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IRS Faces House Grilling On Abuses

Aired May 17, 2013 - 10:00   ET

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

REP. CHARLES RANGEL (D), NEW YORK: -- the applications for this type of corporations explode, increased dramatically, did it not?

ACTING IRS COMMISSIONER STEVE MILLER: They did double, yes, sir.

RANGEL: So you don't have to be a political expert to know that there was an increase in political donations given to 501(c)(4)s.

MILLER: I think if one looks at the reporting on the forms 990 of political --

(END LIVE FEED)

CAROL COSTELLO, CNN ANCHOR: Good morning, everyone. I'm Carol Costello. This is a special edition of NEWROOM. As you can see hearings going on right now on Capitol Hill, the IRS is facing its first congressional hearing on abuse of power.

Just one week ago today, the agency admitted its workers were unfairly subjecting conservative groups to questions -- questions -- more questions than normal when they were targeting Tea Party activists to special scrutiny.

Among those testifying before the House Ways and Means Committee, the acting commissioner, Steven Miller, who lost his job over the scandal, as you can see, Charles Rangel now asking Mr. Miller questions.

Our chief congressional correspondent Dana Bash is on Capitol Hill, our chief national correspondent John King and our chief political analyst Gloria Borger are in Washington. Welcome to all of you.

John, I want to start with you, in a nutshell so far, I should say the acting IRS commissioner said he did not mislead Congress when he testified in the past. He said he answered the questions asked and I must say after an hour of testimony, we don't seem to be any closer to knowing much new.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: No, Carol, that is going to frustrate everybody but especially the Republicans. Mr. Miller I think is trying to do his best, but he is not doing himself any favor just yet as he is trying to protect himself, clearly, and protect his agency.

Now he is a career employee of the agency and what he is trying to say is he is rejecting even the use of the term targeting. He says that's pejorative. He doesn't think the people who targeted or singled out, you pick your word at home, Tea Party groups, conservative groups, groups with conservative sounding names.

He is trying to suggest it wasn't done on a partisan basis. It was done because of this sudden flood of application by these groups. They were trying to just create a filing system, if you will. That's not going to sit well with Republicans because we know the preponderance of cases were conservative groups.

And he would not give any names. He was asked repeatedly just moments ago. You are in charge of this division and you are also the acting commissioner of the agency, who did it? Don't tell me generally this division or that division who did it. He wasn't prepared to go there.

This is very complicated. Everybody here says they want the facts not to be partisan but, Carol, as you go through each side, the Republican chairman started off with questions trying to say this was President Obama's problem.

Every Democrat is trying to say, remember the guy if in charge when the targeting began was a Bush appointee. So all they say let's get to the fact on a nonpartisan basis --

COSTELLO: I'm going to interrupt you, John, and Gloria and Dana, standby. We are going to listen to Congressman Paul Ryan asking questions of the acting IRS Chief Steven Miller.

(BEGIN LIVE FEED)

REP. PAUL RYAN (R), WISCONSIN: Remember, this briefing took place in May of 2012 then you came here to a subcommittee hearing on this issue on July 25th, where we were investigating the discriminatory filters used to hold up the 501(c)(4) applications of groups.

Specifically, you were told that these conservative groups felt that they were being harassed. You were asked this question, quote, "What kind of letter or action is taking place at this time that you are aware of" and then knowing full well these filters were being used to target certain groups, you said and I quote, "I am aware that some 200 501(c)(4)applications fell into this category, the determination letter process.

We did group these organizations together to insure consistency, to insure quality. We continued to work with those cases," closed quote. That was your answer to this committee after you had received the briefing that these targeting was occurring, which you just earlier acknowledged was outrageous.

Now, the law of governing how you must respond to congressional inquiries requires you to tell not only the truth but to tell the whole truth. You quote cannot conceal or cover up by any trick, scheme or device a material fact. How was that not misleading this committee?

You knew the targeting was taking place. You knew the terms Tea Party, Patriots were being used. You just acknowledged a minute ago they were outrageous. Then when you were asked about this after you were briefed about this that was the answer that you gave us? How can we not conclude that you misled this committee?

MILLER: So that was a lot of questions, sir.

PAUL: It's one. How can we conclude that you did not mislead this committee?

MILLER: I did not mislead the committee. I stand by my answer then. I stand by my answer now. Harassment discussion that was part of that question implies political motivation. There is a discussion going on. There is no political motivation.

PAUL: Let me ask it again.

MILLER: May I answer the question, sir?

