[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE IRS'S SYSTEMATIC DELAY AND SCRUTINY OF TEA PARTY APPLICATIONS
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JULY 18, 2013
__________
Serial No. 113-51
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas MARK POCAN, Wisconsin
DOC HASTINGS, Washington TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky PETER WELCH, Vermont
DOUG COLLINS, Georgia TONY CARDENAS, California
MARK MEADOWS, North Carolina STEVEN A. HORSFORD, Nevada
KERRY L. BENTIVOLIO, Michigan MICHELLE LUJAN GRISHAM, New Mexico
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on July 18, 2013.................................... 1
WITNESSES
Ms. Elizabeth Hofacre, Revenue Agent, Exempt Organizations, Tax-
Exempt and Government Entities Division, Internal Revenue
Service
Oral Statement............................................... 6
Written Statement............................................ 9
Mr. Carter Hull, former Tax Law specialist, Exempt Organizations,
Tax-Exempt and Government Entities Division, Internal Revenue
Service
Oral Statement............................................... 12
Written Statement............................................ 14
The Hon. J. Russell George, Inspector General, Treasury Inspector
General for Tax Administration, Mr. Michael McCarthy, Chief
Counsel, Treasury Inspector General for Tax Administration, and
Mr. Gregory Kutz, Assistant Inspector General for Management
Services and Exempt Organizations, Treasury Inspector General
for Tax Administration
Oral Statement............................................... 61
Written Statement............................................ 64
APPENDIX
Statement of Rep. Cummings Submitted for the Record.............. 126
Statement of Rep. Connolly Submitted for the Record.............. 128
The Committee on Ways and Means Democrats Statement Submitted for
the Record by Rep. Connolly.................................... 130
An IRS Document Regarding the BOLD Listing Submitted for the
Record by Mr. George........................................... 131
A Communication from the Head of Investgations Submitted for the
Record by Rep. Connolly........................................ 135
THE IRS'S SYSTEMATIC DELAY AND SCRUTINY OF TEA PARTY APPLICATIONS
----------
Thursday, July 18, 2013
House of Representatives,
Committee on Oversight and Government Reform,
Washington, D.C.
The committee met, pursuant to call, at 11:05 a.m., in Room
2154, Rayburn House Office Building, Hon. Darrell E. Issa
[chairman of the committee] presiding.
Present: Representatives Issa, Mica, Turner, Duncan,
McHenry, Jordan, Chaffetz, Walberg, Lankford, Amash, Gosar,
Meehan, DesJarlais, Gowdy, Farenthold, Hastings, Lummis,
Woodall, Massie, Collins, Meadows, Bentivolio, DeSantis,
Cummings, Maloney, Norton, Tierney, Lynch, Cooper, Connolly,
Speier, Cartwright, Duckworth, Kelly, Davis, Cardenas, and
Lujan Grisham.
Staff Present: Alexia Ardolina, Assistant Clerk; Kurt
Bardella, Senior Policy Advisor; Richard A. Beutel, Senior
Counsel; Brian Blase, Senior Professional Staff Member; Will L.
Boyington, Press Assistant; Molly Boyl, Senior Counsel and
Parliamentarian; Lawrence J. Brady, Staff Director; David
Brewer, Senior Counsel; Daniel Bucheli, Assistant Clerk;
Caitlin Carroll, Deputy Press Secretary; Steve Castor, General
Counsel; Drew Colliatie, Professional Staff Member; John
Cuaderes, Deputy Staff Director; Brian Daner, Counsel; Linda
Good, Chief Clerk; Tyler Grimm, Senior Professional Staff
Member; Frederick Hill, Director of Communications and Senior
Policy Advisor; Christopher Hixon, Deputy Chief Counsel,
Oversight; Mark D. Marin, Director of Oversight; Kristin L.
Nelson, Senior Counsel; Katy Rother, Counsel; Laura L. Rush,
Deputy Chief Clerk; Scott Schmidt, Deputy Director of Digital
Strategy; Sarah Vance, Assistant Clerk; Rebecca Watkins, Deputy
Director of Communications; Jeff Wease, Chief Information
Officer; Jedd Bellman, Counsel; Meghan Berroya, Counsel; Claire
Coleman, Counsel; Susanne Sachsman Grooms, Deputy Staff
Director/Chief Counsel; Adam Koshkin, Research Assistant; Julia
Krieger, New Media Press Secretary; Elisa LaNier, Director of
Operations; Jason Powell, Senior Counsel; and Dave Rapallo,
Staff Director.
Chairman Issa. The committee will come to order.
The Oversight Committee exists to secure two fundamental
principles: First, Americans have a right to know that the
money Washington takes from them is well-spent. And, second,
Americans deserve an efficient, effective government that works
for them. Our duty on the Oversight and Government Reform
Committee is to protect those rights.
Our solemn responsibility is to hold government accountable
to taxpayers, because taxpayers have a right to know what they
get from their government. It's our job to work tirelessly, in
partnership with citizen watchdogs, to deliver the facts to the
American people and bring genuine reform to the Federal
bureaucracy.
Today's hearing particularly touches on taxpayers and what
taxpayers should expect from their government. It continues the
committee's investigation into the IRS's inappropriate
treatment of groups applying for tax-exempt status. It is now
our understanding that some of those groups were 501(c)(3)s,
groups for whom you receive a tax deduction if you give, and
that the vast majority were 501(c)(4)s, groups for whom you do
not receive a tax deduction for your contribution but who do
not pay the same corporate taxes on that income.
This scandal first came to light via a planted question,
directed at Lois Lerner's request, at the American Bar
Association event on May 10th. Prior to the planting of that
question, designed to obstruct the truth about targeting and
break the news to a sympathetic audience that Friday afternoon,
this committee had worked with our Inspector General for
Treasury for more than 10 months. Multiple committees of the
House of Representatives had wanted answers, had sought
answers, and were waiting on those answers.
In response to the planted question, Lois Lerner blamed the
inappropriate IRS activities of line people in Cincinnati. The
IRS hoped it would--we believe the IRS hoped this would make
the scandal quickly dissipate. It did not. And, in fact, today
we are going to hear from one of those line employees in
Cincinnati. But our committee has heard from many of those line
employees. We have also begun hearing from people they reported
to or exchanged information with in Washington.
Sadly, the White House press secretary continues a
narrative characterizing it as ``inappropriate conduct by IRS
officials in Cincinnati.'' Today's hearing needs to dispel that
so we can begin following the witnesses and following the
testimony and following the truth wherever it leads.
We are now convinced and we will hear testimony that, as
the Inspector General found in his investigation/audit, what
began in Cincinnati with one case of a Tea Party application
soon was, in fact, in Washington at levels well above line
employees. They stated the assertions--the assertion Cincinnati
was to blame were absurd, and we will hear that today. More
importantly, it is now understood that these files, these
hundreds of files were in many, many hands, most of whom--many
of whom were not in Cincinnati.
As we look for the truth, let us bear in mind that we can
debunk many things along the way. We will probably never debunk
all accusations, nor should we make accusations unless
testimony and evidence takes us there.
We can today, I believe, debunk the accusations that
Cincinnati was, in fact, the source or that it didn't go to
Washington, which it clearly did. Particularly when we hear
from the Honorable Russell George, the IG who brought us this,
and his staff, I think we're going to find out more, within the
limits of his ability to tell us.
I certainly want to make sure that the smear stops here
today. I want to caution the ladies and gentlemen on both sides
of the aisle here: We will work with what we know, and we will
work to find out what we do not know. And I, for one, and I
hope everyone on both sides of the dais will reject
categorically assumptions for which there is not evidence.
It is difficult to say who should have come forward first.
We know one thing: Conservative groups came forward with their
accusations more than 10 months ago, and they were heard. We
know that, in fact, Members of both parties sent letters to the
IRS, and I believe that is an important area that this
committee cannot overlook.
Everything we have learned of real substance begins with
Mr. George's impartial, independent investigation of IRS
treatment of tax-exempt organizations and the targeting of them
since March of 2010. Our investigation will continue.
I hope that both my side of the aisle and the ranking
member's side of the aisle will be very careful and cautious in
what we say. When I say something goes to the Office of the
Counsel of the IRS, that is not to be construed as the Office
of the President or to the counsel himself. It is important
that we understand that words matter, nuances matter, and that
we not go one step beyond what we know.
What we do know today and what I believe we are going to
hear is that, in fact, Washington made a catastrophic mistake
in taking what would have been in the ordinary course an
individual, one by one application, evaluating them, as Mr.
Hull has done for 48 years, accepting them, denying them, or
asking for more information, and not looking at them as a group
with some sort of special cynicism. That's not what America
expects. America does not expect people targeted as groups.
One of the questions I will ask today will be, if they were
fairly evaluated, wouldn't some of these cases have been
resolved if they were not lumped into a group? I may not get an
answer today, but I will not cease until I get that answer.
Lastly, there have been accusations leveled against the
Inspector General and the work that he has done and his team
has done. This committee is the most important place to resolve
that. We have oversight over all the inspector generals, we
control the legislation that created the position, and we take
seriously accusations about their independence. We will
investigate it, but, as of right now, we stand solidly behind
the best efforts of all our inspector generals. If a credible
accusation occurs, we will take it up.
Lastly, Mr. Ranking Member, I want to make sure that I make
something clear. You're frustrated about 6103 and its
interpretation, and you've made that clear. I'm frustrated
about it. I believe this committee must ensure that the fair
interpretation of this law designed to protect taxpayers'
confidential information is, in fact, not used to re-victimize
people who have previously been victimized. And I will work
with the ranking member and anyone else to make sure we protect
victims from being kept from finding out what actually happened
to them and the public as appropriate.
With that, I recognize the ranking member.
Mr. Cummings. Thank you very much, Mr. Chairman.
Let me be very clear. We come today to seek the truth, the
whole truth, and nothing but the truth, so help me God.
Eight weeks ago, on May 22nd, we met in this room to hear
testimony about a report from the Inspector General about the
IRS's review of groups applying for tax-exempt status. At the
time, there was justifiable outrage, including from me, about
the inappropriate search terms used to screen these groups and
the unacceptable delays they endured.
On this side of the aisle and I know the other side of the
aisle, we are not only concerned about conservative groups, we
are concerned about all groups and all individuals who have
anything to do with the IRS.
Since that hearing, Republican politicians and commentators
have engaged in a sustained and coordinated campaign to accuse
the President and the White House of using the IRS to target
Tea Party groups for partisan, political purposes without any
evidence to support these claims.
Our chairman led the charge, saying this was, ``targeting
of the President's political enemies.'' Other Republicans
followed suit. They cited, ``the enemies list out of the White
House.'' They argued that President Obama, ``doesn't have clean
hands.'' They invoked the specter of disgraced former President
Richard Nixon.
The fact is that there is no evidence before this committee
to support these claims--none. Two days ago, I issued a memo
finding that since the chairman and other Republicans first
began making these accusations, the committee has identified no
evidence whatsoever--documentary, testimonial, or otherwise--to
substantiate them.
I ask that this memo be entered into the record at this
time, Mr. Chairman.
Chairman Issa. Without objection, so ordered.
Mr. Cummings. Committee staff now has conducted--and that's
bipartisan committee staff--have now conducted 16 transcribed
interviews of IRS employees in Cincinnati and Washington, D.C.
We did another one just Tuesday. And none of them reported any
White House involvement or political motivation, including six
who identified themselves as Republicans and who the chairman
chose not to invite today.
To the contrary, these employees indicated that they sought
guidance on how to process these applications in a consistent
manner according to the law. For example, a tax law specialist
in Washington, D.C., one who identifies herself as a
Republican, called the accusations made by the chairman,
``laughable.'' She explained, ``This is purely cases that
unfortunately Cincinnati didn't have enough guidance on, that
the (c)(4) area is a very, very difficult area and there is not
much guidance.'' This is what she said. ``And so the lingering
length of time, unfortunately, was just trying to apply the law
to the specific facts of each case.'' I didn't say that. She
said it.
Yet even today, this very morning, the chairman is still
pedaling this claim. In an op-ed appearing in USA Today, he
asked the question, ``Was the targeting of the Tea Party
applicants directed from the White House or somewhere else
outside the IRS? As our investigation is ongoing, the
responsible answer is that judgment should be withheld.''
This is unsubstantiated nonsense. It undermines the
committee's integrity and every Member of this body's
integrity, and it destroys the committee's credibility. The
chairman certainly did not withhold judgment. He rushed to it
with no evidence whatsoever. The responsible answer is that we
have no evidence at all to back up that claim.
Since our previous hearing 8 weeks ago, we have also
obtained new documents that raise serious questions about the
Inspector General's report. And I'm glad to hear that the
chairman stands by the Inspector General, and I do too. But I'm
very interested, as he would be, to know certain questions that
we will be asking, and I'm encouraged that he has agreed to
come back in today in order to address them directly.
And I want to thank you, Mr. Chairman, at my request, for
bringing him back.
We must have an independent, transparent IG. It is so very,
very important, because we all depend on his word.
For example, the Inspector General failed to disclose, Mr.
Chairman, to this committee that he tasked his top investigator
with reviewing 5,500 emails from IRS employees. After
conducting this review, this official concluded, ``There was no
indication that pulling these selected applications was
politically motivated.''
I want to ask the Inspector General why he did not disclose
this significant information when he testified on May 22nd,
just as I railed against Mr. Shulman for not coming back to
this committee to let us know what he may have found out.
I also want to ask the Inspector General why he was unaware
of documents we have now obtained showing that the IRS
employees were also instructed to screen for progressive
applicants and why his office did not look into the treatment
of left-leaning organizations, such as Occupy groups. I want to
know how he plans to address these new documents. Again, we
represent conservative groups on both sides of the aisle, and
progressives and others, and so all of them must be treated
fairly.
Finally, I want to ask the Inspector General about some
very, very troubling testimony we heard yesterday from the
acting head of the IRS, Daniel Werfel. Mr. Werfel testified
that the IRS was about to produce unredacted documents to the
committee last week that include references to additional
categories of non-Tea Party groups, but the Inspector General
personally--personally--intervened to block the IRS from
producing this information to this committee. According to Mr.
Werfel, no IRS officials he consulted could ever recall such an
unprecedented intervention. We need to know why that was.
And, finally, Mr. Chairman, I'm not here today to attack
anyone. I'm here to get to the truth--not a partial or a
selective truth, but the whole truth. I believe that that
should be the goal of everyone in this room. We do need to stop
making baseless accusations, and we need to get full
information, and I emphasize ``full,'' about the treatment of
all these groups--conservatives, liberals, everyone in between.
And I sincerely hope that we can do that today.
And, with that, Mr. Chairman, I yield back.
Chairman Issa. I thank the gentleman.
Chairman Issa. All Members will have until the end of the
day to submit their written statements.
Chairman Issa. And we now welcome our first panel of
witnesses.
Ms. Liz Hofacre is the revenue agent in Exempt
Organizations, Quality Assurance in the Cincinnati office of
the Internal Revenue Service. That's a mouthful for any
chairman.
And Mr. Carter Hull was a senior tax law specialist at the
Exempt Organizations Technical Unit in Washington, D.C., and
was with the Internal Revenue Service for an astounding 48
years of service.
And we want to thank you for your service.
Pursuant to the committee rules, I'd ask you please both
rise to take the oath and raise your right hands.
Do you solemnly swear or affirm the testimony you are about
to give will be the truth, the whole truth, and nothing but the
truth.
Ms. Hofacre. Yes, I do.
Mr. Hull. I do.
Chairman Issa. Please have a seat.
Let the record reflect that both witnesses answered in the
affirmative.
I know that sometimes prepared statements are the best way
to go, and I'm not going to dissuade you from it, but use your
5 minutes in any way you want. You can abbreviate your
statements if you think it's appropriate in light of opening
statements or for any other reason to add, you may.
I will not hold you to exactly 5 minutes, but when you see
the countdown getting close, please wrap up.
Ms. Hofacre?
STATEMENT OF ELIZABETH HOFACRE
Ms. Hofacre. Chairman Issa, Ranking Member Cummings, and
members of the committee, since 1999 I have been an IRS
employee in the Office of Exempt Organizations, EO
Determinations, in Cincinnati. As of April of 2010, my position
was an EO Determinations specialist.
At the time, I had been assigned to serve as the emerging
issues coordinator. In this role, I was tasked with handling
applications that had been identified as emerging issues. In
late April, I was assigned by my supervisor to handle all
applications that had been identified as applications by Tea
Party groups applying for 501(c)(3) or 501(c)(4) exemption
status. Initially, around April 30th, 2010, approximately 20
Tea Party applications were assigned to me. Subsequently, I
received a steady flow of Tea Party applications.
There were occasions when other agents sent to me
applications from liberal or non-Tea-Party-type groups. When
that occurred, pursuant to the instructions that had been given
to me, I would send those application to general inventory,
since they were not within the scope of the Tea Party emerging
issue.
Around the same time that these applications were assigned
to me, I also learned that two Tea Party applications had been
assigned to Carter Hull in EO Technical in Washington, D.C. I
was told that I was to coordinate the review of these
applications assigned to me with Mr. Hull.
I called Mr. Hull. He sent me the development letters that
he had prepared for the applications assigned to him to use as
examples for my applications. Mr. Hull requested that I send to
him drafts of the development letters I was writing for my
applications, and he subsequently asked me to send him copies
of the applications as well.
At the beginning of the process, when I sent my draft
development letters to Mr. Hull, he would call me with
suggested edits to the letters. I would make the edits and send
them to the applicant--send them to the applicants. When I'd
receive responses from the applicants, I notified Mr. Hull, who
asked that I send copies of the responses to him as well. I do
not remember how many such responses I received. I would
estimate 15 to 25.
At no point did I receive any guidance from Mr. Hull or
anyone else as to what to do with these responses. Similarly,
beginning sometime in the summer of 2010, when I sent draft
development letters to Mr. Hull, I received no guidance from
him or anyone else at EO Technical as to those letters.
In my experience, this was a highly unusual process. I
never before had to send development letters that I had drafted
to EO Technical for review, and I never before had to send
copies of applications and responses that were assigned to me
to EO Technical for review. I was frustrated because of what I
perceived as micromanagement with respect to these
applications.
I also received numerous calls from applicants asking about
the status of their applications. I was only able to tell those
applicants that their applications were under review. I became
very frustrated because I had--because until I received
guidance from EO Technical, I was unable to process these
applications.
I expressed my concerns to both Mr. Hull and my supervisor
at the time, Steve Bowling. As a result of this frustration, in
July of 2010 I applied for a transfer to Quality Assurance, and
in October 2010 I received the requested transfer.
When that occurred, these cases that I had assigned were
reassigned to another agent. To the best of my recollection, I
had a total of 40 to 60 Tea Party cases assigned to me at that
time.
In July and August 2010, I attended several meetings with
Mr. Bowling and another manager, Jon Waddell, at which I was
informed of the creation of the BOLO list. They told me that
the purpose of this list was to consolidate into a single
document all the instructions that agents received about
certain applications. The BOLO list was a new tab that was
added to an existing spreadsheet that had other descriptions of
groups and instructions to agents.
In August 2010, Mr. Waddell told me the language that
should be added to the BOLO list with respect to Tea Party
groups. After adding the language, I sent the document first to
Mr. Waddell for his review. Mr. Waddell then told me to send
the document to Cindy Thomas and a couple of other managers.
A few days later, he told me to email the list to everyone
else in EO Determinations in Cincinnati. I accidentally emailed
the list to everyone in Rulings and Agreements, including
agents in Washington, D.C.
Since October 2010, I have had no direct involvement in the
processing and review of Tea Party applications, aside from
occasionally reviewing them in the course of my quality
assurance responsibilities.
In December 2011 and January 2012, I attended two to three
meetings regarding the creation of a team to process Tea Party
applications that had been held awaiting guidance. I provided
this group with development letters that I had drafted in 2010.
I had no role in the processing of Tea Party applications
following those meetings.
Chairman Issa. Thank you.
[Prepared statement of Ms. Hofacre follows:]
[GRAPHIC] [TIFF OMITTED] 82435.001
[GRAPHIC] [TIFF OMITTED] 82435.002
[GRAPHIC] [TIFF OMITTED] 82435.003
Chairman Issa. Mr. Hull?
STATEMENT OF CARTER HULL
Mr. Hull. Chairman Issa, Ranking Member Cummings, and
members of this committee.
As of the spring of 2010, I was employed by the IRS as a
tax law specialist in the Exempt Organizations, EO, Technical
in Washington, D.C.
In April of 2010, I was assigned by my supervisor to work
on two applications from Tea Party groups. In that same month,
I became aware that a group of Tea Party applications were
being held by EO Determinations in Cincinnati. It was my
understanding that the applications assigned to me were to be
test cases to provide guidance for others--other applications.
I was also told by my supervisor that I was to coordinate the
review of the Tea Party applications that were assigned to
Elizabeth Hofacre in Cincinnati.
With respect to the two applications assigned to me, I
reviewed the application materials and I sent out initial
development letters to the applicants. When one of those
applicants did not respond, the file was closed, and I was
assigned another Tea Party application to replace it.
As part of my review, I also researched determinations that
had been made with respect to previous applications by groups
applying for tax-exempt status that had similar indications of
potential political activity. Throughout this process, I spoke
to my reviewer, Elizabeth Kastenberg, about these cases.
At some point, and I do not have a clear memory as to when,
I made conclusions as to how the applications assigned to me
should be determined, and I subsequently drafted documents
stating my recommendations and analysis. I am constrained from
saying more about these applications due to prohibitions
regarding the disclosure of taxpayer information.
I discussed my recommendations with Ms. Kastenberg, and she
suggested I forward the recommendations to Judy Kindell, who
was at that time a senior technical advisor to Lois Lerner. I
later had a meeting with Ms. Kindell and Ms. Kastenberg in
March of 2011, at which Ms. Kindell told me to forward my
recommendations to the Office of Chief Counsel for their
review.
While this process was going on, I also received draft
development letters from Mrs. Hofacre. In order to assess the
appropriateness of the questions that she had drafted for the
applications assigned to her, I asked Ms. Hofacre to send me
copies of the applications as well. I gave Ms. Hofacre
suggestions regarding her letters over the telephone. I also
asked her to send me the responses to the letters that she
received. However, I was not able to give her guidance on those
responses because the review of the test cases assigned to me
had not been completed. At some point, I stopped giving Mrs.
Hofacre feedback regarding draft development letters for the
same reason.
During this period of time, at the request of my
supervisor, I prepared sensitive case reports on a monthly
basis regarding the Tea Party applications. In October 2010, at
the request of EO Technical Manager Michael Seto, I also wrote
a memorandum to EO Director Holly Paz that described the
coordination of the Tea Party cases in Cincinnati. I attached a
list of all the Tea Party cases that I had received from Ms.
Hofacre.
In the summer of 2011, I recall attending two meetings
relating to the Tea Party applications. In July 2011, I
attended a meeting at which Mrs. Lerner, Ms. Paz, Mr. Seto, Ms.
Kindell, Mrs. Kastenberg, and someone from Chief Counsel's
Office were present. Ms. Lerner led the meeting, and she
instructed everyone that the applications should be referred to
as ``advocacy'' applications and not ``Tea Party''
applications.
In August 2011, I attended a meeting at which the
applications assigned to me were discussed. I recall that Don
Spellmann, David Marshall, and Amy Franklin from Chief
Counsel's Office were at the meeting, as well as tax law
specialists Justin Lowe, Hilary Goehausen, and Ms. Kastenberg.
I recall that Ms. Franklin or someone else from Chief
Counsel's Office stated that more current information was
needed for my applications and that a second development letter
should be sent to the applicants.
I also recall a discussion about the creation of a template
development letter for Tea Party applications. I expressed my
opinion that a template was not a good idea, as there was a
great deal of variance among the groups and each application
needed to be developed according to its particular facts and
circumstances.
After the August 2011 meeting, the applications assigned to
me were transferred to another tax law specialist, Ms.
Goehausen. After the applications were transferred, I had no
further involvement with respect to the Tea Party applications.
Thank you.
Chairman Issa. Thank you.
[Prepared statement of Mr. Hull follows:]
[GRAPHIC] [TIFF OMITTED] 82435.004
[GRAPHIC] [TIFF OMITTED] 82435.005
[GRAPHIC] [TIFF OMITTED] 82435.006
Chairman Issa. I'm going to start with a round of
questions. Mostly, these are pretty much ``yes'' or ``no,'' if
at all possible.
Ms. Hofacre, is it true that you were unable to close any
Tea Party cases because you were waiting on guidance from Mr.
Hull?
Ms. Hofacre. Yes.
Chairman Issa. Mr. Hull, why were you unable to give Ms.
Hofacre guidance she needed? And I guess I will abbreviate it
by saying, were you--were you waiting on answers from Chief
Counsel and Lois Lerner, and is that effectively what your
opening testimony said?
Mr. Hull. I was awaiting word from Chief Counsel----
Chairman Issa. Mic.
Mr. Hull. I was awaiting word from Chief Counsel as to how
to proceed.
Chairman Issa. Thank you.
Mr. Hull, you testified that you made recommendation in
these cases; is that correct?
Mr. Hull. That is correct.
Chairman Issa. And under some caution of 6103, you're not
prepared to tell us your recommendations at this time; is that
correct?
Mr. Hull. I'm prepared to tell you that one was an
application that I was saying should be exempt--should be
recognized as exempt, and one was an application I said that
should be denied.
Chairman Issa. Okay. So there were applications recommended
``yes'' and applications recommended ``no.'' Were those heeded,
to your knowledge? In other words, did they agree with your
recommendation and act on it, or did they not act on it?
Mr. Hull. It was after that time that I was told additional
information was needed on those cases.
Chairman Issa. So it's fair to say that when you
recommended a ``yes,'' you got told, ``Go get more
information''?
Mr. Hull. Correct.
Chairman Issa. Mr. Hull, you have 48 years of experience.
Throughout those 48 years, did you ordinarily, for similar
cases to the ones you're speaking, have enough facts to close
these cases, and were you often overruled in those decisions?
Mr. Hull. I don't recall that I was overruled, sir. I'm not
sure. It goes back a long way. I can't say for certain.
Chairman Issa. And with your 48 years of experience, your
recommendation was that these cases should be treated as
individuals, but, in fact, they were treated as a group, over
your recommendation; is that correct?
Mr. Hull. I recommended each organization as I saw fit,
those two organizations.
Chairman Issa. Thank you.
Could we put up the slide?
Okay. Mr. Hull, Mr. Seto, one of your superiors in
Washington, told the committee staff that Lois Lerner sent him
an email saying that--said, ``These cases need to go through''
a--and the ``a'' is out, but--a ``multitiered review, and they
will eventually have to go to Ms. Lerner's senior advisor and
the Chief Counsel's Office.''
Is this consistent with the instructions you received?
Mr. Hull. I don't ever recall seeing that memo, sir.
