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UPDATE 1-Hearing cut short on Obama's nominee to head U.S. IRS

Patrick Temple-West
Tuesday, 10 Dec 2013 | 1:58 PM ET

* Abrupt halt called by chairman of Senate Finance panel

* Baucus, Hatch say working to reconvene hearing

* Nominee Koskinen vows to restore public trust in IRS

(Adds hearing suspension, details)

WASHINGTON, Dec 10 (Reuters) - A U.S. Senate committee hearing on President Barack Obama's nominee to be the new head of the Internal Revenue Service was unexpectedly cut short on Tuesday, with no clear schedule set for reconvening or holding a vote.

John Koskinen, a 74-year-old lawyer with little tax experience, gave an opening statement to the Senate Finance Committee and took two questions before Senator Max Baucus, committee chairman, called a halt to the hearing.

The Montana Democrat cited a procedural time-limit on hearings, which is normally waived, for the adjournment.

Afterward, Baucus and Senator Orrin Hatch, the panel's top Republican, issued a joint statement saying they were "working to reconvene the Senate Finance Committee hearing to consider the nomination of John Koskinen to be IRS Commissioner."

Before the abrupt end of the session, Koskinen told the panel he would work to restore public trust in the IRS and called on Congress to stop cutting the tax agency's budget.

The Senate committee had been expected to vote in favor of Koskinen's nomination before the end of the year and to send it to the full Senate for consideration, lobbyists said.

Called out of retirement to take on a tough job, Koskinen said he was "excited" to be IRS commissioner, but acknowledged a daunting list of problems awaits him. He said the next commissioner must rebuild the agency's tarnished image.

A political uproar engulfed the IRS in mid-2013 after a senior agency executive apologized publicly in May for unfairly subjecting conservative political groups seeking tax-exempt status to extra time-consuming scrutiny.

The crisis that ensued cost the acting head of the IRS his job, triggered multiple investigations and badly damaged the agency's reputation for political impartiality.

"Taxpayers need to be confident that they will be treated fairly, no matter what their background or their affiliations," Koskinen said in opening remarks at the hearing. "Public trust is the IRS's most important and valuable asset."

The Obama administration last month proposed new rules to rein in the political activity of tax-exempt, social welfare groups of the sort that were at the heart of the IRS crisis.

Hatch pressed Koskinen to widen those proposed rules to include tax-exempt business groups and labor unions. Koskinen said he will "actively participate" in the review of public comments submitted to the IRS on the rules.

Looking to the 2014 tax season starting early next year, Koskinen said customer service may suffer from funding cutbacks.

The IRS will have 11,000 fewer people working on filings next year, but it is expected to process the largest number of returns ever, he said. The IRS has about 95,000 employees.

"We need to solve the funding problem," Koskinen said.

If confirmed, Koskinen would serve a five-year term. He would replace Danny Werfel, who was appointed acting IRS commissioner by Obama in May.

Werfel, a former White House budget official, will be leaving the IRS at the end of the year, Baucus said at the hearing.

"I hope we can approve (Koskinen's) nomination quickly and take it to the full Senate for a vote," he said.

(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Doina Chiacu)