REMARKS OF PETE SEPP
PRESIDENT, NATIONAL TAXPAYERS UNION
Before the
Subcommittee on Delivering on Government Efficiency
House Committee on Oversight and Government Reform
Introduction
Chairman Burchett, Ranking Member Stansbury, Members of the Subcommittee, I am honored to present National Taxpayers Union’s (NTU’s) views on “the IRS under audit.” I can think of no more appropriate place than here to “review operations at the nation’s tax collector,” and no better format for a substantive, thoughtful discussion than this roundtable.
NTU has a rich history of weighing in on tax administration issues. We have provided constructive input on all six of Congress’s comprehensive bills on IRS reform, from the Taxpayer Bill of Rights of 1988 up through this year’s proposed Taxpayer Assistance and Service Act. We served on a federal commission in 1996-97 to make recommendations for restructuring the IRS and developing a genuine strategic plan to move it forward. Our research arm formed Taxpayers for IRS Transformation (Taxpayers FIRST) shortly after passage of the Inflation Reduction Act (IRA) to provide bipartisan expert input from on how best to implement the IRA’s funding provisions for IRS development.
Allow me to review more recent products of ours on tax administration. Here let me acknowledge the outstanding staff at NTU and NTU Foundation I work with on tax administration issues, especially Debbie Jennings, Demian Brady, and Andrew Wilford.
Observations and Analysis
1) In 2024 we published a report card on key taxpayer service, technology modernization, and compliance objectives, after the IRS’s own “report card” declined to issue any grades evaluating its progress. We have updated the report card this week especially for this roundtable, and the highlights show some progress on what remains a very long road to a more efficient, effective IRS. All the following grades remain conditional on further progress in 2026:
- IRS efforts at improving Taxpayer Service have been upgraded from a “C” to a “B-”, owing to items such as development of new Level of Service metrics for phone and online assistance, expanded but still imperfect availability of tools and forms online, and a more intuitive website,.
- NTUF has given a “C” to Modernization work, up from a “D” in the last report card, primarily because of new contracts finally underway for an Application Program Interface to fix legacy taxpayer record databases, and to a lesser degree some limited progress toward more transparency on Artificial Intelligence.
- The IRS grade for compliance objectives and measurement has ticked upward from a “C” to a “C+”, mainly due to the Service’s commitment to improving the quality of guidance to taxpayers and significant strides toward enhancing or introducing new alternative dispute resolution (ADR) and mediation procedures for a wider range of taxpayer cases. As the National Taxpayer Advocate has noted, Fast Track Settlement, a type of dispute resolution, “has saved approximately 450 days per case compared to traditional resolution through Appeals.”
(The updated report card is available at: Foundation - National Taxpayers Union)
(The original report card, in three parts, is available at: Grading the IRS Part 1: Taxpayer Service - Foundation - National Taxpayers Union; Grading-the-IRS-tax-gap.pdf; and Grading the IRS Part 3: Modernization - Foundation - National Taxpayers Union)
2) Another product that might interest the Subcommittee is our analysis of the current filing season, from the outside looking in. GAO, TIGTA, and the Taxpayer Advocate have plenty to say on this topic, but NTU has noted the following:
- As of the end of March, the number of returns claiming the new tipped income deduction was falling far short of projections, while those claiming the new overtime deduction were running double of official projections
- Despite a 27% reduction in IRS staff and a long lag time in training personnel reassigned to taxpayer services, the Service has largely met goals of processing most tax refunds within 21 days. This is important for efficiency, since the IRS would otherwise have to pay hundreds of millions, even billions, in interest on refunds issued past 21 days.
- About 1% of taxpayers have received a CP53E notice this year asking for updated bank information for direct deposit purposes – a small share of total returns filed but a considerable source of delay for moderate-income taxpayers counting on refunds.
(The analysis is available at: Four Lessons from Tax Filing Season 2026 - Foundation - National Taxpayers Union)
3) Tax Day wouldn’t be complete without a study we have produced every tax filing season since 1999 that measures complexity in the federal income tax system. Taxpayers are spending an estimated 6.93 billion hours complying with the tax code in 2025—down from a peak of 7.93 billion hours in 2023.Tax compliance costs include $319.7 billion in lost time and at least $157.1 billion in out-of-pocket expenses, including tax software and professional services.
While a great deal of this report has to do with statutory changes to the tax laws from Congress, the Executive Branch does own a piece of the complexity puzzle:
- The out-of-pocket estimate is low because the IRS has not yet completed analysis for some tax forms, as required under the Paperwork Reduction Act. In fact, some information collections that are incomplete or not available are reported by the government as $0 – an inaccurate description.
- The IRS has deemed broad areas of the tax code as “out-of-scope” for assistance over the phone and at in-person clinics. This also increases out-of-pocket burdens as taxpayers have few options other than turning to paid preparers or advisors.
- Combined, the number of words in the tax code and the number of words in regulations is more than twice as high as it was in 1994.
The economic and fiscal inefficiency of a Tax Code this complex should concern Members of the Subcommittee.
(The study is available at: The Hidden Cost of the Tax Code: 6.93 Billion Hours and More Than $477 Billion in Total Compliance Burdens - Foundation - National Taxpayers Union)
4) We often think of IRS efficiency in terms of IT systems and staffing, but we should also consider the efficiency implications of management decisions. A March 2026 study from NTU Foundation of 798 resolved and pending Tax Court cases involving partnership conservation easement deductions found that the IRS has taken an extreme zero-valuation position 93% of the time and imposed hefty misstatement penalties 99% of the time. There are at least another 400 such cases on the way.
