WASHINGTON (AP) — The height of tax season was the height of turmoil at the IRS.
The agency shuffled through three acting directors over the course of a week. It’s preparing to lose tens of thousands of workers to layoffs and voluntary retirements. And President Donald Trump is weighing in on which nonprofits should lose their tax-exempt status, an incursion into the agency’s typically apolitical stance that threatens to further erode trust in federal institutions and weaponize enforcement efforts.
Just three months into Trump's second term, the government's fly-under-the-radar tax collector has become the latest platform for the Republican administration’s vision to cut and control the federal bureaucracy. Tax policy experts fear that taxpayer services and collection efforts will face prolonged delays as a result of the rapid changes.
The quick turnover in leadership and other changes are likely to dampen employee morale at the IRS and hurt the agency’s ability to serve taxpayers in a timely manner, says Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center.
“Leadership sets the tone, particularly in this environment,” she said.
Already, she notes, the agency has lost decades of institutional knowledge from nonpartisan career civil servants who have left over policy disagreements and layoffs.
The upheaval unfolded as Americans dutifully filed their taxes ahead of the April 15 deadline and as a legion of IRS employees undertook work to process returns and dole out refunds. The latest filing season data shows the agency accepted more than 117 million returns this tax season and issued $228.7 billion in refunds.
“We’re committed to improving the efficiency of the Internal Revenue Service," said the agency's newest acting commissioner, Michael Faulkender. "For the last 35 years, we’ve been five years away from the IRS being modernized. Under the direct leadership of Treasury, the modernization will be done in two years at a fraction of the cost.”
Meanwhile, the IRS, like other federal agencies, is hemorrhaging employees over cuts spearheaded by the Department of Government Efficiency, all while the agency churns through acting leaders as it awaits the installation of a permanent leader.
Douglas O'Donnell, the Trump administration's first acting IRS commissioner, announced his retirement in February as furor spread over DOGE gaining access to IRS taxpayer data. Melanie Krause, the second acting commissioner, resigned early this month over a deal between the IRS and the Department of Homeland Security to share immigrants’ tax data with Immigration and Customs Enforcement.
Gary Shapley, an IRS whistleblower who testified publicly about investigations into Hunter Biden’s taxes, was acting commissioner for a matter of days before being replaced by Faulkender, who was elevated just last week. The New York Times reported that Treasury Secretary Scott Bessent had complained to Trump that Shapley had been installed without his knowledge and at the behest of Trump adviser Elon Musk.
Trump's nominee for IRS commissioner, former U.S. Rep. Billy Long of Missouri, is still waiting for a confirmation hearing but faces controversies of his own. Most recently, Senate Democrats have called for a criminal investigation into Long's connections to alleged tax credit loopholes. The lawmakers allege that firms connected to Long duped investors into spending millions of dollars to purchase fake tax credits. Long did not respond to an Associated Press request for comment.
Among other concerns at the agency are fears that Trump will weaponize the IRS against his enemies — and reward his friends.
Some of the Democratic Party’s core political institutions, including fundraising platform ActBlue and the protest group Indivisible, are preparing for the possibility that the federal government may soon launch criminal investigations against them.
Trump said last week at the White House that the administration is looking at the tax-exempt status of Harvard University, which has defied the government's attempts to limit activism on campus, and environmental groups. He also mentioned the ethics watchdog organization Citizens for Responsibility and Ethics in Washington.
“It’s supposed to be a charitable organization,” Trump said of CREW. “The only charity they had is going after Donald Trump. So we’re looking at that. We’re looking at a lot of things.”
Jonathan S. Masur, an administrative law professor at the University of Chicago Law School, said it's unlawful for the president to unilaterally take away organizations' tax-exempt status.
“It's illegal for starters. The Supreme Court has established that that step is not allowed,” he said, adding that he anticipates that the court system will “very quickly block” any such move from the president.
The Trump administration is also watching out for allies of the president.
Treasury official David Eisner sent an email in March to a top IRS official regarding Mike Lindell, the founder of MyPillow and one of the chief proponents of the lie that the 2020 election was stolen from Trump.