PAUL: I'm going help you give some clarity here. Here's the question you were asked, what kind of letter or action is being taking place at this time that you are aware of?

MILLER: So the discussion of the context of that and again, we need to go back and look at the context, there was the listing, there was the treatment of the cases. My understanding of that question was the treatment of the cases because all of the letters that he was talking, I think it was Mr. Marchand was talking about I'm hearing people are complaining about letters.

My response was to that. We found out about these letters. We dealt with them as has been explained, we gave more time. We went and talked to them about -- about expanding the way they could answer it and we dealt I think fairly and successfully with the donor list issue.

PAUL: You knew of our concern of this targeting. You knew of the allegations that had been reported to this committee. We brought you here to talk about it. You had received a briefing that this targeting was taking place. But you did not divulge that to this committee when we were asking questions about this.

You said in your answer that you were aware some 200 501(c)(4)applications fell into this category. We did these groupings together to ensure consistency, to ensure quality. We continue to work those cases.

You didn't mention targeting based on ideology. You didn't mention targeting based on buzz words like Tea Party or Patriots or 9-12. You knew that, but you didn't mention this to the committee. Do you not think that's a very incomplete answer?

MILLER: I answered the question truthfully.

PAUL: All right, let me ask you one more question. You just gave us a list the other day of approved tax exempt applications for efficacy organizations through 2009, May. We don't know how long these applications sat or how long it took to process them. Just from Mr. Rangel's questioning and from earlier testimony, the IRS was doing this because they were concerned about political activities by nonprofits?

That's the debate that seems to be taking place here. Some of these that were approved were Chattanooga Organization for Action, the Progressive Leadership Alliance and the Progressive USA. If you were concerned about political activity, did you have targeting lists that contained word like progressive or organizing in their names?

MILLER: So let's step back again. Let me walk you through the process. We centralized cases based on political activity evidenced in the file. We took a shortcut on some of it, but we collected, to be blunt, more than Tea Party cases. Mr. George's long report --

PAUL: There were no progressive or organizing buzz words tarp used for targeting, is that correct?

MILLER: That's correct. But we collected more people because any time it was seen that political activity was a part of the file, it went into --

UNIDENTIFIED MALE: Time has expired. Mr. McDermott is recognized.

REP. JIM MCDERMOTT (D), WASHINGTON: Thank you, Mr. Chairman. These days Congress can't seem to agree on whether the sun is shining, but the issue has brought us together in a way unlike anything you have seen here. We all agree these applications were poorly handled and that the IRS stiffed us basically of this.

We asked about it. Our public servants should be held to a higher standard, none more so than the agency that oversees and enforces the tax collection. The IRS is an easy target. Everybody wants to get a pitchfork when the tax man comes. But with our 24-hour media cycle passing around like lighter fluid, it's getting harder and harder to get to the facts and fix what really is going on here.

There is a difference in my mind between stupid mistakes and malicious mistakes. The overwhelming majority of applications for tax free status, for political activities were from far right groups and examiners took a shortcut, which they clearly regret, deeply regret.

The report says in black and white on page 7, quote, "The determination unit employees stated that they considered the Tea Party criterion as a shorthand term for all potential political cases," closed quote. These applications were singled out for their names and policy position, not for the activities, which is really what they should have been singled out for.

Some of these political groups are delayed in getting their taxpayer status and that was wrong. As much as I dislike the right, I think it's wrong to be uneven handed in government application. The inspector general's report says that no one acted out of malice or political motivation. Mr. George, I want to know, do you still stand by that?

UNIDENTIFIED MALE: We have no evidence at this time to contradict that assertion, sir. MCDERMOTT: If we really want to root out the causes of this, we need to talk about campaign finance laws and Citizens United decision in 2010, which is when this all started. It all started right after Citizens United. People saw the door open. We can get in. We can do political advertising and we won't have to report anybody's name, applications for secret money, political organizations increased by fourfold.

After that, the Supreme Court, this small group of people in this Cincinnati office screwed up. Nobody's going to deny that. They've simply screwed up. But the Congress, this committee messed up by not giving any clear criteria for what a real charitable organization is. The law is not clear and people have to make judgments and that means they've got to collect a lot of data to try and figure out what people are actually up to.

Mr. Miller, clearly, there is a problem with our current way of determining what an organization's primary purpose is and I want to ask you in a minute about that. I want you to think about it while I'm talking. But as I watch this conversation shift, to find out what's right and wrong and fix it to the IRS is broken, let's repeal it.

