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Congress Holds IRS Hearing

Aired May 17, 2013 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

REP. DAVE CAMP, R-MICH.: In any event, after learning of that information of the audits, did you-what steps did you take?

ACTING IRS COMMISSIONER STEVE MILLER: We investigated what happened. We took a look. And ultimately I issued a-a directive that said that the law in the area was not that clear. That was had not been enforcing in that area substantially since the period of-I believe a 1982, or something like that, revenue ruling that talked about gift tax and (c )(4) organizations. And I said, let's not enforce right now. Let's talk about it, let's study it and we will put out guidance. And that guidance will be prospective. I felt that was the fair thing to do, Mr. Camp. CAMP: When you say, we investigated, who would that have been?

MILLER: I don't-I'm not-I don't remember, but we took a look at the issue. We looked at how it happened, and I think you were looking at it as well. Your committee, sir.

CAMP: I-I mean when you say, we, what-what does that mean? I mean who? Who are the agencies...

MILLER: The IRS. The IRS looked at the issue. CAMP: I mean what departments?

MILLER: It would have been counsel, I don't know that it was- I'm sorry, sir, I'm not going to be able to answer with particularity there.

CAMP: Were you ever made aware of the publication of the confidential 2008 donor list of the National Organization for Marriage, a conservative tax-exempt organization?

MILLER: I was. CAMP: And when was that?

MILLER: For that date, I'll have to get back to you on, sir. But I remember the issue. CAMP: And how did you find out?

MILLER: Don't remember. Might have been press. Might have been somebody coming to us with a-with a congressional complaint.

CAMP: And when you learned of that publication, did you take any steps?

MILLER: I believe we made a referral to TIGTA, yes.

CAMP: At that time? And you're not sure when that referral was made?

MILLER: It would have been in the same timeframe.

CAMP: Shortly after you became aware of it?

MILLER: It would have been.

CAMP: Were you ever made aware of the IRS leak of confidential applications for tax-exempt status of conservative groups to ProPublica?

MILLER: I was. CAMP: Again when-when were you made aware of it?

MILLER: Again, sir I'm not-I'm not going to be able to give you a perfect timeline, but when it-approximately the time that it became public, was when I became aware. So you would know that from the timeline. CAMP: Did you inform anyone else of that?

MILLER: I believe the service informed TIGTA at that time, yes.

CAMP: In each of these incidents I've asked you about, did you ever come forward and inform the Congress?

MILLER: I don't believe so, unless it came up in-in-in conversation or testimony. Can I-can I suggest something, Mr. Camp on those two? Just to let you know?

CAMP: This would be the National Organization of Marriage, and ProPublica?

MILLER: Those two situations, we went to TIGTA and I think Mr. George can speak to what they find-what they found. We made the referrals, and I believe-I believe what they found was that those disclosures were inadvertent, and that there had been discipline in- in one of those cases for somebody not following procedures. But I will-I will obviously let Mr. George speak to that.

CAMP: But, you never informed the Congress of any of these things that you are aware of?

MILLER: They were...

CAMP: Any of the items I've asked you about this morning?

MILLER: ... they were in the press, sir.

CAMP: All right. Well, obviously, you know the IRS mission statement says that the role of the IRS is to help America's taxpayers understand and meet their tax responsibilities, and enforce the law with integrity, and fairness to all. And I-I think clearly the mission is not being met. Mr. George-I guess I would just have one last question, Mr. Miller. When asked the truth, and you know the truth, and you have a legal responsibility to inform others of the truth, if you don't share that truth, what is that called?

MILLER: I always answer questions truthfully, Mr. Camp.

CAMP: All right. Mr. George, were you ever made aware of the alleged disclosure of the confidential tax structure of a private company?

J. RUSSELL GEORGE, TREASURY DEPARTMENT INSPECTOR GENERAL FOR TAX ADMINISTRATION: We have been alerted to...

CAMP: You personally were made aware of it?

GEORGE: To-well, in specific? Or in general?

CAMP: You specifically.

GEORGE: To a specific company, or in general, sir?

CAMP: It was a specific company, but there was the disclosure of taxpayer information-the tax-confidential tax structure. As you know, any information is considered confidential.

GEORGE: Right.

CAMP: It was particularly the tax-tax structure of a private company. Were you made aware of-made aware of that public disclosure?

GEORGE: We are made aware of public disclosure of information that is protected by Title-26, Section 6103, yes.

CAMP: Are you aware of the incidents I'm referring to?

GEORGE: The one that you refer to?

CAMP: Yes.

GEORGE: I am aware of that, yes. CAMP: And when were you made aware of that?