“The ‘My Pillow guy’ and a high-profile friend of the President recently received an audit letter, from what I understand, his second in two years,” Eisner wrote in the email, which was viewed by the AP. The president “is concerned that he may have been inappropriately targeted," Eisner wrote. A Treasury spokesperson in an emailed statement said Eisner is a “dedicated public servant” who “acted appropriately with the expectation that this would be sent to the Inspector General.”
“Sharing relevant information with nonpartisan Inspectors General is designed to be an effective and confidential way to help ensure all Americans are treated fairly,” they added.
Among other changes in recent weeks are concerns about the IRS' engagement with the Department of Homeland Security over enforcing a new data-sharing agreement signed earlier this month by Bessent and Homeland Security Secretary Kristi Noem. The agreement will allow ICE to submit names and addresses of immigrants inside the U.S. illegally to the IRS for cross-verification against tax records.
The Treasury Department said the agreement is authorized by a statute that relates to criminal information sharing. However, that agreement is being litigated in federal court.
U.S. District Judge Dabney Friedrich will soon decide whether to refuse or grant a preliminary injunction in a lawsuit filed by nonprofit groups. The groups argue that immigrants in the country illegally who pay taxes are entitled to the same privacy protections as U.S. citizens and immigrants who are legally in the country.
The Treasury Department says the agreement will help carry out Trump’s agenda to secure U.S. borders and is part of his larger nationwide immigration crackdown, which has resulted in deportations, workplace raids and the use of an 18th-century wartime law to deport Venezuelan migrants.
Holtzblatt said the agreement is indicative of the turmoil at the IRS.
“There's an emphasis on improving technology and sharing information," but it's unclear for what reason, she said.
FILE - The Internal Revenue Service 1040 tax form for 2022 is seen on April 17, 2023. (AP Photo/Jon Elswick, File)
WASHINGTON (AP) — The Trump administration's criminal investigation of Federal Reserve Chair Jerome Powell appeared on Monday to be emboldening defenders of the U.S. central bank, who pushed back against President Donald Trump’s efforts to exert more control over the Fed.
The backlash reflected the overarching stakes in determining the balance of power within the federal government and the path of the U.S. economy at a time of uncertainty about inflation and a slowing job market. This has created a sense among some Republican lawmakers and leading economists that the Trump administration had overstepped the Fed's independence by sending subpoenas.
The criminal investigation — a first for a sitting Fed chair — sparked an unusually robust response from Powell and a full-throated defense from three former Fed chairs, a group of top economic officials and even Republican senators tasked with voting on Trump's eventual pick to replace Powell as Fed chair when his term expires in May.
White House press secretary Karoline Leavitt told reporters that Trump did not direct his Justice Department to investigate Powell, who has proven to be a foil for Trump by insisting on setting the Fed's benchmark interest rates based on the data instead of the president's wishes.
“One thing for sure, the president’s made it quite clear, is Jerome Powell is bad at his job,” Leavitt said. “As for whether or not Jerome Powell is a criminal, that’s an answer the Department of Justice is going to have to find out.”
The investigation demonstrates the lengths the Trump administration is willing to go to try to assert control over the Fed, an independent agency that the president believes should follow his claims that inflationary pressures have faded enough for drastic rate cuts to occur. Trump has repeatedly used investigations — which might or might not lead to an actual indictment — to attack his political rivals.
The risks go far beyond Washington infighting to whether people can find work or afford their groceries. If the Fed errs in setting rates, inflation could surge or job losses could mount. Trump maintains that an economic boom is occurring and rates should be cut to pump more money into the economy, while Powell has taken a more cautious approach in the wake of Trump's tariffs.
Several Republican senators have condemned the Department of Justice's subpoenas of the Fed, which Powell revealed Sunday and characterized as “pretexts” to pressure him to sharply cut interest rates. Powell also said the Justice Department has threatened criminal indictments over his June testimony to Congress about the cost and design elements of a $2.5 billion building renovation that includes the Fed's headquarters.
“After speaking with Chair Powell this morning, it’s clear the administration’s investigation is nothing more than an attempt at coercion,” said Sen. Lisa Murkowski, R-Alaska, on Monday.
Jeanine Pirro, U.S. attorney for the District of Columbia, said on social media that the Fed “ignored” her office’s outreach to discuss the renovation cost overruns, “necessitating the use of legal process — which is not a threat.”