The U.S. Tax Court’s budget justification noted that “the Court experienced an increase in the duration of special sessions, primarily related to cases involving conservation easement donations.” The IRS has taken an average of four years and six months to complete audits in these cases, at which point taxpayers can then file in Tax Court to wait years more for their day in court. The IRS is taking the same type of approach toward captive insurance and given that the Tax Court only issues about 200 opinions a year, IRS leaders are creating an untenable situation. Fair global settlement offers for easements and captive insurance could clear the docket for other taxpayers’ cases, bring in near-term revenue and save litigation costs for everybody. That is a triple win for efficiency.
(The study is available at: Litigation by Default: How the IRS Turned Conservation Easements into a Court Crisis - Foundation - National Taxpayers Union)
Recommendations
Although the tax-writing and appropriations committees have often taken primary jurisdiction over IRS and tax administration matters, leadership from this Subcommittee as well as the OGR Committee could be of great benefit to taxpayers. Here’s how.
Pass the Taxpayer Assistance and Service (TAS) Act. This bipartisan legislation (S. 3931) addresses a total of 23 major tax administration reform priorities of NTU, the Taxpayers FIRST project, or both, and many of them are relevant to oversight:
- Enhanced whistleblower protections. The bill requires the Tax Court to review IRS whistleblower award determinations under a de novo standard rather than the deferential abuse-of-discretion standard, contains additional privacy protections for whistleblowers, and provides for interest payments on whistleblower awards when the IRS delays proceedings.
- Better modernization metrics. The bill establishes a real-time IRS public dashboard showing call volumes, backlogs, and wait times, with monthly reporting requirements.
- Expanded online taxpayer service tools. The legislation requires the IRS to digitize correspondence using OCR technology, and upgrades accounts so taxpayers and representatives can view returns, notices, and correspondence and respond to IRS inquiries online.
Support from subcommittee Members for these and other TAS Act provisions could not be timelier, given the dwindling number of days in this session. Even passage of the bill by late summer could still delay some of these tremendously positive changes to the 2028 or 2029 filing seasons.
(The NTU analysis of the TAS Act is available at: Taxpayer Assistance and Service Act Advances Long Overdue Reforms - Publications - National Taxpayers Union)
Learn from PART. From the earliest days of the current Administration, those outside the Executive Branch have sought more information on how the Department of Government Efficiency (DOGE) operated. This Subcommittee has commendably interacted with elements of DOGE, but a more systematic, publicly available approach to future efforts would be even more helpful. A model here is the Program Assessment Rating Tool (PART), initiated under the George W. Bush Administration but long since shelved. Although PART had its growing pains and was initially criticized, it evolved into a more sophisticated evaluation process that outside organizations like NTU came to appreciate, but equally important, one that many federal agency staff came to respect (including at IRS).
The Subcommittee’s leadership with hearings, roundtables, and other facilitations to review PART and develop similar processes for the modern policymaking sphere could be invaluable to taxpayers.
(NTU Foundation’s 2025 retrospective on PART is available here: Reviving Comprehensive Performance-Based Budgeting and the Need for Oversight Reform - Foundation - National Taxpayers Union)
Strengthen IRS Oversight. The 1998 IRS Restructuring and Reform Act (PL 105-206) created an Oversight Board to serve alongside the National Taxpayer Advocate, the Treasury Inspector General for Tax Administration, the Government Accountability Office, and limited advisory committees to provide a more fulsome system of accountability, transparency, and oversight of the Internal Revenue Service. The Board’s unique role was to harness private and public sector talent to assist IRS management with meeting its strategic objectives in a timely, innovative fashion. Unfortunately, the Oversight Board has been dormant for more than a decade largely owing to disputes over nominations. This gap has, in NTU’s opinion, undermined the success of all subsequent IRS transformation initiatives. Recent efforts to revitalize the Board came from former Senators Ben Cardin (D-MD) and Rob Portman (R-OH) in their IRS Customer Service and Transformation Act of 2022. This legislative language could be readily adapted for the current Congress.
Another important and relatively straightforward way for Congress to obtain better inputs on modernization goals is to request access to frontline technical personnel at the IRS. Originally provided for in PL 105-206, and subsequently highlighted by the National Taxpayer Advocate, this practice has nonetheless fallen into disuse, with Congress instead depending on indirect communication through the IRS legislative liaison.
Finally, the reform commission on which NTU served during 1996-97 recommended that Congress create a “joint committee on IRS administration to coordinate ongoing, high-level oversight of the IRS” consisting of Members from “six committees with jurisdiction over the IRS.” That proposal, never enacted, is as pertinent today as it was 30 years ago.
(Further NTU analysis and recommendations are available here: IRS Enforcement Funding Should be Reallocated for Modernization - Publications - National Taxpayers Union; Compliance Should Be IRS Goal, Not "Enforcement" - Publications - National Taxpayers Union)
Conclusion
There are many, many more aspects of tax administration to explore in-depth today, including more creative uses of AI in tax administration and reprioritizing the remainder of the IRS’s Inflation Reduction Act funding, but please allow me to finish my time with a few inspiring words about bipartisanship:
“Even in the most difficult times, we can come together as a nation, as a people and as a Congress to accomplish important things for the American people.”
The man who said that was the late, great John Lewis, a colleague that some members of this Subcommittee, and the larger Oversight and Government Reform Committee, knew well. He was speaking about the passage of IRS overhaul legislation in 2019.
This moment presents one of the last, best chances for the IRS to become a 21st Century tax administrator, and more robust oversight tools will be critical for doing so. That’s why the Subcommittee can and should exercise a more prominent role with IRS transformation, starting today.
Thank you for your consideration, and let’s have a conversation.