Alexander Hendrie

IRS Failed to Test Obamacare Changes Until Week Before Filing Season

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Posted by Alexander Hendrie on Thursday, May 21st, 2015, 2:44 PM PERMALINK

The IRS failed to test its Obamacare processing system until a week before filing season began, according to a report released today by the Treasury Inspector General for Tax Administration (TIGTA).

"The administration learned nothing from the failed rollout of Obamacare’s website and then repeated the lack of preparation with the IRS and forced that failure onto every American on tax filing season,” said Grover Norquist, president of Americans for Tax Reform.

The agency relies on what is called a Final Integration Test (FIT) to test its ability to deal with potential tax filing complications. However, according to the TIGTA report, the IRS failed to develop and test key systems to integrate Obamacare into the FIT program. As the report notes:

“key systems and programs were not sufficiently developed and tested before delivery to the FIT environment.”

Instead, the process for integration was so chaotic that eight different builds were received, which meant the agency was only able to complete tests at the last minute. As the report notes:

“…the current procedures resulted in the FIT program receiving eight builds of the ACA 5.0 systems with the final build received by the FIT program less than one week before the start of the 2015 Filing Season.”

At the same time, the e-filing system was delivered to FIT with significant errors which increased the risk of processing errors during the filling season. As the report notes:

“Not completing the planned FIT execution on schedule prior to the 2015 Filing Season increases the risk of filing season processing errors that would have been identified and corrected during the FIT.”

In its recommendations TIGTA said that the IRS must ensure timely delivery of systems to the FIT environment. Failure to do so threatens taxpayers’ ability to file returns, receive refunds, and obtain adequate customer service.


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Grassley to IRS: Why Weren’t Law-Breaking Employees Terminated

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Posted by Alexander Hendrie on Wednesday, May 20th, 2015, 4:57 PM PERMALINK

Senator Chuck Grassley (R-Iowa) yesterday wrote to the IRS asking the agency to explain why it has not terminated employees that have willfully violated tax law.

The letter is in response to a Treasury Inspector General for Tax Administration (TIGTA) report that found the agency was not properly disciplining employees.

The Restructuring and Reform Act of 1998 (RRA 98) requires the IRS to terminate employees that have committed acts of misconduct including willful violations of tax law. In reality, only 25 percent of employees that had willfully violated tax law were terminated by the agency and more than 60 percent of employees were disciplined in a way that did not involve termination.

As Grassley notes in his letter, RRA 98 gave the IRS some discretion on personnel flexibility but outlined clear instances for employee termination including “willful violation of tax law.” As the letter states:

“These changes created a clear and direct path to termination for employees who commit ten specific offenses, two of which are the willful tax violations at issue here.”

Grassley notes that the IRS’s improper use of this discretion is problematic given the serious nature of the offense. As the letter states:

“Willful violation of tax law is a serious offense and the presumption is an employee guilty of the offense shall be terminated.”

Worse still, the TIGTA report found that many of the IRS employees soon received “promotions, performance awards, and permanent pay increases” after their noncompliance cases were closed. 

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Hawaii Obamacare Enrolls ZERO People During Special Enrollment Period

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Posted by Alexander Hendrie on Wednesday, May 20th, 2015, 2:12 PM PERMALINK

The numbers are in: Hawaii’s Obamacare exchange enrolled a grand total of ZERO — yes, zero people during its special enrollment period.

The Obama administration had implemented the special enrollment period from March 15 - April 30 to assist individuals who were unaware they would face a tax penalty for not having “qualifying” health insurance. In all, less than 250,000 individuals decided to enroll nationwide meaning that millions of Americans would rather pay the tax than enroll in Obamacare. 

While Hawaii enrolled zero individuals and is the worst performing state, it is not alone. Vermont signed up only 97 households, while Rhode Island enrolled just 25 households.

Hawaii’s dismal performance should not be surprising. The website cost taxpayers $205 million but could only enroll 8,592 individuals in year one. Cost to taxpayers per enroll: $23,899.

The state legislature recently rejected a $28 million bailout for the website meaning that a contingency plan to dismantle the exchange and migrate to the federal exchange will be implemented immediately. Unfortunately, taxpayers are not off the hook yet as it is expected that moving to the federally run will cost $30 million.

Hawaii is not the first website to implode. Oregon’s $305 million exchange was officially abolished earlier this year at an additional cost and of $41 million. The exchange is currently under investigation by numerous federal organizations for how it wasted so much money.

In all, states received $5.4 billion from the federal government for state-based Obamacare exchanges with no strings attached and zero oversight over spending decisions.

With so much money being wasted, the American people deserve an explanation.