Chairman Issa. Well, but is it consistent with the
instructions you believe you received?
Mr. Hull. Yes.
Chairman Issa. In your experience, is that unusual?
Mr. Hull. Yes, that is unusual.
Chairman Issa. Particularly the multitiered process of,
essentially, belt and suspenders; is that correct?
Mr. Hull. Oftentimes there was more than one reviewer, but
multitiered is unusual.
Chairman Issa. Ms. Hofacre, to your knowledge, do you know
of anyone that you would say, in your opinion, had political
motives in the role of treating of Tea Party groups?
Ms. Hofacre. No, I do not.
Chairman Issa. Mr. Hull, do you know, to your personal
knowledge, of anyone in Washington--obviously, I was asking Ms.
Hofacre primarily Cincinnati--but in Washington or Cincinnati,
for either of you, that you know had political motives against
the Tea Party groups?
Mr. Hull. No, sir.
Chairman Issa. Do you have any personal knowledge of Lois
Lerner's politics, activities, or motives?
Mr. Hull. No, sir.
Chairman Issa. Lastly, one of the challenges that we have
here is determining whether or not specifically there was
special treatment, in your knowledge, of Tea Party groups.
And, Ms. Hofacre, you've said you only worked on Tea Party
groups; is that correct?
Ms. Hofacre. In 2010, that is correct.
Chairman Issa. Okay. So, at that time, your experience is
that the special treatment that you experienced was
specifically related to groups who had been gathered--some 298
is the number we have during the entire--the tenure, and 471 to
date--for special treatment. Is that correct?
Ms. Hofacre. Yes, that is correct.
Chairman Issa. Mr. Hull, you have 48 years of service, and
I can't say that enough without realizing what a unique, long
career that is.
Can you give us a single valid reason for groups to be
lumped together and not granted for this long period of time?
Realizing you didn't look at all of these, but can you give us
a reason where, in history, you'd seen that kind of lumping
together of people, primarily 501(c)(4)s, and the kind of
delays, this nearly 3-years delay and still counting?
Mr. Hull. I don't think I could answer that question, sir.
Chairman Issa. But you don't have any experience of seeing
it before?
Mr. Hull. I have no experience--no.
Chairman Issa. Thank you.
We now go to the ranking member.
Mr. Cummings. Thank you very much.
To you, Ms. Hofacre, and to you, Mr. Hull, before I begin,
I want to take a moment to thank you, Ms. Hofacre, for your 14
years of service, and to you, Mr. Hull, for your 48 years.
And I know this can be--this is a tough environment to be
in.
You're retired, Mr. Hull?
Mr. Hull. Yes, sir.
Mr. Cummings. And I'm sure there are a lot of things you'd
rather be doing. Amen.
And to you, Ms. Hofacre, I want you to understand, as I
said to both of you, that we're simply seeking the truth.
That's all.
I'm sure--I'm sure you would--let me just go back to one
thing. The chairman invited only two of you today, and he
didn't invite any of the other 14 IRS employees who were
interviewed, even though they could help provide a more
complete explanation of what occurred. At any rate, I just want
you to answer the questions as best you can, and that's all we
can expect.
So, Ms. Hofacre, let me start with you. Since the IG
released his report, we've been hearing over and over again
from the Republicans that the Obama administration and the
White House were responsible for the, ``targeting,'' of Tea
Party groups for political reasons. Even the chairman's op-ed
this morning in USA Today continues to raise questions about
whether the White House, ``directed,'' the targeting.
Chairman Issa. Would the gentleman yield?
Mr. Cummings. Of course. I want to say, I need my time.
Chairman Issa. Yes.
Mr. Cummings. Okay. Stop the clock.
Chairman Issa. We'll hold----
Mr. Cummings. Yes.
Chairman Issa. I would hope that you're not linking the
two. I have never said that it was the President. I've never
said that he directed it. And, certainly, my questions in an
op-ed were posed as questions, not as conclusions.
Mr. Cummings. Very well. If you would----
Chairman Issa. Thank you.
Mr. Cummings. --let me finish----
Chairman Issa. Thank you.
Mr. Cummings. --you will see that I'm just stating the
facts.
This is despite the fact that the committee has already
conducted 16 interviews, reviewed thousands of documents, and
found no evidence of White House involvement. This is also
despite the fact that the Inspector General identified no
evidence of White House involvement during his office's
interviews or email searches.
Hearing this sustained focus on this supposed involvement
of the White House, however, I have no choice but to ask about
your personal knowledge about whether the White House was
involved.
Ms. Hofacre, let me start with you. During your transcribed
interview with the committee staff, you were asked this
question: Are you aware of any--aware of any political bias by
employees in the Cincinnati office against Tea Party
organizations? And you responded; ``No, I am not.'' Is that
correct?
Ms. Hofacre. Yes, sir, that is correct.
Mr. Cummings. And you still stand by that?
Ms. Hofacre. Yes, sir.
Mr. Cummings. You also were asked this question: ``Are you
aware of any political motivations behind the development and
screening and grouping of Tea Party cases.'' And, again, you
responded that, ``No, I am not.'' Is that correct?
Ms. Hofacre. Yes, sir, that is correct.
Mr. Cummings. And is your testimony the same today?
Ms. Hofacre. Yes, sir.
Mr. Cummings. Okay. So based on your own personal
experience, did you ever receive direction from anyone in the
White House concerning your handling of the Tea Party
applications?
Ms. Hofacre. No, sir, I did not.
Mr. Cummings. You know, we heard exactly the same thing
from--just to let you know, we heard the same thing that you
just said from every single person we interviewed, 16 of them,
of you all. So I don't understand why this keeps--these
allegations keep cropping up.
Ms. Hofacre, Senator Mitch McConnell recently released a
video that was paid for by his political campaign, and I would
like to read what it says. ``I don't know about you, but I
think that the leader of the free world and his advisors have
better things to do than dig through other people's tax
returns. What they are trying to do is intimidate donors to
outside groups that are critical of the administration. They've
got the IRS, the SEC, and other agencies going after their
contributors.''
Ms. Hofacre, you have basically already answered this
question, but do you have any knowledge, personal knowledge, of
the President digging through, the White House digging through
other people's tax returns?
Ms. Hofacre. No, I do not have any personal knowledge.
Mr. Cummings. Do you have any knowledge?
Ms. Hofacre. No, sir, I have none.
Mr. Cummings. And so, again, I want to thank you all for
being with us today. There has been no greater defender of
public employees. I know that, in the great words of one of my
favorite theologians, Swindoll, he says, so often the great
things that people do are unknown, unseen, unappreciated, and
unapplauded. I take this moment to thank you for what you have
done, what you continue to do, and thank you for being great
public servants.
Thank you.
Chairman Issa. Thank you.
We now go to the gentleman from Ohio, Mr. Turner. If----
Mr. Turner. I'll yield the chairman 30 seconds.
Chairman Issa. Yeah, just very briefly, just to maybe tell
a story.
You know, the amazing thing is I keep saying, it wasn't in
Cincinnati if we see it leading to Washington. We now today see
it leading to Washington. It reminds me that, although I expect
the right to say it immediately leads to the White House, I'm
always shocked when the ranking member seems to want to say,
like a little boy whose hand's caught in the cookie jar, ``What
hand? What cookie?''
I've never said that it leads to the White House. We've
gone out of our way to say, we're following the facts where
they lead. So, hopefully, when these kind of statements come
up, people will understand we're following the facts. They
undeniably now lead to Washington, to the offices of Lois
Lerner and to the counsel. And that's what we're saying here
today.
Mr. Cummings. Mr. Chairman?
Chairman Issa. I thank the gentleman for yielding. Yield
back.
Mr. Turner. This is my time now.
Thank you. Mr. Cummings was attempting to interrupt.
Let me say this first before I ask you both questions. I
know that neither of you have any direct, personal knowledge of
whether the President of the United States had lunch yesterday.
And Mr. Cummings can ask you whether or not the President of
the United States had lunch, and neither of you will have
personal information. It doesn't mean he didn't have lunch; it
means you don't know. And we knew that already when you were
here. So asking questions that we know you're not here to prove
or have information about really is irrelevant to our
discussion.
But I want to ask both of you about, you know, what we've
heard so far in this testimony previously. I want to thank both
of you, because you're coming forward and being honest. Because
there are those who not only want to stick their heads in the
sand but who don't want us to find out the answers. And both of
you are standing here telling the truth and honestly telling us
what happened. And one of those truths is that this was not
just directed out of Ohio.
Now, Ms. Hofacre, I'm from Dayton, Ohio, just a few miles
from you. So I was kind of personally offended when it was
placed as a label, as a bunch of rogue employees in Cincinnati.
Because what we now know from you and Mr. Hull definitively,
under oath, is that that was not true. If we had stopped this
investigation previously, we would just have the answers of the
IRS that this was some rogue employees from Cincinnati.
Ms. Hofacre, how did you feel when they said that, when you
knew that that was not the case that it was just rogue agents
down in Cincinnati?
Ms. Hofacre. Sir, I was deeply offended. I mean, it
impugned my reputation and the reputation of other agents and
basically all Federal employees.
Mr. Turner. Mr. Hull, you've had a great career, dedicated
to what we know is one where we have some people who execute
things honestly and with detail. You've dedicated yourself to
the principles of that.
How did you feel when you heard that they were saying it
was just Cincinnati, when you knew that also was not the case
from your involvement?
Mr. Hull. I didn't feel that I had anything to say, sir.
Mr. Turner. Well, I know you would--it would seem to me
that you would feel, as Ms. Hofacre, that since you were
dedicated to making certain that the truth occurred, that these
things were executed, that it also violated your sense of,
really, integrity.
I want to ask both of you, have either of you been
contacted by the Department of Justice or the FBI to be
questioned about this matter?
Ms. Hofacre?
Ms. Hofacre. Yes, I have.
Mr. Turner. Who were you contacted by, Department of
Justice or FBI?
Ms. Hofacre. I believe both.
Mr. Turner. Mr. Hull?
Mr. Hull. Yes, I was contacted by the Department of
Justice.
Mr. Turner. I'm glad to hear that, because one of the
questions that we have had from the very beginning is that this
should not merely be an issue of the IRS, through Lois Lerner
issuing an apology, but that the American public should never
be afraid of the investigative arms of their government being
turned against them. And criminal laws should be enforced to
ensure that that doesn't happen. And, to the extent that there
are not criminal laws, they should be enacted.
I have a bill, 1950, that would make this a specific crime.
We certainly are hopeful that, as the Department of Justice and
the FBI looks into this, that they don't merely just stop and
stick their heads in the sand, as some of those wish that we
would do, but they would actively look at all the aspects of
this to make certain that we can hold people accountable and
make certain that this doesn't happen again.
Mr. Hull, when--you had said that this was different, that
this was not what your experience had been before. You said, I
can't recall that--it ever happening, but it may have--that
you'd been overturned or that things had this type of delay.
Is there a process by which you could, and/or an inquiry as
to, ``This is unusual,'' that you might have been able to
report to supervisors or record that this process was unusual
and, therefore, you know, by you, needed additional scrutiny?
Mr. Hull. I don't believe that was any part of my--my
duties, sir.
Mr. Turner. Say that again?
Mr. Hull. This was not part of my duties, to complain about
what the review process should be.
Mr. Turner. Okay. So you would not, then, have a forum by
which to say, ``This is of a concern,'' and have someone else
review the fact that you were being reviewed?
Mr. Hull. I--as a tax law specialist, any suggestion that I
had a determination on would go to a reviewer, and the reviewer
would either agree with me or disagree with me, whereupon we
would have a discussion about it. Further review is very--
beyond that, is very rare. But it did happen in--in this
particular case.
Mr. Turner. Thank you both for your honesty.
Mr. Chairman?
Chairman Issa. I thank the gentleman.
We now go to the--oh, the gentleman, Mr. Lynch, is gone--
the gentleman from Virginia, Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman.
And thank you both for being here.
I must say, I agreed with the opening statement of our
distinguished chairman. I listened carefully to what he said:
We should not rush to judgment. Words mean something. We need
to be careful.
And if only those very commonsensical principles had been
at work when the very same chairman called the press secretary
of the President of the United States a paid liar. ``Rush to
judgment?'' ``Words mean something?''
He took time just now to insist that the ranking member is
wrong in suggesting that he had rushed to judgment and
deliberately took what now turns out to be not much of a
scandal--bad judgment; balanced, they went after progressives
as well as conservatives. And it's a terrible thing when the
narrative we've got in our heads just doesn't quite work out
because the facts don't back them up and witnesses we call to
back them up turn out to be flawed.
Not you.
But----
Chairman Issa. Would the gentleman yield?
Mr. Connolly. I will in a second, Mr. Chairman.
But--but I--in fact--in fact, before I yield, I'd read back
a quote from the chairman on national television, because he
just assured us that he never linked the President to this. And
I'd read this quote: ``This was the targeting of the
President's political enemies, effectively, and lies about it
during the election year so that it wasn't discovered until
afterwards.''
Now, that's the narrative. And there's no evidence,
including from these two witnesses today, that that's true.
So when the chairman cautions us correctly to withhold
judgment, to be careful, words mean something, I wonder whether
the chairman wants to retract his own statements, including
that one I just read on television.
Mr. Chairman, I yield.
Chairman Issa. I thank the gentleman.
I look forward to seeing evidence that progressive groups
were treated equally harshly, delayed, and anything more than
looked at.
But I will say this: I think it's fair to say today that,
with the harsh statements the President's made about Tea Party
groups and with the way the Tea Party groups feel about the
President's usurping of the Constitution, his expansion beyond
his powers, yes, they are enemies of the President's politics.
And I stand by that.
Mr. Connolly. I reclaim my time.
That, of course--you can stand by that, Mr. Chairman, but
that wasn't your initial narrative. Your initial narrative was
there was an enemies list and it was limited to conservative
groups like the Tea Party. And that's not true. In fact, the
evidence tells us that's not true.
More and more evidence coming out that the Inspector
General cherry-picked evidence to help with your narrative. And
we'll hear from him in the next panel.
But the fact that the Tea Party was----
Chairman Issa. Would the gentleman yield?
Mr. Connolly. No, Mr. Chairman, I won't.
Chairman Issa. No, no, I just want you to--we're stopping
the clock.
Folks, we're going to take about a 5-minute recess until
that stops. I don't--your time will be preserved.
Mr. Connolly. Thank you, Mr. Chairman.
Chairman Issa. We'll stand in recess for 5 minutes until we
get that stopped.
[Recess.]
Chairman Issa. Could we please close the doors to enjoy our
quiet?
The gentleman from Virginia may continue when ready.
Mr. Connolly. Thank you, Mr. Chairman.
Mr. Chairman, we left off with you saying that you welcomed
Democratic evidence that progressive and Democratic-oriented
groups were targeted. I would--I'll ask unanimous consent that
this press release be entered into the record from the Ways and
Means Committee, but I will read from it.
``The group of Democratic-leaning organizations was denied
tax-exempt status by the IRS after their applications were
pending for over 3 years. These denials happened during the
period of the TIGTA's audit, but they were not disclosed by the
IG in the audit report or during his testimony before our
committee and the Ways and Means Committee.
``These applications were processed in the same manner as
the Tea Party cases outlined in the TIGTA's audit report
released on May 14th. The cases were identified and screened
for political activities. They were transferred to Exempt
Organizations Technical Unit. They were the subject of a
sensitive case report. They were subject to multiple levels of
review within the IRS. And they were reviewed by the IRS Chief
Counsel.''
The chairman has asked for evidence. I will be glad to make
sure that this evidence from the Ways and Means Committee, our
colleagues on the Ways and Means Committee, is provided to the
chairman and his staff. And I would ask that this be entered
into record.
Chairman Issa. Reserving----
Mr. Connolly. This is----
Chairman Issa. For the gentleman, as long as you don't want
to call it evidence. We don't call press releases evidence.
Mr. Connolly. No, no. I'm not referring to this as
evidence, Mr. Chairman.
Chairman Issa. But we're happy to put the press----
Mr. Connolly. It describes evidence, and I'm happy to make
sure that evidence is made available to you.
Chairman Issa. We look forward to seeing that evidence. It
has not been provided to the majority or minority at this time.
But I thank the gentleman. And, without objection, it will be
entered in the record.
Mr. Connolly. I thank the chairman.
And I thank our two witnesses. And I'm sorry you have to be
here today, but thank you for coming.
Chairman Issa. We now go to the gentleman from Florida, Mr.
Mica.
Mr. Mica. Well, thank you, Mr. Chairman.
And, first of all, just a comment, observing this process
today and through the past couple of months that we've been
working on this IRS thing.
I'm disappointed that the ranking member and the other side
of the aisle have chosen to continuously try to close down this
process of discovery to get to the bottom of what took place--
--
Mr. Cummings. Would the gentleman yield for just 5 seconds?
Mr. Mica. Well----
Mr. Cummings. That's absolutely not true.
Mr. Mica. Well, first of all, he--I didn't yield, but he
said that.
But we started this on the 22nd of May. On the 9th of June,
Mr. Cummings said--you can put it up on the screen--``Based on
everything I've seen, the case is solved.'' Started almost
immediately to try to close this down.
When they couldn't do that, they tried to discredit the
chairman. And then they released time and time again, as we
interviewed folks, different transcripts, taking parts out and
trying to, again, discredit the process.
When they couldn't do--discredit the chairman and we
proceeded in a very orderly fashion, now they're attempting to
discredit the Inspector General. And I find that offensive,
because, whether they targeted conservative or progressive
groups, it's our responsibility to get to the truth and find
out what happened.
We've done this in a methodical manner. In fact, we first
went to the Cincinnati folks. And we've only had--Mr. Hull,
you're the second IRS official at the Washington level we've
had, I understand.
Is that correct, Mr. Chairman?
Chairman Issa. [Nonverbal response.]
Mr. Mica. So you're the first one we've had.
We've gone first to--and I think there were eight folks who
said that we interviewed that--the rogue employees. And I'd
never met one before, but you look very good for a rogue
employee, Ms. Hofacre.
But, in any--in any event, you started getting these cases
in the beginning of 2010, was it, approximately?
Ms. Hofacre. Sir, it was the end of April 2010.
Mr. Mica. Okay, the beginning of 2010. And you--this wasn't
a targeting by a group of your colleagues in Cincinnati that
decided we're going to go after folks.
And most of the cases you got, were they ``Tea Party'' or
``Patriot'' cases?
Ms. Hofacre. Sir, they were all ``Tea Party'' or
``Patriot'' cases.
Mr. Mica. Were there progressive cases? How were they
handled?
Ms. Hofacre. Sir, I was on this project until October of
2010, and I was only instructed to work ``Tea Party''/
``Patriot''/"9/12'' organizations.
Mr. Mica. Okay. And then you sought counsel or advice from
higher up in Washington, and that was Mr. Hull, sitting next to
you?
Ms. Hofacre. Yes, sir, I was instructed to contact Mr.
Hull.
Mr. Mica. Okay. And did you get advice back? What was
happening at the local scene? Did any of those affected
contacted you? Or was it, you were just waiting for Hull? What
was going on?
Ms. Hofacre. Sir, I'm not real clear on what you're asking.
Could you rephrase it?
Mr. Mica. Well, like, taxpayers or those that submitted
these requests, did you hear from them at all?
Ms. Hofacre. Yes, sir. When certain taxpayers responded, as
Mr. Hull and I both earlier said, I sent him a copy of the
response, and he was to get back to me in order to process the
response. The taxpayers called me, when I had not gotten any
instruction from Mr. Hull, to find out the status----
Mr. Mica. And that didn't happen.
So, Mr. Hull, you had also contacted Ms. Lerner for advice
and counsel and also, I understand, that the counsel--the IRS
counsel. Is that correct?
Mr. Hull. I gave my recommendations to my reviewer, and my
reviewer sent them up to Ms. Kindell. And Ms. Kindell suggested
that they should go to Chief Counsel. I don't recall----
Mr. Mica. So Kindell is in Lerner's office. And did----
Mr. Hull. And----
Mr. Mica. Did she tell you that something had gone to the--
the legal counsel?
Mr. Hull. Ms. Kindell suggested or said that the cases
should go to the Chief Counsel.
Mr. Mica. So--and the Chief Counsel is one of the two, I
believe, IRS employees that are political appointees. Is that
correct, staff? I'm not sure, but I think that's the case.
So, so far, we find that, again, Cincinnati ``rogue
employees,'' are asking for advice from Washington. You're in
Washington. You're the second person we've had from Washington.
I think we had Mr. Shulman, was the only other one.
So we're just beginning this investigation. We're just
starting this. It's not going to be closed down.
Chairman Issa. Would the gentleman wrap up?
Mr. Mica. Yes.
So, finally, Mr. Hull, again, those are--you sought counsel
and advice from above. That didn't come. You never got it down
below. And, finally, what happened?
Did you--did you step aside or seek another assignment,
Ms.----
Chairman Issa. The gentleman may answer briefly. The
gentlemen's time has expired.
Mr. Hull. Were you asking me, sir?
Mr. Mica. No. I--well, I was trying to get back to her not
getting answers, the frustration she experienced. And I'll----
Chairman Issa. Did the gentlelady understand--do you
understand the question?
Mr. Mica. I was told you finally----
Chairman Issa. We do need an answer, but we're out of time.
Ms. Hofacre. Sir, yes, I did get transferred out of there.
Mr. Mica. At your request?
Ms. Hofacre. Yes, sir, I did.
Mr. Mica. Thank you.
Chairman Issa. Thank you.
We now go to the gentleman from Massachusetts, Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman.
I thank the ranking member.
I thank the witnesses for coming before the committee and
trying to help us with our work.
I would like to try to reset this if I could. It seems we
are getting into a debate about whether or not it was fair for
the IRS to add enhanced scrutiny for Tea Party groups if they
did the same thing for progressive groups, and I just want to
point out that when the inspector general, Mr. George came
before the committee, he indicated there were three
classifications of U.S. citizens that were subject to enhanced
scrutiny: One, he did identify Tea Party groups, Patriot
groups, ones of a more conservative ideology. He also mentioned
progressive groups. But he also mentioned another--another
category that sort of subsumes both of those groups. He said
that there were enhanced scrutiny of groups that were critical
of the way the government was being run, which in my district
is about 90 percent of the population, including myself at
times.
And I think it's unfortunate that the allegations against
the White House were made because it became a game of gotcha,
whether or not the White House was somehow implicated here.
Those facts are not in evidence yet, but I think we are missing
an opportunity here because what we do know is that the IRS was
targeting groups who were critical of the way the government is
being run, which is a core democratic right, small ``d''
democratic, and a core--a core right for every citizen.
Ms. Hofacre, have you in your experience there, have you
come across groups that were targeted because of their could
you call it criticism of the way the government is being run?
Ms. Hofacre. No, sir. I have not.
Mr. Lynch. Okay, what about yourself, Mr. Hull?
Mr. Hull. I'm not aware of any, sir.
Mr. Lynch. Would--but you are--you are aware of instances
where Patriot, or Tea Party were investigated?
Mr. Hull. Only what I read in the newspapers, sir.
Mr. Lynch. Only what?
Mr. Hull. Only what I read in the newspapers, sir.
Mr. Lynch. I see, how about you, Ms. Hofacre?
Ms. Hofacre. Sir, I don't understand what you're asking.
Mr. Lynch. Well, why do you think the folks that had the--
those labels, why do you think they were being investigated?
Ms. Hofacre. Do you mean scrutinized by the IRS, or why we
were----
Mr. Lynch. Yeah, yeah.
Ms. Hofacre. Well, each application is evaluated on the
facts and circumstances in that particular case, and
consequently----
Mr. Lynch. But these are ``Be on the Look Out.'' You know,
be, Be On the Look Out for Patriot, Be On the Look Out for Tea
Party. I mean, help me if you can. Those seem to be political
positions and indicia of a political view, and so the IRS is
focusing on that, and I'm just curious.
Ms. Hofacre. Well, when I was there in 2010, sir, I was
instructed to develop these applications.
Mr. Lynch. Uh-huh. And what does that mean?
Ms. Hofacre. That means that somebody else screened them
out for whatever reason, and I was assigned these applications
that met the parameters of Tea Parties.
Mr. Lynch. Okay. Well--well, you are the one who was
involved in the process. Why are these people being singled out
then?
Ms. Hofacre. Because the screeners and the management
identified that they should be screened out, or I mean, for
this particular reason.
Mr. Lynch. Who was the--who was the individual who screened
them for you?
Ms. Hofacre. Well, it was a whole group. I mean, Mr.--there
were several screeners. That is what they were tasked to do
based on my understanding.
Mr. Lynch. Okay. I have about 20 seconds left. I just think
it is disgraceful that we are squandering this opportunity to
get to the bottom of this because of partisan bickering; one
group trying to blame the President, the other one trying to
defend themselves that progressives were also being targeted.
I think it is very unfortunate because I think the root of
this matter is that people who were critical of the way this
government is being run were being targeted, regardless of what
their--what the source of their gravamen was, what the source
of their complaint was, they were being targeted as U.S.
citizens by the IRS. And I think we have squandered the
opportunity to get to the bottom of this.
I yield back.
Chairman Issa. I would ask unanimous consent I have 30
seconds.
Without objection.
Mr. Lynch, I couldn't agree with you more. And hopefully
you are setting a tone that we will all observe going forward,
and I will do my best.
Mr. Cummings. I ask unanimous consent for 30 seconds?
Chairman Issa. Of course.
Mr. Cummings. I said in the beginning of what I said, I
think that we--and I have said it 50 million times. We have got
to get to the bottom of this. There have been recommendations
made by the IG. We need to make sure those--and I don't think
the people want the IRS to be destroyed. They want it to be--
function the way it is supposed to function for everybody,
conservatives, progressives, those in the middle. Thank you,
Mr. Issa.
Chairman Issa. Thank you.
We now go to the gentleman from Tennessee, Mr. Duncan.
Mr. Duncan. Thank you, Mr. Chairman.
We have heard Mr. Hull in his 48 years of experience say
that these cases were handled in a very unusual manner.
And Ms. Hofacre, I understand that you said that in your 14
years experience these cases were handled differently. Was that
the word?
Ms. Hofacre. Yes, sir, that is correct.
Mr. Duncan. And you had 40 to 60 of these cases that were
given to you in April, and then, in October, you requested a
transfer, is that correct?
Ms. Hofacre. Well, sir, the number that you had just stated
was how many I had when--assigned to me when I left in October
of 2010. Initially I had maybe about 20.
Mr. Duncan. I see. And prior to this, how common was it
that you would be told by the--by someone in Washington to hold
up applications?
Ms. Hofacre. It wasn't very common at all.
Mr. Duncan. And was your frustration coming from the fact
that you felt that you had enough information to go ahead and
process these applications, but you basically were just made to
sit on them?