Imagine a country without -- we could appeal that along with the Obamacare yesterday. I'm reminded that it's only part right, part wrong. It's also about a Republican story line in this agenda. We need to find some truth here and I've heard members of this committee now talk about it. The IRS can't access your medical files. Is that true, Mr. Miller?

MILLER: Correct, sir.

MCDERMOTT: They cannot find out your private medical information.

MILLER: That's correct, sir.

MCDERMOTT: Their job in Obamacare is simply to collect paid financial information on which a determination is made to whether somebody can get a subsidy for their premium. Is that correct?

MILLER: Were you covered and over what period is what we would be getting.

MCDERMOTT: It is not a fascist takeover that's going on here of the healthcare system and let's not forget that the IRS is one of the hardest and most hated jobs and there are thousands and thousands of good, solid, hard working americans who work every day to run this system.

And a couple of people make a problem, that does not damage the organization in my view. You get rid of the people who made the problem. But I would really like to hear from Mr. Miller, what do you need that would make it so that this wouldn't have happened before?

MILLER: Sir, there are two things, sir. And I appreciate the kind word for our people, because we are incredibly hard working and honest group, frankly. That seems to be forgotten in all this. With respect to political activity, it would be a wonderful thing to get better rules, to get more clear rules.

And in terms of our ability to get to this work, it would be good to have a little budget that would allow us to get more than the number of people we have to do 70,000 applications and to do our job if looking at whether an organization is tax exempt or not.

UNIDENTIFIED MALE: All right, time has expired. Mr. Nunes is recognized.

REPRESENTATIVE DEVIN NUNES (R), CALIFORNIA: Thank you, Mr. Chairman. Mr. Miller, do you know the director of the IRS' exempt organizations division, Lois Lerner?

MILLER: I do, sir.

NUNES: Are you aware that she testified before this committee last Wednesday on May 8th?

MILLER: I believe I was.

NUNES: Are you aware that she did not acknowledge this investigation at the time?

MILLER: Actually, I do not know that, but I was engaged in other testimony that day.

NUNES: Were you aware that the IRS was preparing a statement to put out during this time last week?

MILLER: Yes. I don't know whether we knew at that time or not.

NUNES: Wouldn't Miss Lerner have known that last week when she testified before the committee?

MILLER: I don't know that.

NUNES: Did you know that Miss Lerner was going to appear last Friday, May 10th on a panel called "News from the IRS and Treasury at the American Bar Association Conference?"

MILLER: I knew she was appearing. I did not know the topic.

NUNES: Did you or any of your subordinates direct Lois Lerner to make the public statement at the panel discussion acknowledging the targeting of tax exempt groups?

MILLER: It was a prepared Q & A.

NUNES: Do you know Miss Celia Rody, a member of IRS' advisory council on tax exempt in government entities?

MILLER: I do.

NUNES: Was Miss Rody's question to Ms. Lerner about targeting conservative groups planned in advance?

MILLER: I believe that we talked about that, yes.

NUNES: Did you ever have any contact either by e-mail, phone, or in person with the White House regarding the targeting of tax exempt groups from 2010 until today?

MILLER: Absolutely not.

NUNES: How about the Department of Treasury?

MILLER: I certainly would have had some conversations with Treasury in my role as acting commissioner because I reported to them. On this topic, it was very -- it would have been I believe I have to go back and look, very recent that that conversation would have taken place.

NUNES: How about President Obama's re-election campaign?

MILLER: No.

NUNES: Did you ever have any contact with anyone associated with Organizing for America or its non-profit successor Organizing for Action?

MILLER: No.

NUNES: Did you ever have any contact with anyone associated with Propublica?

MILLER: I don't believe so. But there was, when this whole thing came out, that was previously referenced. I think the IRS might have talked to them, yes.

NUNES: So then it would probably clarify your involvement in any of this, Mr. Miller, would be if you submitted to this committee your e- mails, phone records and personal schedule from 2010 until you resign, would you be willing to do that?

MILLER: I'll have to see what's legally appropriate.

NUNES: You know, we could subpoena those records.

MILLER: I understand and I'll have to talk to my, the lawyers in the agency. I'm just saying, I don't know, you are asking me and then we'll talk.

NUNES: Mr. Chairman, I would suggest that we work hard to get those records. I would also encourage you to contact Miss Rody and Miss Lerner to testify before this committee at our earliest possible time.