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Congressional Democrats: We Aren’t Being Paid Properly

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Posted by Alexander Hendrie on Wednesday, May 20th, 2015, 9:00 AM PERMALINK

Senior Democrats are pushing for a pay raise for those who deserve it most - Members of Congress.

House Minority Whip Steny Hoyer (D-Md.) raised the issue at Tuesday’s Democratic Caucus meeting and has said he plans to ask Speaker John Boehner (R-Ohio) to give members a pay raise.

Members of Congress already earn $174,000 a year – far greater than the $47,230 that the average US worker earns a year. In fact, according to the Bureau of Labor Statistics, Congressmen earn more than the average lawyer ($133,470), Dentist ($170,940), Engineer ($93,630), and ‘Top Executives’ ($122,060).

Congressional salary has been frozen since 2009 because of tough economic conditions and rising federal deficits. However, Hoyer believes that if Congressional pay is not raised it will mean that “the only people who can serve are the rich."

He is not alone in this view. Congressman Alcee Hastings (D-Fla.) recently argued “we aren’t being paid properly,” during consideration of FY 2016 Legislative Branch spending levels.

Fortunately for taxpayers, sanity prevailed and the Republican majority again voted against giving themselves a pay raise.

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No Hope for American Free Trade without Trade Promotion Authority

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Posted by Alexander Hendrie on Tuesday, May 19th, 2015, 1:27 PM PERMALINK

Congress is currently considering Trade Promotion Authority (TPA), legislation that is essential to the prospect of any US free trade agreement. Although the US Constitutional system of checks and balances makes TPA essential, no other country has the same reliance on a TPA type mechanism. This reliance puts the US at a disadvantage in the global competition to lower trade barriers and hurts local exporters. As a result, approval of TPA is not only a precondition for US trade, it is essential if America wants to be viewed as a genuine trading partner by the rest of the world.

While free trade opponents are characterizing TPA as Congress recklessly ceding its authority to the President, nothing could be further from the truth. Congress has delegated trade authority to the President since 1934, and has granted TPA to Republican and Democrat Presidents five times over the past 30 years. The proposed TPA bill contains strong oversight provisions and ensures that Congress always has the final say.

But TPA’s importance goes beyond providing the President with a set of guidelines and rules. Without TPA, trade agreements stand little chance of approval because members of Congress can, and will continually offer amendments when an agreement is being considered. This forces US negotiators to go back to table and restart negotiations on an otherwise concluded agreement.

TPA solves this problem by requiring Congress to consider trade agreements on an up-or-down vote, with no amendments allowed. However, the fact that TPA is needed at all puts the United States at a disadvantage in the global race for trade.

It goes without saying that having 535 negotiators, all with their own parochial objectives, does not work. In fact, no other country grants each and every representative such broad influence over trade agreements. At best, this uncertainty makes the US a difficult partner, at worst it discourages other nations from negotiating an agreement with them altogether.

Most countries already grant their executive the authority to negotiate trade agreements, or have mechanisms that allow the executive to secure approval in a straightforward way. Countries in the European Union have an efficient process that delegates negotiating authority to the European Commission and approval authority (with no amendments allowed) to the European Council. In fact, this streamlined process shortens the negotiating process substantially, with many EU trade agreements taking two to three years.

Parliamentary systems like Australia and Canada link their executive and legislative branches, and so the trade minister has clear authority from the political majority, making approval of trade agreements a streamlined process.

America’s method of approving trade agreements is convoluted and complex by comparison. In fact, the need for TPA puts the US at a significant disadvantage, because it makes the complexity of negotiating with the US a difficult partner to negotiate with. According to the World Trade Organization, over 400 trade agreements are in effect around the world. But despite being the world’s largest economy, the US is only part of 14 agreements with 20 other countries. In contrast, the EU has agreements with over 50 countries. As a result, the EU is the top trading partner for 80 countries while the US is the top trading partner for just over 20 countries. Clearly, America is falling behind.

When the US does not have barriers with a trading partner, the economic benefits are enormous. America’s 20 free trade partners purchased 12.8 times more US goods per capita compared to non-free trade partners. In addition, 46 percent of US exports go to a free trade partner, despite these agreements not covering some of the largest markets in the world such as China, India, Japan, Germany, and the United Kingdom. Despite substantial barriers existing with these and other major markets, trade already accounts for 1 in 5 jobs in America. Clearly, if the US had more free trade agreements, the economy would be much, much stronger.

If Congress is serious about free trade, TPA is an absolute necessity. It will provide strong guidelines and structure around the approval of pro-growth free trade agreements. But without TPA, the United States will continue to fall behind in the world economy. 