Ms. Hofacre. Well, my frustration primarily was that I had
to sit on them and wait for guidance from D.C.
Mr. Duncan. Now, I'm told an IG report in May said there
were 70 Tea Party groups, 11 9/12 groups, 13 Patriot groups.
Now I'm told these numbers have been revised upward to say
there were 298 Tea Party groups; and 3 groups that had the word
``progressive'' in the application; zero that had the word
``Occupy.''
But I also--staff tells us that Washington officials asked
for two additional Tea Party cases that would serve as test
cases. As of the present, one of those cases is still pending
and the other case, the application process was withdrawn
because the person or persons, ``couldn't take it anymore.'' I
would assume that that's extremely unusual to be delayed from
2010 when you worked on these cases till now, 2013, and still
all of these cases are still apparently pending.
Ms. Hofacre. Yes, sir.
Mr. Duncan. What--this investigation was started in part
because of complaints from Tea Party groups to various Members
of Congress. We don't have any evidence yet, or any comment yet
that any progressive groups, these three that had the word
``progressive,'' ever complained to any Member of Congress
about their holdup, if they were held up. But you also know
that this was started in part not entirely from the complaints
from Members, but Lois Lerner said at an ABA conference that
Tea Party and Patriot groups were being targeted. What was your
reaction when you heard about that comment?
Ms. Hofacre. Well, as I said previously and it has been
reported, I said it was like a nuclear strike.
Mr. Duncan. And did you and other people in the Cincinnati
office feel that they were being unfairly blamed or used to
excuse this political activity that was going on in the
Washington office?
Ms. Hofacre. Well, I can't comment on what others, but
personally, I felt like it was a nuclear strike. I felt they
were blaming us.
Mr. Duncan. All right. Thank you very much, Mr. Chairman.
Chairman Issa. Would the gentleman yield?
Mr. Duncan. Yes, I will yield the rest of my time to you.
Chairman Issa. The gentleman, Mr. Lynch has left, but you
have been asked repeatedly about the politics of it. And I just
want to take a moment to say that I appreciate that both of you
are not political folks, and that it is appropriate that, no
surprise, you did everything as far as we know, very
professionally.
So, particularly for Ms. Hofacre, I want to thank you again
for being here. You represent a larger group who have all said
similar things. You were chosen, quite candidly, because of the
time frame that you had these cases. But we appreciate--and
maybe this is not a lottery you wanted to win, but we
appreciate the fact that you are here today to speak on behalf
of many people that you work with in Cincinnati, who, as far as
we can tell, by the close of this hearing today, we will
understand they did what they could do; they were limited as to
what they could do. They moved it to Washington.
Mr. Hull, to a great extent, we have had you here to show
that you and others who got cases after you did what they could
do and, as far as we know, waited on others to make decisions.
And I thank you.
And with that, we go to the gentlelady from California, Ms.
Speier.
Ms. Speier. Thank you, Mr. Chairman.
And thank you both for your service in a department,
frankly, that none of us like, right? But nonetheless, we
recognize the great value that you provide to making sure that
everyone is treated equally under the law.
And let me just start off with you, Ms. Hofacre, isn't it
true that in the division within Cincinnati that you were
working in that your responsibility was to determine whether or
not applicants for 501(c)(4) status were--met the definition,
which meant that they could not primarily be engaged in
political activity?
Ms. Hofacre. Yes, it is.
Ms. Speier. And as a result, it has always been your task,
at least when you were doing that there, to scrutinize
applications to make sure that it was less than 50 percent.
Ms. Hofacre. It was our job to make a determination, to
ensure that they were 51 percent social welfare.
Ms. Speier. And there was an unusual increase in the number
of applications during that period of time, was there not?
Ms. Hofacre. From what I understand, I believe that's
correct.
Ms. Speier. All right. You stated in your written testimony
that there were occasions when other agents sent you
applications from liberal or non-Tea Party-type groups. When
that occurred pursuant to the instructions that you were given,
it would--I would send these applications to general inventory
since they were not within the scope of the Tea Party emerging
issue.
When you met with committee staff, you were asked whether
you received direction to send non-Tea Party cases back to
general inventory.
And I'm going to read the exchange:
``Do you remember if anyone told you to send progressive or
liberal cases back to general development?''
``No, I don't remember anything like that.''
``It just made sense to you?''
``Exactly, because my function was to develop Tea Party and
work with Carter Hull and the Tea Parties.''
Can you explain the discrepancy between these two
statements?
Ms. Hofacre. Ma'am, I was instructed by management to work
Tea Parties. It was on the BOLO list, and anything that did not
meet the parameters between, that met the parameters in that
BOLO list, I sent to general inventory.
Ms. Speier. But you didn't know what happened to those non-
Tea Party cases?
Ms. Hofacre. No, ma'am I do not.
Ms. Speier. How many do you think you referred to
inventory?
Ms. Hofacre. I can't estimate that.
Ms. Speier. I mean, was it 5, or was it 50?
Ms. Hofacre. Ma'am, I sent everything back that didn't meet
the parameters of Tea Party, so on the right and on the left.
Ms. Speier. Okay. So it was a significant number then?
Ms. Hofacre. It seemed at the time. I can't estimate how
many.
Ms. Speier. One of the documents obtained by the committee
is a PowerPoint presentation for a 2010 training session
instructing employees on how to handle applications for tax-
exempt status from groups engaged in political activity. And it
has photos of an elephant and a donkey, not very good ones,
but, and since that the employees should look for names like
the following, and you see there on the next page it shows what
those employees should be looking for: Terms, ``Tea Party,'' on
the next page, ``Patriots,'' ``9/12 Project.'' Then on the
following page, it says to look for the word ``progressive.''
And there's lots of redacted information there, which I
understand may be a list of progressive or left-leaning groups.
When you turn to the next page, the slide show explains
that most of these applicants will file a 501(c)(4), and it
says that the concerns are that there may be more than 50
percent political, possible PAC, political action committees.
Do you recall attending this training?
Ms. Hofacre. I do not specifically recall attending that
training.
Ms. Speier. Do you dispute that you were there at the
training?
Ms. Hofacre. I do not recall. I do not dispute that I was
there either.
Ms. Speier. So I understand that your--your plate was full
handling of lot of these Tea Party applicants. Are you--and you
referred non-Tea Party cases back to the general inventory.
Based on this training document, it appears that someone else
may have been looking at progressive groups. Is that a logical
assumption to make?
Ms. Hofacre. I--I don't have the facts to verify that.
Ms. Speier. So you never talked to anyone else in the
Cincinnati office that might have been looking at another
segment that were----
Ms. Hofacre. I do not recall talking to anybody else.
Ms. Speier. Okay, Mr. Chairman, based on these training
materials, I think we need to see what is under those
redactions and examine in more detail how these progressive
cases were handled as well.
Chairman Issa. I agree with the gentlelady. We would like
to see the claim of 6103 modified to be more reasonable. I
would mention that Teddy Roosevelt was a progressive, that the
term is not automatically liberal.
Ms. Speier. Well, no, but my point is that there is a lot
under that second bullet that has been redacted, and for us to
really do an exhaustive investigation, we really need to know
that. And to the extent that Ms. Hofacre has testified that she
did return significant numbers, we should find where do those
significant numbers of applications go and have someone come
testify on them.
Chairman Issa. I agree with you, and this committee has
reached out and asked I and I will ask again with theoretically
with a larger audience, that if there was any progressive group
that was held for 3 years, asked abusive questions, asked about
their campaign activities, their board of directors, their
names of their contributors, and so on, I would ask them that
they come forward because they can get us around this arcane
6103 law that causes victims not to be protected, but rather
re-victimized.
And I join with the gentlelady that I would like to see
groups on the left and the right be able to come to us as
victims and get some resolution rather than being re-victimized
by a system that is supposed to protect confidential
information.
So I join with the gentlelady in total agreement.
Ms. Speier. Thank you.
Chairman Issa. With that, we go to the gentleman from Ohio,
who is keying up his mike, Mr. Jordan.
Mr. Jordan. Thank you, Mr. Chairman.
Mr. Hull, you have got 48 years of experience with the IRS,
and your annual reviews and evaluations, were those all
positive.
Mr. Hull. Yes, sir, they were.
Mr. Jordan. And most of the time that you spent at the IRS,
you dealt with applications for tax-exempt status?
Mr. Hull. Yes, sir.
Mr. Jordan. And you are viewed as an expert in this field,
is that fair to say?
Mr. Hull. Which field, sir?
Mr. Jordan. Dealing with applications--and you can, you
know, you are dealing with politicians here. You can give the
yes answer. That's fine. We are used to boasting and----
Mr. Hull. I'm very knowledgeable about working applications
for tax exempt status.
Mr. Jordan. Okay, isn't it true you conducted the training
sessions, right?
Mr. Hull. Yes, I have.
Mr. Jordan. And in some of those training sessions, Lois
Lerner even showed up and was present at some of the training
sessions, is that true?
Mr. Hull. I don't recall, sir.
Mr. Jordan. Okay. We have been--other witnesses we talked
to said that's the case. And you were assigned the now famous
two test cases that dealt with two--I think it is important.
These were test cases of Tea Party groups. You were assigned
those two cases, is that correct?
Mr. Hull. Yes.
Mr. Jordan. And you, in your testimony, you said those
cases were taken from you in August of 2011, is that right?
Mr. Hull. Yes, sir.
Mr. Jordan. And they were given to, my understanding is
they were given to Hilary Goehausen, is that correct?
Mr. Hull. That's correct as far as I know.
Mr. Jordan. And could we put the slide up real quick
because we want to talk about--do you how long Hilary Goehausen
had been at the IRS when she got those cases, do you know?
Mr. Jordan. Well, we do, because we asked her:
``And how long have you been with the IRS'', is the
question that Hilary Goehausen--"
``I have been with the IRS since late April 2011.''
``Prior to this time, had you had any experience in
campaign intervention, lobbying, or as it relates to tax-exempt
organizations?''
``No.''
So we have a lady who has been at the IRS 4 months, never
dealt with this area, who now gets the two infamous test cases.
They take them from a guy who has been there 48 years with
stellar evaluations, and they gave them to this individual,
correct?
Mr. Hull. Yes, sir.
Mr. Jordan. Okay, okay, fine. So here is what I--from your
testimony, they were taken from you after you made
recommendations on how to deal with the test cases, is that
correct?
Mr. Hull. That's correct.
Mr. Jordan. And the recommendation--just for the other side
to know, the recommendations were split. You said one group
should be approved for tax exempt status and one should be
disapproved, and get further information, further data, is that
correct?
Mr. Hull. That's correct.
Mr. Jordan. And they give them to someone who had no
experience dealing with this. And they also took them away from
you after, according to your testimony, you met with the Chief
Counsel's office, is that correct?
Mr. Hull. That's correct.
Mr. Jordan. So this is I think important to understand. The
real harassment of Tea Party groups wasn't just the fact that
they applied and maybe were denied. The fact was, they had to
wait. They never got resolution. Because even if you are
denied, you have an appeals process. You can finally get some
closures through an appeal process. So the real harassment was
never getting to an answer.
Mr. Hull, with 48 years experience, the expert, conducts
the training sessions, gives recommendations on the test cases,
and they say, oh, wait a minute. We are not going to let that
happen. We are going to hold these cases. We want to continue
to further harass these entities. And furthermore, we are going
to the them away from you and not give you any more. And we do
that after he has made the recommendations and after there has
been a meeting with the Chief Counsel's Office. That's why this
is--that's why this is all about Washington and this Chief
Counsel's Office and why we are going to have Mr. Wilkins in
front of this committee at some point in the future.
Ms. Hofacre, you are a public servant. You have served at
the IRS for 14 years, I think, if I got that right?
Ms. Hofacre. Yes, sir, that is correct.
Mr. Jordan. Prior to that you served our country wearing
the uniform of our country as a veteran, is that correct?
Ms. Hofacre. Yes, sir, I was both Active Duty and Reserve.
Mr. Jordan. Tell me how you felt when Lois Lerner with the
plan in question on May 10th, goes public and says, ``this was
inappropriate actions by line people in Cincinnati.''
Ms. Hofacre. Sir, like I said before, it was like a nuclear
strike, and----
Mr. Jordan. I think that's the term you used with----
Ms. Hofacre. With the earlier interviews.
Mr. Jordan. With your interview with staff, a nuclear
strike.
Ms. Hofacre. Correct.
Mr. Jordan. So you would agree with Cindy Thomas, one of
your bosses in Cincinnati who said, people in Cincinnati felt
like they were being thrown under the bus.
Ms. Hofacre. I'm not sure the context that was stated in,
but literally, that statement I would agree with that.
Mr. Jordan. Let me ask you one other question here and then
I will close, Mr. Chairman. You were asked in your interview by
our staff, Ms. Hofacre, this specific question:
``Do you think the public has been purposely misled by
assertions that Cincinnati was to blame?''
And your response was?
Ms. Hofacre. Yes, I believe so.
Mr. Jordan. Yeah, I think your response was, according to
what we have, exactly. So statements made by folks in
Washington, two rogue agents, this narrative that was trumpeted
out there and bandied about, statements made by--statements
made by the White House press secretary, ``apparent conduct by
IRS officials in Cincinnati. IRS line personnel had improperly
targeted conservative groups.''
They were purposely--according to your statement, you think
folks in Washington were purposely, that's the key point, you
said you think it was a purposeful misleading of the facts and
what really took place.
Ms. Hofacre. Sir, in my opinion, when Lois Lerner made that
statement, that would be correct.
Mr. Jordan. Thank you.
Mr. Chairman, I yield back.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Pennsylvania, Mr. Carter.
Mr. Cartwright. Thank you, Mr. Chairman, and Ms. Hofacre,
Mr. Hull.
Chairman Issa. I'm sorry, Mr. Cartwright, I apologize.
Mr. Cartwright. Well, I'm sorry, I didn't hear you.
Mr. Hull and Ms. Hofacre, thank you both for being here and
I want to thank you both for your long service.
Mr. Hull, according to the transcript of your interview
with committee staff, you stated that the processing of Tea
Party cases was subject to, ``substantial delays,'' because
``we didn't know exactly where we were going.'' Is that still
your testimony?
Mr. Hull. Yes, sir.
Mr. Cartwright. And what did you mean by that?
Mr. Hull. I just meant that I was receiving no indication
of which way we should be going with the--I had made my--I had
made some recommendations, and I was not told if those
recommendations would be accepted or not. All I was told, we
needed additional information.
Mr. Cartwright. All right.
And Ms. Hofacre, you previously told the committee that Mr.
Hull took a long time to give you guidance on development
letters for Tea Party applicants. You are not--you are not
suggesting that Mr. Hull intentionally delayed developing Tea
Party cases that you handled, am I correct in that?
Ms. Hofacre. Yes, sir, you are.
Mr. Cartwright. Okay. And back to you, Mr. Hull. You never
intentionally stalled or delayed your work with Ms. Hofacre on
the Tea Party cases, did you?
Mr. Hull. No, sir.
Mr. Cartwright. Okay. And now, we learned that there was a
miscommunication between the senior management in the
Cincinnati office and the group manager overseeing the
political advocacy cases that caused a 13-month long delay when
the person Ms. Hofacre transferred her cases to stopped sending
development letters while waiting for guidance from the
Technical Unit.
Unfortunately, both the individual who held the cases and
his manager at the time are Republicans and neither of them was
invited to testify here today to discuss that delay. I believe
the delays in processing these political advocacy cases are
highly problematic, but the evidence compiled by the committee
does not suggest that they were intentional or motivated by
bias.
Now, Mr. Hull, did anyone tell you to stall or delay your
work on the Tea Party cases?
Mr. Hull. No, sir.
Mr. Cartwright. And one IRS official we interviewed was an
attorney in the IRS Office of Chief Counsel who worked on these
cases. And when he was asked if anyone ever instructed him to
stall or delay providing guidance on how to develop these
cases, he responded as follows: ``No. On the contrary, we were
told to work extremely fast. We were given a 48-hour time
deadline on the first document. We turned around and had such
extremely short deadlines to turn that around.''
As far as you understand, I will throw it up to both
witnesses, is that correct?
Mr. Hull. I'm not aware of anything in that regard, sir.
Mr. Cartwright. Okay.
Ms. Hofacre. I'm not either.
Mr. Cartwright. Well, thanks very much.
And I yield back, Mr. Chairman.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Utah, Mr. Chaffetz.
Mr. Chaffetz. Thank you, Mr. Chairman.
And I do think it is important that we continue on to find
the truth. And I appreciate you holding this hearing.
And for these two fine Americans who are coming forward,
and I appreciate your service. Nearly 70 years of service
between the two of you in the IRS. Both have served in the
military and for that, we are very grateful, and we thank you.
Ms. Hofacre, we have had your reaction to some of the
statements by some very powerful people in Washington. I would
like to have you comment, if you could, about accuracy of their
comments. We had--CNN reported that former Commissioner Miller
blamed two employees in Cincinnati. I think the quote was,
``two rogue agents.'' Is that true or not true, in your
opinion?
Ms. Hofacre. Sir, I'm not clear on what you're asking.
Mr. Chaffetz. The former commissioner, IRS Commissioner
Miller----
Ms. Hofacre. Right.
Mr. Chaffetz. --blamed all this targeting on two rogue
agents.
Ms. Hofacre. Correct.
Mr. Chaffetz. I would suspect that you would be one of
those two rogue agents.
Ms. Hofacre. It was inferred that I was one of them.
Mr. Chaffetz. Is that true?
Ms. Hofacre. No, it was not. I was following direction from
management, and they were aware of what I was doing.
Mr. Chaffetz. Who is that management?
Ms. Hofacre. Well, when I started the project, it was
Joseph Herr, and then I was transferred to another group, Steve
Bowling.
Mr. Chaffetz. Who, when the spokesperson for the President
of the United States, Jay Carney stood up before the American
people and said, ``IRS line personnel had improperly targeted
conservative groups.''
What's the accuracy of that statement?
Ms. Hofacre. Sir, I know the accuracy of any inference to
rogue agents is not correct.
Mr. Chaffetz. How--there had to be a moment when you went
back home and you were kind of by yourself. What was that like?
Ms. Hofacre. Well, like I said to the other gentleman, it
was like a nuclear fallout. I mean, the press hounded my family
and me. They were hounding us at work, so, I mean, it wasn't a
character builder.
Mr. Chaffetz. Why--why did they do that? Why was
everybody----
Ms. Hofacre. I don't understand--I don't have any factual
knowledge of why they said what they said or why they did what
they did.
Mr. Chaffetz. What could you do about it?
Ms. Hofacre. There's nothing I could have done.
Mr. Chaffetz. What did you want to do?
Ms. Hofacre. Go back to my life previously, before May
10th.
Mr. Chaffetz. And I guess that's the sad part of this
story. You know, I'm glad the truth is surfacing because I
think most people now reflecting back are going to understand
that you're more heroic in this, and really, I think when you
have such senior powerful people in Washington, D.C., trying to
discredit you and your person, your service, it's just wrong.
And I'm proud of the fact that we are pursuing this.
You know, if we did what the White House wanted us to do,
if we did what the ranking member suggested we do, this thing
would be over: Nothing here. Don't do it. As far as I'm
concerned it is over.
When you have the spokesperson for the President of the
United States make a definitive statement that it was two rogue
agents and start poking at these people, who have no power to
do anything about it, that is wrong. How dare anybody suggest
that we are at the end of this? This is the beginning of this.
We have to make an example of it. We need to get to the bottom
of it, and quite frankly, I'm tired of this administration
having to keep having these hearings. We have done it on Fast
and Furious. We are doing it on Benghazi. We are doing it on
the IRS. We are doing it--why? Each time, there is a pattern.
Nothing here. Oh, it was just a couple of people. Just move on.
That's not true. When the ranking member went on national
television and said that this case should be closed, that's
wrong. And I have the greatest respect for----
Mr. Cummings. Will the gentleman yield?
Mr. Chaffetz. Yes.
Mr. Cummings. Let me--let me be clear because there's some
old talking points going on here.
Mr. Chaffetz. No, I'm reclaiming my time.
Mr. Cummings. I just want to answer your allegation.
Mr. Chaffetz. No, no, I want to reclaim my time.
Chairman Issa. It's the gentleman's time.
Mr. Chaffetz. To suggest that they are just talking points.
These are not just talking points.
I yield the gentleman time.
Mr. Cummings. Thank you. Let me be very clear. I hope the
gentleman will join me when I say that I want every single
syllable of every single transcript that we can get redactions,
appropriate redactions. But I have been asking for that and I
want that.
What I said was, when it came to the issue of saying that
the President and the White House was responsible for this, I
said that the evidence to that point and continues to be not
there.
As far as the investigation is concerned, I want us to get
to the bottom of that. And I really mean that. It is very,
very, very important. So I just wanted to make that clear.
Mr. Chaffetz. Can I ask unanimous consent for 30 seconds?
Chairman Issa. Of course.
Mr. Chaffetz. Part of the reason it has risen to this level
is that you have the White House spokesman, Jay Carney, blaming
one of the people sitting there at this table. You have the
former acting commissioner saying it was two rogue agents. It
was the most powerful people in Washington, D.C., placing blame
on the person sitting before us, and that's why it continues
forward, and that's why I do think the White House is now
engaged in this.
Chairman Issa. The gentleman is entitled to his opinion.
We will stick to the facts here at this time.
We thank the gentlelady for her showing that it's not
Cincinnati.
With that, we go to the gentlelady from New York.
Mrs. Maloney. Thank you, and thank you for your public
service and for being here today and for your testimony. I just
would--I would like to get to the bottom of this and get over
with it, too.
And I have to ask you. I would like to ask both of you.
Would it make your professional life easier if you were not
retired and still working, if it was just very clear in the law
that no not-for-profit that engages in political activity shall
receive in any, way, shape, or form a tax relief from the IRS?
Would that make your life easier in doing your job, Mr. Hull.
Mr. Hull. Yes, I think it would.
Mrs. Maloney. How about you, Ms. Hofacre?
Ms. Hofacre. Yes, I agree with Mr. Hull.
Mrs. Maloney. Okay, well, I intend to put in such a bill.
Just stop it. Let's just make sure that there is never any
confusion in the future. The IRS is there to perform a
function, not to decide whether someone is involved in
political activity or not, and quite frankly, most Americans
believe that not-for-profits serve an important role if they
are addressing social concern and need of this great country
and deserve a tax deduction, but certainly political activity
does not.
So, in concerns of efficiency and clearness, I think that's
the approach we should take in a bipartisan way and end this,
as my colleagues on both sides of the aisle want to do so much.
Let me say that, as a Member of Congress, we do have a serious
responsibility and a constitutional responsibility to practice
and conduct oversight. But we must do it in a responsible and
clear way, and not make unfounded political attacks or use this
incredibly important responsibility to make a political point.
And one of the myths that keep being pushed out there by the
right and some others, is that the Obama campaign was somehow
involved in directing the IRS to target Tea Party groups for
unfair scrutiny, and according to all of the testimony that I
have read, some many, many people testified, only two of you
are before us, but in the depositions, they have all said there
was no connection whatsoever.
But to give an example of sort of unfounded conduct and
statements, I would like to quote Senator Rubio, who recently
claimed on national television that both the Obama
administration and President Obama's campaign had attempted to
use the IRS, and I will quote directly, ``muscle anyone who is
their political opponent and to use whatever power they have at
their disposal to intimidate people who they don't agree
with.''
So I would like to ask both of you the same question. Were
any of you intimidated or contacted or influenced in any way,
shape, or form by the Obama campaign committee to do anything?
Mr. Hull?
Mr. Hull. No, I was not contacted.
Mrs. Maloney. Okay, Miss?
Ms. Hofacre. No, ma'am, I was not.
Mrs. Maloney. Did any--did anyone from the campaign, either
a political appointee, a volunteer, a bystander, or an employee
ever give instructions or directions on how to process Tea
Party applications? Did anyone interfere in the process?
Mr. Hull?
Mr. Hull. No.
Mrs. Maloney. Ms. Hofacre?
Ms. Hofacre. No.
Mrs. Maloney. Okay, did any of your IRS colleagues ever
tell you that the Obama campaign gave them any instructions or
directions on how to process applications for tax exempt status
of Tea Party applicants? Did any----
Ms. Hofacre. No, they did not.
Mr. Hull. No, they did not.
Mrs. Maloney. Now, they are giving the exact same answers
that were given also by other witnesses that were interviewed
by both the Republican and Democratic committee that it is
completely un--it is not true. It is un--I'm getting very
concerned about this because it keeps going on and on, and I
just want to make it very clear that there was no connection
whatsoever, correct?
Mr. Hull. That is correct.
Ms. Hofacre. That is correct.
Mrs. Maloney. And again, would it make your life easier if
we just had clear directions from Congress that no not-for-
profit receive any tax deduction whatsoever for--if they engage
in political activity?
Mr. Hull. I'm sure it would be a help.
Ms. Hofacre. Yes, it would.
Mrs. Maloney. I yield back the balance of my time.
Chairman Issa. If the gentlelady would yield. A follow up
just to get clarity on your question.
Mrs. Maloney. Sure.
Chairman Issa. Mr. Hull, wouldn't the American Lung
Association's support of an initiative in California, the
NAACP's support of civil rights, wouldn't all of those be a
challenge in which you would like to have clarity that zero may
not be the right number either?
Mr. Hull. I'm not sure I would be able to answer that
question, sir.
Chairman Issa. But currently, it is roughly 5 percent for
501(c)(3)s and under 50 percent for 501(c)(4)s. You would have
a challenge if you had to audit at zero for organizations, such
as the American Lung Association, that actually endorses
initiatives, and so on, and I only ask this for the gentlelady.
We are not the tax committee, but I think we have to--we have
to work together to find solutions for this.
Mrs. Maloney. Yes.
Chairman Issa. Hopefully, we will recognize that the narrow
interpretation of none might, in fact, hamper very good
charities that we all support.
Mrs. Maloney. Will the gentleman yield?
Chairman Issa. Of course.
Mrs. Maloney. The difficulty, it appears to me, is when an
employee who is trying to do their job honestly and fairly and
correctly is then given the task to interpret the 5 percent.
That's a very difficult thing to do when you don't have access
to their books or their activities or everything they are
doing.
And given the fact that our democracy is such a sacred
right--and I want to share this with you very quickly, the
ambassador from Pakistan, they just had their first peaceful
transfer of power, and they are so thrilled that they had a
peaceful election. We have had that--we have had that honor our
entire existence.
Chairman Issa. I thank the gentlelady.
Mrs. Maloney. It is important to honor that and continue
that honor clearly and fairly. And the allegations are very
serious allegations against the American Democratic system that
the Tax Code would be used in any way to promote an election in
any way, shape, or form, and so I feel----
Chairman Issa. The gentlelady's time is really expired.
Mrs. Maloney. --very strongly about it, and I appreciate
that they agree that they don't want to get involved in the
election.
