Text Timeline

Text Timeline
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00:00:266 min.	Baucus, Max - U.S. Senator, [D] Montana (Sounds gavel.) The hearing will come to order. Sophocles wrote, "Things gained through unjust fraud are never secure." Today we consider...
00:07:002 min.	Grassley, Charles "Chuck" E. - U.S. Senator, [R] Iowa Mr. Chairman, I'm going to just refer to one paragraph of my opening statement, put the rest in the record. Some of the charities...
00:09:1127 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you, Senator, very, very much. Now I welcome our witnesses. Our first is IRS Commissioner Doug Schulman. Thank you, Commissioner,...
00:09:386 min.	Shulman, Douglas H. - Commissioner Thank you, Mr. Chairman, Ranking Member Grassley, members of the committee. I appreciate the opportunity to testify today about Ponzi schemes...
00:16:094 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you very much, Commissioner. Sorry, my microphone wasn't on. Thank you, Commissioner. Mr. Brostek, you're next.
00:16:135 min.	Brostek, Michael - Director Mr. Chairman, Senator Grassley and members of the committee, thank you for inviting me to discuss our work related to individuals' use of...
00:21:304 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you very much, Mr. Brostek. Mr. Josephson.
00:21:3440 sec.	Josephson, William - Attorney Thank you, Chairman Baucus, Senator Grassley, other senators. I'm very happy and honored to be able to appear before the committee again....
00:22:142 sec.	Baucus, Max - U.S. Senator, [D] Montana Without objection it will be put in.
00:22:165 min.	Josephson, William - Attorney Thank you. I would like to make a few general remarks about what I think the implications for charity the Madoff scandal has and what I...
00:27:2524 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you very much, Mr. Josephson. That was very persuasive. I'll start with you, Commissioner. Let's just take, say -- just do the...
00:27:4913 sec.	Shulman, Douglas H. - Commissioner Well, a couple things. One, any investment made with -- and I want to clarify, the ruling and procedure we put out today is trying to be...
00:28:02	Baucus, Max - U.S. Senator, [D] Montana Right.
00:28:0219 sec.	Shulman, Douglas H. - Commissioner -- not just the Madoff situation. I'll use the example under Madoff. It's an investment theft loss. If the 500,000 (dollars) -- it can include...
00:28:21	Baucus, Max - U.S. Senator, [D] Montana Right.
00:28:214 sec.	Shulman, Douglas H. - Commissioner And this is assuming they paid taxes on those earnings.
00:28:25	Baucus, Max - U.S. Senator, [D] Montana Correct.
00:28:2510 sec.	Shulman, Douglas H. - Commissioner It will be deductible in the year discovered, and we give some guidance in the revenue procedure about how to determine what the year is...
00:28:35	Baucus, Max - U.S. Senator, [D] Montana The full 500 (thousand dollars)?
00:28:353 sec.	Shulman, Douglas H. - Commissioner Excuse me? And then --
00:28:383 sec.	Baucus, Max - U.S. Senator, [D] Montana I'm sorry, what's deducted? What amount?
00:28:4142 sec.	Shulman, Douglas H. - Commissioner An amount, and then we have the procedure of safe harbor that says you can deduct up to 95 percent without us, you know, looking further....
00:29:234 sec.	Baucus, Max - U.S. Senator, [D] Montana So about 95 percent is deductible then, basically?
00:29:272 sec.	Shulman, Douglas H. - Commissioner More or less.
00:29:297 sec.	Baucus, Max - U.S. Senator, [D] Montana More or less, okay. And these regulations, when are they in effect? When can taxpayers expect to be able to utilize them?
00:29:367 sec.	Shulman, Douglas H. - Commissioner They can utilize them immediately. We plan to put them out on our website later today.
00:29:4340 sec.	Baucus, Max - U.S. Senator, [D] Montana Okay. With respect to offshore problems, Mr. Brostek, last week the Finance Committee released a bipartisan preliminary draft of legislation...
00:30:232 sec.	Brostek, Michael - Director Well, as I noted in my statement --
00:30:256 sec.	Baucus, Max - U.S. Senator, [D] Montana -- of evaded taxes.
00:30:317 sec.	Brostek, Michael - Director As I noted in my statement, when compliance is really dependent on the self-reporting of individuals, data indicates that taxpayers tend...
00:30:382 sec.	Baucus, Max - U.S. Senator, [D] Montana Right.
00:30:408 sec.	Brostek, Michael - Director In general, the provisions in the bill appear to be trying to get more transparency --
00:30:48	Baucus, Max - U.S. Senator, [D] Montana Right.
00:30:48	Brostek, Michael - Director -- over the transactions of individuals.
00:30:48	Baucus, Max - U.S. Senator, [D] Montana Right, right.
