Obama appointed Werfel to lead the IRS shortly after a watchdog detailed inappropriate screening methods the agency used to determine whether advocacy groups qualified for tax exemption during the 2010 and 2012.
Treasury inspector general J. Russell George said in a May report that the controversial methods largely affected conservative entities.
The IRS proposed new rules this month to help clarify allowable activities for advocacy groups applying for tax-exempt 401 (c) (4) status as so-called social-welfare organizations.
Sen. Orrin Hatch (R-Utah), ranking member of the committee, asked Koskinen whether he would ensure that the agency applies its political-activity standards equally to other types of 501 (c) groups, including labor unions and trade associations.
“I don’t think the IRS can restore its reputation as a nonprofit agency if it finalizes a regulation that favors one group over another,” Hatch said.
Koskinen responded: “I do think the regulations need to be evenhanded and fair and that people need to have a view that the IRS is a nonpolitical, nonpartisan agency.”
Koskinen, who was testifying on his birthday, is a former government official with experience leading private-sector organizations.
The nominee served as D.C.’s deputy mayor and city administrator from 2000 until 2003. He played key roles in leading Freddie Mac after Obama placed the corporation under conservatorship in the wake of the subprime mortgage crisis.
Koskinen said he would take seriously the threat of potential fraud relating to the healthcare subsidies the IRS will administer under the Affordable Care Act, which is Obama’s signature piece of first-term legislation.
The nominee was responding to concerns about a recent inspector general’s report that said the agency has not proven it can prevent fraud with subsidies promised to consumers who cannot afford health coverage on their own under health law, known as Obamacare.
Koskinen acknowledged the importance of the matter but noted that most of the payments will go to insurance companies rather than individuals. “There is less incentive for fraud than there are in programs where the refunds go directly to the beneficiary,” he said.
Hatch also asked the nominee what he would do to protect sensitive data consumers enter into the troubled online health-insurance exchange that recently opened under the Affordable Care Act.
Koskinen noted that the Department of Health and Human Services runs the exchanges but that he would do his part in conjunction with the IRS inspector general to ensure protection of data on the back end.
Baucus asked the nominee to share his views on tax reform, complaining that the existing tax code is “unnecessarily complex” and that taxpayers devote significant funds toward navigating the rules.
Koskinen said he is a “fan of tax simplification.”
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