Chairman Issa. Please, the gentlelady's time really has
expired.
We now go to the gentleman from Michigan, Mr. Walberg.
Mr. Walberg. Thank you, Mr. Chairman.
And thank you for continuing these hearings, because
frankly, it is important to get to the truth and I thank the
two witnesses here today. You deserve your day to have the
truth come out, especially since you were put in as rogues
incorrectly.
I read in D.C. newspapers and seen on cable news that some
people believe the IRS case is solved. We know that not to be
the case. My constituents, the groups in question, those being
targeted, the evidence we have uncovered so far and continue to
look for, says differently. And so we appreciate you being
here.
Ms. Hofacre, just to continue some questioning where you
had indicated that in working with Mr. Hull, initially, plenty
of responsiveness, information was shared, questions were
answered, but that slowed down.
Ms. Hofacre. Yes, sir, that is correct.
Mr. Walberg. And though it might not have been direct
statements from individuals above you saying slow it down, yet
it was starting to slow walk in the process.
Ms. Hofacre. Yes, sir, as Mr. Hull pointed out, he stopped
responding to me.
Mr. Walberg. And we know from his testimony that the
reasons why he stopped responding or slowed it down because of
hurdles that were put in his way, and disagreements that took
place as well. Were taxpayers calling you still during this
time period?
Ms. Hofacre. Yes, sir, they continued to call me probably
until the end of 2010, beginning of 2011.
Mr. Walberg. How often would you get the calls?
Ms. Hofacre. Well, initially, I got numerous calls a day.
Mr. Walberg. What did you tell them?
Ms. Hofacre. I continually told them that the cases were
under review.
Mr. Walberg. How did that make you feel telling them the
cases were under review?
Ms. Hofacre. Like I said in my testimony, it was like
working in lost luggage. I mean-- I mean, there was never any
positive response because I couldn't give them a clear answer.
And like I may have said in my previous testimony, that every
taxpayer deserved an answer because if the answer is negative,
they have other avenues they can pursue, like appeals to, you
know, to look at it from a different angle, perhaps.
Mr. Walberg. You said also, I remember in your response to
the committee: ``I remember thinking this is ridiculous because
at the same time you are getting calls from irate taxpayers,
and I see their point, even if a decision is unfavorable, they
deserve some kind of a treatment. They deserve, you know,
timeliness, and it was just these applications and their
responses were just being sent up there, and I'm not sure what
was happening. But I mean, I just kept getting the same
responses from Carter Hull. They are under review. And that is
what I told the taxpayer.''
Ms. Hofacre. I continued to tell them that, yes, sir.
Mr. Walberg. Did you express frustration to anyone about
the delays in the process?
Ms. Hofacre. Yes, sir, I expressed it to my manager at the
time, Steve Bowling.
Mr. Walberg. Steve Bowling. I understand you told the
committee staff that you expressed that frustration and what
was his response?
Ms. Hofacre. He was just saying that he was waiting on
Washington, and that he had--he was just waiting on them.
Mr. Walberg. I understand you switched positions in October
of 2010, that's correct?
Ms. Hofacre. Yes, sir, that is correct.
Mr. Walberg. What caused you to switch positions?
Ms. Hofacre. I mean, it was the frustration of working on
this project. Like I may have previously said, I was getting
more and more Tea Party applications. I was also getting
applicants--applications with any kind of political or
legislative activity, and I was tasked to do Tea Parties, but I
think I said in my previous interview that I became a dumping
ground probably around August of 2010, so I was seeing every
case with any inkling of any kind of political or legislative
activity.
At the same time, I was getting slammed with phone calls
from taxpayers who seemed to have a legitimate, you know, right
to complain about the process because they deserve some kind of
answer at that time. And that was 3 years ago.
Mr. Walberg. What happened to the Tea Party cases in your
queue when you transferred?
Ms. Hofacre. They were transferred to another agent.
Mr. Walberg. Who was that agent?
Ms. Hofacre. It was Ron Bell.
Mr. Walberg. And Ron Bell, do you know if he was able to
make any progress on these cases?
Ms. Hofacre. From what I understand, no.
Mr. Walberg. Did you have any contact with him over these
cases subsequent to your transfer?
Ms. Hofacre. Just, I had--I was still receiving telephone
calls from taxpayers, so----
Mr. Walberg. On these issues from taxpayers to you?
Ms. Hofacre. Right, so for about a few months after I
changed, so I would call him and give him the name of the
applicant and the contact number to have him call them and tell
them what was going on.
Mr. Walberg. Did he indicate to you whether they continued
in a holding pattern?
Ms. Hofacre. I was under--I was led to believe they were in
a holding pattern. I believe he did say that.
Mr. Walberg. And these were just Tea Party cases, right?
Ms. Hofacre. In October of 2010, that is correct.
Mr. Walberg. What is a pink slip?
Ms. Hofacre. Sir, a lot of these organizations, they all
have various activities, but a couple of the applicants would
have these email blasts on their Web sites, and you could send
a pink slip to your Congressman or your Senator, however----
Mr. Walberg. These were Tea Party groups?
Ms. Hofacre. Yes, sir, they were Tea Party group Web sites.
Mr. Walberg. So were you to select out these pink slips,
organizations?
Chairman Issa. The gentleman's time is expired. The
gentlelady may answer.
Ms. Hofacre. Sir, I mean, that was just one of their
activities. I mean, if their activity was in the file, I would
ask about it.
Mr. Walberg. Well, I guess I just wonder what relevance
that is to IRS, Mr. Chairman. Could I ask Ms. Hofacre to answer
that?
Chairman Issa. If the gentlelady would answer and then
that's the end.
Ms. Hofacre. Okay, so like, we keep saying it is facts and
circumstances and our job was to determine, and for me to get
the information to help determine whether or not they were
primarily social welfare or political, and that was just one
piece of the pie.
Chairman Issa. Okay, thank the gentlelady. I thank you.
The gentlelady from Illinois, Miss Kelly.
Ms. Kelly. Thank you, Mr. Chair.
Mr. Hull, I understand that you were originally assigned
two Tea Party cases in April of 2010 and then had those cases
transferred away from you in August of 2011. Is that correct?
Mr. Hull. Yes, that's correct.
Ms. Kelly. Were you given any special instructions on how
to work those cases?
Mr. Hull. No, I was not.
Ms. Kelly. Did anyone ask you to give them special
attention?
Mr. Hull. No, no one asked me to give them special
attention.
Ms. Kelly. When you sat down with the committee in June of
2013, you told staff that you asked for a special card to be
drawn up so that you could put your time into that particular
place coordinating Cincinnati cases. Can you explain what you
meant by this?
Mr. Hull. Each time we get a case, there is a--you get a
card saying this is your case, and you are working it. Because
I knew I would be spending time on coordinating Tea Party cases
with Ms. Hofacre, I asked that card be made up so that when I
did talk to her, I could put my time correctly as to what I was
doing.
Ms. Kelly. Okay, did taking these cases on add a
significant burden to your workload?
Mr. Hull. Yes, it did.
Ms. Kelly. Did they add to the many responsibilities that
you already had?
Mr. Hull. Yes, they did.
Ms. Kelly. I want to ask about the process of having the
cases transferred away from you to a different tax law
specialist, who identified herself to the committee as a
Republican. Mr. Hull, do you know why these cases were
transferred from your inventory to that of the other tax law
specialist?
Mr. Hull. I was never told the reason.
Ms. Kelly. Never told. Were they transferred away from you
in order to give them extra scrutiny or to further delay them?
Mr. Hull. I have no knowledge of that.
Ms. Kelly. According to evidence gathered by the committee,
it appears that these cases were transferred so they could be--
they would be worked more efficiently. Mr. Hull, a manager in
the Technical Unit acknowledged your experience in working on
501(c)(3) applications, but told the committee that you were
not moving fast enough on these cases. Specifically, he said,
``it was taking longer time than I would expect for someone at
his level.'' He told committee staff that the cases you were
working had been, ``stagnant for a year and a half, so he and
his manager decided to reassign the cases.''
Ms. Hofacre, you told committee staff that at first Mr.
Hull was, ``more timely,'' but as the months dragged on, he
became less timely and nonresponsive. Is that accurate?
Ms. Hofacre. Yes, ma'am, that is.
Ms. Kelly. Mr. Hull, did you know that your managers, and
Ms. Hofacre wanted you to move more quickly on these cases?
Mr. Hull. I don't believe--I can't remember them ever
expressing that to me.
Ms. Kelly. As we can see, the original Tea Party cases were
not transferred within the Technical Unit, so they would be
delayed and given extra scrutiny. Instead, the opposite was
true. These cases were transferred away from Mr. Hull where
they were a burden on his already heavy workload to another tax
law specialist in order to ensure that they would be processed
more efficiently. And thank you both.
Mr. Cummings. Does the gentlelady yield?
Ms. Kelly. I yield.
Mr. Cummings. I just want to pick up on one thing, Mr.
Hull, and I want to thank the gentlelady for yielding. So your
cases were transferred to a Republican, is that what they just
said?
Mr. Hull. I have no knowledge of what Ms. Goehausen's
political affiliation was.
Mr. Cummings. And you said you had not received any
complaints about your work speed or anything like that?
Mr. Hull. Not that I can recall, sir.
Mr. Cummings. And Ms. Hofacre, you never complained to him
about his work speed or anything did you?
Ms. Hofacre. No, I did not.
Mr. Cummings. Okay, and again, when you look at all of
this, when you are trying to figure out, Ms. Hofacre, what part
of the case is, I mean organization's work is political, and
which part is for general welfare, is that a complicated
situation?
Ms. Hofacre. Yes, sir. It's 51 percent.
Mr. Cummings. Uh-huh, and how do you do that?
Ms. Hofacre. Again it's facts and circumstances.
Mr. Cummings. So you got to really go through each case
very carefully?
Ms. Hofacre. That is correct.
Mr. Cummings. Would you agree with that, Mr. Hull?
Mr. Hull. Yes, I would.
Mr. Cummings. So you had gone through the cases and looked
through them very carefully, Mr. Hull?
Mr. Hull. Yes, I did the cases I had.
Mr. Cummings. The factual patterns of each one?
Mr. Hull. Of the two cases that were assigned to me, yes,
sir.
Mr. Cummings. And what did you go through to get to your
conclusions?
Mr. Hull. I did research. I went to their Web site. I
looked for prior precedents as to how cases like this may have
been handled in the past to try and decide how we would put--
what my recommendation would be.
Mr. Cummings. Thank you very much, Mr. Chairman.
Chairman Issa. Thank you.
We now go to the gentleman from Oklahoma, Mr. Lankford.
Mr. Lankford. Thank you.
And I thank both of you for being here. You know very well,
because you have heard from people, that when others talk about
applications and groups, these folks have names and faces. Some
of them live in my district, some of the individuals that
waited a very, very long time to give a response, so I
appreciate both of your work and your diligence through the
process on this.
Mr. Hull, I understand that the Tea Party test cases were a
sensitive case report, is that correct?
Mr. Hull. A sensitive case report was sent up every month,
yes, sir.
Mr. Lankford. Okay, I want to ask for the slide. I think we
have one of those that staff has requested. Is this the--I'm
not sure if you can tell from where you are, but does this look
like one of the sensitive test case reports?
Mr. Hull. I can't actually read anything, but the form
looks familiar.
Mr. Lankford. Yeah, the form looks familiar to you. We will
try to get a copy of it to you. The top part of it seems to
have just a template information, and then the middle to the
bottom of it seems to be filled in. Let me read some of the
stuff that's in it. When it says, ``the case or issue
summary,'' it says: ``The various Tea Party organizations are
separately organized, but appear to be part of a national
political movement that may be involved in political
activities. The Tea Party organizations are being followed
closely in national newspapers, such as The Washington Post,
almost on a regular basis.''
Further down, it says this: ``Met with J. Kindell to
discuss organizations two and three, and service position. Mrs.
Kindell recommended additional development activities, i.e. The
activities then forwarded on to the chief counsel.''
Later on, it says: ``Coordination between HQ and Cincinnati
is continuing regarding information letters through applicant's
exemption under 501(c)(3) and 501(c)(4).''
Mr. Hull, does this sound like the document that you had
created there?
Mr. Hull. Yes, it does.
Mr. Lankford. Did someone instruct you to create a
sensitive case report for Tea Party cases?
Mr. Hull. My manager, Mr. Shoemaker, asked me to prepare
one.
Mr. Lankford. Okay, well, I need to ask that question. At
one point, you write into this, ``Met with J. Kindell to
discuss organizations two and three and service position.''
What did you mean by discussing ``service position''?
Mr. Hull. Whether or not the organization-- the facts would
go to exemption, or denial.
Mr. Lankford. So trying to make a broad decision on that,
you are waiting on decisions on the--on a broader case because
I know you have said a lot they say case by case, and you
pushed back on saying this can can't be a template response
because each case is different. So I'm trying to determine the
service position, what that might be in that conversation.
Mr. Hull. Well, at this point the service position was
going to be decide, I thought, by chief counsel. I was--I had
given my recommendations. And I never received back one way or
the other whether either recommendation was acceptable to the
higher ups.
Mr. Lankford. So you are continuing to wait on the
Counsel's Office to be able to give your response back so that
you could finish up these cases. You are waiting on a service
position, not only just two and three, not only these two
individual sensitive test cases that you are working with, but
also trying to figure out what is going to be the broader
perspective as well?
Mr. Hull. If we were able to tell from the facts and
circumstances of each particular case whether they should or
not be recognized as exempt, then I could be able to tell Ms.
Hofacre, that yes, if this organization was recognized as
exempt and sent her the file if she so desired, so that she
could find out what the story was. Or, since--if she was
transferred, it would have gone to Mr. Bell.
Mr. Lankford. Okay, but that's waiting on Counsel's Office
to be able to respond back to you to be able to get that back
to them.
Mr. Hull. Yes, sir.
Mr. Lankford. Okay, aside from the sensitive case reports
that you created for the three Tea Party applications, did you
create sensitive case reports for any other political advocacy
cases between March 2010 and July 2011.
Mr. Hull. Not that I'm aware of, sir.
Mr. Lankford. You had mentioned earlier as well, ``further
review is extremely rare.'' What did you mean by that?
Mr. Hull. Usually, if my reviewer agrees with me, the case
can go to the supervisor for signature. Usually, it's--most
cases only last that far, application cases. Some application
cases go further up to Ms. Kindell or someone else and some go
to chief counsel.
Mr. Lankford. Okay, but in this case, the reviewer agreed,
is that correct, or----
Mr. Hull. She neither agreed or disagreed. She just said
that it should be forwarded.
Mr. Lankford. It was just a hold on it. You also mentioned
Lois Lerner at some point came in and said to some kind of
training environment that these cases need to be referred to as
advocacy applications, not Tea Party applications.
Mr. Hull. That's correct.
Mr. Lankford. Was that for all of these political or just
for these particular Tea Party groups?
Mr. Hull. Ms. Lerner seemed to indicate that any time we
should use the word advocacy as opposed to Tea Party.
Mr. Lankford. Not use Tea Party anymore, just call them
advocacy groups and----
Mr. Hull. Correct.
Mr. Lankford. --but you knew that she was referring to the
Tea Party groups. Just say said, don't say that; say advocacy
applications only?
Mr. Hull. Yes, sir.
Mr. Lankford. Thank you, I yield back.
Mr. Jordan. [Presiding.] I thank the gentleman.
Ms. Lujan Grisham.
Ms. Lujan Grisham. I want to talk about--I'm way over here.
I'm sorry, you guys are going to break your necks getting all
the way to the end of the hearing room. But it is my
understanding that in the 2 years following the Citizens United
decisions--decision which allowed social welfare organizations
to directly spend money on campaign activities, the number of
applications for 501(c)(4) status nearly doubled.
In the testimony that I have heard today and in previous
hearings, it becomes clearer to me that there is no political
motivation, but there is confusion, at best, about what you do
about the facts and circumstances review to figure out whether
more than 49 percent of a 501(c)(4)'s funding has been spent
directly on political activity. And following the line of
questioning by my colleague from New York, Representative
Maloney, I have such a bill that says that the 1959
congressional law says, exclusive, that the IRS that the
Treasury ruled later that said you can do 49 percent should
never have been allowed, that now we have what is a
disorganized, at best, complete mess, and I agree with this
committee that however you are objectively trying to take
subjective information and identify whether or not there has
been a violation, has caused grave concerns by both--by this
committee in particular.
I think we should go back to exclusive, and the point that
the chairman raised that they won't be able to advocate is not
true, that in fact as long as they are taking the positions,
501(c)(3)s are limited, and 501(c)(4)s are not, as long as they
are taking an advocacy position in line with that organization,
like the Cancer Society, or the Muscular Dystrophy Society, but
engaged in broad political activity should not be allowed.
You answered my colleague's question that, Mr. Hull, that
that would certainly simplify this issue and allow the IRS to
determine clearly and definitively who meets the standard for a
501(c)(4) and who does not. Correct?
Mr. Hull. It is very difficult to be able to say that an
organization is involved 51 percent of their time in social
welfare activities. There is no bright line that defines it,
and it's the facts and circumstances, and they usually fall one
way or the other, but there is no bright line at the present
time.
Ms. Lujan Grisham. And if they can still follow their basic
501(c)(4) status, which means they can advocate their position
and do their social welfare work, disengaging them from
political activity should not harm those organizations. And is
it also true if you want to engage in political activity, you
can have a 527 or establish a super PAC, that there are many
clear organizational structures that are not tax exempt that
would allow you to engage directly in political activity. True?
Mr. Hull. There are such organizations, yes.
Ms. Lujan Grisham. And in those organizations, those donors
would have to be disclosed. Correct?
Mr. Hull. I do not know the answer to that question.
Ms. Lujan Grisham. I believe that's correct. In that
setting, it would be managing those efforts, just like Members
of Congress are required to do? I think that's correct as well.
And the point being that it seems, based on the testimony
today and prior testimony, that the clearer way forward if
we're going to solve the problem, which seems to me to be what
we should do from here in out is that we should solve it, let's
make the 501(c)(4)'s go back to exactly what Congress intended
in 1959. They're exclusively for the purpose of social welfare.
Mr. Chairman, I yield back the rest of my time.
Mr. Jordan. I thank the gentlelady.
The gentleman from Tennessee, Dr. DesJarlais, is
recognized.
Mr. DesJarlais. Thank you, Mr. Chairman.
And thank you both on behalf of the people of Tennessee's
Fourth District and people across America. They're anxious to
get to the facts on this case, and this case it not going away.
One of your colleagues, Ms. Lerner, testified here briefly,
and she proclaimed that she was innocent and did nothing wrong,
and that very well may be the case, but I also believe that she
knows a lot more, possibly a lot more than even the two of you,
but yet she did not sit there and do what you're doing and
testify.
The big unanswered questions of all these hearings still
is, why? You know, why were these groups targeted? And they
were targeted. Mr. Werfel yesterday was kind enough to be one
of the first to admit that the IRS did target conservative
groups. Mr. Shulman, Miller and others were reluctant to say
that.
So do either of you have an opinion onto why these groups
were targeted in this fashion, with your 62 years of combined
experience?
Mr. Hull. I have no--I--I can't answer that question. I
have no idea why they were targeted.
Mr. DesJarlais. Have you ever seen anything like it before?
Mr. Hull. There--there were somewhat similar instances at
one time, but that was a long time ago, and I'm afraid my
memory is very dim about that.
Mr. DesJarlais. It wasn't, like, 40 years ago, was it?
I--Ms.--Ms. Hofacre, go ahead.
Ms. Hofacre. I wasn't aware of any situation that was--
that-- where applications were treated in this fashion.
Mr. DesJarlais. Okay. So pretty unusual. The other question
is who. And we're starting to get an idea of who, when we had
other folks here, Mr. Shulman. I assume that some of the people
you've named today probably do interact with the commissioner.
I don't know how high up they are, but do they actually
interact with the commissioner, some of your bosses?
Ms. Hofacre. I would imagine so. I mean----
Mr. Hull. I have no knowledge of----
Ms. Hofacre. I mean----
Mr. Hull. --of their--of their----
Mr. DesJarlais. Okay. Their testimony a while ago, they
didn't know anything; they just knew that it was a couple of
rogue agents in Cincinnati. That was the story. And I think
we've dispelled that rumor. So we're still trying to find out
who.
And the President, you know, may not know anything about
why this happened, but we do know, I think we proved today that
one of his political appointees did know. Would you both agree
with that? That this was going on, that this was being--this
targeting was going on?
Ms. Hofacre. I have no factual basis to agree or disagree.
Mr. DesJarlais. Okay. The chief counsel is a political
appointee, correct?
Ms. Hofacre. From what I understand, that is correct.
Mr. DesJarlais. Is that your understanding, Mr. Hull?
Mr. Hull. Yes.
Mr. DesJarlais. And you both have testified that these
cases were sent to Chief Counsel's Office?
Mr. Hull. Yes.
Ms. Hofacre. I was just a made aware of that recently.
Mr. DesJarlais. Okay. So, at any rate, there does seem to
be somebody who doesn't want the truth to come out, because if
there was nothing wrong done here, then we wouldn't be sitting
here today, we wouldn't continue to have these hearings. Do you
have agree with that?
Mr. Hull. I have no knowledge of such a situation, sir.
Mr. DesJarlais. Okay. Did you have a special expertise, Ms.
Hofacre, in this area of Tea Party organizations or this type
of case you were asked to do?
Ms. Hofacre. I had no specific expertise in political
organizations.
Mr. DesJarlais. Any idea why you were assigned that?
Ms. Hofacre. Oh, at the time, it was identified by
management as an emerging issue, and I was the emerging--
emerging issue coordinator, so consequently, I was assigned the
cases.
Mr. DesJarlais. As you were doing these cases, both of you,
did it ever dawn on you that this was kind of strange, there's
something weird going on here, that this is abnormal, you know,
maybe I should suggest this to someone?
Ms. Hofacre. I did. I think that's--the fact that I pursued
another job is evidence of that.
Mr. DesJarlais. Mr. Hull, did you find this strange?
Mr. Hull. I approached it as two organizations that have--
of which I was supposed to determine whether or not they were
exempt. I did not go in any further type of speculation.
Mr. DesJarlais. So you felt you were given an assignment,
you were just doing your job?
Mr. Hull. Yes, sir.
Mr. DesJarlais. Okay. Did either of you think it was
strange the type of questions they were being asked? There were
some pretty unusual questions asked. Like donor information, do
you think that that was inappropriate?
Mr. Hull. I think----
Ms. Hofacre. I--go ahead.
Mr. Hull. I think they were inappropriate. And when I
learned of that, I did talk to somebody and say that question
should not be asked, because a (c)(4), it doesn't really matter
where the money comes from. It's what the organization's
activities are.
Mr. DesJarlais. Wouldn't it make--as you were asked
earlier, wouldn't it make your lives a lot easier if someone
within the IRS, if this was designed within the IRS to target
these groups, would just step up and say, you know, I did this.
Or even if the President, somebody--if the President didn't
know about it, wouldn't it make life easier if someone on the
president's team who made this decision and sent it down to you
would just step up and say, I did this, so the American people
can start to regain the credibility that they deserve from an
agency that expects so much of them?
Ms. Hofacre. Sir, I cannot comment on that.
Mr. DesJarlais. Okay.
Mr. Hull. I wouldn't be able to comment either, sir.
Mr. DesJarlais. Okay. I know that you guys are very brave
to come forward. And really you're just telling the truth, and
that's all we're asking from other people who come forward as
well. So let me just say we very much appreciate that. And we
hope for the sake of the country and everyone else that we do
get the bottom of this, because there's obviously something to
be determined. And thank you for your help.
I yield back.
Mr. Jordan. I thank the gentleman.
We'll now go to the gentlelady from Illinois, Ms.
Duckworth.
Ms. Duckworth. Thank you, Mr. Chairman.
Mr. Hull, thank you for your years of military service in
Vietnam.
And of course Ms. Hofacre, for your over 13 years of
service in the army.
Mr. Hull, I would like to ask about the involvement of the
IRS Office of the Chief Counsel in this process. It's my
understanding that the IRS Office of the Chief Counsel
sometimes reviews applications for tax exempt status in order
to provide legal advice. Is that correct?
Mr. Hull. Yes, ma'am.
Ms. Duckworth. It's also my understanding that all
501(c)(3) denials are reviewed by the IRS Office of the Chief
Counsel as part of standard procedure. Is that correct?
Mr. Hull. I believe that is standard procedure, yes.
Ms. Duckworth. Okay. In this case, your boss asked the
Chief Counsel's Office to review the two Tea Party cases you
were working. Did you agree with that decision?
Mr. Hull. I agreed the cases should go to the chief
counsel, yes.
Ms. Duckworth. Okay. Thank you. You know, we have talked to
a number of your colleagues who agreed with the decision to
obtain advice on these cases from the Office of the Chief
Counsel. For example, the committee spoke with a tax law
specialist who took over the Tea Party cases that you had been
working, and you'd established that your workload was heavy;
she took those over. She, in fact, has identified herself as a
Republican to this committee, and she told us that on some
issues, it was common to ask the IRS Chief Counsel's Office for
assistance and to review applications for tax exempt status.
And I just want to quote what she said. And she said, ``from my
experience, it's been cases, applications that have received
some media attention or that, like, in the (c)(4) instances,
the law is really murky, those have been my experiences with
the cases that I've had sent to them.'' And to ``them,'' she
means the chief counsel.
Mr. Hull, do you agree with your colleague that the cases
that sometimes get sent to the chief counsel, the ones that are
murky, that are difficult, that need further clarification?
Mr. Hull. I don't believe I can comment on--on what reasons
they--what reasons they gave to send to chief counsel. I'm not
aware of--of those particular murky things.
Ms. Duckworth. When you send cases to--when your cases that
you've worked on that have gone to chief counsel, you said that
if they're denied, then they go to the chief counsel. Were
there other cases in your time that also went to chief counsel
for further clarification?
Mr. Hull. I don't recall any that--I believe the (c)(3)
questions are going up if they're denials, because chief
counsel would have to defend them, and that's why they go up
there.
Ms. Duckworth. I understand. Okay. Do you have any reason
to believe that your colleague who took over your two cases is
biased against Tea Party groups?
Mr. Hull. I have no knowledge of that at all.
Ms. Duckworth. Thank you. We also spoke, the committee
spoke to an attorney in the IRS Chief Counsel's Office who
attended a meeting about the two specific Tea Party cases and
assisted with drafting guidance for the development of
political advocacy cases in 2012. And we asked him whether it
was appropriate for the office of chief counsel to review two
of these two Tea Party cases, and he said this: ``It's
customary, it would be--certainly be customary, it makes
perfect sense that--I mean, you see, we have seen this
situation before where they have a group of cases that they
would send over sometimes to look at.''