00:30:4828 sec.	Brostek, Michael - Director And therefore, they ought to have something of a deterrent effect on the non-compliant behavior, reduce it just because the reporting is...
00:31:1612 sec.	Baucus, Max - U.S. Senator, [D] Montana But how effective do you think it will be? I mean, is this enough? Can you do more? What's your sense? If we want to close this down, this...
00:31:285 sec.	Brostek, Michael - Director Well, I hate to be pessimistic but I don't think that we're ever going to --
00:31:335 sec.	Baucus, Max - U.S. Senator, [D] Montana I want you to be realistic, but you're a good public servant. (Laughter.)
00:31:3826 sec.	Brostek, Michael - Director To be realistic, I don't think we are ever going to completely shut down tax evasion. Those who would like to evade...
00:32:042 sec.	Baucus, Max - U.S. Senator, [D] Montana So what more could we do?
00:32:062 sec.	Brostek, Michael - Director I don't have a set of proposals for you today.
00:32:083 sec.	Baucus, Max - U.S. Senator, [D] Montana Well, just some thoughts, some ideas.
00:32:1112 sec.	Brostek, Michael - Director Okay. Well, as I noted in the statement, I do think that one of the things you have in your legislation is to expand the period of time...
00:32:232 sec.	Baucus, Max - U.S. Senator, [D] Montana And we do that from three to six.
00:32:2535 sec.	Brostek, Michael - Director Yes. And I think that's desirable for a number of reasons, but in part because IRS agents are very careful not to extend over the statute...
00:33:001 min.	Baucus, Max - U.S. Senator, [D] Montana Okay, before I do that I just -- you know, Americans are quite angry about these -- (inaudible) -- quite angry about these AIG bonuses paid...
00:34:3636 sec.	Shulman, Douglas H. - Commissioner Let me say a couple things, Mr. Chairman. As a citizen, I share your outrage. I can't add a lot to what the president said yesterday, that...
00:35:1211 sec.	Baucus, Max - U.S. Senator, [D] Montana Right, well, you're likely to work with us, and we'll work with others too. We've got to find an answer to that question: What's the highest...
00:35:234 sec.	Nelson, Bill - U.S. Senator, [D] Florida Perhaps 90 percent, Mr. Chairman.
00:35:274 sec.	Baucus, Max - U.S. Senator, [D] Montana Let's find out what it is.
00:35:3127 sec.	Nelson, Bill - U.S. Senator, [D] Florida I want to congratulate the IRS and the Justice Department when you exposed the massive fraud on the Swiss bank UBS. Do you have any reason...
00:35:581 min.	Shulman, Douglas H. - Commissioner Yes, thank you for your commendation. We've been trying to be very aggressive around offshore tax evasion. I guess I can't speak to other...
00:37:176 sec.	Nelson, Bill - U.S. Senator, [D] Florida Okay, so the answer is you don't know of any others.
00:37:2315 sec.	Shulman, Douglas H. - Commissioner I think the answer is we've got a whole bunch of things we're looking at. We have taxpayers coming in under the whistleblower program. I'm...
00:37:3841 sec.	Nelson, Bill - U.S. Senator, [D] Florida All right, well, thanks to the chairman we're going to get into some legislation on this. The chairman has filed one version. I've filed...
00:38:1955 sec.	Shulman, Douglas H. - Commissioner The first question, I don't have the number. As you know, the law allows the U.S. Virgin Islands to set up its own economic development...
00:39:146 sec.	Nelson, Bill - U.S. Senator, [D] Florida Will you share with the committee how many taxpayers participate in this Virgin Islands shelter?
00:39:206 sec.	Shulman, Douglas H. - Commissioner Yeah, I don't know. I will share with you what we have. I'm not sure we have a clear definition of the Virgin Islands shelters but I'll...
00:39:261 min.	Nelson, Bill - U.S. Senator, [D] Florida Okay, thanks to the good work of the GAO, you found out that a number of financial institutions that have been receiving considerable federal...
00:41:0055 sec.	Brostek, Michael - Director I think it's a mixture, sir. The work that we did for the chairman and ranking member on the Cayman Islands suggested that there are subsidiaries...
00:41:552 sec.	Nelson, Bill - U.S. Senator, [D] Florida Mr. Chairman, we've got to put a stop to this nonsense.
00:41:573 sec.	Baucus, Max - U.S. Senator, [D] Montana It's an outrage. It's an absolute outrage.
00:42:008 sec.	Nelson, Bill - U.S. Senator, [D] Florida It's part of the way that we can solve the budgetary deficit problem: Get the tax that's owed instead of allowing all of this tax avoidance.