GEORGE: I don't have the exact date, sir.

CAMP: OK. How were you made aware of that?

GEORGE: I believe it came through my Office of Investigations, or it could have been put through a hotline. That I'm not completely certain of.

CAMP: So you don't believe you were-you learned of it from another- from an IRS employee?

GEORGE: I generally do not, below the commissioner or deputy commissioner levels, interact with the average IRS employee. It goes through a chain-a chain of command.

CAMP: Well, that would include the commissioner?

GEORGE: Yes. CAMP: So, no IRS employee informed you of this information? GEORGE: Most likely it would have come from one of my principle deputies, and they may have received that information from someone. I don't believe at the commissioner level, but it may have been at the deputy commissioner level. CAMP: But, you're not aware-you-you can't tell us for sure?

GEORGE: At this time I cannot, sir. CAMP: Were you ever made aware of the alleged publication of a confidential 2008 donor list of the National Organization for Marriage?

GEORGE: I both read in the newspapers, allegations to that effect. But I have to make it clear, Mr. Chairman that the Internal Revenue Code has very strict rules as it relates to the way that confidential taxpayer information is revealed. And we at TIGTA are the ones who are going to enforce those rules. So, I have to be very careful as to exactly how I respond, and whether or not I can even acknowledge publicly some of these revelations that you're inquiring about.

CAMP: Did you respond to that information?

GEORGE: It would-it has been-it has been taken.

CAMP: Is it-is it ongoing?

GEORGE: I will have to confer with my colleague, if you'll-if you'll give me a moment. CAMP: OK.

(CROSSTALK)

GEORGE: It is not ongoing.

CAMP: All right. There are daily reports of new allegations of IRS misconduct, political targeting. And it's clear that more work needs to be done. Is your office continuing to investigate these allegations?

GEORGE: Yes, we are, sir.

CAMP: OK, thank you. Mr. Levin is recognized?

REP. SANDER M. LEVIN, D-MICH.: Thank you very much. I wanted to go on to other things, but the-the incidents that Mr. Camp has been talking about, disclosure, what years were those? Mr. Miller?

MILLER: Again Sir, I apologize for not having the date at hand. They have been a couple of years now, I believe.

LEVIN: A couple years? Who was the commissioner at that time?

MILLER: I believe it was Mr. Shulman.

LEVIN: Who appointed Mr. Shulman?

MILLER: Mr. Bush.

LEVIN: Let me start with two key issues. There's no question about the inappropriate criteria, I want to focus on that. But, let me first ask right up front if I might, Mr. Russell (sic), during the course of your audit were you allowed access to everyone you requested to interview?

GEORGE: To my knowledge we were not denied access to anyone.

LEVIN: Did you interview employees in both Cincinnati, and in D.C.?

GEORGE: Correct. Yes we did, sir.

LEVIN: On page 7, Mr. George, of the I.G. report it states, and I quote, "All of these individuals stated that the criteria were not influenced by any individual organization outside the IRS.", is that correct?

GEORGE: That is the information that we received. Correct, sir.

LEVIN: Did you find any evidence of political motivation in the selection of the tax exemption applications?

GEORGE: We did not, sir.

LEVIN: Mr. Miller, during your review of this matter, you indicated when you started it. Did you find any evidence of political motivation on the part of employees involved in processing the applications at issue?

MILLER: We did not, sir.

LEVIN: If we could put on the screen, the organizational chart?

Is that possible-from the report? Is someone going to do that? It's called high level organization of report. Mr. Miller, in 2010, the inappropriate criteria that singled out applications for tax-exempt status by name was developed by what office?

MILLER: It would be developed by a-an office that actually is not on here, but is on page two of this is, is under Lois Lerner's jurisdiction. LEVIN: And where are those employees located?

MILLER: For the most part, they are located in Cincinnati. There's about 140 folks who do this sort of work in Cincinnati. There are a handful of people around the country that report into Cincinnati, as well.

LEVIN: In 2011, the report finds that the director of Exempt Organizations, EO on this chart, and I'm afraid it's not on the screen yet-this is Ms. Lerner's position-became aware of the inappropriate criteria. She ordered the criteria changed, and it was changed in 2011 to no longer refer by name "tea party" or "patriot." Mr. George, is that correct?

GEORGE: That is correct, sir.

LEVIN: Mr. Miller, as then-deputy, were you aware of the problem with the criteria in June and July of 2011?

GEORGE: I was not, sir.

LEVIN: In January 2012, the criteria were changed again to, and I quote, "organizations involved in limiting expanding government, educating on the Constitution and the Bill of Rights, and social economic reform-movement. The I.G.'s report indicates that this change was again made in the Cincinnati Determination's Office without executive approval." Mr. George, is that correct?