Mr. Hull, do you disagree with your colleague?
Mr. Hull. I don't think I have enough knowledge to
understand what--what he was getting at. My two cases, I--that
went over to chief counsel, I'm not sure how long it had been
since I'd sent a case to chief counsel.
Ms. Duckworth. Okay. We also spoke with an employee who
served as the Exempt Organizations Technical Unit Group manager
in Washington, D.C., and this employee said it was quite
typical to send to counsel cases that were particularly
difficult or there was felt to be a need for further review of
the case.
Do you agree with the colleague--with this statement?
Mr. Hull. I think that person would have had more knowledge
of those cases than I. I'm not aware of all the cases that may
or may not have gone to chief counsel.
Ms. Duckworth. Okay. Mr. Hull, do you have any reason to
believe that this decision to have the IRS Chief Counsel's
Office review Tea Party cases was motivated by political bias?
Mr. Hull. No, I do not.
Ms. Duckworth. And so it seems to me that seeking advice
from one of the 1,600 lawyers in the IRS on a complicated legal
question seems reasonable. And numerous witnesses have told us
that this was not a stalling tactic or evidence of a political
bias, but in fact, at this time, it was common that if you had
questions, that's why legal counsel was there, was to refer and
ask them additional clarification. And, of course, you did talk
about the fact that if they are denied, then they go right to
the legal counsel.
I, too, want to thank both of you for being here. I know
that you were both moved off of these cases, Ms. Hofacre,
because you went on to another position. Mr. Hull, your two
cases when on to another employee. So sometimes when we're
talking about these rogue agents, we're not necessarily talking
about you, but that there are many people who were in this
chain of confusion that led to these cases being delayed for a
long period of time. Thank you so much for being here.
I yield back, Mr. Chairman.
Mr. Jordan. The gentleman from South Carolina is
recognized.
Mr. Gowdy. Thank you, Mr. Chairman.
I have been fascinated by, and not necessarily in a good
way, by the evolution of the defense in this case.
Mr. Chairman, initially it started when Lois Lerner
disclosed this information in a fashion most calculated to be
ignored, with a planted question at some boring conference.
And then the second iteration of this defense was blaming
two rogue agents in the Ohio field office.
And, Mr. Chairman, make no mistake, Jay Carney advanced and
furthered that narrative, and he did so intentionally. You
know, Mr. Carney's willingness to say, ``I don't know,'' is
exceeded perhaps only by his willingness to acknowledge that he
appreciates the question, but he didn't say, ``I don't know.''
He advanced the narrative that two rogue agents were
responsible for this insidious discriminatory practice.
And then we had colleagues that said this matter was closed
months ago, Mr. Chairman, the matter was closed.
And then the new iteration of the defense is, well, at
least the White House isn't directly involved, as if that's the
new standard for propriety in this town, that at least the
White House directly didn't know about it. So that's our
defense.
And then the defense, Mr. Chairman, morphed into this, the
most novel of all defenses, that the IRS is too poorly managed
to be capable of concocting a scheme this sophisticated. That
was the defense, that my client's too dumb to have committed
this crime.
And then, Mr. Chairman, we moved to the most recent
defense, which is that, no, we didn't just improperly target
conservative groups; we improperly targeted all groups. So
while we may be guilty of improper conduct, we're not guilty of
discrimination, because we did it against people at both ends
of the political spectrum. So--so that's our defense.
And now to see the inspector general attacked. And Mr.
Chairman knows it was an axiom in court, if you had the facts,
pound the facts; if you had the law, pound the law; if you
didn't have either one, pound the judge. And what has been said
about Mr. George is reprehensible, and I can't wait until he
has an opportunity to defend himself.
But let me tell you what else is reprehensible, Mr.
Chairman, Lois Lerner sat where those two witnesses sit today
several weeks ago, and these two witnesses put on a uniform and
fought and defended this country and the Constitution so she
could hide behind the Constitution, invoke her Fifth Amendment
right, but only after she blamed them. She blamed two rogue
agents in Ohio and then didn't have the courage that these
witness--I ought to just be thankful any time IRS agents don't
invoke the Fifth Amendment. I ought to be glad that anyone's
willing to come before a committee of Congress and testify, but
to have these two people's reputation or whoever she was
talking about besmirched by someone who doesn't even have the
courage to come do what they're doing?
Mr. Hull, I appreciate your modesty. It's not something we
see very often in this town, but you have been in service to
the IRS for exactly as long as I've been alive, 48 years, so
whether you want to be called an expert or not, you are one, by
virtue of your training and your expertise and your education.
And so are you, Ms. Hofacre, you're both experts. And if we
were in a court of law, the defense would stipulate that you're
experts. They wouldn't even challenge it.
So I've heard about the complexities and I've heard about
the novel issues, but--but, Mr. Hull, there's nothing novel
about political activity. It's been going around since before
the country was founded. So that part of your analysis, what
was novel about that? What's novel about determining political
activity?
Mr. Hull. Each case is looked at. It depends on the facts
and circumstances of each particular case.
Mr. Gowdy. And you've done it a hundred times, times a
hundred times, right?
Mr. Hull. I'm--I'm not aware of how many political cases I
may have worked. That's----
Mr. Gowdy. Is it because you can't count that high? I mean,
it's a lot, right?
Mr. Hull. I can't remember that far back, sir.
Mr. Gowdy. Well, I can't either. I can't either. But
there's nothing new about political activity. And our numeric
code, we've had since, Lord knows when. I think it's Arabic,
but--but ascertaining 50 percent is not a new phenomena.
So--so, Mr. Chairman, I'm out of time. I'm just vexed by
the complexity that our colleagues on the other side of the
aisle talk about. It's political activity; 50.1 percent will
disqualify you. And the Tax Code's been around forever, so
what's new about this? Why did we have to have test cases? Why
did we have to have Washington involved on what strikes me as a
pretty simple analysis. But I'm out of time, and I yield back
to the chairman.
Mr. Jordan. Thank the gentleman.
The chair now recognizes Ms. Norton. I'm sorry. I didn't
know which of the three were next on the list.
Ms. Norton, you're recognized, the gentlelady from D.C.
Ms. Norton. Thank you, Mr. Chairman.
Without trying to answer the gentleman's question about
complexity, there could be a great deal of complexity when you
tell someone that something has to be 51, ``political.'' The
most pregnant word in the English language is the word
political, what is political and what is not political.
And I want to congratulate these two civil servants for
having the courage to come forward before this committee. These
are civil servants of the IRS, which this Congress has cut by
30 percent. President won't sign that. It will not get through
the Senate. But out of retaliation somehow against what we are
told is targeting by agents, rogue agents. I don't see any
rogue agents. I see civil servants who are heros and who are
trying to--to deal with the complexities, and it has lots of
complexities, that come before you every day. And I
congratulate you for the way you do it.
I don't see targeting, even. I don't see confusion. You get
into targeting, we're into one to one. This is what I see, and
I want to--my question really goes to it. Forgive me for
getting out the statute, but it says, concerning these social
welfare organizations, that they must be operated exclusively
for the promotion of social welfare, and they say if it is
primarily engaged in promoting in some way the common good and
general welfare of the people of the community.
Then it goes on to define what it means by ``exclusively''
to say an organization embraced within this section is one
which is operated primarily for the purpose of bringing about
civic betterments and social improvements.
I say, I wouldn't want to be in your position to look first
at the words ``exclusively,'' then ``primarily,'' and then
trying to figure it out.
I cite that because I don't see what so many are looking
for here, and I want to find it if I can. So I look to see,
well, why would anybody pick out anybody. And I noted that
after Citizens United--and remember, we're talking about a
501(c)(4), so what do you get from wanting to be a 501(c)(4)?
Well, you don't get any tax exemption, but you don't have to
disclose your donors and you can raise apparently unlimited
funds, if I'm correct on that. Is that true, you can raise
unlimited funds for a 501(c)(4), Mr. Hull?
Mr. Hull. Yes, ma'am.
Ms. Norton. Now, there was a surge in spending, because the
figures are in now on the surge in spending in the last
campaign. Almost 85 percent of that surge, or that--those funds
for--for 501(c)(4) organizations went to--and others, went to
organizations which have conservative viewpoints.
Now, it--after Citizens United, it would not be unusual,
would it, for those who wanted to spend a lot of money and had
access to it, that is their right in this country, to take
advantage of a court decision and come forward in the numbers
that they had not done before. Could that not be reflected in
seeing this large surge where you were assigned to look for--
look at this special group called Tea Party-type applications?
Mr. Hull. Did you have a particular question, ma'am?
Ms. Norton. Yes. Whether or not you think the--the
opportunity for spending unlimited amounts of money opened the
door for people who had that money to spend to come forward, or
had access to it, to come forward and say, please give us this
status which we have not had before? Wouldn't that--if you knew
you could get funds in a way you had not thought of before,
because you now can get unlimited funds, there would be reason
to come forward and ask for the status that you had not done
before?
Mr. Hull. I'm sure there would be.
Chairman Issa. The gentlelady's time has expired. We now go
to--but if there's a pending question anyone wants to answer,
go ahead.
Ms. Hofacre. Can we have a short break?
Chairman Issa. We'll take a 5-minute break now. Thank you.
Ms. Hofacre. Thank you.
Chairman Issa. Stand in recess.
[Recess.]
Chairman Issa. While people are taking their seats, I want
to announce that we expect a series of votes. It is our hope
that we will complete this panel by the time we leave for the
votes. If we do, then we'll pick up the next panel afterwards.
I must also announce for members that by agreement with the
minority, there will be concurrent--or concurrent full
committee and subcommittee hearings, so it's your
responsibility to go back and forth. And we will accommodate
people as they come in to take care of that.
With that, we go to the--Mr. DeSantis.
Mr. DeSantis. Thank you, Mr. Chairman.
Thank you to the witnesses for your time. You know, as I've
been sitting here through this whole ordeal, one consistent
theme has been the refusal of higher ups in the IRS to take any
responsibility for the malfeasance within the agency. We had
Douglas Shulman testify in front of this committee, and he said
that while this impropriety happened on his watch, that he was
not, in fact, responsible even though he was the IRS
commissioner at the time. Lois Lerner, of course, famously
blamed rogue agents in Cincinnati for illicit targeting. Even
the White House press secretary, Jay Carney, falsely claimed
that political targeting was perpetrated by line personnel in
Cincinnati.
As the witnesses have explained today, the lack of response
by the IRS to applications for tax exempt status effectively
froze these Tea Party groups in place and was even worse than a
denial, because the groups could not appeal a non-decision. And
so I think it had a--a very tangible effect on these groups'
ability to organize, but as I go through this, I keep coming
back to Lois Lerner and her role in all this. It seems to me
that she's left behind a trail of misinformation and
obfuscation. As the testimony demonstrated today, Lerner
deliberately misled the public and the Congress by blaming
rogue agents in Cincinnati for something that she knew was
being orchestrated from Washington, D.C.
And as the witness testified, this was akin to a nuclear
strike against employees in Cincinnati. They were the ones that
she wanted to throw under the bus. No responsibility for her;
blame people beneath you who may not be able to defend
themselves effectively.
And even worse than that, she tried to cloak the illicit
targeting that she knew about by ordering that employees use,
``advocacy groups,'' a neutral sounding term, in lieu of, ``Tea
Party,'' which of course denotes a conservative group.
And I just found it interesting that a couple years ago it
was reported that she referred to thick IRS questionnaires,
those being sent to somebody, as being, ``behavior changers.''
Some of us would think that that would constitute harassment if
it's being illicitly done, but for her it's a behavior changer.
So I think Lois Lerner needs to answer for her behavior.
This committee found that she waived her Fifth Amendment rights
when she testified in front of the committee. I think she
should be required to testify.
As we get more and more information, it's becoming
increasingly clear to me that if there were any, ``rogue
agents'' during this or deal, that rogue agent was Lois Lerner.
That's all I have, Mr. Chairman. I yield back the balance
of my time.
Chairman Issa. Would the gentleman yield to me?
Mr. DeSantis. Yes, sir.
Chairman Issa. I want to take a point of privilege for a
moment. Earlier, like many people from the chair, you say
something and you take a shortcut. And I want to make sure I
make something very clear. When I referred to my ranking
member, who when we're not sparring over politics, he and I
work very well together, I talked about effectively me thinks
he doth protest too much as we debate the question of whether
things not being rogue agents in Cincinnati but rather being in
Washington at various levels that we're discussing here today,
which include the--the Office of the Counsel and Lois Lerner,
and I've been offended by my ranking member wanting to defend
the White House, who I have not accused. But I took a shortcut
in how I expressed it, and I want to make it very clear that
when I talk about the little boy putting his hand in the cookie
jar, I'm talking about the, I--what cookie jar? What hand? And
that is something that I grew up with. It is intended to be
about a small child, and in no way the use of ``boy'' or
``little boy'' to be anything else. Ranking member and I enjoy
a personal relationship that is by definition strained because
of our jobs, but not because of how we respect each other.
So, Mr. Cummings, I want to make it very, very clear that
that difference of opinion should always be expressed in a way
that you understand, that you and I disagree sometimes about
policies, but never about our individual roles. And--and I want
to make sure that's clear, because the press, I think, took the
use of little boy in a way that would certainly never come out
of my thought, much less deliberately out of my mouth.
And to the extent that anyone gets offended, Mr. Cummings,
I certainly do not want it to be you.
Mr. Cummings. Thank you very much, Mr. Chairman. I really
do appreciate your words. Words can certainly be taken out of
context and taken and twisted, whatever, but I do appreciate it
and I know you mean that.
We--like you said, we are--we differ sometimes on our
views, but at the end of the day, the respect level is still
extremely high, and so I really appreciate that.
Chairman Issa. Thank you, Mr. Cummings.
I thank the gentleman.
The gentleman from Illinois, Mr. Davis, has the full 5
minutes.
Mr. Davis. Well, thank you very much, Mr. Chairman.
And I want to thank our witnesses for not only their
stamina, but also for the--what I call their careful,
analytical and professional way in which they have responded to
many highly subjective questions. And so I appreciate both
your--your long service to the agency as well as your
professionalism.
Yesterday, the principal deputy commissioner of the
Internal Revenue Service, Danny Werfel, testified before this
committee that progressive groups received treatment from the
IRS that was similar to Tea Party groups when they applied for
tax exempt status. In fact, Congressman Sandy Levin, who is the
ranking member of the Ways and Means Committee, explained these
similarities in more detail. He said the IRS took years to
resolve these cases, just like the Tea Party cases. And he said
the IRS, one, screened for these groups, transferred them to
the Exempt Organizations Technical Unit, made them the subject
of a sensitive case report, and had them reviewed by the Office
of Chief Counsel.
According to the information provided to the Committee on
Ways and Means, some of these progressive groups actually had
their applications denied after a 3-year wait, and the
resolution of these cases happened during the time period that
the inspector general reviewed for its audit. Unfortunately,
because the inspector general objected to the release of this
information to the public, I can only ask you about these
groups only in a vague manner.
Ms. Hofacre, were you aware of the existence of any
groupings of progressive organizations within the
Determinations Unit?
Ms. Hofacre. Sir, when I was involved in the project in
2010, I was not aware of any such grouping.
Mr. Davis. Were you aware of how these cases were being
processed?
Ms. Hofacre. In 2010, no, I do not have any awareness of
how they were being processed.
Mr. Davis. Did you know that they were being treated in a
manner that was similar to your Tea Party groups?
Ms. Hofacre. I have no knowledge of that, sir.
Mr. Davis. Mr. Hull, let me ask you. I understand that you
were not assigned any of these progressive groups. Do you know
who in the Washington Technical Unit was assigned these
applications?
Mr. Hull. No, sir, I do not.
Mr. Davis. Do you have any information you can share with
the committee about how such groups were screened or reviewed?
Mr. Hull. No, sir, I do--I cannot.
Mr. Davis. According to Ranking Member Levin, who has been
able to review the names of these categories of groups, key
terms to search for these groups are included in the screening
workshop training's slide show from July of 2010. It appears
from that document that screeners were told to; ``Look for
names like the ones for these groups as well as for the terms
``Progressive'' and ``Tea Party'' and ``Patriot'' and ``9/12
Project.''' Certainly from this document, it appears that the
Tea Party groups were not treated differently than progressive
groups; rather, they appear to be handled in a similar manner.
Mr. Hull, do you agree that in order to determine whether a
group has been singled out and treated differently than its
peers, it is important to review how all similarly situated
groups were handled?
Mr. Hull. I think that's above my grade level, sir. I
wouldn't be able to comment on that.
Mr. Davis. All right. But to me, based on the evidence
before us, the inspector general's report did not tell us the
full story of how the Internal Revenue Service handled
applicants with political advocacy issues between 2010 and
2012. I hope that the reviews will provide relevant information
and those corrections can be made.
I thank you again both.
And I yield back the balance of my time.
Chairman Issa. I thank the gentleman. We're now going to
complete our--as fast as we can as many as we can before we
have to go to the vote.
At this point, I show Mr.--Dr. DesJarlais--I'm sorry.
Mr. Meehan, if you'd please go next.
Mr. Meehan. Thank you, Mr. Chairman.
And I want to thank you for your perseverance today, both
of the witnesses. And I have struggled just to sort of find out
as we continue to pursue, you know, what's happening with these
Tea Party cases, I'd like to go back and put these things into
context. I'm just trying to find out at a baseline how cases
were handled normally, Ms. Hofacre, before--before Tea Party
got put into--to your life.
So, first, you were working in a division that the
responsibility for you was to make decisions about people who
were applicants for these 501(c)(4) designations. Is that not
accurate?
Ms. Hofacre. Yes, sir.
Mr. Meehan. And in that period of time, you had to make
decisions numerous times about the very characteristics that
we've identified here, that would include the possibility that
some of it might be political activity and some of it may be
advocacy for their--for their activity, correct?
Ms. Hofacre. Sir, I worked cases that had all different
activities. I--I worked 501(c)(3)'s, all different tax exempt
codes.
Mr. Meehan. And once you made those decisions, what did you
have to do? When you made a conclusion that that passed muster,
what happened then?
Ms. Hofacre. Sir, we would have work papers and we would
provide a summary of the case. We used the appropriate law and
then come to some kind of conclusion. And then I would
recommend approval to our manager, and then he would decide
whether or not to sign off and approve the case.
Mr. Meehan. And if your manager approved and signed off on
the case, what happened then?
Ms. Hofacre. Well, if the case were not mandatory review,
it--the applicant would get exemption, and they would get their
letter. If it were mandatory review, it would go through
another level.
Mr. Meehan. What creates mandatory review?
Ms. Hofacre. Well, it can be manager designated. We have an
internal revenue--internal revenue manual that designates
numerous cases mandatory review?
Mr. Meehan. And that's what happened with the Tea Party
cases at one point in time?
Ms. Hofacre. It may have down the road after I left.
Mr. Meehan. Okay. But normally, you were able to make the
recommendation. Your supervisor, presumably in Cincinnati, then
approved it. And in the normal course of business, many of
those cases then were--the exemption was granted, and they went
on their way.
Ms. Hofacre. That is correct.
Mr. Meehan. Okay. When--when--when you were making those
calculations, there were questions you asked. Who designed the
questions?
Ms. Hofacre. Sir, the individual agent, myself, designed
the questions based on the information typically in the file.
Mr. Meehan. And, once again, that was part of your--your
analysis, but you weren't--nobody else was looking at the
questions that you were asking to make that calculation, were
they?
Ms. Hofacre. Generally, that is correct.
Mr. Meehan. Okay. Now, when you were assigned this special
class of cases that were now going to seek approval of--working
on the Tea Party cases, is this the first time that you then
had to automatically make sure that it went to EO Technical?
Ms. Hofacre. Yes, sir, that would be correct.
Mr. Meehan. Now, when you met--asked the questions at the
outset, did you design that questionnaire?
Ms. Hofacre. Well, Mr. Hull had provided me copies of the
letters he had sent to his applicants, and I used those and
tailored them to my particular applicants' activities.
Mr. Meehan. And, Mr. Hull, did you design those to--all of
the questionnaires that were used in the applications for the
Tea Party?
Mr. Hull. With regards to those--the two cases that were
assigned to me.
Mr. Meehan. Simply two cases?
Mr. Hull. Two cases.
Mr. Meehan. Okay.
Mr. Hull. I prepared a letter asking for additional
information from the organizations. No one reviewed it. I
signed it.
Mr. Meehan. Just a letter asking for additional----
Mr. Hull. Just a letter asking for----
Mr. Meehan. How complex was that letter? Was it a lot of
issues that were being asked for?
Mr. Hull. I don't recall the exact number of questions, but
usually it wasn't more than a page of questions or maybe a page
and a half. It would depend on what the facts----
Mr. Meehan. Okay. A page--a page and page and a half.
Mr. Hull. It would depend on the circumstances, sir.
Mr. Meehan. Okay. Ms. Hofacre, did you get any other
extensive questionnaires that were directed to you from
Washington, D.C.?
Ms. Hofacre. No, I did not.
Mr. Meehan. At that point in time, okay, you did not ask
those questions. All right. When you forwarded these to Mr.
Hull, then, which was EO Technical and it was your
responsibility, Mr. Hull, to in all of the cases or in only in
a few of these to make decisions on the recommendations that
were made by Mrs. Hofacre with--with regard to Tea Parties?
Mr. Hull. In the beginning, when the first applications
came in, there was a--there was a manager that overlooked it
with me, and he decided at the end of the first group, he said
he didn't need to see any more. So I--I looked at all the
questions that Ms. Hofacre----
Mr. Meehan. And that changed? How did it change and when
did it change?
Mr. Hull. How did--which change?
Mr. Meehan. Well, he decided that he didn't need to see any
more, so I'm presuming that you then made determinations, sent
them back down to Cincinnati in the beginning, as you stated,
with some of these cases, and that was the resolution, and it
was either granted or appealed. Is that accurate?
Mr. Hull. I made suggestions to Ms. Hofacre on these
letters that were to be sent out for information.
Mr. Meehan. And when did it change that there was a
requirement for you not simply to send it back down to her with
those recommendations, but that you had to send it two other
places, including chief counsel for resolution?
Mr. Hull. I had to send the two cases to chief counsel to
find out exactly what--what would be appropriate as far as they
were concerned, at which point, it went--when I finally learned
what was appropriate, then I would be able to tell Ms. Hofacre
how she might want to tailor her questions.
Mr. Meehan. Okay.
Chairman Issa. If the gentleman could wrap up.
Mr. Meehan. Yes. I--I want to thank you. I was just simply
asking about routine process. Thank you.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Massachusetts, Mr. Tierney,
who will complete this panel. And you will be excused following
his questions.
Mr. Tierney. And I'll do it quickly. Thank you.
Just on the reform side of things, both of you have had an
extensive history with the agency, and we thank you for your
service and your experience, but let me ask you to put that
experience to work. Do you have any suggestions as to how this
process might be speeded and made to run more smoothly and to
resolve some of the issues that bring us here today?
Mr. Hull. I never thought about suggestions in that regard,
sir.
Mr. Tierney. I'm sorry?
Mr. Hull. I never thought about suggestions in that regard,
sir, as to how it might go faster. It--it never occurred to me.
Mr. Tierney. Okay. Ms. Hofacre?
Ms. Hofacre. Sir, there are so many unknown variables and
facets to a question like that. I'm not in a position to give
an answer.
Mr. Tierney. Okay. I only say it because, I mean, part of
the problem, I mean, people thought they were getting delayed
and delayed on that, and it seemed to me endemic to the entire
system on that. So I didn't know if it was a lack of manpower,
if it was a lack of clear guidance, or what it might be, but if
you haven't thought about it, then you haven't thought about
it. And I thank you.
I'll yield back my time.
Chairman Issa. I thank the gentleman.
That allows us to dismiss the panel. I want to thank you
for your years of service, and I want to thank you for your
patience with, if you will--and I'm not trying to be--unkind,
but we know you were asked the same questions over and over
again. We know you heard the same speeches over and over again,
but you have moved us in a decisive way toward our next level
of investigation. And I did not expect to ask you to come back.
I do expect you to enjoy your retirement, Mr. Hull.
And Ms. Hofacre, I hope your career is as long as you want
to have it. Something tells me it may not be 48 years, but
hopefully----
Ms. Hofacre. No.
Chairman Issa. --we have not diminished----
Ms. Hofacre. It's all right.
Chairman Issa. --your--your confidence in Congress.
Mr. Cummings.
Mr. Cummings. I'll be very brief.
I actually want to thank both of you for your service and I
thank you for being here.
Ms. Hofacre, I got to tell you, one of the most painful
things that I've heard since I've been here is when you said
that there were some threats or whatever to you and your
family. You know, that--that is totally unfortunate. If there's
anything that we can do, and I know the chairman joins me in
that, and all our members, we want to make sure that we do what
we can to help you.
And, again, to you Mr. Hull, thank you very much, and your
testimony has been quite helpful. Thank you.
Ms. Hofacre. Thank you.
Mr. Hull. Thank you.
Chairman Issa. We stand in recess for the next panel.
[Recess.]
Chairman Issa. The committee will come to order.
Thank you for your patience and indulgence during the panel
and the recess.
We now welcome our second panel of witnesses. The Honorable
Russell George is the--is Treasury's inspector general for tax
administration. He comes today with Mr. Michael McCarthy, who
is the chief counsel for Treasury inspector general for tax
administration, in other words, your counsel, and Mr. Gregory
Kutz, who is the assistant inspector general for Treasury
inspector general for tax administration. In other words,
you're the guy that digs into it.
Chairman Issa. Pursuant to the committee rules, as you all
know, and Michael particularly you know, would you please rise
to take the oath?
Do you solemnly swear or affirm that the testimony you're
about to give will be the truth, the whole truth and nothing
but the truth.
Please have a seat. Let the record reflect that all
witnesses answered in the affirmative.
Since I understand that there will only be one opening
statement for all three of you, given by inspector general, we
will not observe the 5 minutes. Take the time reasonably you
need. You're effectively the only witness.
And, Mr. McCarthy, welcome back. I know that, for many
years, you worked from this side of the dais for Mr. Towns and
others, and that you wondered what it would be like on that
side. Today you find out.
Mr. McCarthy. Thank you, Mr. Chairman. I look forward to
it.
Chairman Issa. Thank you.
The gentleman is recognized.
STATEMENT OF THE HONORABLE J. RUSSEL GEORGE
Mr. George. Thank you, Chairman Issa, Ranking Member
Cummings and members of the committee.
Thank you for the opportunity to address specific issues
that have been raised related to our report, published May
14th, 2013, on inappropriate criteria used by the Internal
Revenue Service to identify tax exempt applications for review.
Our report included three key findings: first, that the
Internal Revenue Service used inappropriate criteria that
identified for review organizations applying for tax exempt
status based upon their names or policy positions, rather than
on tax exempt law and Treasury regulations; second, that the
cases that the IRS referred for review as potential political
cases experienced delays; and third, the IRS made unnecessary
and burdensome requests for information.
