Acting IRS commissioner replaced by Treasury official

Gary Shapley, who was named only days ago as the acting commissioner of the Internal Revenue Service, was removed by President Trump and replaced by Deputy Treasury Secretary Michael Faulkender amid a power struggle between Treasury Secretary Scott Bessent and Elon Musk.

The New York Times reported that Bessent was outraged that Shapley was named to head the IRS without his knowledge or approval and complained to Trump about it. Shapley was installed as acting commissioner on Tuesday, only to be ousted on Friday, when Bessent named Faulkender as the new acting commissioner.

Haiyun Jiang/Bloomberg

Shapley first gained prominence as an IRS Criminal Investigation special agent and whistleblower who testified in 2023 before the House Oversight Committee alongside another IRS CI special agent, Joseph Ziegler, that then-President Joe Biden's son Hunter received preferential treatment during a tax-evasion investigation, and he and Ziegler had been removed from the investigation after complaining to their supervisors in 2022. They were promoted last month to senior advisors to Bessent, and Shapley was made deputy chief of IRS CI. Shapley is expected to remain now as a senior official at IRS Criminal Investigation, according to the Wall Street Journal.

"Trust must be brought back to the IRS, and I am fully confident that Deputy Secretary Michael Faulkender is the right man for the moment," Bessent said in a post on X. "Gary Shapley's passion and thoughtfulness for approaching ways by which to create durable and lasting reforms at the IRS is essential to our work, and he remains among my most important senior advisors at the U.S. Treasury as we work together to rethink and reform the IRS. After Gary and Joseph Ziegler complete their ongoing year-long investigation, I will ensure they are both in senior government roles that will enable the results of their investigation to translate into meaningful policy changes."

Faulkender was confirmed last month as deputy secretary at the Treasury Department and formerly worked during the first Trump administration at the Treasury on the Paycheck Protection Program before leaving to teach finance at the University of Maryland.

A Treasury spokesperson noted that Faulkender is the Treasury's choice to temporarily lead the IRS during its transition toward a more efficient and effective agency and pointed to his extensive experience during Trump's first term leading the PPP and other initiatives. "The fight against weaponization and politicization at the IRS is a top-tier priority for the Trump Administration, and Deputy Secretary Faulkender will continue to make the needed changes both durable and lasting," the spokesperson added. "We urge Congress to act quickly to confirm permanent leadership at the IRS to ensure its ability to best serve taxpayers going forward."

Faulkender will be the fifth head of the IRS this year. Former IRS commissioner Danny Werfel departed in January, on Inauguration Day, after Trump announced in December he planned to name former Congressman Billy Long, R-Missouri, as the next IRS commissioner, even though Werfel's term wasn't scheduled to end until November 2027. The Senate has not yet scheduled a confirmation hearing for Long, amid questions from Senate Democrats about his work promoting the Employee Retention Credit and so-called "tribal tax credits." The job of acting commissioner has since been filled by Douglas O'Donnell, who was deputy commissioner under Werfel. However, O'Donnell abruptly retired as the IRS came under pressure to lay off thousands of employees and share access to confidential taxpayer data. He was replaced by IRS chief operating officer Melanie Krause, who resigned last week after coming under similar pressure to provide taxpayer data to immigration authorities and employees of the Musk-led U.S. DOGE Service. 

Krause had planned to depart later this month under the deferred resignation program at the IRS, under which approximately 22,000 IRS employees have accepted the voluntary buyout offers. But Musk reportedly pushed to have Shapley installed on Tuesday, according to the Times, and he remained working in the commissioner's office as recently as Friday morning. Meanwhile, plans are underway for further reductions in the IRS workforce of up to 40%, according to the Federal News Network, taking the IRS from approximately 102,000 employees at the beginning of the year to around 60,000 to 70,000 employees.

Layoff notices that were expected to be to go out on Friday afternoon were paused, the Washington Post reported, after the IRS rescinded the building and systems access of a top DOGE official on Friday morning.