I just have one last question, Mr. Miller, you really are not taking any acknowledgment that you knew anything, that you didn't do anything wrong. You've said that numerous times on the record today, that you did nothing wrong. So I find it hard to believe, why did you resign or why are you resigning? MILLER: I never said I didn't do anything wrong, Mr. Nunes. What I said is contained in the questions. I resigned because as the acting commissioner, what happens in the IRS, whether I was personally involved or not, stops at my desk and so I should be held accountable for what happens, whether I was personally involved or not are very different questions, sir.

NUNES: Well, I hope that you would be willing to submit all your e- mails, phone records, any personal meetings that you had in the last four years and I think that would really I think keep your reputation in good standing with this committee and the American people.

MILLER: Obviously, we'll have to talk about that. I'm not saying now. I just don't know.

NUNES: Thank you, Mr. Miller. I yield back my time, Mr. Chairman.

UNIDENTIFIED MALE: Mr. Neal is recognized.

REP. RICHARD NEAL (D), MASSACHUSETTS: Thank you, Mr. Chairman. Mr. Chairman, earlier, you referenced an article from "USA Today." I would like for the purpose of this hearing to insert an article from "Bloomberg News" that appeared on May 14th indicating that there were Democratic-leaning organizations that were -- the focus of the IRS as well.

UNIDENTIFIED MALE: Without objection.

NEAL: Thank you. Mr. Chairman, when I woke up this morning as I do just about every morning now, I went to my phone and I was curious about what the word of the day would be and the word of the day because Miriam Webster is located in my hometown. Mr. Miller you have rejected the term "targeted," is that correct?

MILLER: I think it's a term that implies something that didn't exist here.

NEAL: Let me draw you into the weeds based upon what Miriam Webster by sheer irony this morning suggested. That is they used the term litmus test, which they define as a single factor as an attitude, event or a fact that is decisive in choosing these organizations. Would you say that there was a litmus test?

MILLER: No, sir. The litmus test, if any, was political activity.

NEAL: OK, I have one of my constituent was contacted my office yesterday outlining --

(END LIVE FEED)

COSTELLO: All right, we're going to take a quick commercial break. When we come back, of course, we'll take you back to Capitol Hill for this committee hearing on what allegedly happened within the IRS. We'll be right back.

(COMMERCIAL BREAK) COSTELLO: All right, welcome back. Good morning to you. I'm Carol Costello. We want to go back to Capitol Hill in just a minute where the IRS is facing its first congressional hearing on abuse of power.

Dana Bash is here. John King is here and before we get back to the hearing, the acting IRS Commissioner Steven Miller has been taking questions for what, an hour and 22 minutes. But Dana, what struck me when he was asked a direct question, who is responsible for targeting Tea Party groups, he had no answer.

DANA BASH, CNN CHIEF CONGRESSIONAL CORRESPONDENT: He had no answer that he was willing to give. He was asked specifically, directly to name names. He wouldn't do so. Now, there might be some legal reason why he has not, you know, not doing this. Civil servants have great, great protections and that may be a part of it.

So that's an issue, but I think what is most fascinating here is the way Republicans appear to have really coordinated there line of questioning, almost prosecutor style, kind of going from the broad to the narrow. By the time we got to Paul Ryan, which I know, we heard our viewers live. He was really trying to get at Steven Miller to explain why he didn't disclose to Congress the fact that he knew.

And Miller's answer was, well, I answered the questions that I was asked truthfully. Obviously, what Republicans are trying to explain here is that it's a state of omission. He should have when he found out about this come to Congress voluntarily and not waited to be ask because he knew that Congress was investigating this for years.

So that is something that is not sitting well with Republicans. On the Democratic side, I also think it's fascinating how they are trying to build a narrative to remind people that the former commissioner was a Bush appointee. He was a Republican appointee and to sort of explain more of the process of why these groups really blew up back in 2010.

It is because of a Supreme Court decision, Citizens United and even Miller said that the amount or the number of applications for tax exempt status doubled. They really just had limited personnel to do that. He obviously said the shortcut attempt was the wrong way to go because, clearly, it was perceived as political. But it really does kind of put more meat on the bone and explain the context in which all of this happened back then.

COSTELLO: Yes, we hear Lois Lerner's name coming up, too, a lot, John King. Do we know if she's going to testify or not?

KING: We are awaiting her to be called as a witness and obviously she is not at this first committee hearing today. Carol, you can be certain this is going to continue. As Dana noted she is a civil servant. She has some protections and this is part of the back and forth before these committees.

You have what makes this unique is that you have on the Senate side, there will be hearings the Democrats control the Senate. On the Republican side, you have this hearing today. The Republicans control the House. There is bipartisan outrage and there is bipartisan determination to get the answers, to who is responsible.