On May 10th, 2013, at an American Bar Association
conference held in Washington, D.C., Lois Lerner, the director
of exempt organizations for the IRS at the time, stated,
``Instead of referring to the cases as advocacy cases, they
actually used case names on this list. They, the Determinations
Unit in Cincinnati, Ohio, used names like Tea Party or
Patriots, and they selected cases simply because the
applications had those names in the title. That was wrong. That
was absolutely incorrect, insensitive and inappropriate.''
She also stated that some cases were delayed and
unnecessary questions were asked, confirming the three key
findings of our report. The story line based on Ms. Lerner's
presentation was that the IRS had apologized for
inappropriately targeting conservative organizations.
Ms. Lerner made her statements on May 10th, 2013, before
our audit was completed and issued on May 14th, 2013.
It has been asserted that TIGTA concluded that the IRS
inappropriately targeted conservative organizations. However,
that narrative is based upon Ms. Lerner's statements, not on
TIGTA's conclusions. It is imperative for me to emphasize that
our audit never labeled groups as conservative or liberal.
TIGTA reviewed the process used by the IRS from May 2010
through May 2012 to screen cases for potential political
campaign intervention, in other words, advocating for or
against a candidate running for political office.
As of the end of May 2012, the IRS provided TIGTA a list of
298 organizations that it, the IRS, had selected for further
scrutiny. The report focuses on the terms, ``Tea Party,
Patriots and 9/12, is at the--IRS provided us a document at the
beginning of our audit that showed these were the terms they
used to select the potential political cases.
I submit for the record a document that the IRS provided to
my organization on May 17th, 2012, while we were still in the
planning phase of our audit. This document is purported to be
the language used in the ``Be on the Look Out,'' otherwise
known as BOLO listing, over time to describe potential
political cases.
Mr. George. We focused our audit on the BOLO entries shown
in this document precisely because the IRS represented that
these were the criteria relevant to potential political cases.
Furthermore, the IRS provided us additional names and policy
positions that were used to select cases, including Patriots
and 9/12.
The scope of our audit included the process the IRS used to
review applications for tax exemption from groups potentially
involved in political campaign intervention. During the audit,
our understanding was that the other BOLO entries were not used
to select cases for this type of specialized review. As new
information emerges, we are continuing to review whether this
is accurate. In interviews, emails and documents, we found
repeated discussions of the use of Tea Party and other related
criteria described in our audit report.
New documents from July 2010 listing the term,
``progressive,'' but noting that progressive are not considered
Tea Parties were provided to TIGTA last week on July 9th, 2013.
They were not provided during our audit, even though similar
documents that ``Tea Party,'' but not progressive were. I am
very disturbed that these documents were not provided to our
auditors at the outset, and we are currently are you're viewing
this issue.
To follow up on the information that other terms like,
``progressive and Occupy,'' appeared in various sections of the
BOLO list, we conducted additional analyses to provide you,
Members of Congress, with the data that we had due to the
interest in this issue. However, we do not have full audit
findings on the use of these other criteria.
With respect to the 298 cases that the IRS selected for
political review, as of the end of May 2012, three have the
word ``progressive'' in the organization's name; another four
were used--are used, ``progress,'' none of the 298 cases
selected by the IRS, as of May 2012, used the name ``Occupy.''
I know you have questions, and so do we, on the other Be on
the Look Out listings, but from the date of the May 17th, 2012,
document until we issued our report 1 year later, IRS staff at
multiple levels concurred with our analysis citing Tea Party,
Patriot and 9/12 and certain policy positions as the criteria
the IRS used to select potential political cases.
Although our audit was focused on the processing of
potential political cases, we were concerned about the
appropriateness of other criteria appearing in BOLO listings.
We took prompt action after our report was issued to follow up
on those concerns and communicated them to Congress, consistent
with legal restrictions on the release of confidential taxpayer
information. The names of the 298 groups and the majority of
the information on the BOLO listings are return information, as
defined under Title 26, United States Code, Section 6103, and
thus TIGTA is prohibited by law from disclosing this
information to members of this committee and to the public.
However, we did provide this information to the acting
commissioner, Danny, or Daniel Werel, on May 28, 2013, and
recommended that he review whether BOLO listings were still in
use and whether they were appropriate. He has since announced
that he has taken action on this suggestion and restricted the
use of Be on the Look Out listings.
We also provided this information and briefed staff on the
committees authorized by statute to receive tax information,
the House Committee on Ways and Means and the Senate Committee
on Finance, in early June of 2013.
Our Office of Audit also referred the IRS's use of other
BOLO listings to TIGTA's Office of Investigations for further
review.
The letter from Ranking Member Cummings to the chairman,
dated July 12th, 2013, states that I failed to disclose to
Congress that we had no evidence of political motivation.
With all due respect, I believe the record shows otherwise.
When I testified before this committee on May 22nd, 2013,
Representative Cartwright inquired as to whether TIGTA saw any
evidence that IRS employees were politically motivated in their
creation or use of the inappropriate screening criteria. I
stated unequivocally, ``we received no evidence during the
course of our audit to that effect.''
In addition, when I testified before the House Committee on
Ways and Means, on May 17th, 2013, Ranking Member Levin
inquired, ``did TIGTA find any evidence of political motivation
in the selection of the tax exemption applications,'' I
responded, ``we did not, sir.''
The letter from Ranking Member Cummings also states that I
may have improperly prevented disclosure of relevant
information. That is not correct. Career TIGTA and IRS
attorneys independently determined that certain taxpayer
information should be redacted. Following that decision, the
IRS told us it had changed its mind about one BOLO entry. This
was an interpretation that we requested additional information
about, and our lawyers continue to have a dialogue regarding
it.
It is important that I be clear on this point. None of this
information has been withheld from Congress. TIGTA provided it
in an unredacted form to the tax committees entitled to receive
this information weeks ago.
Since the issuance of our report, on May 14th, 2013,
Congress, the Department of Justice, the Internal Revenue
Service and TIGTA have been reviewing the issues surrounding
the IRS' processing of tax exempt applications. As such, we
understand that additional questions may be raised and
additional issues may need to be reviewed.
Permit me to conclude by saying that when Ms. Lerner
revealed information on our unissued report on May 10th, 2013,
her statements confirmed the findings in our report. In fact,
as previously noted, we provided IRS officials with several
opportunities to comment on our findings, and they consistently
agreed that, ``Tea Party,'' and related criteria described in
our report were the criteria that the IRS used to select cases
for review of potential political campaign intervention during
the 2010 to 2012 time frame that we reviewed.
Chairman Issa, Ranking Member Cummings, members of this
committee, this concludes my testimony.
[Prepared statement of Mr. George follows:]
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Chairman Issa. Thank you. Thank you all three for being
here today.
Mr. George, USC 26, 6103 was created by Congress, right?
Mr. George. Yes. That is correct.
Chairman Issa. But the rules and the interpretation to a
great extent come from the IRS itself. Is that correct?
Mr. George. That is my understanding.
Chairman Issa. And the intent, as far as you know, of 6103
was in fact to protect confidential information from Members of
Congress and others diving into it and extracting personal
information for whatever use that would be thus inappropriate.
Is that right?
Mr. George. Among many others, not just Members of
Congress.
Chairman Issa. Right. And there is good caselaw for why a
law like that would be on the books.
Let me ask you first a question. Are you interpreting 6103,
in your years since I guess 2004, and your two deputies there,
substantially the same as your predecessors?
Mr. George. Yes.
Chairman Issa. Does it frustrate you that often a victim
can, in fact, be denied the ability to get information as a
result of that law?
Mr. George. It is extremely frustrating, Mr. Chairman. And
it's actually counterintuitive that someone who may be the
victim of a tax-related crime, incident, what have you, can
complain to us, can complain to Members of Congress, and that
we have limited opportunity to provide them with an outcome of
any investigation that we conduct.
Chairman Issa. Now, our own House counsel has explained to
us many, many times that, under speech and debate, we can take
a great deal of information and use it on the House floor in an
official committee in ways that the executive branch objects
to.
But I want to get specifically into Mr. Cummings and I
receiving what, rightfully or wrongfully, has been interpreted
as 6103. Isn't it true that each body, the Senate and the
House, produce their own rules as to who receives 6103?
Mr. George. That I will defer to my chief counsel on, sir.
Mr. McCarthy. Mr. Chairman, the House rules and the Senate
rules, they can determine. The way the statute is written is
that the chairman of the Committee on Ways and Means, the
chairman of the Committee on Finance in the Senate, and the
staff director of the Joint Committee on Taxation can make
requests for information from the Treasury Department.
Chairman Issa. And share it.
Mr. McCarthy. And then they can designate who they will
share it with.
Chairman Issa. So if I----
Mr. McCarthy. However, in closed session, in some
circumstances.
Chairman Issa. Sure. No, I understand.
But, of course, they also can make the final determination
on whether they agree with the 6103 or not, as a body. So when
they get unredacted information, they, then, in the ordinary
course, usually work with your organization, Mr. George, and
make decisions on what should be redacted before release. Is
that right?
Mr. George. I believe we do have discussions, but they are
not limited at all.
Chairman Issa. Right, they make the final decision,
although they work in consultation with yours and other
offices.
Mr. George. Yeah, I don't know if I would use the words
``work in consultation,'' sir. They make the determinations on
their own unless----
Chairman Issa. So, if I understand correctly--and I want to
make sure I understand this, because Mr. Cummings and I are
very much in agreement on the need to protect victims and get
full disclosure to the public as appropriate.
The Senate, as I understand it, the chairman over there
shares with the ranking member; is that correct?
Mr. McCarthy. Yes, the chairman, Chairman Baucus, has
authorized that we share information with his staff as well as
Ranking Member Hatch and his staff.
Chairman Issa. So they've made a decision that includes
more than a dozen people.
Mr. McCarthy. That's correct.
Chairman Issa. And the House has not made a similar
decision.
Mr. McCarthy. That's not--I'm not sure about that right
now.
Chairman Issa. Or, at least, it's a little more narrow.
Mr. McCarthy. The letter that we have received from
Chairman Camp authorizing us to provide 6103 information to him
included members of the Republican staff. I believe that there
has been--has been information shared between the majority
staff and minority staff; however, we do not have currently on
file an authorization from the chairman allowing us to share
that information directly.
Chairman Issa. So if Chairman Camp sent a letter saying
that Mr. Cummings was included in the group to see 6103, you
would comply with that, is that correct, under the law?
Mr. McCarthy. I would have to review that, but I believe
that's accurate.
Chairman Issa. Okay. So I just want to make sure that we
understand that, to the extent that somebody pushes back on
6103, we have two problem. One is to make sure the scope is
narrow enough that it only includes 6103, and that's open to
consideration, including by Chairman Camp. And, secondly, the
question of who gets the information, which, currently, in open
session would not be appropriate but even in closed session
would not be available to us. Is that correct?
Mr. McCarthy. Yes, that's correct, sir.
Chairman Issa. And, Mr. George, your need to err on the
side of caution, just briefly, if you were wrong and you came
before us and you disclosed 6103, would you be protected by
what we call ``speech and debate,'' something that protects us?
Mr. George. No.
Chairman Issa. What could happen to you if you released
6103 information, if you erred on the side of, let's say, a
little more liberal interpretation?
Mr. George. Anywhere from removal from position to possible
criminal prosecution, sir.
Chairman Issa. Thank you.
I recognize the ranking member.
Mr. Cummings. Thank you very much.
Mr. George, I want to begin by sort of picking up where the
chairman left off. I'm going to ask you about some very
troubling testimony we heard yesterday about your efforts to
personally intervene to block this committee from receiving
documents. And I listened to what you just said, and I just
want to--I'm taking that into consideration as I ask.
At a hearing yesterday, the new acting head of the IRS, Mr.
Werfel, testified that the IRS was about to send us documents
last week with information related to categories of progressive
or left-leaning groups that may have received treatment similar
to the Tea Party applicants. Mr. Werfel said that career
experts at the IRS determined that it was permissible to share
this information with our committee because it related to
categories of groups rather than specifically identifiable
taxpayers, but Mr. Werfel said you personally intervened and
objected to the legal determination of these career IRS
officials who make these determinations for a living.
I want to read exactly what he said yesterday under oath
and then get your response. He said, ``We were imminently going
to produce a document in an unredacted form that would indicate
the identity of a grouping of entities that we felt were
similar in a kind of scope as Tea Party in terms of its
grouping, so that it wouldn't be able--you wouldn't be able to
identify a particular taxpayer because the grouping name was so
broad. And he'', meaning you, Mr. George, ``he reached out when
he learned that we were about to produce this information and
expressed concern and indicated a disagreement with our
internal experts on whether this information was 6103-protected
or not.'' And that's the end of the quote.
Mr. George, is that true?
Mr. George. Is----
Mr. Cummings. Did you personally contact Mr. Werfel's
office and----
Mr. George. Yes, I did. Yes, I did. And can I explain why?
Mr. Cummings. Yes, please.
Mr. George. I was contacted by counsel on my staff about
the overall situation that you described and that there was a
dispute, there was some concern, because the career IRS
officials that you referred to----
Mr. Cummings. Yes.
Mr. George. --you cited Mr. Werfel----
Mr. Cummings. Yes.
Mr. George. --had indicated their original position was
that this was 6103-protected information.
Mr. Cummings. Okay.
Mr. George. And then, lo and behold, after all of this has
broken into the public, they all of a sudden changed their
legal, you know, decision----
Mr. Cummings. Okay.
Mr. George. --position on this, and without providing me,
personally, with a legal analysis.
Now, I have had subsequent conversations with my staff, and
we are still in the process of discussing this. But if I'm
going to err, sir, it's going to be err--I'm going to err on
the side of protecting confidential taxpayer information and
not on some willy-nilly decision by some unnamed career IRS
employees to release sensitive taxpayer information.
Mr. Cummings. Well, let me say this: I understand your term
``willy-nilly,'' but these were not willy-nilly people, as I
understand it. And--let me finish. I think we need to be very
careful with those kinds of words. You are career people, just
like the career people that sat here a few minutes ago. And,
according to Mr. Werfel, they were experts.
And let me--and so we asked Mr. Werfel whether this has
ever happened before, that is, an Inspector General intervening
personally in a production of documents to Congress based on a
disagreement with career IRS experts. And Mr. Werfel went back
to his office and checked and then provided us with this
response, and let me read it. And keep in mind, according to
the law, this is still under oath, this written response.
``I had my staff check with the current IRS disclosure
counsel and one retired disclosure counsel. None of the people
we checked with recalled a situation where the Inspector
General told the IRS that a planned release of information by
the IRS would constitute a Section 6103 violation after the IRS
disclosure counsel determined that particular material was
releasable to the public or to Congress under Section 6103.''
So, Mr. George, he is basically saying your intervention is
unprecedented. That's what he's saying.
Mr. George. You know, there's a first time for everything,
sir. And, again, I repeat: I would rather make a mistake on
protecting the privacy of a taxpayer than making a mistake----
Mr. Cummings. I understand, but let me finish. Here is my
concern. First, your report discloses a ``Tea Party'' category.
Then, several weeks later, we learned there was also a
``progressive'' category. Then, a week after that, we discover
there was a category for Occupy groups. And now we understand
that there are other progressive categories but that you
intervened to prevent us from seeing them.
Mr. George, our goal is to have as much information as
possible so we can draw accurate conclusions about the
treatment of all of the groups, all of them. As I said a little
bit earlier in the hearing, we don't just represent
conservative groups--I have a lot of conservative groups in my
district, believe it or not, and I will fight for them just as
hard as I will fight for more liberal, progressive groups.
Mr. Werfel testified yesterday that the IRS has asserted
its position that he has been in further discussions with the
office and that if you--if you withdraw your objection, he will
send over the documents to our committee.
And so, you said those discussions are continuing? Is that
what you said?
Mr. George. Yes, that is correct.
Mr. Cummings. And if you all can come to an agreement, you
will allow us to see those documents?
Mr. George. Most definitely. We're going to comply with the
law, sir.
Mr. Cummings. And how soon do you think that decision might
be made?
Mr. George. That, I have no--I don't know, sir. I don't
know the answer to that.
Mr. Cummings. I mean, are there planned meetings already or
what?
Mr. George. They are ongoing. It's going to be sooner
rather then later. But I under oath can't give you an exact----
Mr. Cummings. I understand. And I want you--and, as I
close--Mr. Chairman, thank you--I just want to--all I'm trying
to do is, we have--these are documents, of course. We want you
to stay within the law. I don't want you to get in trouble or
anything like that. But, you know, I just want to make sure
that there is some type of decision made and then we know about
it. Because we want this investigation to go forward, and so
that is very important for us. And I think the information
would be helpful.
Mr. George. Mr. Cummings, if I may--and I beg the
chairman's indulgence--two things.
One, this information has been provided to Congress, to the
committees with the ability to receive 6103 information. So
we're not withholding anything, one.
Mr. Cummings. Okay.
Mr. George. Two, ``progressive,'' we just learned about
that recently, that that name was being used by the Internal
Revenue Service.
So, you know--and, as I indicated in my opening statement,
we, just as recently as last week, received new information
that is disturbing and that we need to pursue. So, you know,
this is not a clean-cut matter, sir. There's a lot going on
here.
Mr. Cummings. Yeah. I'm not saying that it's clean-cut. I'm
just saying that we would just like to know--I mean, you just
said a number of things just in that 1 minute. But, apparently,
this is an ongoing process. We are in an ongoing process. And
you're trying to do your job, and we're trying to do ours.
And all I'm asking you to do is, as this information
becomes available, and it's things that do not violate the
restrictions that you have, for example, 6103 problems, we
would like to have it. Okay?
Mr. George. Understood.
Mr. Cummings. All right. Thank you very much.
Mr. Mica. [Presiding.] I thank the gentleman.
And let me ask a few questions, if I may, Mr. George.
First of all, this all started with different Tea Party
groups and groups, I guess, some with the name of ``Patriot,''
and ``9/12,'' requesting IRS certification as a tax-exempt
organization. And, as I recall, the motivation was by a number
of Members of Congress who said, ``What's going on here? We
have reports from our constituents of this.'' Is that sort of
the genesis of this?
Mr. George. That, in addition to media reports about----
Mr. Mica. Right, about this going on.
And you testified today you conducted an audit. It wasn't
an investigation; we know that. And you mentioned today that
IRS provided you with this list of 298 organizations, ``Tea
Party,'' ``Patriot,'' ``9/12.'' That's correct. So it's not
something that you just went after on your own.
Mr. George. Right.
Mr. Mica. It appears, too--I don't know, did you hear the
witness today from Cincinnati? Because we've had a whole bunch
of folks say this is Cincinnati, Cincinnati. And the committee,
in trying to act in a responsible manner, is trying to find out
how this all occurred, who was responsible for what.
But did you hear today--was it Hofacre? She said that all
of her cases were Tea Party, or I guess ``Patriot,'' and they
were referred--or they were--she was looking for guidance from
Washington and waiting on that. Is that what you found in your
audit?
Mr. George. You know, I only heard bits and pieces of her
testimony, so I'm going to defer to Mr. Kutz.
Mr. Kutz. The answer is yes.
Mr. Mica. The answer would be yes.
Now, the question recently has been how were progressives
treated. And it's been intimated that you have tried to block,
oh, certain information or groups that they may have gone after
or treated.
Is there any indication that progressives were treated
differently? Did you--have you investigated--in your part of
the audit, did you look at progressives? You said a few minutes
ago, this is a fairly recent----
Mr. Kutz. We look at the criteria they gave us for the
BOLOs that had only ``Tea Party'' on it. And that was what Ms.
Hofacre talked about this morning.
Mr. Mica. And that was the crux of your----
Mr. Kutz. On May 17th, 2012, they gave us what was called
the BOLO iterations list----
Mr. Mica. Exactly.
Mr. Kutz. --which is what Mr. George submitted for the
record in his opening statement. And on that listing were the
Tea Party criteria, iterations that started in pre-BOLOs, in
May 2010, and went all the way through when the Cincinnati
staff changed the criteria back to include policy positions
after Ms. Lerner----
Mr. Mica. And he traced that all the way up to Ms. Lerner
and her staging and coming out on May 10th, 2013. That was your
testimony. She was the one that actually confirmed the
conservative targeting. That's what you testified today.
So what you're seeing is sort of a diversionary tactic to
try to undermine your audit and your report. From my
standpoint, they have tried to undermine my chairman. They've
tried to close down the investigation. They tried to keep us
from moving forward.
Now, you aren't through with your investigation, are you?
Mr. George. That is exactly right, and that is such an
important----
Mr. Mica. And audit--I said audit or review, we'll call it.
Mr. George. And if you don't mind, thank you, sir, because
that is an important distinction.
Mr. Mica. Right.
Mr. George. I mean, I can't discuss, you know, an
investigation. Suffice it to say, though, that we are working
with the FBI and the Department of Justice----
Mr. Mica. And we heard both witnesses today, one from
Cincinnati who testified and created a direct link to
Washington, and we heard from Mr. Hull, a 48-year veteran, I
guess, of IRS. And he continued the link up to both Lois
Lerner's office and then he had also indicated that one of the
two political appointees--did you get that far? How far have
you gotten in tracing it up the line?
Mr. Kutz. As part of the audit, we did not interview anyone
from Chief Counsel's Office, but our timeline shows----
Mr. Mica. Okay.
Mr. Kutz. --the Chief Counsel's office was consulted at
some points in the process.
Mr. Mica. So you can confirm that.
Mr. Kutz. We can confirm that, and----
Mr. Mica. Okay. And, again, we are all in an ongoing review
of how this started, what took place, who was responsible. We
have--Ms. Lerner has exercised, at least initially, her Fifth
Amendment right. We may be calling her back. But this is an
ongoing process.
Do you think it should be closed down, Mr. George?
Mr. George. Not at all. And, if I may, the moment I was
made aware of the fact that other groups were similarly, you
know, spotlighted----
Mr. Mica. Yeah.
Mr. George. --by the IRS, I directed my staff to commence a
review of that. However, given the work that we're doing with
the FBI and with the Department of Justice, we have to hold in
abeyance many of the other things we would otherwise be doing
to allow for the completion of their work or that work.
Mr. Mica. And you are dotting your I's and crossing your
T's----
Mr. George. Precisely.
Mr. Mica. --because you are subject to criticism like we
are.
Well, thank you. My time has expired.
And let me see, we have--Mr. Connolly is next. You're
recognized, sir.
Mr. Connolly. Thank you, Mr. Chairman.
Welcome back.
Mr. George. Thank you.
Mr. Connolly. Mr. George, we all have political
backgrounds. I assume, once you were appointed by President
Bush to your present position, you saw yourself as a
nonpartisan professional; is that correct?
Mr. George. Yes. Yes, it is, sir.
Mr. Connolly. Mr. George, there have been reports with
respect to the scope of your audit or review, including by the
spokesperson in your office, that you met with the chairman of
this committee and, essentially, he helped limit the scope of
the review.
Mr. George. That's incorrect, sir.
Mr. Connolly. That is incorrect?
Mr. George. The report I did see, but that did not occur.
Mr. Connolly. So Karen Kraushaar, your spokesperson who
quoted--who said, and I quote, that Darrell Issa had
specifically requested that investigators, ``narrowly focus on
Tea Party organizations,'' so they did just that, according to
Kraushaar, that is an inaccurate statement?
Mr. George. That is correct.
Mr. Connolly. On what basis would she make such a statement
on your behalf to the press?
Mr. George. Well, it was not without my authorization, and
she misspoke, sir.
Mr. Connolly. She misspoke. Did you, in fact, have meetings
with the chairman of this committee about the nature of this
audit?
Mr. George. I had one meeting with the chairman. And, if
anything, I was berated because he thought I failed to provide
information to him that he thought he was entitled to.
I'm sorry, what?
Oh, and this was actually, sir--and it was just pointed out
to me that this was after the audit was issued. So there was no
meeting prior to that at all.
Mr. Connolly. All right. And so, other statements, either
attributed to you or others in your operation, that, for
example, looking at those 202--if you remember, you and I had a
conversation about the pie chart. Two hundred and two of 298
organizations were not identified. And do you remember your
answer under oath to me when I asked you, could that 202
include progressive organizations?
Mr. George. And I recall the discussion. I don't recall
verbatim what I said.
Mr. Connolly. Let me read to you what you said: ``We were
unable to make that determination, sir, because in many
instances the names were neutral, in that you couldn't
necessarily attribute it to one particular affiliation or
another.''
And yet, that's not exactly what you said to me in July in
your letter to me on this very same subject. You said, ``It
would be inappropriate for a nonpartisan inspector general with
responsibility for the tax administration and law enforcement
to apply political labels to organizations based solely on the
name of the organization and subjective assumptions about what
those names mean.''
Mr. George. I don't----
Mr. Connolly. That seems to be at variance with what you
said to me in May.
Mr. George. I beg your--I beg to differ, sir. I don't see
an inconsistency in that at all.
I believe that, one, the statement that I made about the
inappropriateness of a nonpartisan inspector general to
determine--``progress,'' I have no idea what that stands for,
sir. Teddy Roosevelt ran for President under the Progressive
Party banner. Would you consider him a Democrat or a
Republican?
Mr. Connolly. Today, I most certainly would, Mr. George.
He'd be primaried in his own party for being too squishy and
liberal, but that's a different matter.
Mr. George. Well----
Mr. Connolly. Well, so I want to make sure--you're under
oath, again--it is your testimony today, as it was in May, but
let's limit it to today, that at the time you testified here in
May you had absolutely no knowledge of the fact that in any
screening, BOLOs or otherwise, the words ``Progressive,''
``Democrat,'' ``MoveOn,'' never came up. You were only looking
at ``Tea Party'' and conservative-related labels. You were
unaware of any flag that could be seen as a progressive--the
progressive side of things.
Mr. George. I was unaware of the names on the--the 298
names except for ``Tea Party,'' ``9/12,'' and ``Patriots.''
Mr. Connolly. No knowledge at that time?
Mr. George. I was aware of those groups being on that list.
It subsequently was made aware to me of groups that might
have ``progress'' in it, that groups might have some other
names. And I have to be careful, sir, because if I give some of
the names here, I'm in violation of 6103.
Mr. Connolly. Uh-huh.
Mr. George. So please don't----
Mr. Connolly. But you did give names about the Tea Party.
Mr. George. But that, you know, that's a grouping. That's a
grouping. That's a----
Mr. Connolly. Oh, I see.
Mr. George. --you know, a categorization----
Mr. Connolly. I see.
Mr. George. --a category.
Mr. Connolly. So one is not a violation, one is.
So let me ask you, at the same time, when you were at this
table in May, you had already--and you knew you had--asked for
an investigation of a total of, or an examination of, 5,500
emails on this subject matter. Is that correct?