00:42:0833 sec.	Baucus, Max - U.S. Senator, [D] Montana That's true. I mean, as Mr. Brostek said, I don't think we'll -- I mean, first we have to distinguish between individual tax evasion and...
00:42:4113 sec.	Enzi, Michael "Mike" B. - U.S. Senator, [R] Wyoming Thank you, Mr. Chairman. I appreciate you holding this hearing today. It's already been educational and I appreciate Commissioner Schulman's...
00:42:546 sec.	Baucus, Max - U.S. Senator, [D] Montana I noticed you were listening very intently to -- (Cross talk.)
00:43:0041 sec.	Enzi, Michael "Mike" B. - U.S. Senator, [R] Wyoming I'll submit a few questions that are probably more technical than anybody around here would be interested in, but I would have been interested...
00:43:411 min.	Shulman, Douglas H. - Commissioner Well, you know, at the end of the day most of our enforcement resources are focused on making sure we collect the proper amount of tax,...
00:44:586 sec.	Enzi, Michael "Mike" B. - U.S. Senator, [R] Wyoming It's estimated that we stand to lose about 17 billion (dollars) on this tax scam in taxes that we won't be able to collect.
00:45:043 sec.	Shulman, Douglas H. - Commissioner On -- I'm sorry?
00:45:072 sec.	Enzi, Michael "Mike" B. - U.S. Senator, [R] Wyoming On the Madoff scheme.
00:45:095 sec.	Shulman, Douglas H. - Commissioner I hadn't heard that estimate. I'm sorry. (Cross talk.)
00:45:1435 sec.	Enzi, Michael "Mike" B. - U.S. Senator, [R] Wyoming I would be interested in an estimate of what was probably lost by the time we do the tax adjustments that will be coming up. Chairman...
00:45:496 sec.	Shulman, Douglas H. - Commissioner I can't comment on the interpretation because I think, you know, the legislation will still be hashed out. I would refer the committee to...
00:45:553 sec.	Enzi, Michael "Mike" B. - U.S. Senator, [R] Wyoming Right.
00:45:5853 sec.	Shulman, Douglas H. - Commissioner What I would say is I've had a lot of conversations with this committee, with the chairman. One of the keys to really getting after the...
00:46:512 sec.	Enzi, Michael "Mike" B. - U.S. Senator, [R] Wyoming And what particular groups would those be?
00:46:53	Shulman, Douglas H. - Commissioner Excuse me?
00:46:5311 sec.	Enzi, Michael "Mike" B. - U.S. Senator, [R] Wyoming What particular groups would those be that this would now target that we're not already requiring reports for income transfers under the...
00:47:0435 sec.	Shulman, Douglas H. - Commissioner Well, as I understand it, the proposal is actually putting a responsibility on the financial institution to send information to the IRS....
00:47:395 sec.	Enzi, Michael "Mike" B. - U.S. Senator, [R] Wyoming Thank you, and my time is expired and I look forward to working with the chairman on that proposal.
00:47:4434 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you, Senator. I might say that clearly we need to work this out so that, you know, some of the concerns that you're implying are addressed,...
00:48:188 sec.	Schumer, Charles E. - U.S. Senator, [D] New York Thank you, Mr. Chairman, and I want to thank you for holding this hearing at the -- in part at least of the request of Senator Cantwell...
00:48:26	Baucus, Max - U.S. Senator, [D] Montana Right, you're welcome.
00:48:264 min.	Schumer, Charles E. - U.S. Senator, [D] New York -- and I appreciate that. I have a brief opening statement to make and then I'll ask some questions of the commissioner. The...
00:52:491 min.	Shulman, Douglas H. - Commissioner Yeah, a couple of issues. One is we've actually met with SIPC -- I've met with the chairman. You know, unfortunately in this tragic situation...
00:54:0510 sec.	Schumer, Charles E. - U.S. Senator, [D] New York I would just ask you in this guidance to be, again, as much on the victims' side as you can be, given the awful situation they're in.
00:54:152 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you. Senator Menendez.
00:54:17	Schumer, Charles E. - U.S. Senator, [D] New York Chairman, I have other questions. Are we going to have a second round?
00:54:174 sec.	Baucus, Max - U.S. Senator, [D] Montana Yes.
00:54:21	Schumer, Charles E. - U.S. Senator, [D] New York Great. Thank you.
00:54:214 sec.	Baucus, Max - U.S. Senator, [D] Montana Senator? (Cross talk.)
00:54:257 sec.	Menendez, Robert "Bob" - U.S. Senator, [D] New Jersey Thank you, Mr. Chairman. I want to join -- my other colleagues here asked you for this hearing and I appreciate you doing it so quickly...
00:54:322 sec.	Baucus, Max - U.S. Senator, [D] Montana You bet.
