The taxman cometh: Despite scandals, IRS to pay out $70 million in union bonuses

Though the Internal Revenue Service (IRS) is currently embroiled in several scandals, it has announced that it is legally obligated to pay out millions of dollars in bonuses to its employees.

While reeling from charges of wasteful spending and targeting specific groups for their political views, the IRS nevertheless is expected to pay out about $70 million in staff bonuses. The issue was raised by Sen. Chuck Grassley of Iowa, a senior Republican on the Senate Finance Committee, which has supervisory powers over the tax-collecting agency.

"The IRS always claims to be short on resources," AP quoted Grassley as saying. "But it appears to have $70 million for union bonuses. And it appears to be making an extra effort to give the bonuses despite opportunities to renegotiate with the union and federal instruction to cease discretionary bonuses during sequestration."

The Obama administration recently ordered government agencies to cancel discretionary bonuses as part of Washington’s ‘sequestration’ initiative to reign in out-of-control federal spending. On April 4, 2013, the Office of Management and Budget issued a statement advising that “discretionary monetary awards should not be issued while sequestration is in place, unless issuance of such rewards is legally required.”

The IRS maintains that awarding bonuses to its employees is part of its legal obligations stipulated by a collective-bargaining contract, which says employees are eligible to receive performance-based bonuses of up to $3,500 a year.

Grassley clearly believes the bonus allowances should be cancelled: "While the IRS may claim that these bonuses are legally required under the original bargaining unit agreement, that claim would allegedly be inaccurate," Grassley wrote in a letter to acting IRS Commissioner Danny Werfel. "In fact, the original agreement allows for the re-appropriation of such award funding in the event of budgetary shortfall."

On Wednesday, the IRS said it was still negotiating with the union over the issue. "IRS is under a legal obligation to comply with its collective bargaining agreement, which specifies the terms by which awards are paid to bargaining-unit employees," spokesperson Michelle Eldridge said in a statement.

Eldridge declined to say whether the IRS believes it is contractually bound to pay the bonuses.

The National Treasury Employees Union (NTEU), which represents IRS employees, has claimed the bonuses are legally required as part of the collective bargaining agreement. "NTEU has had a negotiated performance awards program at the IRS for decades, pursuant to the law and regulations which specifically authorize agencies to implement such merit-based incentive programs," NTEU President Colleen M. Kelley said in a statement carried by AP. "NTEU is currently in discussions with the IRS on this matter and other matters resulting from budget cutbacks."

Bad time for a bonus?

Legal or not, it is certainly a controversial time for IRS employees to be receiving bonus packages.

In May 2013, the IRS came under fire after it was revealed that certain right-leaning political groups – particularly ones affiliated with the Tea Party – were heavily scrutinized when they applied for tax-exempt status.

“We know now that the IRS began targeting individuals based on their personal beliefs three years ago,” House Ways and Means Committee Chair Dave Camp said in a statement. “We still need to know who began this targeting and why.”

Earlier this month, however, Democratic Congressman Elijah Cummings released an interview transcript revealing that an IRS supervisor who described himself as a ‘conservative Republican’ had admitted to Congressional investigators that he had initiated the reviews. The unnamed IRS official said he targeted the conservative groups without any involvement from the White House, and that the extra scrutiny was not politically motivated.

Three congressional committees, in cooperation with the US Justice Department, are investigating the targeting of conservative groups. The FBI has about 12 agents in Washington working on the case, and around the country, FBI Director Robert Mueller told a congressional hearing Wednesday.

A few weeks after the story first made headlines, the IRS was once again in the spotlight, this time for wasteful spending during the peak of the financial crisis. From 2010 to 2012, the tax-collecting agency hosted about 225 conferences, six of which cost over $1 million. The total cost for all of the conferences in this period was just under $50 million.

Many top IRS managers have lost their jobs since the scandals broke. President Barack Obama forced the acting commissioner to resign and replaced him with Werfel, who previously worked in the White House budget office.