Mr. George. Well, I'm so glad you've raised that issue,
sir, because it's very important that this matter be clarified.
I was told that there was a smoking gun, that there was an
email that the Internal Revenue Service provided to us that
indicated that someone directed the targeting of Tea Party
groups and that such an email existed. The auditors and the
investigators are two different parts of TIGTA. Five thousand
emails--I don't recall the timing of it, and I might defer to
Mr. Kutz to give a little more flavor to this. But the auditors
did not have the wherewithal to go through all 5,000, whatever
the number was, emails.
And when that was brought to my attention, because of the
due diligence that I think is necessary whenever you conduct
any audit, I instructed my Deputy Inspector General for
Investigations to use the facilities that he has, the
capabilities that he has to go and to review that.
Do you want to elaborate?
Mr. Kutz. Well----
Mr. Mica. If you would like to respond to that.
Mr. Kutz. Yeah, if I could just elaborate, Congressman, I
would just say that there was--IRS had said at one point there
was a May 2010 email out there that elaborated on the BOLO
criteria that was being used. That was a pre-BOLO, before the
actual BOLO list was developed in August.
And then we were trying to determine, also, who actually
authorized and developed the criteria that were inappropriate
that were being used. And so that was what was in the referral
to OI, the Office of Investigations, to look for.
Mr. Mica. Thank you, Mr. Connolly.
Mr. Jordan?
Mr. Jordan. Thank you, Mr. Chairman.
Mr. George, the information that Mr. Cummings and Mr.
Connolly were talking about, that 6103, and your experts--I
think you said earlier Mr. McCarthy is the one who said you
shouldn't release the names of those entities; is that
accurate? He's your chief counsel.
Mr. George. You know, this is attorney-client, too, so, you
know----
Mr. McCarthy. If I could expand on the----
Mr. Jordan. Let me just ask this question.
Mr. McCarthy. Yes.
Mr. Jordan. Just tell us--I just want to know the number.
What's the--we don't need to know the names. How many--how many
entities are we talking about that Mr. Cummings wants you to
make public and that you think there are 6103 concerns? What's
the number?
Mr. McCarthy. Well, the first, there was one that was
raised to us by the IRS counsel that they had changed their
position on that we asked for more information on. And then
others----
Mr. Jordan. Right.
Mr. McCarthy. There's a second one that they believe would
be treated similarly if their new----
Mr. Jordan. The two entities----
Mr. McCarthy. --were to be adopted.
Mr. Jordan. Two entities? Not two terms, two entities?
Mr. McCarthy. Two terms, at this point. I don't know how
many entities it would cover.
Mr. Jordan. Do you have an idea?
Mr. McCarthy. No, I do not.
Mr. Jordan. Let me ask you--I'm looking at your testimony,
Mr. George. You said, ``New documents from July 2010 listing
the term 'progressive' were provided to TIGTA last week on July
9th, 2013.'' You're disturbed that these weren't provided
earlier. I get that. ``We are currently reviewing the issue.''
What can you tell us? Without violating 6103, what can you
tell us?
Mr. George. Great question, sir.
I don't know whether they were withheld intentionally. I
don't know--I don't know the circumstances. Again, I may defer
to Mr. Kutz, if he has additional information on that. But I
don't know because I just learned about this.
Mr. Kutz. We don't know. But, Congressman, throughout the
entire audit, starting May 17, and the document Mr. George
submitted for the record, we were given a listing of the BOLOs
that were----
Mr. Jordan. No, I get what you're going to say now because
you said it once. Because I had this underlined, too: From the
date of the May 17th, 2012, document until we issued our report
1 year later, the IRS staff had multiple levels--at multiple
levels concurred with our analysis.
So they had all kinds of opportunity to tell you this was
there. They didn't tell you. Suddenly it appears, because the
Democrats keep talking about it, it appears out of nowhere.
You're currently reviewing it. I mean, is there anything else
you can tell us about the current review?
Mr. George. It tells me I'm concerned that there may be
additional pieces of information that we don't have. I am very
concerned about that, sir.
Mr. Jordan. But you--can we put this slide up?
I just want to walk through the numbers, because--and, you
know, this is largely developed from your report and interviews
and emails that our staff has looked at.
But when you walk through this, you know, we start in
February 2010. You got one Tea Party case, you got nothing
anywhere on the ``progressive'' name, ``Occupy'' name, whatever
term is being used. You move down to March, you got 10 to zero.
You move down, the score is 18 to zero. Then it's somewhere
between 40 and 60 to zero. Then it's 100 to zero. It's unclear,
around 100. And then, finally, we get to the end, and it's 96
to 7 is the score. And yet, none of those seven groups, to my
knowledge, were ever denied the status they sought. And if I do
my math right, there's 195 cases you don't, frankly, know about
that are part of that overall universe of 298.
So when you walk--in fact, USA Today reported 12
applications from liberal and progressive groups got some kind
of scrutiny. They were all approved. None of the Tea Party/
conservative groups were. There was obviously disparate
treatment here.
And I think that this idea that Mr. Connolly keeps raising,
I just--the evidence doesn't point to that at all.
Mr. Kutz. Again, the document we submitted for the record--
I don't want to repeat it because you already have seen it--it
showed what the BOLOs were relevant to this.
The other tabs of BOLOs were touch-and-go and other things
like that, related in some cases to fraud, abuse, terrorist
activity----
Mr. Jordan. Everything you guys have looked at--the
heightened scrutiny, the delays, the fact that these groups
were never approved, the fact that when they hung out there in
this limbo status they were denied their opportunity to appeal
any decision because there was no decision rendered--everything
you have looked at, that happened with ``Tea Party,'' ``9/12,''
``Patriot,'' conservative groups, correct?
Mr. Kutz. The criteria in our report is what we understand
to be accurate----
Mr. Jordan. All right.
Mr. Kutz. --that was used.
Mr. Jordan. All right. I understand.
Mr. Chairman, I'd yield back.
Mr. Connolly. Mr. Chairman?
Mr. Mica. Mr. Walberg?
Mr. Connolly. Well, Mr. Chairman, could I just have a
unanimous consent?
Mr. Mica. Oh, no problem.
Mr. Connolly. Thank you so much.
Just before we were finished, I was going to ask unanimous
consent to enter into the record the communication from the
head of investigations to the Principal Deputy IG on the
subject we were talking about, in the review of the 5,500
emails.
Mr. Mica. Without objection----
Mr. Connolly. I thank the chair.
Mr. Mica. --so ordered.
Mr. Mica. And now we'll go to Mr. Walberg.
Mr. Walberg. Thank you, Mr. Chairman.
And thanks to the panel for being here again.
According to Mr. Hull, who we had the privilege of
listening to this morning with his direct testimony, during a
meeting in July of 2011, Ms. Lerner instructed her subordinates
to--that the Tea Party applications should henceforth be
referred to as ``advocacy'' applications. Is that right?
Mr. Kutz. What Ms. Lerner did, as I understand, is she
changed the criteria in the BOLO to no longer include ``Tea
Party'' names in the BOLO, if that's what you're referring to.
July 2011 is when the criteria was changed from ``Tea Party''
to what you have----
Mr. Walberg. ``Advocacy.''
Mr. Kutz. That's correct. That's my understanding. And
that's what's in the document Mr. George submitted for the
record.
Mr. Walberg. But just to be clear, according to Mr. Hull,
the two test cases he was working in Washington on were both
filed by groups affiliated with the Tea Party movement, right?
Mr. Kutz. Only one, sir.
Mr. Walberg. Only one.
Mr. Kutz. Correct.
Mr. Walberg. Do you think it was pretextual for Ms. Lerner
to label these applications as advocacy cases when they were
really Tea Party cases?
Mr. Kutz. Well, she was trying to fix the problem. She
actually, I think, recognized then that these criteria were
inappropriate, to use any names, regardless of political party.
Mr. Walberg. Okay.
Mr. Kutz. And she was trying to fix it. It wasn't perfect
criteria, but it was better than using the names ``Tea Party,''
``9/12,'' and ``Patriots.''
Mr. Walberg. Okay, so ``Tea Party'' didn't work, so
``advocacy'' would, at that point.
Mr. Kutz. Political advocacy, sir. That's how it was----
Mr. Walberg. Political advocacy.
Mr. Kutz. --referred to, yes.
Mr. Walberg. Mr. Hull has testified that the Tea Party test
cases pending in Washington were transferred from him in August
of 2011 with no explanation and assigned to Hillary Goehausen.
Is that reflective of your findings, as well?
Mr. Kutz. Yes, sir.
Mr. Walberg. With no explanation, just a transfer.
It's interesting that Mr. Hull, as we listened to this
morning and know of his record, his tenure and service,
extensive service, 48 years, in fact, do you have any sense of
whether Ms. Goehausen has anywhere near the practical
experience of Mr. Hull?
Mr. Kutz. We don't have anything on that, sir.
Mr. Walberg. She had 4 months before being put in this job.
Ms. Goehausen told committee staff in an interview that,
prior to July 2011, she had no experience with 501(c)(3) and
501(c)(4) groups applying for tax-exempt status. Do any of you
find that to be odd, that the IRS would transfer these test
party--or these Tea Party, these advocacy cases from someone
with decades of experience to someone with little or no
experience?
Mr. Kutz. We don't know. I mean, in the time that we have,
the issue you're talking about contributed to the delays that
we describe in our report. But we have no knowledge of what
have described there.
Mr. George. But I would just add, Congressman, given the
fiscal constraints facing the entire Nation but especially
those confronting the Internal Revenue Service, I am not
surprised that they would have made a decision like that. And
they are unfortunately going to have to continue to make some
of these, you know, haphazard types of decisions because of a
lack of resources and manpower.
Mr. Walberg. We can only hope it was resources and
manpower.
Mr. George, in a letter sent to Chairman Issa on Friday,
Ranking Member Cummings asserts that you found no evidence of
political bias. And I apologize for not being here for your
opening comments due to the fact of being on the floor.
But in the course of your audit, you said that you hid this
fact from the general public, about the political bias. I
recall reading the audit and finding you stating exactly that,
that you did not find any evidence implying political bias.
It seems Mr. Cummings and his staff did not thoroughly read
your report or pay attention when you testified to this effect
previously. How do you respond to Mr. Cummings' criticism that
you hid this fact from the public?
Mr. George. Yes, Congressman, thank you for helping me once
again to clarify both in the opening statement that I issued
today, both in terms of the audit report that we issued and in
previous testimonies before a variety of a number of committees
both in the House and Senate, I made it patently clear that we
had not found such motivation, political motivation.
But, again, this was under an audit, not under any other
review that we're undertaking.
Mr. Walberg. Mr. Chairman, I yield back.
Mr. Jordan. [Presiding.] I yield to the gentleman from
Tennessee, Dr. DesJarlais.
Mr. DesJarlais. Thank you, Mr. Chairman.
And, Mr. George, I do appreciate you being here and your
colleagues.
You've been doing this for about a decade. Have you ever
been involved in a case quite like this?
Mr. George. This is the most unprecedented example I have
ever experienced, not only as an inspector general but as a
former member of this very committee's staff for almost 25
years and being a former White House staffer. I have not--I
have never experienced anything like this, sir.
Mr. DesJarlais. What type of things have made it more
challenging than usual?
Mr. George. The fact that people are trying to misinterpret
the findings of career employees who, over the course of the
existence of our organization, have uncovered billions and
billions of dollars that the IRS has misspent or could be spent
in more efficient and effective ways, and then a variety of
policy changes that the IRS has agreed to in terms of making
changes to better serve the American people.
And to have our reputation, again, of career people--I am,
you know, a political appointee; I expect this heat. I mean,
even though I don't think I deserve it in this instance, I
expect it. My career people neither deserve it nor should they
have to expect it. And that is troubling, sir.
Mr. DesJarlais. Well, certainly, we could sense the
frustration from our earlier witnesses, Ms. Hofacre and Mr.
Hull, that--you know, it was apparent that they were willing to
come here, openly testify. They didn't have anything to hide.
They were doing their jobs. But yet somebody higher up the food
chain chose, as Ms. Hofacre said, to invoke a nuclear strike,
and they felt essentially thrown under the bus.
Do you have any sense as to why somebody would either want
to cover something up or blame somebody that clearly we've
proven, I think, through testimony were not responsible?
Mr. George. You know, I don't have facts that I--to provide
to justify that, sir. But it's just troubling that it's
happening.
Mr. DesJarlais. Well, you know, I guess I hate to say we're
almost getting used to that here, but after our hearing on
Benghazi and listening to reports come out about how this pesky
YouTube video was responsible for the death of the Americans,
and that story was propagated for 3 weeks, and then we hear Mr.
Carney and other folks higher up in the IRS blaming it on these
two rogue agents in Cincinnati, you might think that they want
to change their storyteller, because, you know, we've proven
both of those are not the case. You know, I think the American
people are getting very frustrated, and I know that they are
extremely anxious to hear what we find and where this goes.
What would--what would make your job easier? What continues
to make this so difficult, besides being personally attacked by
members of this committee?
Mr. George. And, again, I have to preface my response by
saying tax policy decisions that the Department annunciates is
within the scope of the Assistant Secretary for Tax Policy. And
it has been that way since the Nixon administration.
But it is extremely--and I indicated this earlier in a
response to a question--when a provision of law prevents me
from telling you and others information that I have that I know
would help clarify the matter but under, you know, the
potential of violating Federal law I'm unable to do so. So I'll
have to leave it at that.
Mr. DesJarlais. Okay.
Elizabeth Hofacre testified that she could not process Tea
Party applications pending in Cincinnati because she was
waiting on guidance from Carter Hull in Washington. Mr. Hull
testified that he could not provide Ms. Hofacre with guidance
because he was waiting for direction from senior IRS
leadership, including Chief Counsel's Office.
Is that consistent with the findings of your audit?
Mr. Kutz. Yes, sir.
Mr. DesJarlais. And I'm assuming that Chief Counsel will be
questioned more thoroughly in the future?
Mr. Kutz. We did not interview Chief Counsel as part of the
audit, I will say. They were in our timeline as being consulted
and one of the reasons perhaps for the delays. But we did not
interview anyone from Chief Counsel's Office for the audit.
Mr. DesJarlais. Okay. Are there plans to interview people
from Chief Counsel?
Mr. George. Again, as I indicated earlier, sir, we're
working both with the Department of Justice as well as the
FBI--there's a component of that--on a continuing review of
this matter. And I'm not at liberty to go into----
Mr. DesJarlais. Okay. Well, you know, people seem to feign
outrage that the Republicans are just on this witch hunt trying
to implicate the White House. The fact is, there was an
election year, there were groups that had different political
views than this President, and there was a political appointee
who has been implicated in these cases that have been sent up
the food chain.
So, you know, I think it's only fair that we continue to
look and dig, because, you know, this happened about 40 years
ago in our history, not this exact same thing. But I don't
think it's outrageous, considering the fact that people are
trying to put out misleading stories if there's nothing more to
see. And there wouldn't be agents, or there wouldn't be
employees claiming the Fifth or asking for the Fifth when they
come to testify.
So, anyways, thank you for your work. I'm out of time, and
I'm sure there's more to come.
Mr. George. Thank you, sir.
Mr. Jordan. The gentleman from Pennsylvania is recognized.
Mr. Cartwright. Thank you, Mr. Chairman.
You know, when Mr. George was here last in front of this
committee, I said, it's an outrage if this is true. And I want
to say I took a lot of heat from folks back home, because I was
implying that perhaps what you said in your report wasn't the
complete story. And I just want to go back to that, because I'd
hate to imply something that isn't true.
Mr. George, in the committee hearing on May 22, 2013, the
chairman asked you some clarifying questions to my line of
questioning. I'd like to ask you some clarifying questions
about those clarifying questions.
To refresh your memory, here's what you--what you said.
Chairman Issa said, ``Were there any BOLOs issued for
progressive groups, liberal groups?''
``Mr. George: The only 'Be on the Lookout,' that is BOLO,
used to refer cases for political review were the ones that we
described within our report. There were other BOLOs used for
other purposes. For example, there were lookouts for indicators
of known fraud schemes so that they could be referred to the
group that handles those issues. There were nationwide
organizations. There were notes to refer State and local
chapters to the same reviewers. As we continue our review of
this matter, we have recently identified some other BOLOs that
raised concerns about political factors. I can't get into more
detail at this time as to the information that there is because
it's still incomplete--that we've uncovered, rather, because
it's still incomplete.''
Chairman Issa said, ``So, clearly, it's fair to say,
though, there was a BOLO for 'Tea Party' but not a BOLO for
'MoveOn' or 'progressive.'"
Mr. George, you said, ``I'm not in a position to give you a
definitive response on that question at this time.''
Chairman Issa said, ``I only ask if there's at least one.
Are you aware of at least one that was targeted using a BOLO
that was a 501(c)(4), in which they were targeted politically
but did not fall into this current report we have before us?''
Mr. George, you said, ``Under the report, the review, the
purposes of the audit that we conducted, which was to determine
whether they were looked at for--in the context of political
campaign intervention, there were no others.''
And the chairman said, ``Thank you.''
So, to be clear, Mr. George, first you said the only BOLOs
used to refer cases for political review were the ones
described within the report. Then you immediately say there
were other BOLOs used to refer cases for political review that
were outside your report. Then, after Chairman Issa pressed
you--and I want to thank Chairman Issa for pressing you so hard
on this issue--by asking if there was even one group that was
flagged with a BOLO for political reasons that wasn't included
in the report, and you said there were no others.
Have I read that correctly?
Mr. George. You've read it correctly, but, I mean----
Mr. Cartwright. I just want to give you the benefit of the
doubt here and allow you to explain yourself, Mr. George. Was
it true when you said that the only BOLOs used to refer cases
for political review were the ones described within the report?
Mr. George. That is correct, sir.
Mr. Kutz. Congressman, that's in the document that he
submitted for the record. Those were the BOLOs we were given by
the IRS, May 17, 2012, that show for political advocacy cases
what the BOLOs were.
Mr. George. Sir, you were not here during the part of my
testimony which indicated that, as recently as last week, the
Internal Revenue Service is still providing us information that
would've had a direct bearing on this testimony and on our
audit report.
Mr. Cartwright. Let's go at it this way, Mr. George. As of
today, are you aware that there were BOLOs out about
progressive or liberal groups?
Mr. George. There were BOLOs----
Mr. Cartwright. And when did you first find out?
Mr. Kutz. On which ones?
Mr. Cartwright. I'm asking Mr. George.
When did you first find out there were BOLOs about liberal
or progressive groups?
Mr. George. It was the night before I was testifying before
the Senate Finance Committee, at around 6:30 p.m.
Mr. Cartwright. And was that before your testimony here on
May 22nd?
Mr. George. That was before, yes.
Mr. Cartwright. So you were here on May 22nd testifying
about BOLOs about Tea Party groups, and when Mr. Issa
questioned you specifically about other groups, you said there
were no others.
Mr. George. Well----
Mr. Cartwright. But you didn't say a word about BOLOs that
you knew were about progressive or liberal organizations, even
though you just admitted today----
Mr. George. Yeah.
Mr. Cartwright. --that you were aware of that as of your
May 22nd----
Mr. George. Sir----
Mr. Cartwright. --testimony. Am I correct on that, Mr.
George?
Mr. George. --I need to clarify something. One, it was on--
the BOLO group name was on ``Occupy.'' And I can use that word
because it's generic. We had no information whatsoever how, if
at all, that information was used or misused.
Mr. Cartwright. It doesn't matter. You knew there were
BOLOs about ``Occupy''----
Mr. George. But we----
Mr. Cartwright. --and you didn't say a word about it in
your last testimony here in this committee, May 22nd.
Mr. George. Yeah.
Mr. Cartwright. You knew people's heads would explode if
you talk about Tea Party BOLOs, and you didn't mention any
other ones.
Mr. George. Sir----
Mr. Cartwright. What do you think we are doing here?
Mr. George. Sir, if you look at page 6, footnote 16 of my
audit report, it acknowledges the existence of other BOLOs and
the fact that we did not--the charge of that audit was not on
how they were utilized.
Mr. Cartwright. You knew there were BOLOs about liberal
groups----
Mr. Jordan. The gentleman's time has expired.
Mr. Cartwright. I'll yield back, Mr. Chairman.
Mr. Jordan. You can only yield back when you've got time to
yield back, but we thank the gentleman.
We'll go now to the gentleman from South Carolina.
Mr. Gowdy. Thank you, Mr. Chairman.
Mr. George, how long have you been the Inspector General?
Mr. George. I was confirmed in November of 2004 for this
current position.
Mr. Gowdy. And how do you view your job, your role?
Mr. George. I consider it one of the most important
Inspector General responsibilities in the Federal Government,
given the role that the IRS plays in the lives of every single
American and anyone else who has a tax obligation to the United
States of America.
Mr. Gowdy. Well, I've always thought of inspector generals
as really having no friends to reward and no foes to punish;
they just go where the facts take them.
Mr. George. And that is exactly how I've comported myself,
sir.
Mr. Gowdy. You know, Mr. George, when I see quotes like
this one from one of our colleagues on the other side of the
aisle--or, rather than discuss the facts of your investigation
or your background or your reputation for integrity, they just
want to say this: ``This is a Republican-appointed inspector
general. This is someone who has donated and worked for
prominent Republicans. Are we as Democrats and the public to
believe he is objective and simply followed the truth where it
leads?''
And I think to of your colleagues, a man by the name of
Michael Horowitz. He's the Inspector General for the Department
of Justice. And, you know, he had a connection to Lanny Breuer,
and he was appointed by this administration. But I decided to
do something novel, and I would encourage my colleagues on the
other side of the aisle to do it, too: Allow the person to do
their job before you judge them based on connections. So I let
Mr. Horowitz do his job, and guess what? He was fantastic,
straight down the middle, calling balls and strikes. Couldn't
tell he had any political connection.
So what's your reaction when you have questions like the
ones you just had from our colleague on the other side of the
aisle and when your integrity is attacked like it was by my
colleague responsible for this quote? What's your reaction?
Mr. George. You know, and I'm not being flip here, but they
don't know that I was page at the 1980 Democrat National
Convention. They don't know that I was a founder of the Howard
University College Democrats. Yes, you know, I saw the light
and joined Bob Dole's staff during college, but I have--I think
anyone who has worked with me on either side of the political
spectrum will agree that I call it as I see it. I have never
allowed political--you know, personal political views to affect
decisions. We worked with Democrats, we worked with Republicans
to get legislation passed. And we--and I continue to do so.
And so, you know, I mean, again, sir, I've been in
Washington now for, you know, over 2 decades, and I know how,
you know, sometimes politics is played and works. It's
unfortunate, because, you know, when I was doing my due
diligence, sir, by talking to some of the first IGs, you know,
who were appointed by Jimmy Carter and then later fired by
Ronald Reagan and then some rehired by him, they said to me, do
not take this job. They say, if you are perceived to be too
aggressive, the administration is angry at you. If you're
perceived to be not aggressive enough, Congress is angry at
you.
And while I love this job and I just have the greatest
staff that work with me, you know, I'm willing to make--to do
it. And I've made sacrifices personally and in many other ways,
but I'm serving the people of the greatest Nation on Earth, and
I have no regrets.
Mr. Gowdy. Well, Mr. George, I've got to be honest with
you, you're a lot more magnanimous than I am, because I think
it's disgraceful. I think when you attack people just because
you have a political opportunity and you go through their
background and find some tangential connection to a Republican
or a Democrat and then want to disparage their work because of
that--if somebody has a problem with your audit--and I hasten
to add, this was not an investigation, it was an audit. And
your work is ongoing.
You know, you got Republican and Democrat sheriffs, you got
Republican and Democrat prosecutors, you can't tell the
difference. I can't tell the difference in inspector generals,
which is why I never thought to ask. Just tell me what the
facts are.
And you don't prosecute cases, do you? You don't convene a
grand jury.
Mr. George. That is correct.
Mr. Gowdy. You refer them to the Department of Justice.
Mr. George. That is correct, sir.
Mr. Gowdy. And I will remind my colleagues on the other
side of the aisle, one of his referrals to the Department of
Justice for the willful disclosure of confidential information
was declined by the Department of Justice.
So, Mr. George, I appreciate your work. Keep going, keep at
it, and don't let the detractors get you down.
I yield back, Mr. Chairman.
Mr. George. Thank you.
Mr. Jordan. Mr. McCarthy, real quick. You were--in your
former job, you were deputy staff director at this committee;
is that correct?
Mr. McCarthy. That's correct, sir.
Mr. Jordan. And you served under a Democratic chairman, Mr.
Towns; is that correct?
Mr. McCarthy. That's correct, yes.
Mr. Jordan. And in your 3 years working, or approximately 3
years for working for Mr. George at TIGTA, have you ever seen
him function in a political manner being biased one way or the
other?
Mr. McCarthy. I haven't been at TIGTA for 3 years. I've
been there for about 18 months.
Mr. Jordan. In your 18 months that you've been there--
excuse me--have you ever seen that?
Mr. McCarthy. No, I--it's not a political organization.
Mr. Jordan. The way he described his behavior in the last
12 years, you would attest to that in what you've seen in the
last 18 months?
Mr. McCarthy. I haven't seen any political behavior.
Mr. Jordan. I appreciate that, Mr. McCarthy.
I now yield to the gentlelady from the District of
Columbia, Ms. Holmes Norton.
Ms. Norton. Mr. George, I asked staff to get out what was
the charge for the audit. And the charge, and here I'm quoting,
was that you were to look for inconsistent treatment of
applications. That's the word I want to focus on,
``inconsistent treatment of applications.''
You have testified earlier today that you did not know of
the--of the handling of progressive groups. You didn't know,
for example, that some of them had had a 2- or 3-year wait.
Mr. George--Mr. George, my question really goes to the
methodology that you were using. You have used words previously
like ``targeted.'' It seems to me that one has to look at the
entire universe in order to know whether any specific groups
have been targeted or kicked out.
Even though you were not told about progressive groups, if
your charge was to look for inconsistent treatment of
applications, doesn't that necessarily drive you to look at
applications from progressive groups to the extent possible and
applications from conservative groups to the extent possible?
That's my question.
Mr. George. Okay. And I'm going to defer to Mr. Kutz.
Mr. Kutz. We probably could. We weren't labeling anybody. I
mean, that's what Mr. George said in his opening statement----
Ms. Norton. That's not my question, about whether you were
labeling. Here is my question. My question goes to methodology.
Mr. George. Uh-huh.
Ms. Norton. You were focused on the Tea Party--the way in
which Tea Party groups were treated.
Mr. George. All groups in the 298. All groups in that 298
that----
Mr. Kutz. All groups in the political advocacy----
Ms. Norton. Well, if you were focused on all groups, how
could you not have--how could you not have, in the ordinary
course of doing your work, discover the treatment of the
progressive groups? And why would you not have reported the
treatment of both groups to this--to this committee?