00:54:341 min.	Menendez, Robert "Bob" - U.S. Senator, [D] New Jersey Bernie Madoff is probably the most visible and incredible example of a calamitous failure of the federal government's responsibility and...
00:56:101 min.	Shulman, Douglas H. - Commissioner Senator, you know, we're pretty focused on this issue of direct investors, indirect investors, feeder funds. What I...
00:57:1313 sec.	Menendez, Robert "Bob" - U.S. Senator, [D] New Jersey Yeah. I'm just concerned that while they have to wait for the feeder funds to do their work and their reporting, that they're left out there...
00:57:266 sec.	Shulman, Douglas H. - Commissioner At the end of the day, I mean, I think there's no other way. And any sort of partnership that you can file a tax return, you've got to know...
00:57:322 sec.	Menendez, Robert "Bob" - U.S. Senator, [D] New Jersey We'll have to look at how those feeder --
00:57:343 sec.	Shulman, Douglas H. - Commissioner Yeah. We'd be happy to look at it and talk with your office.
00:57:3726 sec.	Menendez, Robert "Bob" - U.S. Senator, [D] New Jersey Let me ask you: In terms of documentation of losses, what's going to be considered proper documentation to establish losses, particularly?...
00:58:0315 sec.	Shulman, Douglas H. - Commissioner Yeah, I mean, I don't -- in general, yes. I mean, this is general guidance, but in the Madoff case we anticipate statements are good enough,...
00:58:1822 sec.	Menendez, Robert "Bob" - U.S. Senator, [D] New Jersey Let me ask you. In our letter to you, we asked whether or not you're going to establish a special unit to process claims related to the...
00:58:4040 sec.	Shulman, Douglas H. - Commissioner What we've done, you know, across the board we've taken a look at this very significant economic downturn that we're in. And everything...
00:59:2015 sec.	Menendez, Robert "Bob" - U.S. Senator, [D] New Jersey Okay. I have other questions. I'll submit them for the record. One of them is about how we treat IRAs -- particularly certain types of IRAs --...
00:59:352 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you, Senator. Senator Grassley.
00:59:371 min.	Grassley, Charles "Chuck" E. - U.S. Senator, [R] Iowa Mr. Chairman, if I could, before I ask questions, reinforce the dialogue that we had at the opening of this hearing. You alluded to some...
01:01:032 sec.	Baucus, Max - U.S. Senator, [D] Montana You bet.
01:01:0536 sec.	Grassley, Charles "Chuck" E. - U.S. Senator, [R] Iowa Mr. Commissioner, as I mentioned in my opening statement, I appreciate that the IRS is moving quickly to assist taxpayers during these difficult...
01:01:4145 sec.	Shulman, Douglas H. - Commissioner Yeah. Sure, Senator. It's a great question. Anyone who takes advantage of the safe harbor and streamlined implementation of the procedure...
01:02:2644 sec.	Grassley, Charles "Chuck" E. - U.S. Senator, [R] Iowa Okay. Next, let's take a look at the disheartening situation of billions being lost by charitable victims of Ponzi. In Congress in 1969...
01:03:104 sec.	Shulman, Douglas H. - Commissioner Yeah. I think you're referring to the private foundation --
01:03:14	Grassley, Charles "Chuck" E. - U.S. Senator, [R] Iowa Yes.
01:03:1436 sec.	Shulman, Douglas H. - Commissioner -- jeopardy investment rules, where we have the ability to assess a 10 percent excise tax on people who don't exercise due diligence and...
01:03:5044 sec.	Grassley, Charles "Chuck" E. - U.S. Senator, [R] Iowa That's very good. Thank you. Mr. Josephson, your testimony troubles me, as you seem to indicate that many states are not minding the store...
01:04:342 min.	Josephson, William - Attorney As you know, Mr. Chairman -- excuse me. As you know, Senator Grassley, the state laws for charities are widely unenforced. Forty states...
01:06:452 sec.	Grassley, Charles "Chuck" E. - U.S. Senator, [R] Iowa Thank you, Mr. Chairman.
01:06:473 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you, Senator. Senator Stabenow, you're next.
01:06:502 min.	Stabenow, Debbie - U.S. Senator, [D] Michigan Well, thank you, Mr. Chairman, for holding this meeting. And let me start by saying that I appreciate President Obama's comments and leadership...
01:09:161 min.	Shulman, Douglas H. - Commissioner Yeah, we -- I've been very clear that we can't have a go-it-alone strategy. That we certainly have interests that we need to pursue on behalf...
01:11:0021 sec.	Stabenow, Debbie - U.S. Senator, [D] Michigan Well, there's no question that we're seeing some increased transparency and more willingness to share information. I'm wondering specifically,...