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More from Americans for Tax Reform Consultant Gets Tax-Free Golden Parachute in Latest Obamacare Exchange Scandal

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Posted by Alexander Hendrie on Monday, May 18th, 2015, 4:41 PM PERMALINK

In more bad news for Obamacare exchanges, QSSI, the information technology firm that manages the federally run unexpectedly quit last Thursday. The IT firm, which is the third to manage in its brief two year history, has been marred by controversy over its relationship with administration officials.

While QSSI has been credited with saving the federal exchange following its disastrous 2013 rollout, its relationship with the Centers for Medicare and Medicaid Services (CMS) has come under scrutiny for possible conflicts of interest. Andy Slavitt, formerly an executive at QSSI’s parent groups United Healthcare Group and Optum, was later made a senior advisor at CMS.

Slavitt was strangely allowed to pocket at least $4.8 million in tax-free income by indefinitely deferring capital gains taxes on the sales of millions in stock upon joining CMS. Slavitt was also granted a rare federal ethics waiver which allowed him ignore the one-year mandatory cooling off period and simultaneously be involved in contracting issues for Optum and United Healthcare while working at CMS.

This potential conflict of interest led Senators Chuck Grassley (R-Iowa) and Orrin Hatch (R-Utah) to investigate whether United Healthcare was receiving preferential treatment from CMS.

The United Healthcare – CMS relationship is the latest in a long line of suspicious and unexplained events surrounding the implementation of Obamacare exchanges.

Earlier this year, Oregon abolished its Obamacare exchange, at the cost of $41 million. Since 2011, the state received nearly $305 million with no strings attached, and no direction to construct its website. 

Despite a three million dollar acid-trip themed ad campaign encouraging Oregonians to enroll on the exchange, individuals were unable to do so months after the November 2013 deadline. With a tough reelection campaign looming, then-Governor Kitzhaber appointed a favored political consultant, known as the “Princess of Darkness” to oversee the website. The debacle led to a flurry of investigations from the FBI, the Government Accountability Office, the Department of Health and Human Services, and the U.S. House oversight committee. 

Unfortunately, Oregon is not alone.  Exchanges in Hawaii, Massachusetts, Maryland, Vermont, New Mexico, and Nevada have all been spectacular failures that set back taxpayers billions of dollars.

Hawaii’s state exchange appears doomed to fail despite desperate attempts by the Democrat governor to salvage it. The website cost taxpayers $205 million but was only able to enroll 8,592 individuals in year one, for an average of $23,899 spent per enroll. Unsurprisingly, the website is now unable to support itself and appears poised to shut down, at estimated additional cost of $30 million.

With so many unexplained cases of wasted taxpayer dollars and inappropriate behavior from administration officials, Congress must step up its oversight on Obamacare exchanges and get to the bottom of how billions of dollars were wasted. 

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ATR Supports the “No Hires for the Delinquent IRS Act”

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Posted by Alexander Hendrie on Monday, May 18th, 2015, 9:47 AM PERMALINK

Congressman David Rouzer (R-N.C.) recently introduced H.R. 1206, the “No Hires for Delinquent IRS Act.” This common-sense legislation prevents the IRS from hiring additional employees until the Secretary of the Treasury confirms that no current employee of the IRS has a seriously delinquent tax debt. ATR supports this legislation and urges all members of Congress to vote for and otherwise support this bill.

H.R. 1206 holds IRS employees to a fair standard and ensures that the workforce practices what it preaches. Each year, IRS employees are expected to process the tax returns of millions of Americans from across the nation. In the process, they come across the confidential information of taxpayers, and must be trusted to perform this task in a responsible manner.

Recently, it was revealed that the agency has failed to properly discipline employees that “willfully violate tax law.” Despite being legally required to fire employees who committed this serious transgression, only 25 percent of employees were terminated. Clearly, it is time for the agency to clean up its act. This legislation will help hold the IRS accountable to the American people and ensure that its employees act in a responsible way. ATR fully supports this legislation and urges all members to support it.

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IRS May Have Broken Law, Put Taxpayers on Hook for $1,000 per Hour Trial Lawyers

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Posted by Alexander Hendrie on Thursday, May 14th, 2015, 11:20 AM PERMALINK

The IRS potentially broke federal law by hiring the trial law firm Quinn Emanuel to perform an audit of Microsoft. The unusual decision has prompted an investigation by the Senate Finance Committee over whether the agency is unnecessarily putting taxpayer data at risk and wasting taxpayer dollars. The trial law firm is billing taxpayers at least $1,000 per hour 

In a letter released Wednesday, Finance Committee Chairman Orrin Hatch (R-Utah) questioned the hiring of expensive trial lawyers and asked the IRS to explain its decision. Specifically Hatch noted that the decision violates federal law, removes taxpayer protections, and raises questions the IRS’s ability to allocate its limited resources. As the letter states:

“The IRS’s hiring of a private contractor to conduct an examination of a taxpayer raises concerns because the action: 1) appears to violate federal law and the express will of the Congress; 2) removes taxpayer protections by allowing the performance of inherently governmental functions by private contractors; and 3) calls into question the IRS’s use of its limited resources.”