GEORGE: That is correct, sir.

LEVIN: It was changed without executive approval?

GEORGE: That is our understanding.

LEVIN: The May 2012 criteria are in place today. It states, "organizations with-indicators of significant amounts of political campaign intervention." The I.G. report states that, in quotes, "it more clearly focuses on the activities permitted under the treasury regulations.

Mr. George, is that correct?

GEORGE: That is correct, sir.

LEVIN: I have no further-my time is up.

CAMP: All right, at this time I'll yield to the chairman of the Oversight Subcommittee, Doctor Boustany.

REP. CHARLES BOUSTANY JR., R-LA.: Thank you, Mr. Chairman.

Mr. Miller, on March 22 of 2012, the Oversight Subcommittee held a hearing in this room, and I specifically asked then-Commissioner Shulman about reports that the IRS had been targeting tea party groups and other conservative groups. And I would like to play the video of his response. Could we have the video?

(BEGIN VIDEO CLIP)

DOUGLAS SHULMAN, COMMISSIONER, INTERNAL REVENUE SERVICE: There's absolutely no targeting. This is the kind of back and forth that happens when people apply for 501(c )(4)s.

(END VIDEO CLIP)

BOUSTANY: This was in March-March 22 of 2012. Knowing what you know now, was Commissioner Shulman's response truthful?

MILLER: It was incorrect, but whether it was untruthful or not look, when you talk about targeting, and-and-and we should really get into this, Dr. Boustany-because when you talk about targeting, it's a pejorative term. What-what happened here was- and I'm not defending the list-but what happened here-and I would like to go through the application process-what happened here is that someone saw some tea party cases come through. They were acknowledging that they were going to be engaged in politics.

This was the time frame in 2010 when Citizens United was out.

There was a lot of discussion in the system about the use of (c )(4)s.

People in Cincinnati decided, "Let's start grouping these cases. Let's centralize these cases." The way they centralized it, troublesome. The concept of-centralized-centralization, not. And it's not-we're not targeting these people in that-in that sense. What we are doing, is making sure that we bring them in and have people...

BOUSTANY: Well, let me ask you this.

MILLER: Yep.

BOUSTANY: You said, "incorrect, but not untruthful."

MILLER: Yeah, I don't...

(CROSSTALK)

BOUSTANY: Does that mean he was not informed? Was he not informed of this process?

MILLER: To my knowledge, I don't believe he knew at the time.Because in March you sent a technical adviser to Cincinnati. There were press reports. There were letters from Chairman Camp and myself dating back to-to 2011. And so, clearly, there was-congressional interest in this issue, press reports, and you're saying he was not informed of this?

So let's divide the world (ph) into a couple of pieces here. There is the list that was used. And there was the processing of the cases. At that time, we were aware that there were issues in the processing of the cases. We were not aware of the list. I asked in late March, actually after the hearing, I believe, for us to go in and take a look-because I thought there were problems in processing of the cases. They came back with both pieces. Yes, there were problems with processing of the cases and there were problems with the listing.

BOUSTANY: OK, so at this-you were given a complete briefing on this improper selection, based on political beliefs. And this briefing was, I think, you said May 3rd of 2012. Is that correct?

MILLER: So, I would recharacterize your question, sir. I was informed of what we had found out to date. TIGTA was in there at the time. I was told that there was a use of the list. The list seemed obnoxious to us, as it does to you. BOUSTANY: OK.

MILLER: And we were going to take actions on that. And, yes, that was in-in May. BOUSTANY: And you say it was not targeting. But why was only one side of the political-spectrum singled out in this?

MILLER: So I think what happened was, they were-look, they get 70,000 applications in there for 150 or 200 people to do. They triage of those. People look at them, and they send them either through the system because they're OK into a mix of folks so that they can get technically fixed up. And some go for substantive questions.

Politics is an area where we always ask more questions. It is our obligation under law to do so. As-as Mr. George indicated...

BOUSTANY: Right, no, I understand... MILLER: 501...

BOUSTANY: ... the process.

MILLER: ... (c )(3) organization can't do it. And a (c )(4) organization can do some of it. Our obligation...

BOUSTANY: But, Mr. Miller, we-we-we've received letters describing process, but we're trying to get to the heart of this matter. And-and at the briefing in May of 2012, you were told that tax-exempt applications were being targeted if they contained terms such as "tea party," "we the people," "patriots," and so forth, many of the terms that Chairman Camp referenced.

And-and knowing these practices, knowing that-you sent letters to Congress acknowledging our investigation of these allegations, but consistently omitted that such discriminatory practices that are alleged were actually, in fact, taking place. Why -- why-did you mislead Congress and the American people on this?