01:11:211 min.	Shulman, Douglas H. - Commissioner Yeah. Well, I guess what I would say is if there's tax haven countries that have been facilitating this -- Lichtenstein, for instance, had...
01:13:122 sec.	Stabenow, Debbie - U.S. Senator, [D] Michigan Thank you, Mr. Chairman.
01:13:142 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you, Senator. Senator Snowe.
01:13:163 min.	Snowe, Olympia J. - U.S. Senator, [R] Maine Thank you, Mr. Chairman. And, like everyone else, I share an outrage over the payment by AIG and their announcement of bonuses. It certainly...
01:16:391 min.	Shulman, Douglas H. - Commissioner Yeah. Well, a few things. One is, as I said before, I can't really add much to what the president said yesterday about AIG. But as a citizen,...
01:17:4333 sec.	Snowe, Olympia J. - U.S. Senator, [R] Maine Well, I (did see ?) -- (chuckles) -- it's inconceivable to me, though, that the Treasury Department didn't look at these cash flows. So...
01:18:16	Shulman, Douglas H. - Commissioner Yeah.
01:18:1622 sec.	Snowe, Olympia J. - U.S. Senator, [R] Maine And frankly, it's preposterous. And so I don't blame the American people about the extent of their anger. And -- but this is something that,...
01:18:383 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you, Senator. Senator Kerry.
01:18:411 min.	Kerry, John F. - U.S. Senator, [D] Massachusetts Thank you, Mr. Chairman. Thanks a lot for doing this hearing and, again, bringing this subject up as you did earlier last year. We appreciate...
01:20:1724 sec.	Shulman, Douglas H. - Commissioner I find it to be varying among governments. I don't necessarily find that to be true, because I think there's a lot of like-minded governments...
01:20:4112 sec.	Kerry, John F. - U.S. Senator, [D] Massachusetts Let me just say, as chair of the Foreign Relations Committee, I will say that we are going to look at those treaties, and we're going to...
01:20:5351 sec.	Shulman, Douglas H. - Commissioner I think that's a worthwhile effort because what I was going to say is the model U.S. treaty for taxes has 30 provisions, everything from...
01:21:441 min.	Kerry, John F. - U.S. Senator, [D] Massachusetts Well, it seems to me that we -- we even have to go beyond that. I mean, I have found that a lot of these governments have just fundamental...
01:23:031 min.	Shulman, Douglas H. - Commissioner I guess I'd say a couple of things. One is I'd say there's no silver bullet. There's going to be multiple pieces of the strategy that include...
01:24:356 sec.	Baucus, Max - U.S. Senator, [D] Montana Senator Cantwell. Excuse me. Senator Carper. I'm sorry. Senator Carper's next. Sorry.
01:24:4111 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Thanks very much. Mr. Shulman, you were good to come by my office and meet with me almost a year ago. I think it was before you'd been confirmed....
01:24:528 sec.	Shulman, Douglas H. - Commissioner A dog year. Feels like seven. (Laughter.) Well, yes. Yes.
01:25:0011 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Welcome to the pound. (Laughter.) I -- you serve a term of five years as I recall. Is that correct?
01:25:11	Shulman, Douglas H. - Commissioner That's correct.
01:25:112 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Any idea how long that's been the case?
01:25:1316 sec.	Shulman, Douglas H. - Commissioner A five-year term for the commissioner? It was part of the IRS restructuring and reformat. Ninety-eight was the first five-year term and...
01:25:293 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware I hesitate in asking this question but you -- but do you think it's a good idea?
01:25:32	Shulman, Douglas H. - Commissioner What's that?
01:25:326 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Do I (sic) think it's a good idea to have a five- year term that stretches across different terms of the president?
01:25:3824 sec.	Shulman, Douglas H. - Commissioner You know, my belief is that, you know, the IRS needs to be a nonpartisan by-the-book agency that enforces the law, that is removed from...
01:26:0226 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Well, the reason why I ask -- the reason why I ask I chair a subcommittee that has jurisdiction over among other things the Census Bureau,...
01:26:282 sec.	Shulman, Douglas H. - Commissioner I won't comment on the Census Bureau.
01:26:3045 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Just fill out your Census form and we'll be fine. As you may recall, when you visited with us, we talked a bit about the tax gap. You talked...
01:27:152 min.	Shulman, Douglas H. - Commissioner You know, the answer is yes. Chairman Baucus, a number of other members of Congress, have been incredibly supportive of the IRS and the...
01:29:1743 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware I share the passion of our chairman and that of a number of people on our committee to go after as much of this tax money that's owed and...
01:30:007 sec.	Brostek, Michael - Director Well, there are a number of things that could be done. Looking for additional information reporting is clearly one of the best strategies....
