"I recognize that your agenda and the duties facing your Chief Performance Officer are urgent," Killefer wrote in a letter to President Obama that was released by the White House. "I have also come to realize in the current environment that my personal tax issue of D.C. Unemployment tax could be used to create exactly the kind of distraction and delay those duties must avoid."
"Because of this I must reluctantly ask you to withdraw my name from consideration," she wrote.
Last month, the Associated Press reported that the D.C. government had filed a $946.69 tax lien on Killefer's home over nonpayment of employment taxes on household help.
An executive with consulting firm McKinsey & Co., Killefer would have been the first chief performance officer in the nation's history, tasked with maintaining fiscal discipline and responsibility and overseeing budget and spending reform.
She was also nominated last month to serve as Deputy Director for Management at the Office of Management and Budget.
In announcing his choice of Killefer back on January 7th, President Obama said she would work to "restore the American people's confidence in their government – that it's on their side, spending their money wisely, to meet their families' needs."
Officials have not answered questions about Killefer's tax problems since they surfaced last month.
Killefer is the third Obama nominee to face questions over taxes, following now-confirmed Treasury Secretary Tim Geithner and Health and Human Services nominee Tom Daschle. (UPDATE: Daschle has now withdrwan from consideration.)
Geithner initially failed to pay $34,000 in income taxes while Daschle did not initially pay $128,000 in taxes related to a car and driver.
Mr. Obama's first Commerce secretary pick, Bill Richardson, had to withdraw from consideration amid a federal investigation into contracts won by donors.
At an appearance this morning announcing his new choice for Commerce secretary, Sen. Judd Gregg, President Obama ignored a question about his nominees' tax problems.