IRS Hearings Express Lawmakers’ Outrage

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(Bloomberg) The first round of congressional hearings on the Internal Revenue Service’s scrutiny of small-government groups didn’t reveal the people who started that practice or provide clearer answers on why they did it.

So far, the intense questioning and outrage by lawmakers on three separate committees directed at the IRS hasn’t shown who decided to give extra attention to “Tea Party” and “patriot” groups applying for tax-exempt status based on their names. It hasn’t explained why the agency kept using what an inspector general called “inappropriate” criteria even after IRS officials tried to stop it in 2011.

“What people want to know is who is going to be held accountable and how they’re going to be held accountable,” said Representative Scott DesJarlais, a Tennessee Republican.

Even as the White House has changed its timeline about who was informed in 2013, lawmakers also haven’t proven that anyone outside the IRS knew of the practice until after the 2012 election.

Former IRS Commissioner Douglas Shulman testified under oath again yesterday that he kept the information inside the agency, and Deputy Treasury Secretary Neal Wolin said he didn’t know any of the details until May 10, 2013.

Lawmakers asked for the names of low-level employees and received none. They sought explanations for the IRS actions and got mostly generalities.

At least six separate inquiries continue: four from congressional committees, a Justice Department criminal probe and further review by the inspector general who oversees the IRS that could result in referrals to prosecutors. Steven Miller, the acting IRS commissioner, lost his job, and Joseph Grant, who oversaw tax-exempt groups, is retiring early.

Lawmakers’ Frustration
At two House hearings and one in the Senate, lawmakers expressed frustration with the lack of clarity from senior IRS officials, including Shulman. They criticized the agency’s breach of trust and pledged to keep investigating.

“You’re really good at certain parts of detail and you obscure the rest,” Republican Representative Paul Gosar of Arizona told Shulman, who left the IRS in November 2012.

One IRS employee who could have provided more detail—Lois Lerner, who oversees tax-exempt organizations—refused to testify to the House Oversight and Government Reform Committee.

Lerner, accused of making false statements to Congress, cited her constitutional right not to incriminate herself after insisting that she had done nothing wrong and committed no crimes.

“She’s at the heart of the storm,” said Representative Jim Jordan, an Ohio Republican. “You would have liked for her to answer our questions.”

Constitutional Rights
Committee Chairman Darrell Issa, a California Republican, said he may recall Lerner to testify and suggested that by giving a statement, she may have waived her constitutional rights. Some criminal-procedure experts questioned whether Lerner said enough to give up her right against self-incrimination.

Lerner’s opening statement was “puffing,” said Washington criminal defense attorney Stanley Brand, who was House general counsel from 1976 to 1983. “She’s not answering questions, and she’s not giving an account of what happened. She’s saying, ‘I’m innocent.’”

As a practical matter, congressional Republicans can test Lerner’s assertion only by holding her in contempt and referring her case to the Justice Department for prosecution—a process that could take two years, Brand said.

Lawmakers could call Lerner to testify again and require her to answer questions that aren’t incriminating, said Gabriel Chin, who teaches criminal procedure at the University of California Davis School of Law. Still, he said, “If it gets anywhere near the issue, she’s allowed not to say.”

Consistent Procedures
The IRS has insisted that lower-level employees in the agency’s Cincinnati office, which handles applications for tax-exempt status, came up with the idea of using “Tea Party” as a shorthand for a batch of cases that raised concerns of impermissible political activity. The IRS maintains that it was trying to apply consistent procedures to similar cases and not trying to target groups based on their views.

So-called social welfare groups organized under section 501(c)(4) of the tax code can engage in politics as long as it’s not their primary purpose. Hundreds of groups had their applications delayed because of the extra scrutiny, and some received extensive questionnaires that asked for lists of donors. Social welfare groups don’t have to disclose donors.

“We have had some difficulty in terms of getting clarity from some of the employees we’ve interviewed,” J. Russell George, the inspector general who issued a May 14 report on the issue, said at yesterday’s hearing.

Representative James Lankford, an Oklahoma Republican, said more than a few employees had come up with the questions.

“This is a pretty large list of people that are involved in creating this,” he said. “Someone knew. In fact a lot of someones knew.”

Lawmakers from both parties criticized George’s process, particularly allowing managers to sit in during interviews of lower-level employees.

Screening Group
The House oversight committee yesterday released internal IRS e-mails that back up part of the IRS’s story while leaving some questions unanswered.

In one e-mail on June 2, 2011, Cindy Thomas of the tax-exempt division wrote to Holly Paz, who supervised legal guidance on issues involving the groups.

Thomas described the screening criteria, which captured “Tea Party” groups, as something the “screening group came up with based on cases they were seeing” as applications came in.

“If we don’t want the screening group to include all of these type issues as ‘tea party cases,’ they would have no problem including or excluding certain cases,” Thomas wrote in a plea for a consistent rule. “What I am trying to say is that it doesn’t matter what the cases are called or how they are grouped.”

The chain of e-mails occurred before a June 29, 2011, meeting at which Lerner ordered that the use of “Tea Party” as a screening criterion be stopped.

It bolsters the point in the inspector general’s report that ineffective management and training left employees in Cincinnati without adequate rules.

Written Answers
The committee also released written answers to questions that Lerner submitted to the inspector general. A key section—on the origin of the employees’ interest in political cases—is blacked out.
In her written statement, Lerner said after the June meeting, employees changed the criteria again, “unbeknownst to me,” to include groups “educating on the Constitution and Bill of Rights.” She made them change it again, according to her statement.

Staff members from the oversight panel, the Senate Finance Committee, the House Ways and Means Committee and a Senate investigative subcommittee are pursuing the issue. Oversight staffers interviewed Paz this week and are seeking to speak with four other IRS employees.

—With assistance from Greg Stohr in Washington. Editors: Laurie Asseo, Jodi Schneider

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