MILLER: Mr. Chairman, I did not mislead Congress nor the American people. I answered the questions as they were asked. B OUSTANY: Why didn't you tell us about the terms?

CAMP: All right, time has expired. Mr. Crowley is recognized.

REP. JOE CROWLEY, D-N.Y.: Thank you, Mr. Chairman. Mr. George, you are-you are the inspector general of the Treasury. Is that correct?

GEORGE: That's really-there are three inspector generals within the there are three inspectors generals within the Department of the Treasury. I'm the inspector general exclusively focused on the IRS- over the system of tax administration written.

CROWLEY: Over the IRS? Very good. And you were appointed by then- President Bush. Is that correct?

GEORGE: Yes, correct.

CROWLEY: And state in your report that no one outside the IRS was involved in this political targeting of not-for-profit organizations. Is that correct?

GEORGE: That is the finding of this particular audit, sir.

CROWLEY: Your-your audit-your findings are that no outside groups were involved, correct?

GEORGE: Of this particular-yes, as of-as of now. That's our conviction (ph).

CROWLEY: Mr.-Mr. George, who was the last presidentially-appointed IRS commissioner?

GEORGE: It was Douglas Shulman.

CROWLEY: Douglas Shulman, correct?

GEORGE: Yes, correct.

CROWLEY: Appointed by-by then-President George W. Bush, is that correct?

GEORGE: Yes, that's correct, sir.

CROWLEY: And-and Mr. Shulman was commissioner when these improper and outrageous activities that both sides of the aisle recognize as being outrageous and improper when they occurred, is that correct?

GEORGE: Yes, it is.

CROWLEY: Mr. George, prior to Commissioner Shulman, the last political head, or political appointee, of the IRS was Mr. Mark Everson. Is that correct?

GEORGE: That's correct, sir.

CROWLEY: He was also appointed by President George W. Bush?

GEORGE: Yes, I believe so.

CROWLEY: And during his tenure, it's widely believed (ph) that groups like the NAACP, progressive churches that were in opposition to the war in Iraq, and environmental groups were targeted of the IRS. Mr. Miller, while you were appointed acting-acting commission at the IRS, you are not a career-you-you are, sorry, you are a career civil servant, is that not the case?

MILLER: It is, sir.

CROWLEY: And you were not a political appointee?

MILLER: I am not a political appointee.

CROWLEY: Now, what I'm trying to-to-to point out, and basically to debunk, is the notion or idea of-of the political statements-and, I believe, non-factual statements by Chairman Camp -- to link these scandals to the White House, or-or solely the targeting of-of conservative groups.

I was the person last week who asked the question of Ms. Lerner as to whether or not the IRS were (sic) investigating political not-for- profit organizations. And at that hearing, we were not given a proper-we were not given an answer I think Mr. Boustany would agree, but rather the world only learned after she was asked a planted question at a president come at that sadly unacceptable.

But what I also think it's important to keep this-at least at this point in time I would hope in a nonpartisan-maybe a bipartisan content, because we want to find affected want to find out who knew what when, and why steps were or were not taken.

I was as outraged when I learned that when she was asked the question why she did that to Congress when she was before Congress, our responsibility was no one ever asked or. I asked her, and she didn't answer the question. So we're all outraged. Were all upset about this. I don't believe nor do any of my college believe that any organization-political organization should be targeted solely because of their thought.

That's on both sides of the spectrum. And I would dare say doing the prior administration and Mr. Shulman and Mr. Everson, that there was targeting of political entities as well. It has to end. That has to end on both sides, and the president has been very forthright and very strongly condemning that type of action. The entire administration is the as has Mr. Lew.

So I would really ask chairman and my colleagues on the other side, let's get the answers. Ask the question can't get the facts, and then we can draw our own conclusions. With that, I yield back the balance of my time.

CAMP: Thank you. Mr. Brady's recognized.

REP. KEVIN BRADY, R-TEXAS: Chairman, thank you for getting to the truth in this scandal.

Let's look at one of tea party groups in my community. The founder, a small businesswoman, who originally filed for tax exempt status in July of 2010. Fully 20 months later, in February 2012 she received a letter from the IRS with numerous follow-up questions, a lot of them intrusive, but she answered every one of them and returned it well within the two week time limit. Now almost three years to the day that she first filed, her application is still pending.

But let's look at what happened to her in the three years since she applied. Beginning in December 2010 she was visited by the FBI domestic terrorism unit. Her personal returns and her business returns were both audited by the IRS. She received four FBI inquiries, and her business received unsolicited audits, unscheduled audits by OSHA, the Commission on Environmental Quality and the ATF twice.