“The word ‘indictment’ has come out of Mr. Powell’s mouth, no one else’s,” Pirro posted on X, although the subpoenas and the White House’s own statement about determining Powell's criminality would suggest the risk of an indictment.
A bipartisan group of former Fed chairs and top economists on Monday called the Trump administration's investigation “an unprecedented attempt to use prosecutorial attacks" to undermine the Fed's independence, stressing that central banks controlled by political leaders tend to produce higher inflation and lower growth.
“I think this is ham-handed, counter-productive, and going to set back the president’s cause,” said Jason Furman, an economist at Harvard and former top adviser to President Barack Obama. The investigation could also unify the Fed’s interest-rate setting committee in support of Powell, and means “the next Fed chair will be under more pressure to prove their independence.”
The subpoenas apply to Powell's statements before a congressional committee about the renovation of Fed buildings, including its marble-clad headquarters in Washington, D.C. They come at an unusual moment when Trump was teasing the likelihood of announcing his nominee this month to succeed Powell as the Fed chair and could possibly be self-defeating for the nomination process.
While Powell's term as chair ends in four months, he has a separate term as a Fed governor until January 2028, meaning that he could remain on the board. If Powell stays on the board, Trump could be blocked from appointing an outside candidate of his choice to be the chair.
Powell quickly found a growing number of defenders among Republicans in the Senate, who will have the choice of whether to confirm Trump's planned pick for Fed chair.
Sen. Thom Tillis, a North Carolina Republican and member of the Senate Banking panel, said late Sunday that he would oppose any of the Trump administration’s Fed nominees until the investigation is "resolved."
“If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis said.
Sen. Dave McCormick, R-Penn, said the Fed may have wasted public dollars with its renovation, but he said, “I do not think Chairman Powell is guilty of criminal activity.”
Senate Majority Leader John Thune offered a brief but stern response Monday about the tariffs as he arrived at the U.S. Capitol, suggesting that the administration needed “serious” evidence of wrongdoing to take such a significant step.
“I haven’t seen the case or whatever the allegations or charges are, but I would say they better, they better be real and they better be serious,” said Thune, a Republican representing South Dakota.
If Powell stays on the board after his term as chair ends, the Trump administration would be deprived of the chance to fill another seat that would give the administration a majority on the seven-member board. That majority could then enact significant reforms at the Fed and even block the appointment of presidents at the Fed's 12 regional banks.
“They could do a lot of reorganizing and reforms” without having to pass new legislation, said Mark Spindel, chief investment officer at Potomac River Capital and author of a book on Fed independence. “That seat is very valuable.”
Powell has declined at several press conferences to answer questions about his plans to stay or leave the board.
Scott Alvarez, former general counsel at the Fed, says the investigation is intended to intimidate Powell from staying on the board. The probe is occurring now “to say to Chair Powell, ’We’ll use every mechanism that the administration has to make your life miserable unless you leave the Board in May,'" Alvarez said.
Asked on Monday by reporters if Powell planned to remain a Fed governor, Kevin Hassett, director of the White House National Economic Council and a leading candidate to become Fed chair, said he was unaware of Powell’s plans.
“I’ve not talked to Jay about that,” Hassett said.
A bipartisan group of former Fed chairs and top economists said in their Monday letter that the administration’s legal actions and the possible loss of Fed independence could hurt the broader economy.
“This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly,” the statement said.
The statement was signed by former Fed chairs Ben Bernanke, Janet Yellen, and Alan Greenspan, as well as former Treasury Secretaries Henry Paulson and Robert Rubin.
Still, Trump's pressure campaign had been building for some time, with him relentlessly criticizing and belittling Powell.
He even appeared to preview the shocking news of the subpoenas at a Dec. 29 news conference by saying he would bring a lawsuit against Powell over the renovation costs.
“He’s just a very incompetent man,” Trump said. “But we’re going to probably bring a lawsuit against him.”
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AP writers Lisa Mascaro and Joey Cappelletti contributed to this report.
FILE - Federal Reserve Chairman Jerome Powell, right, and President Donald Trump look over a document of cost figures during a visit to the Federal Reserve, July 24, 2025, in Washington. (AP Photo/Julia Demaree Nikhinson, File)
