strategic thinking."

Offshore Accounts

At a time when the IRS was cracking down on wealthy people who hid their money in offshore accounts, Rettig made his name helping wealthy individuals disclose their hidden offshore bank accounts while advocating the lightest possible penalties. In 2008, CPA Magazine called him one of the 50 best lawyers "to have in your corner when the IRS calls."

An IRS restructuring commission in 1997 said agency leaders should be skilled managers. For decades, commissioners were primarily tax lawyers and tax accountants.

Rettig is expected to tout his leadership experience in recent years as chair of the IRS Advisory Council, head of the tax section of the California bar and as an organizer and presenter on dozens of tax panels.

It’s a different resume from John Koskinen, the most recent commissioner who spent two decades handling corporate turnarounds and served in senior roles at Freddie Mac amid fallout from the 2008 financial crisis and as a deputy director of the White House’s Office of Management and Budget.

Familiarity

Still, "with all of the issues surrounding the tax law, having a commissioner conversant with the issues can’t hurt," Koskinen said. He called Rettig "a good people-person."

Some Democrats question how Rettig would oversee the agency’s audit of Trump’s personal tax returns. While Rettig won’t be involved directly, he’s responsible for how the agency manages it.

Trump has repeatedly declined to follow presidential tradition and make his returns public. Some Democrats said they’re concerned over Rettig’s 2016 comments to Forbes that no lawyer would advise Trump to release his returns while under audit by the agency’s "Wealth Squad." Rettig told Bloomberg in 2016 that the probes were “the audits from hell that your grandfather warned you about.”

In March 2016, Trump’s lawyers at Morgan Lewis & Bockius, Sheri Dillon and William Nelson, released an unusual letter saying that although Trump’s federal tax returns for 2002 through 2008 were no longer under audit, those for 2009 forward were.

Inquiries

In recent weeks, Democratic Senate Finance Committee investigators have made inquiries about whether Rettig had done any legal work for acquaintances or friends of Trump or his inner circle, according to a person familiar with the matter, who spoke on condition of anonymity because the deliberations are private.

One former IRS official, who spoke on condition of anonymity, said that Rettig’s ties to Morgan Lewis & Bockius, the law firm handling Trump’s audit, potentially could raise questions. Nathan Hochman, Rettig’s partner in private practice for more than a decade, now works at Morgan Lewis in Century City, California. Hochman declined to comment.

Rettig mentioned 26 confidential clients -- 19 individuals and seven entities -- in a required federal disclosure released on March 26. Attorney-client privilege rules prevent him from revealing their identities.

"It’s a canon of being an attorney that you have to keep your client matters confidential," said Niles Elber, a tax lawyer at Caplin & Drysdale. "Your client could sue you."

To contact the reporters on this story: Lynnley Browning in New York at lbrowning4@bloomberg.net;Laura Davison in New York at ldavison4@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Justin Blum

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