01:30:074 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware I'm told that when the information is reported we collect about 90 percent of the -- IRS collects about 90 percent.
01:30:113 sec.	Brostek, Michael - Director Or more, yes. I think it's up to 96 percent --
01:30:14	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Pretty good.
01:30:1437 sec.	Brostek, Michael - Director -- with complete information reporting. IRS knows exactly the same income items that the taxpayer knows. One area that I think is maybe...
01:30:51	Baucus, Max - U.S. Senator, [D] Montana Thank you very much.
01:30:512 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Thank you very much.
01:30:532 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you, Senator. Senator Cantwell?
01:30:552 min.	Cantwell, Maria - U.S. Senator, [D] Washington Thank you, Mr. Chairman, and I want to add my thanks for you holding this important hearing. Madoff frauds and schemes...
01:33:001 min.	Shulman, Douglas H. - Commissioner Yeah, you know, a couple of issues. One is the majority of our enforcement resources are focused on collecting taxes. And as you said, you...
01:34:085 sec.	Cantwell, Maria - U.S. Senator, [D] Washington Do you think if you would've had the resources and we had better coordination that we could've connected some of the dots?
01:34:1335 sec.	Shulman, Douglas H. - Commissioner You know, I think it's always easy to look in the rear-view mirror; a lot of people were duped by Bernie Madoff, from federal regulators...
01:34:4812 sec.	Cantwell, Maria - U.S. Senator, [D] Washington Do you think there's any legal obstacles for more coordination? Because, again, it seems to me that you have access to records and information...
01:35:0030 sec.	Shulman, Douglas H. - Commissioner Yes, well Section 6103, which is a pretty locked- down provision around us not sharing taxpayer information is quite important to the integrity...
01:35:3020 sec.	Cantwell, Maria - U.S. Senator, [D] Washington Well I certainly want to explore that with you but I think the inter-agency coordination and cooperation is critical on many fronts -- and...
01:35:5019 sec.	Shulman, Douglas H. - Commissioner And I will tell you, I mean, to the other topic we're talking about with offshore -- we're actually now very aggressively having conversations...
01:36:0927 sec.	Cantwell, Maria - U.S. Senator, [D] Washington Thank you. And, Mr. Chairman, I know that this is -- you know, we've had all of this economic crisis on individuals and the impact but the...
01:36:361 min.	Baucus, Max - U.S. Senator, [D] Montana Yeah. Thank you, Senator. I would just like to ask a few questions, Commissioner Shulman, about UBS. As I understand it, at the urgence...
01:37:4911 sec.	Shulman, Douglas H. - Commissioner Let me say a couple of things, Mr. Chairman. First of all, I would love to go into this case with you and brag about it because I think...
01:38:002 sec.	Baucus, Max - U.S. Senator, [D] Montana And I compliment you for that.
01:38:0250 sec.	Shulman, Douglas H. - Commissioner -- and, as you know, I can't really talk about specific taxpayer cases, et cetera. What I will tell you is there's two things that happened,...
01:38:5230 sec.	Baucus, Max - U.S. Senator, [D] Montana Right. But how do we get at the Swiss problem? Because I understand that Switzerland makes its own decision whether or not the requested...
01:39:2255 sec.	Shulman, Douglas H. - Commissioner Yeah. One of the problems -- and we talked about treaties a little bit before -- sovereign law often trumps treaties. These indications...
01:40:178 sec.	Baucus, Max - U.S. Senator, [D] Montana Right. So to what degree does information reporting actually trump sovereign Swiss law?
01:40:252 sec.	Shulman, Douglas H. - Commissioner Would information?
01:40:2710 sec.	Baucus, Max - U.S. Senator, [D] Montana What information? If we require -- this is legislation we're contemplating here -- were to be enacted, to what degree would that help?
01:40:3729 sec.	Shulman, Douglas H. - Commissioner Well, I think what it would do is -- I'm not sure it trumps Swiss law but we'd actually see the flows going out of the U.S. and be able...
01:41:0611 sec.	Baucus, Max - U.S. Senator, [D] Montana So how many other havens are there? You know, Lichtenstein is stepping forward as I understand it; Andorra has -- Monaco has not as I understand...
01:41:173 sec.	Shulman, Douglas H. - Commissioner I read in the papers that they say they are but that's all I know.
01:41:2016 sec.	Baucus, Max - U.S. Senator, [D] Montana Okay. Well I hear the current position in Monaco is to make no comment at all to the state officials. Now I know what no comment means,...
01:41:361 sec.	Shulman, Douglas H. - Commissioner Well I guess I'd rather --
01:41:371 sec.	Baucus, Max - U.S. Senator, [D] Montana I know you'd rather not name.