How long has this been going on? Was it really just rogue employees in Cincinnati or was it a broader network to that? So there is a bipartisan agreement on getting the facts and then you have the partisanship, a little pendulum as you see going from Democrat to Republican.

But on the Lois Lerner question and the Steven Miller question, as Dana noted. Paul Ryan is looking to nail the witness, if you will. Saying we brought you in to talk about this subject. You did not disclose things you knew to us. They also said Lois Lerner was there before that committee. She said nothing about the targeting.

Days later in a planned, calculated question and answer session disclosed it at a public conference. So what the committee smells here is number one contempt for Congress that the agency has not been answering honestly. Let's say on Tuesday the answer is I don't know and on Thursday you come into information, what the Congress is trying to say the law requires you to call us an come back and say I have that information.

When I told you this I was not aware of that. That's going to get to a broader question on the Republican narrative and this happens in all administrations, but we happened to have a Democratic president at the moment. That this president on this and other issues and his people just look down their noses at Congress and decide, we don't have to tell you anything. But then they made a very calculated step to put this out in public, because they knew that inspector general report was coming down the pipeline.

COSTELLO: The thing that struck me at the beginning of the hearing, Congressman Dave Camp, the chair of House Ways and Means Committee seemingly put emphasis on the IRS as an organization, not just on the acting commissioner here. He sort of indicted the IRS. Let's listen to what he said at the start.

(BEGIN VIDEO CLIP)

REP. DAVE CAMP (R), MICHIGAN: The power to tax is the power to destroy. Well, under this administration the IRS has abused its power to tax and it has destroyed what little faith and hope the American people had in getting a fair shake in walk in Washington. This will not stand. Trimming a few branches will not solve the problem when the roots of the tree have gone rotten.

(END VIDEO CLIP)

COSTELLO: Now, he's talking about the entire organization, not just a tiny part of it in charge of the Cincinnati office, right, Dana?

BASH: Absolutely. He is talking about the organization there, but then I think in the next breath, he pointed to the entire Obama administration saying that they are -- that they sort of conveniently withhold facts until after the election, which of course, Democrats took issue with. I think that that is an important point here when you look at the substance of what's going on in the hearing. Steven Miller did say, look, I admit, we need to have better guidelines for how to deal with political groups. He admitted that they do deal differently with political groups.

Because when are you talking about what is allowed for a tax exempt status, 501-C4s, that's what the subject is, they are allowed to do political activity not primarily political activity. So it is something they have to generally scrutinize more than other things. It is required of them by law.

The way they went about it and the way they really just asked unnecessary questions, pretty over the top questions like who are your donors to mostly conservative groups, that is what is not allowed. But he said, look, we need better guidelines. Of course, he asked Congress for more money, not a shocker there. We need more explanation of how we need to do that. That might be something Congress has to do statutorily.

COSTELLO: Well, the Democrats are exploring the fat of that questions, but Republicans aren't so much and it's still strikes me, John, that this acting commissioner can't name names, can't say who is responsible. He said, I'm not saying I didn't do anything wrong, but he couldn't articulate what it was he did wrong.

KING: I think there are both leadership questions there and legal questions. Legal questions in that he's going to let the inspector general, he'll let Congress, these people, Miss Lerner and others, I'm sure by now most of them have attorneys or consulting attorneys, about what might happened to them when they go up to Congress and that is the big question, Carol, at these hearings.

Was this just incompetence? Was it stupidity? Was it mistakes made at a bureaucracy, stupid mistakes or was it deliver -- it would be criminal if they sat in any IRS office and said let's go after a group because of its political beliefs and ideology. That would be criminal behavior.

Mr. Miller is trying to say that did not happen. That is why he is defending the bureaucracy. He is disputing the use of the word targeting. Frankly, he is being a loyal soldier and God bless him, but he is tilting the windows if he thinks he is going to convince the Congress or the American people that the bureaucracy didn't do anything terribly wrong here.

That's why you have the outrage. He is trying to do his best here in a very difficult job. But there is a broader question too, Carol. When you brought up the statement from the chairman right in the very beginning, the Republicans are trying to get to a broader theme too.

They are trying to narrow down on what happened at these abuses at the IRS. They are also trying to make the case, yes, it's an independent agency. But it reports to the Treasury Department, which reports to the president and if you have this stuff going on, they know it's going on. And they are not dealing with it and they are not telling the Congress and why didn't they tell the president right away when they found out.