This article first appeared in the September 28, 2015 edition of Tax Notes Today.
IRS data released to Tax Analysts September 17 on performance awards and retention incentives reveal a glimpse at the agency's supplementary compensation patterns for senior executive service and non-bargaining-unit managers at one of its most critical functions.
Tax Analysts requested the records, which concern Office of Chief Counsel employees at the GS-15 level and above, through a Freedom of Information Act request in early 2015. The awarding of performance bonuses became an issue at congressional hearings last year over the IRS's spending priorities, especially after IRS Commissioner John Koskinen in 2014 officially reversed his predecessor's policy of suspending most bonuses. (Prior coverage: Tax Notes, June 29, 2015, p. 1517.)
The IRS paid 1,269 performance awards and retention incentives to 351 chief counsel executive and nonunion managers for a total of $5.97 million between January 1, 2010, and February 2, 2015, the date of Tax Analysts' original FOIA request. The average performance award was $4,483, although individual awards -- both performance bonuses and retention incentives -- ranged from $88 to $44,096. Individual recipients' total awards over the period ranged even more widely, from $250 to $285,688.
The position of IRS chief counsel is one of only two Service appointments made by the president and confirmed by the Senate (the other is the IRS commissioner). The Office of Chief Counsel is the chief legal adviser to the IRS commissioner in interpreting, administering, and enforcing tax law and in other legal matters. The chief counsel's office also provides legal guidance to the Treasury Department and to taxpayers.
Highs and Lows
The IRS data show that most awards were paid in specific months of the fiscal year, while other months showed barely any payments at all.
For example, the IRS on February 14, 2010, paid three performance awards totaling $3,000. On April 11, 2010, the Service made one performance award of $350. Yet on August 29, 2010, the agency doled out 204 awards totaling $659,453.
The pattern roughly repeats over the pre-2013 data received, with most performance awards paid in August, December, and January, until awards stopped in January 2013. At the time, the IRS said it was suspending the awards as part of budget cutting mandated by sequestration. (Prior coverage: Tax Notes, Apr. 1, 2013, p. 37.)
The single performance award of $18,500 paid January 27, 2013, was the last paid that fiscal year until one performance award of $4,126 paid on September 8, 2013.
Performance awards continued to trickle out through late calendar year 2013 -- two totaling $7,934 on October 20, 2013, and one for $26,500 on January 12, 2014 -- before they ramped up near previous levels with 212 paid on February 23, 2014, totaling $624,952.
When performance awards resumed in earnest in early 2014, just a few months after Koskinen assumed the position of commissioner in December 2013, most were paid in February 2014 (212 awards worth $624,952) and March 2014 (26 awards totaling $351,435). No further awards were recorded until November 2014 (190 awards totaling $598,935) and January 2015 (28 awards totaling $401,173).
Only three IRS employees are recorded receiving retention incentive payments, which are paid to employees whose expertise is considered particularly important to chief counsel functions.
The peak for retention incentives paid was in 2011 (the IRS did not include day and month of retention incentive payments in the data), when the Service paid three chief counsel executives a total of $108,544. The last retention incentive in the data received by Tax Analysts was paid in 2015, when Deputy Chief Counsel (Operations) Christopher Sterner received $25,305. Sterner was the biggest recipient of retention incentives, paid $185,993 in those incentives from early 2010 to early 2015.
Winners and Bigger Winners
The IRS data also show wide variation in bonus and retention payments depending on the recipients' job titles.
Supervisory general attorneys (tax) were the top total recipients, with 486 awards totaling more than $1.56 million over the four-year-plus period. Individual awards for that function ranged from $88 to $10,000, for an average award of $3,207. One thing to note is that the IRS didn't provide divisions for all award recipients, so those totals don't include supervisory general attorneys for which no division was given.
Next come supervisory trial attorneys (tax). The IRS made 410 performance awards totaling almost $1.2 million to those individuals. These individual awards ranged from $200 up to $7,200, for an average award of $2,927.
Twenty-seven performance awards worth $527,970 were paid to associate chief counsel. The lowest award paid to these job titles was $9,230, and the highest was $35,400, with awards averaging out to $19,500.
At the level of deputy chief counsel (operations), retention incentives outweighed performance awards, six totaling $185,993 for the former, and five worth $99,695 for the latter.
Retention incentives were also a significant portion of supplemental compensation at the level of special counsel to the chief counsel (six performance awards made totaling $83,770 versus three retention incentives worth $80,560) and for the deputy chief counsel (technical) title (six performance awards totaling $95,550 versus two retention incentives worth $66,908).
The largest single performance award for the period was $35,400, received by Associate Chief Counsel Curtis Wilson in 2010. The largest retention incentive was $44,096, received by Sterner in both 2011 and 2012, and by Catherine Livingston, special counsel to the chief counsel, in 2012.