01:41:389 sec.	Shulman, Douglas H. - Commissioner (Laughs.) Yeah, listing the names of countries is the purview of Treasury, State Department. Obviously, we've got our eyes on it. I mean,...
01:41:477 sec.	Baucus, Max - U.S. Senator, [D] Montana If we name names, that puts the, you know, sunshine on those countries but they will glare on them; it embarrasses them and that might do...
01:41:541 sec.	Shulman, Douglas H. - Commissioner Well I think we've --
01:41:555 sec.	Baucus, Max - U.S. Senator, [D] Montana Let me just cozy in here -- you know, I'm not going to corrupt -- (laughter)
01:42:0034 sec.	Shulman, Douglas H. - Commissioner Let's just say I'm probably not going to be doing a lot of ski vacations in the Swiss Alps. (Laughter.) So it -- I think bank secrecy is...
01:42:3418 sec.	Baucus, Max - U.S. Senator, [D] Montana Well, my time has expired. I'd just urge you to just go for it. And you have such support in this country for you to -- very, very vigorous...
01:42:5221 sec.	Schumer, Charles E. - U.S. Senator, [D] New York Thank you, Mr. Chairman. I really appreciate your having the hearing. I think it's on two very important subjects and I appreciate the second...
01:43:132 sec.	Baucus, Max - U.S. Senator, [D] Montana Oh, I'd like him to be embarrassingly vigorous.
01:43:153 sec.	Schumer, Charles E. - U.S. Senator, [D] New York Embarrassingly vigorous on offshore stuff and I agree. Okay --
01:43:187 sec.	Baucus, Max - U.S. Senator, [D] Montana Right. But better -- we can back off a little bit -- just be very vigorous. (Laughter.)
01:43:25	Schumer, Charles E. - U.S. Senator, [D] New York For this year.
01:43:251 sec.	Baucus, Max - U.S. Senator, [D] Montana For this year, right.
01:43:2634 sec.	Schumer, Charles E. - U.S. Senator, [D] New York The man from Montana has spoken. Next question -- this is back on helping the victims of Madoff. And this one's -- it sounds innocuous but...
01:44:0033 sec.	Shulman, Douglas H. - Commissioner Yeah. You know, 401Ks, IRAs, retirement vehicles. If an investment was deductible going in, you can't take a loss going out because there...
01:44:338 sec.	Schumer, Charles E. - U.S. Senator, [D] New York Right. Again, I would just urge you to be as helpful as you can to the victims in this regard -- particularly with the Roth IRA situation.
01:44:414 sec.	Shulman, Douglas H. - Commissioner Can I just make one clarifying comment about your earlier comment, Senator?
01:44:451 sec.	Schumer, Charles E. - U.S. Senator, [D] New York Yeah.
01:44:4641 sec.	Shulman, Douglas H. - Commissioner You talked about a five-year carry-back and indefinite carry-forward of the loss. Under general rules it's a three-year carry-back because...
01:45:273 sec.	Schumer, Charles E. - U.S. Senator, [D] New York But if you were below 15 million (dollars) you're okay with the five years.
01:45:302 sec.	Shulman, Douglas H. - Commissioner In 2008 yeah.
01:45:3231 sec.	Schumer, Charles E. - U.S. Senator, [D] New York Okay, good. The one point about the IRA, just to make it, the money in the IRA was still stolen in an IRA but it's still gone -- so anything...
01:46:0343 sec.	Shulman, Douglas H. - Commissioner So the ruling tries to clarify existing law, not make up law, and it's deductible in the year discovered except for reasonable prospects...
01:46:4627 sec.	Schumer, Charles E. - U.S. Senator, [D] New York Good. Again, I have to repeat that the IRS has done all of the rulings and the guidance that you've given are really helpful to the victims....
01:47:132 sec.	Shulman, Douglas H. - Commissioner It's a good day.
01:47:1510 sec.	Schumer, Charles E. - U.S. Senator, [D] New York -- in a difficult situation, so thank you. I'm going to yield back my time because the chairman has been generous. I have a few more questions....
01:47:252 sec.	Baucus, Max - U.S. Senator, [D] Montana Absolutely. Without objection.
01:47:274 sec.	Schumer, Charles E. - U.S. Senator, [D] New York -- znd the commissioner answer them in writing within say five days -- would that be all right?
01:47:31	Baucus, Max - U.S. Senator, [D] Montana We could do that.
01:47:312 sec.	Shulman, Douglas H. - Commissioner Yeah. But we'll get them as quickly as we can.
01:47:33	Baucus, Max - U.S. Senator, [D] Montana I think we'll get them back --
01:47:332 sec.	Schumer, Charles E. - U.S. Senator, [D] New York Thank you.