Chairman Hatch asked the agency to immediately stop using the expensive firm, citing the significant risks of using private contractors for the examination of records and handling of sworn testimony.

The IRS made the decision to hire expensive trial lawyers despite having over 40,000 employees dedicated to enforcement efforts. Additionally, the agency had the option to turn to the IRS office of Chief Counsel or a Department of Justice attorney, both of which have the expertise to conduct an examination without risking sensitive information. Instead, the agency choose to bring in a litigation-only white shoe law firm. The elite law firm was hired under an initial $2.2 million contract and is charging taxpayers over $1,000 an hour.

Earlier this year, the Taxpayer Advocate - an independent watchdog – raised concerns that the IRS was unable to justify its spending decisions. Despite having the data available to make these decisions, the agency did not bother to develop this data into a useful analysis. Given the carefree way in which the IRS is contracting trial lawyers, questions have to be asked about how the agency allocates its resources. 

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Hawaii’s $205 Million Obamacare Exchange Implodes

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Posted by Alexander Hendrie on Tuesday, May 12th, 2015, 5:17 PM PERMALINK

Despite over $205 million in federal taxpayer funding, Hawaii’s Obamacare exchange website will soon shut down.  Since its implementation, the exchange has somehow failed to become financially viable because of lower than expected Obamacare enrollment figures. With the state legislature rejecting a $28 million bailout, the website will now be unable to operate past this year.

According to the Honolulu Star-Advertiser the Hawaii Health Connector will stop taking new enrollees on Friday and plans to begin migrating to the federally run Outreach services will end by May 31, all technology will be transferred to the state by September 30, and its workforce will be eliminated by February 28.

While the exchange has struggled since its creation, it is not for lack of funding. Since 2011 Hawaii has received a total of $205,342,270 in federal grant money from the Center for Medicare and Medicaid Services (CMS). In total, CMS provided nearly $4.5 billion to Hawaii and other state exchanges, with little federal oversight and virtually no strings attached.

Despite this generous funding, the exchange has underperformed from day one. In its first year, Hawaii enrolled only 8,592 individuals – meaning it spent $23,899 on its website for each individual enrolled. Unfortunately, taxpayers will have to hand out an additional $30 million so that Hawaii can migrate to the federal system.

This is not the first time that a state exchange has failed, and taken millions of dollars in federal funds down with it. Earlier this year, Oregon’s state exchange was officially abolished at an estimated cost of $41 million. Cover Oregon, as it used to be known received $305 million in funds from CMS but failed to produce a workable website months after the 2013 November deadline. The debacle has prompted numerous federal agencies and organizations to investigate allegations of inappropriate political interference from then Governor Kitzhaber’s 2014 reelection campaign.

Hawaii now joins Oregon, Massachusetts, Maryland, Vermont, New Mexico, and Nevada as cautionary tales in government central planning. With so many failed state exchanges, questions need to be asked about the haphazard allocation of billions of dollars in taxpayer funds and the complete lack of oversight. 

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IRS Refuses to Fire Employees Who 'Willfully Violate Tax Law"

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Posted by Alexander Hendrie on Wednesday, May 6th, 2015, 5:04 PM PERMALINK

The IRS is failing to fire employees who have willfully violated tax law, according to a report released today by the Treasury Inspector General for Tax Administration (TIGTA).

Under the Restructuring and Reform Act of 1998 (RRA 98) the IRS is legally required to terminate employees that have committed acts of misconduct including willful violations of tax law. However, TIGTA’s review of IRS practices found that the agency is failing to terminate these employees despite the serious nature of their transgressions. As the report states:

“Our review of a judgmental sample of 34 cases found that some employees, who management had concluded were not credible, with significant and sometimes repeated tax noncompliance issues, or a history of other conduct issues, were not terminated.”

In fact, as the reports notes, only a fraction of the employees found to have willfully violated tax law were fired. The majority of employees received far more lenient punishments:

“More than 25 percent, or 400, of the willful employee tax noncompliance cases resulted in termination of the employee…. More than 60 percent of employees, or 960, with willful tax noncompliance cases had their discipline mitigated to a penalty lower than termination.”

If that were not bad enough, many of these same employees received bonuses and promotions from the IRS within a year after their noncompliance case. As the reports says:

“In addition to not being terminated for willful tax violations, some IRS employees also received promotions, performance awards, and permanent pay increases within one year after their willful tax noncompliance case was closed.”

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