Now, this is a citizen and a small businesswoman who had never been audited by the IRS or any of these agencies until she applied to you for tax-exempt status for her tea party. There's a broader question here, is this still America? Is this government so drunk on power that it would turn its full force, it's full might to harass and intimidate and threaten an average American who only wants her voice and their voices heard?

Mr. Miller, who in the IRS is responsible for targeting conservative organizations?

MILLER: So, let me first say, I cannot speak to a given case. We have talked about 6103, but that's...

BRADY: This is not just one case. You know what we're talking about the whole list the inspector general put up the. Who is responsible for targeting these groups?

MILLER: So again I'm going to take-I'm going to take exception to the concept of targeting because it's a loaded term. The listing was done...

BRADY: This is not a listing. You created a be on the look out list. That's not a centralized government mandated or directed listing. You had a be on the look out list that you acknowledged, to have the cases the inspector general already verified.

So the question remains, who is responsible for targeting the conservative organizations?

MILLER: So again, and I think if you look at the TIGTA report it answers your question.

BRADY: There are no names in the inspector general's report. So I'm asking you, not only as the acting commissioner but as the deputy commissioner over this organization who is responsible for targeting these individuals?

MILLER: So I don't have names for you, Mr. Brady, and am willing to try to find that out. I think TIGTA is looking at that right now. I don't think targeting again is...

BRADY: You're telling us you have no knowledge of who initiated or who approved this targeting of conservative organizations?

MILLER: I will stand by what the TIGTA report has-has put out there as the facts.

BRADY: Can you assure this committee that none of the information provided the IRS by this group was shared or given to any other federal agency?

MILLER: That would be a violation of law, and I do not believe that happens.

BRADY: You can assure use there was absolutely no sharing of this information with another government agency?

MILLER: TIGTA and others will look at that but I will be shocked, Congress and, if that happened. Shocked.

BRADY: If your earlier answers or any indication we will all read about in the media, we ought to be getting the truth from you. Mr. Chairman, I yield back.

CAMP: Thank you.

Mr. Rangel is recognized.

REP. CHARLES B. RANGEL, D-N.Y.: Thank you, Mr. Chairman. (inaudible) we are all outraged what occurred under the Bush appointees as well as the Obama appointees.

MILLER: There were no Obama appointees, so under Mr. Shulman- I'm not sure, I apologize, Mr. Rangel.

I'm not sure, are we talking about...

RANGEL: The people that were-once it was discovered that people were put under a list, a look out list, that type of thing, regardless of what you call it, worry the people responsible in Treasury Department appointed by President Bush as well as continued service under president Obama? Basically what Mr. Crowley was talking about.

MILLER: At the IRS the commissioner was appointed under the Bush administration. Obviously, at Treasury those would be-at main treasury, those individuals would be Obama appointees.

RANGEL: What I'm trying to say, this outrage is not Democrat and Republican. It involves the credibility of government as relates to American citizens.

Now, the president has indicated outrage. You have indicated outrage. So I would assume that we are on the same side in trying to determine how did this happen, who was responsible for it, how far does this cancer to? How quickly can we cut it out?

So that tens of thousands of IRS employees have this stigma of corruption taken away from them, that you, Mr. Miller, who is a career employee don't have to explain to your kids and friends that you are not involved in this scandal, that all of the people that served the government-it's too late for the Congress-but it's not too late for the government to try to get its reputation cleaned up for America.

So I don't want to see anger with you do, but I certainly hope before this hearing is over that you share with us how you intend to have your voices heard so that America would know that whether this was criminal activity or a mistake, I don't know, but we have to get on with it.

Now, under 501 (c )(4), we are supposed to allow political activity to take place, meaning that you can make political donations without saying how much and who made the donations, right?

MILLER: I-if I could restructure it. Under 501(c )(4), organizations, donors and their contributions are not public information, if that was the question.

RANGEL: So you can make political contributions.

MILLER: You can make contributions to 501(c )(4) that are used for political purposes.

RANGEL: Yes, and you can do this as long as this is not the primary purpose, you can do this for 49 percent of whatever the activities are, without technically violating the law. Is that not correct?

MILLER: That test is whether your primary activities are social welfare in nature.

RANGEL: Primary means that technically you could to 49 percent political.

MILLER: We've never been that precise.

RANGEL: I know what I'm asking, you could say that.

MILLER: Yes.

RANGEL: And after the Supreme Court's decision in Citizens Union what?

United, whatever.

(LAUGHTER)

The-the applications for this type of corporations increased dramatically, did it not?