01:47:354 sec.	Baucus, Max - U.S. Senator, [D] Montana -- in fewer than five days. The rule here is, what, about two or three?
01:47:394 sec.	Schumer, Charles E. - U.S. Senator, [D] New York What is the rule?
01:47:43	Baucus, Max - U.S. Senator, [D] Montana We'll rule three days.
01:47:433 sec.	Schumer, Charles E. - U.S. Senator, [D] New York The chairman has ruled.
01:47:46	Shulman, Douglas H. - Commissioner We certainly will obey the rules.
01:47:463 sec.	Baucus, Max - U.S. Senator, [D] Montana We just ruled. It's three days. Okay, Senator Snowe?
01:47:492 min.	Snowe, Olympia J. - U.S. Senator, [R] Maine Thank you again -- Commissioner Shulman, to follow up again on UBS, because I think it's extremely disturbing about this, frankly, and I...
01:50:472 sec.	Shulman, Douglas H. - Commissioner Not to my knowledge.
01:50:4920 sec.	Snowe, Olympia J. - U.S. Senator, [R] Maine It's hard to imagine, actually, because this -- obviously, this institution not only failed to pay $220 million in taxes, obviously paying...
01:51:0956 sec.	Shulman, Douglas H. - Commissioner Well, I will tell you, it's in the public record and I can only talk about the public record, but we actually, you know, through informants...
01:52:0551 sec.	Snowe, Olympia J. - U.S. Senator, [R] Maine I appreciate that too. And I appreciate the work. Mr. Josephson, on the Pension and Benefit Guarantee Corporation that's responsible for...
01:52:563 min.	Josephson, William - Attorney It depends where you think, Senator, the risk of loss should fall. Obviously, diversification is required by the applicable state law. And...
01:56:247 sec.	Snowe, Olympia J. - U.S. Senator, [R] Maine You're absolutely correct and we thank you very much for those very constructive suggestions. Thank you.
01:56:311 min.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Gentlemen, I have just a couple of questions to wrap up -- at least for me. Again, thank you very much for being here today and for your responses...
01:57:531 min.	Shulman, Douglas H. - Commissioner Yeah. You know, the tax gap numbers, as I've gotten under it, is very difficult to estimate the tax gap. The current numbers that are public...
01:59:0549 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Thank you. A question for Mr. Brostek, and also for you, Commissioner. Sticking with the tax gap, again, we all know we need additional third-party...
01:59:541 min.	Brostek, Michael - Director Maybe I'll start and pass it over. The research that the Commissioner's referred to is fundamental to their being able to determine which...
02:01:253 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware Thank you. And Mr. Commissioner, if you'd just respond briefly, please.
02:01:281 min.	Shulman, Douglas H. - Commissioner Yeah. I mean, I think that -- I guess I don't think it's necessarily a choice, the way I'd think about it. Basis reporting, for example....
02:03:0912 sec.	Carper, Thomas "Tom" R. - U.S. Senator, [D] Delaware That's a very good point. Again, thank you for your testimony today. And Mr. Chairman, I've got another question or two I'd like to submit...
02:03:2119 sec.	Baucus, Max - U.S. Senator, [D] Montana Thank you, Senator. Mr. Commissioner, I just have a question about your budget. You're getting a slug of -- you're getting a big increase...
02:03:403 sec.	Shulman, Douglas H. - Commissioner It's a significant increase. I don't think -- the details haven't come out.
02:03:4324 sec.	Baucus, Max - U.S. Senator, [D] Montana Okay. I understand it's very significant. The question is: How do you intend to put this extra funding to work? What are you going to do...
02:04:072 min.	Shulman, Douglas H. - Commissioner I'm happy to go through that with you. We're going to put the budget to work by making sure we get the right personnel to do what we need...
02:07:00	Baucus, Max - U.S. Senator, [D] Montana (Off mike.)
02:07:0040 sec.	Shulman, Douglas H. - Commissioner I just wanted to answer -- international. A significant portion will be international. As you know, the president set out $210 billion --...
02:07:4020 sec.	Baucus, Max - U.S. Senator, [D] Montana Okay. I guess -- there are a lot of pretty bright people out there trying evade taxes -- a lot of preparers, tax lawyers, others. Do...
02:08:0043 sec.	Shulman, Douglas H. - Commissioner Yeah, we've talked before, Mr. Chairman. One of my highest priorities is our work force -- getting the right people, training them, making...
02:08:432 min.	Baucus, Max - U.S. Senator, [D] Montana That may be true and there may be an opportunity -- a major opportunity there. I've run across this in several different circumstances....
02:10:44	Shulman, Douglas H. - Commissioner We need all the support.
02:10:4434 sec.	Baucus, Max - U.S. Senator, [D] Montana Hearing's adjourned.