I mean, you have testified that you didn't know of the
treatment of some of the progressive groups. And that says to
me--that goes to a flaw in methodology. If all of the groups
are on the table, one concludes targeting only after comparing
the groups. And I don't see evidence of that kind of rigorous
comparison, Mr. George, in your work.
Mr. George. Ms. Norton, if I may, first of all, again, we
did not go line by line to say, this is a progressive group,
this is a, you know, conservative group, this is----
Ms. Norton. Well, then, how could you find that there was
targeting of Tea Party groups?
Mr. George. Because of the----
Ms. Norton. Because that would have to be compared to
something else.
Mr. George. It was because----
Ms. Norton. Because you can't possibly target everybody or
else you wouldn't use the word ``target.'' If you are
targeting, it means you're picking them out from the universe
of groups, or else you were wrong to use the word ``target'' at
all.
Mr. George. But, ma'am, it was because they used ``Tea
Party.'' The groups that were highlighted/targeted had the name
``Tea Party'' or ``9/12'' or----
Ms. Norton. Yeah, well, the BOLO listing for Occupy groups,
unless--if you were born even yesterday, would mean that you'd
have to look at Occupy groups, but you don't mention Occupy
groups in your report.
Mr. George. But they weren't in the same category,
Congresswoman. They were in a, what was called historical tag.
They were not--I'm sorry, what?
I'm sorry, they were on a watch list. They were not on the
political advocacy group tab that we were provided and that we
were charged with looking at in this audit.
Ms. Norton. You were charged with looking at what?
Inconsistencies among groups.
Mr. George. We were charged with looking at whether or not
the Internal Revenue Service was applying Treasury regulations,
as well as, you know, the Tax Code, as it applied to 501(c)(4)
applicants in this particular realm, which the Internal Revenue
Service itself provided us. Not, there----
Ms. Norton. I don't know what the Internal Revenue Service
provided you. All I know is your charge was to look at
inconsistent treatment of applications.
If I may say so, Mr. George, I don't believe you are
dishonest and I don't believe that you are political. I do
believe that your testimony shows, demonstrates that you were
not using the appropriate methodology in order to meet your
charge, which was to find whether there was inconsistent
treatment. You would have had to put the universe before you to
responsibly make that--answer that question.
Mr. Kutz. May I comment just because, you know----
Mr. Jordan. The lady's time has expired. The gentleman may
respond.
Mr. Kutz. Okay. We looked at over 600 cases, and only 72 of
them were Tea Party cases. We sampled from a bucket of cases
that was outside of this 298 cases, and we found that 175
statistically should have actually been included in the
political review.
We didn't look at them and label them as any sort of
political thing. We said, based on the substance in the case,
if there was evidence in the files, as Mr. George said, and
Treasury regulations in that should've been actually looked at
as political cases. In the same light, of the 298, we found
that 31 percent of them had no evidence in the file of
political campaign intervention and perhaps should not have
been looked at.
So we only looked at 72 Tea Party; we looked at over 600
cases total. So, you know, we did look at it a little bit
broadly, sure, but the lane we looked at was the lane called
political advocacy. Keep in mind, they process tens of
thousands of cases a year. There were only 300 in this group--
--
Ms. Norton. Political advocacy, where the statute says 51
percent. You know, obviously, you narrowed--you narrowed your
focus.
Mr. Kutz. That's correct. We narrowed it to political
advocacy cases.
Chairman Issa. [Presiding.] I thank the gentlelady.
We now go to the gentleman, Mr. Meadows.
Mr. Meadows. Thank you all for being back with us.
And, as you know from some of our previous inquiries, I'm
one that will call it as I see it. And so I am not necessarily
giving you a free pass, but I want to just apologize. You know,
you guys are the messengers, and you're getting beat up in the
middle of this when we're throwing out red herrings.
You know, we're talking about BOLO list, and we're--these
are red herrings. And I'd like you to comment on this. Even
though there may have been two different BOLO lists, we do know
that the ``Tea Party''s were singled out because 100 percent of
those were either detained for a long period of time or
systemically detained in terms of any kind of result, for some
as much as 3 years or more. Is that not correct?
Mr. Kutz. There were actually five different BOLO tabs.
There was the potential abusive historical, potential abusive
coordinated processing watch list, or what was called emerging
issues----
Mr. Meadows. Right.
Mr. Kutz. That's where the Tea Party was, emerging issues.
These other four BOLO lists out there, we said very clearly in
our report on page 6 that we did not look at them. That doesn't
mean there's not something wrong, perhaps, with what they were
doing----
Mr. Meadows. But they weren't treated in the same way as
these on this BOLO list; is that correct? Let that message be
clear today.
Mr. Kutz. We don't know if they got delays and letters. We
know that the people--a large group of those people got
significant delays, on average almost 600 days.
Mr. Meadows. And 100 percent of the Tea Party cases got a
delay?
Mr. Kutz. I don't know if a hundred. No. Some were actually
approved. Some Tea Parties were approved at some point.
Mr. Meadows. Three? I think you--how many were approved?
Mr. Kutz. We'll have to get that into the record, sir.
Mr. Meadows. Okay. Because I've read your report five
times, I feel like I know you, and so I want to go on a little
bit further, because Lois Lerner, you know, it's been reported
widely that she found out about this in July of 2011 is--but
in--there was a sensitive case report that actually started
back as early as April of 2010. Is that not correct? I think
it's on page 32 or 33 of your TIGTA report. April of 2010. Is
that correct?
Mr. Kutz. April 2010, yes, that's correct.
Mr. Meadows. Okay. And that report actually went to Ms.
Lois Lerner at that particular point. So she could have known.
It was meant to be reported. It was going to the executive, as
Mr. Hull testified earlier today. And we also know that it went
up to E and O. Could it have gone to her--her desk?
Mr. Kutz. She gets a summary. She would not get the actual
report, my staff----
Mr. Meadows. So she would get a summary of the sensitive
case reports?
Mr. Kutz. Right.
Mr. Meadows. Okay.
Mr. Kutz. That's correct.
Mr. Meadows. And so that summary, would it indicate that
these were Tea Party cases?
Mr. Kutz. We don't know.
Mr. Meadows. Okay. Why would we not call these progressive
cases from--from February of 2010 until July of 2011? Why would
we not have called those progressive cases?
Mr. Kutz. I don't understand your question.
Mr. Meadows. Well, I mean, did we call them Tea Party cases
because the majority of them were Tea Party cases?
Mr. Kutz. We called them Tea Party cases because that was
what was actually told----
Mr. Meadows. Right. I mean, why would the IRS call them Tea
Party cases? I mean, we're missing this whole point. We----
Mr. Kutz. Because----
Mr. Meadows. If they were predominantly progressive cases,
wouldn't we have referred to them as progressive cases----
Mr. Kutz. I believe----
Mr. Meadows. --or Occupy cases?
Mr. Kutz. I believe they're generally referred to Tea Party
cases, meaning Tea Party, 9/12 and Patriots, because if you
look at the names of some of the Tea Party organizations, they
actually have the word ``Patriot'' in them. So I think that
there's some combination. My understanding is 9/12 is a
separate organization, but I think Tea Party Patriots is--is a
frequent combination.
Mr. Meadows. So if you think predominantly that these were
liberal groups, would we have not probably come up with a
different name, the IRS would have come up with a different
name to refer to them as?
Mr. Kutz. Let--let me say this: of the 298 cases, we know
that 96 were Tea Party, 9/12 or Patriots. We did not go through
and make a judgment about what the 202. You've read our report
five times.
Mr. Meadows. Right.
Mr. Kutz. You know we did not do that.
Mr. Meadows. Right.
Mr. Kutz. And we really don't think it's--some of them had
the words ``liberty,'' ``freedom.'' I don't think we could make
a judgment based upon certain words. And that wasn't really our
charge. Our charge was to look at the substance of the case and
see if it had actual evidence of political advocacy.
Mr. Meadows. All right. Knowing what we know now, and so
let me get to--so we don't follow this red herring here, if--if
we've got--as we start to look at these particular cases,
knowing that you can't classify conservative or liberal, were
Tea Party, 9/12, Patriot groups treated predominantly
differently than the Occupy or progressive groups that we have?
Mr. Kutz. We don't know. We did not audit Occupy or the
other names you've used. We know everybody that got into the
298, whether they were conservative, liberal, whatever, they
were treated differently. The average time in our report was
well over 500 days that they were sitting waiting. So--and we
know there were 96 Tea Party, 9/12 and Patriot. That's what we
do know, sir.
Mr. Meadows. If I can ask one last question. We've been
told by IRS employees that the case names actually appeared on
the summary of this sensitive report that went up. Is that
accurate? So those case names were actually on there, the ones
that went to Lois Lerner? That's what we've been told by IRS
employees.
Mr. Kutz. We know they're on the actual case reports.
That's what I'm told.
Mr. Meadows. So can you check back with us and let--because
that would make a big difference, because it would indicate
that Lois Lerner probably knew about it as early as April of
2010, some 14 months before she changed it.
Mr. Kutz. Yeah. The first thing we know of Lois Lerner
knowing is July of 2011, but we will check on the question you
have and submit it for the record.
Mr. Meadows. All right. Thank you. I appreciate the
patience
Chairman Issa. I thank the gentleman. We now go to the
gentleman from Massachusetts.
And if the gentleman would allow me 10 seconds before he
begins.
Would you also include in the gentleman's request, quite
frankly, a short, quick analysis to see if you can find one or
more of this nearly 300 files that your people could
potentially go through that is, in fact, clearly not
conservative? And if you find one or more, would you inform the
ranking member and myself? I know that an exhaustive, extensive
search might take time, but if it's there, I think the ranking
member and I would love to know anecdotally that at least one
likely, and we will then go to the Ways and Means Committee to
ask for a detailed look, because right now, you know, we show
that there are seven that have the name ``progressive.''
Mr. George. The answer's yes, Mr.----
Chairman Issa. Okay. So----
Mr. George. And it may be more than one, but, so----
Chairman Issa. Okay. So--so progressive likely are not
conservative groups, right?
Mr. Kutz. We didn't look below the name. I mean, there
were--there were, I think, three with the word ``progressive,''
and there were no ``Occupy'' in the 298.
Chairman Issa. Okay. I've taken too much time. I'll come
back to it. You know, I think--I think all of us here at some
point are going to want to know of nearly 300, how many of
them--I mean, if you dig down into them, whether deliberately
or accidentally were set aside in this group of people that
wait 500 days.
You know, I think the ranking member and myself, we may
argue about a lot of things, but we don't want to argue about
the facts. If the facts are that--that people got abused for a
myriad of reasons, we'd like to know it.
There's one thing that I think we all are going to know at
the end of this hearing is groups got sectioned out, and they
got abused in the process, and that's the undeniable part. Now
we--we want to dumpster dive, if you will, a little bit in to
find out why, but certainly I don't think any of you or any of
us here think that this be--or the president thinks that this
behavior was acceptable.
Yes, Mr. George.
Mr. George. I don't know whether you were in the room, but
I indicated that I requested that my staff do take a look to
see how these other groups were treated, but again, during the
course of this additional review that we're doing with the FBI
and the Justice Department, some of this has to be held in
abeyance until that aspect of the work is done, but we will try
to comply with your request.
Chairman Issa. All right.
And, Mr. Cummings, maybe you and I should speak off line,
but it would be our considered opinion, I believe, that this
committee can receive knowledge which cannot be made public, so
that at least we could understand whether or not there was a
there there, even if it has to be withheld. We don't norm---we
want to be very public, but we certainly, I think, would join
together to say if you find certain--some of those things in
your investigation, we'd like--sort of consistent with the 7-
day rule, we'd like a non-public disclosure, so at least we
know how to plan going forward.
Mr. George. And I've just been informed by staff that we
can comply with that within a timely period, sir.
Mr. Cummings. Would the gentleman yield?
Chairman Issa. Of course. The chairman will yield as much
time as the ranking member wants.
Mr. Cummings. I apologize. I just want to get this
straight, Mr. Chairman.
Chairman Issa. We haven't started the clock. Go ahead.
Mr. Cummings. Real quick. Can you put some kind of timeline
on that for us? I mean, do you have any idea? Because we may be
next year.
Mr. George. Actually, I'm told, sir, it could take us
almost as long as a month from now. We have the information,
but it's voluminous, sir.
Mr. Cummings. Well, a month is not as bad as a year.
Chairman Issa. That's lightening time when we're going to
be gone all of August.
Mr. George. Okay. Right.
Chairman Issa. So--but we look forward to hearing that by
the time we come back from the August----
Mr. George. Maybe we could work with your staff just to
ensure that we are all on the same----
Chairman Issa. We will--we will work together with your
folks.
Mr. George. Thank you.
Chairman Issa. Mr. Tierney, thank you for your patience.
Mr. Tierney. Certainly. Thank you.
Mr. George, in your testimony, you made a statement that
raised some concern the with me, and I quote, your statement
was, ``the letter from Ranking Member Cummings to the chairman
dated July 12, 2013, states that I failed to disclose to
Congress that we found no evidence of political motivation.''
I think, you know, when I read the letter from Mr. Cummings
to Mr. Issa, that's not what it says. Let me, in fact, read to
you what it says. It says, Mr. George did not disclose to the
committee either in his report or during his testimony that he
met personally with his top investigator and tasked him to
conduct the review of 5,500 emails of IRS employees and that
this official concluded after this review that there was, ``no
indication of pulling these selected applications was
politically motivated,'' a fact that this official reported
was, ``very important.''
That's quite a distinction from what you were saying in
your testimony, Mr. Cummings, had said, and so I wanted to make
sure that we were all on the same page here.
But the fact of the matter is, Mr. George, you never told
this committee, you never disclosed about your meetings with
your top investigator, did you?
Mr. George. Yeah. Well, sir, for two reasons: one--and,
again, you weren't in the room when I explained this earlier--I
was told by my staff that there was a smoking gun email in
which an IRS employee either, and this is not verbatim, but
acknowledged that he or she was charged with targeting Tea
Party people--and, again, I know there's a nuance here that my
colleague can address in a moment--and that there were, again,
roughly 5,000 emails that the auditors had not had a chance to
review, but that my investigators----
Mr. Tierney. I guess the point is, if I can be so--to
interrupt you, but you never told us that you charged your
investigator with looking at the 5,500 emails.
Mr. George. Well, sir, but because it's very important,
this was an audit. It was no more than an audit, sir.
Mr. Tierney. All right. So he reported to you that the
emails showed no indication of any political motivation, and
you didn't think it was important to share that information
with this committee?
Mr. George. Well, sir, because I don't know whether there
was an email that was destroyed. This was done very quickly.
There may have been an email that was destroyed.
Mr. Tierney. Well, it certainly wasn't amongst the 5,500
that he reviewed.
Mr. George. Yeah.
Mr. Tierney. --that he thought that it was very important
that he found nothing in there that was politically motivated.
Mr. George. Well----
Mr. Tierney. And then you just thought you weren't going to
share that with the committee?
Mr. George. Well, that was one--that was his opinion. And--
and, then, so if--under oath, when people are subject to a lot
more, you know, potential penalties regarding their behavior
and responses to questions and additional information
available, who knows whether or not this email will surface. I
don't know, sir.
Mr. Tierney. Well, no. I'm not asking about one that may
service in the future. I'm asking about the 5,500 that you
charged your investigator to look through, and he reported--let
me tell you what he reported back. The emails indicated the
organizations needed to be pulled because the IRS employees
were not sure how to process them.
Mr. George. Right.
Mr. Tierney. Not because they wanted to stall or hinder the
application. There was no indication that pulling these
selected applications was politically motivated.
Mr. George. Yeah.
Mr. Tierney. The email traffic indicated that there was
unclear processing directions, and the group wanted to make
sure they had guidance on processing the applications, so they
pulled them. This is a very important nuance. So your
investigators went through 5,500. That's what I found. I think
it's an important nuance. You then had it in an earlier draft
report, and you scrubbed it.
Mr. George. I'm going to ask----
Mr. Tierney. What's that all about?
Mr. George. Well, there's a reason for that.
Mr. Kutz. Because the investigator said that our report
support--that their work supported the fact that we said
ineffective management. Our report also said there was no
political motivation. He's testified to that today.
Mr. Tierney. Right. But you didn't give us the--I mean, I--
you don't think it's important that you look through 5,500
emails and had a report from an investigator that said the
words I just quoted? You don't think it would be important for
us know to that, when everybody's running around here trying to
make allegations and, you know, hyperventilating about it being
something more than it is? You don't think that was important?
Mr. Kutz. Well, we thought it was important because it
confirmed our report. And he told us that it confirmed our
report.
Mr. Tierney. So why didn't you put it in there?
Mr. Kutz. We----
Mr. Tierney. I think it's important because it confirms
your report as well. I think it gives us the kind of substance
that may have stopped some of this, you know, allegations that
are running around here rampant and people, you know, going
off, you know, and taking these positions that don't make any
sense when the facts are out there. These are facts that
support your report that are pretty important.
Mr. George. Sir, this is an ongoing matter. If, at the
conclusion of this, if you were to make the same allegations,
mea culpa. I would join you in admonishing me. This is an
ongoing review, and we're working with the FBI. We're working
with the Department of Justice. We're doing subsequent work
looking at various other treatment of taxpayers.
Mr. Tierney. That's fair. But it would have been helpful to
have that----
Mr. George. Hindsight's 20/20, sir.
Mr. Tierney. --at the appropriate time, because it opened
the door to a lot of people going off in directions that are
just----
Mr. George. But not at my----
Mr. Tierney. --helter-skelter.
Mr. George. Sir, I didn't suggest they do that.
Mr. Tierney. No, no. You did not suggest it, but I'm
suggesting that if you had left it in your report instead of
scrubbing it out, if you had wanted to tell us that you did
have an investigator involved even though it was audit, that he
looked through 5,500 emails, that he found out that, you know,
there was no indication that pulling these selected
applications was politically motivated, all of those things, I
think, would have been important at the right time on that.
So, Mr. Cummings, I don't know if you want any more time on
that. Otherwise, I'll yield back.
Chairman Issa. The gentleman yields back his negative 24
seconds.
We now go to the gentleman from Florida, Mr. DeSantis.
Mr. DeSantis. Thank you, Mr. Chairman.
And the gentleman from Ohio, would you like me to yield?
Mr. Jordan. You go first.
Mr. DeSantis. Go first? Okay.
Mr. George, I know that some of our colleagues on the other
side have attacked the manner in which your audit was
conducted. I think Ranking Member Cummings wrote a letter
requesting your testimony. In that letter he wrote, he implied
that your audit was purposely tailored in a way that shows only
conservatives were targeted. It that true?
Mr. George. The--his assertions or that----
Mr. DeSantis. His assertions.
Mr. George. No. No.
Mr. DeSantis. Were--were there any facts that your team
uncovered that were intentionally left out of the audit?
Mr. George. You know, there are always decisions made as to
what information should and should not be included in an audit,
some which are--have, you know, just a tangential relationship
to the overall subject matter, others that might be, you know,
in hindsight deemed extraordinarily important and then the vast
majority in between, which is why there are different
iterations of it, which is why the subject of the audit is
included in almost every step of the audit process, to make
sure that we don't misstate facts or that if they deem
something that is of great importance that we neglected to
mention, that we are in a position to include it. So--so I
don't know. Did you want to add anything to that?
Mr. Kutz. No. I mean, with respect to what Mr. Tierney was
talking about, we were told that what they found validated the
facts in our report, and we thought that made us feel good that
our report was accurate. And we didn't say something in
addition to what we already said, because we'd already said
what he found.
Mr. DeSantis. So any facts that were left out, I mean,
there was no intent to kind of skew the result of the report in
one direction or another?
Mr. Kutz. It didn't change the report. We just didn't say
we did it. That--that--that's the difference.
Mr. George. And the answer is no. And nothing that has been
alleged here at all changes our conclusion that the IRS engaged
in inappropriate behavior and this showed gross mismanagement
in the process of operating this program, sir.
Mr. DeSantis. And what was your reaction to the letter that
the ranking member sent to Chairman Issa? Have you had a chance
to read that?
Mr. George. I--just in passing. There's been so much
paperwork, sir, but, I mean--so, I mean, it's--you know, again,
this is Washington. This is a highly contentious issue. I
understand if, you know, if there's a feeling that it's not
perfect what we have done, but, you know, being human beings--
I'm from, you know, the old school. By definition, being a
human being, were imperfect, so I can't say that, you know,
anything that a human does is perfect. Would I have loved for
him to given me a gold star on it? Of course. He didn't do
that.
Mr. DeSantis. Well, this is Washington, after all. Thank
you.
And I'll yield the balance of my time to the gentleman from
Ohio.
Mr. Jordan. I thank the gentleman for yielding.
Look, Mr.--Mr. George, if you're such a Republican
political hack, look, I've been a little critical of a couple
things in your timeline, but if you're favoring the
Republicans, we got the TIGTA timeline the last time you were
in front of this committee testifying. And on May 30th of last
year, you shared with the IRS commissioner initial findings of
your audit that Tea Party, Patriot, 9/12 were used to target
groups. Four days later, you shared that with the chief counsel
at the Treasury.
Mr. George. Correct.
Mr. Jordan. But you didn't share it with us. You had to--
think about this. Put it in context. That's in the middle of a
Presidential election year. That's kind of important
information for people to get, but you chose, because what Mr.
Gowdy said, you're calling the balls and strikes here. You're
going to play it down the middle. You're going to play fair.
You chose not to share that information with the chairman of
the committee, with me as the chair of the subcommittee who
asked for the audit, and we're the committee that has
jurisdiction over the inspector general. And you said, you know
what? I'm not going to do it, because that would look
politically motivated as well. So this idea is just baloney. I
mean, I wish you would have shared it, frankly, but--and I made
that point clear a month and a half ago when you were here. It
makes no----
And here's the other thing. Look at the facts. I know media
reports one or two left wing groups said they experienced
delays, but they got approved, but I know of dozens and dozens
and dozens of conservative groups that got not only delayed,
but still haven't been approved, because one of them is in our
district and is what prompted the chairman and I to request the
audit in the first place.
So the other side can say all the baloney the want, but the
facts are the facts. That--that's what--I got fired up again,
as I do sometimes in this committee.
But, I mean, look, you were calling the balls and strikes,
because, frankly, I would have loved to have had that
information in May of 2012 that dozens and dozens and dozens of
conservative groups were being targeted, and you chose not to
give it to the very committee who asked for the audit. And
that's fine. That's your role. But to say you're somehow
favoring the Republicans, I just don't get it.
Mr. George. It was never a consideration of politics at
all, sir. Never considered.
Mr. Jordan. And you're proving that, you're proving that.
Chairman Issa. Because if politics had been the case,
releasing that just before the election would have been
dynamite for the Republican side. If you--if you wanted to play
Republican politics, you could have had a heck of an impact by
showing that they were going after Tea Party people
systematically at a time in which the President was up for
election, right?
Mr. George. But if I may, sir, the most important factor
that I--that I took into consideration is that the audit was in
midstream; it wasn't complete. Had it been complete, it would
have been released. It was not complete.
Chairman Issa. Thank you. We now go to the gentleman from
Illinois.
Mr. Tierney. Will the gentleman first yield for a question?
Chairman Issa. I--I don't control any time.
The gentleman from Illinois is recognized.
Mr. Davis. Thank you very much, Mr. Chairman----
Chairman Issa. He can certainly yield.
Mr. Davis.--and thank you, gentlemen, for being here.
Mr. George, I'm--I'm recalling that when you appeared
before this committee before, I specifically asked you how
several progressive groups had been included in the list of
298. Neither your testimony nor your report revealed that you
had limited your investigation solely to targeting of
conservative political campaign ideology.
When you wrote Congressman Levin, you stated that you were
nonpartisan. When I asked you at the Ways and Means hearing how
this audit started, you stated that you met with staffers from
the Oversight Subcommittee. Were these Democratic staffers or
Republican staffers, or were they both?
Mr. George. You know, thank you so much for this
opportunity, because I actually misspoke in response to, I
don't know whether it was you, Mr. Cummings, or it was--whether
it was Ms. Norton, but who inquired about the first time that I
sat down with Mr. Issa. And I was informed that at--at a staff
level, two of my staffers, three of my staffers met with Chris
Hixon, a staffer of the Government Reform majority staff on
March 8th, and this was prior to the--the audit. And so I--I
wanted to clarify that now. And then----
Mr. Davis. And so there were no Democratic staff or
staffers present at this meeting?
Mr. George. That's my understanding.
Mr. Davis. Did anyone ever raise any concerns that there
may not have been any Democratic staffers present?
Mr. George. No one raised concerns to me about that. I
don't know if----
Mr. Kutz. I wasn't there.
Mr. George. Are you aware?
Mr. McCarthy. [Nonverbal response.]
Mr. George. All right.
Mr. Davis. And so you're basically responding to staff
inquiry, and on the basis of that, you initiated the audit?
Chairman Issa. Would the gentleman yield? The chair--very
quickly. The chair in a formal letter requested that. The
consultation earlier on led to a letter which the ranking
member received. Thank you.
Mr. Davis. So once the chairman--Mr. Chairman received the
concern, the expression or the information, then you actually
initiated----
Chairman Issa. Right. It was in a--it was in a letter that
was CC'd to the ranking member requesting his audit. If the
gentleman wants to be involved in protecting, you know, these
groups, we're happy to have you help us with the Tea Party
complaints. I will tell you, over in the Senate, the Senate
Democratic leaders were constantly sending letters to the
others--from the other side asking that they go after these
groups. These are all in the record.
Mr. Cummings. Will the gentleman yield just so I'll help
him with--just--would you just yield just for a second?
Mr. Davis. Yeah.
Mr. Cummings. We--okay. We--staff tells me we got the
letter that the chairman sent out, we did get a copy of that,
but we did not get a copy of the response from Mr. George to
that letter. All right. Then you can let--thank you very much
for yielding. And I'll enter George's response into the record.
Chairman Issa. Without--without objection, it will be
placed in the record.
Mr. Cummings. All right. Thank you.
Mr. Davis. Thank you. Reclaiming my time.
Mr. George, there's been a great deal of discussion about
whether you found any White House involvement or political
motivation in your investigation, in your report. And I believe
the statements on page 9 of your written testimony make clear
that you found nothing of the kind, no documents, no witnesses,
nothing. Is that correct?
Mr. George. That is correct, as of the time of that audit,
sir.
Mr. Davis. Are you suggesting that at some other time, you
found something else?
Mr. George. I'm--I'm suggesting, sir, that this is an
ongoing review, and I'm not going to make any conclusions
beyond what we have already done with a concluded--an audit
report that has been concluded, but this is an ongoing matter,
and I'm not going to prejudge the findings.
Mr. Davis. So as of this moment, nothing has been found
that would suggest any kind of political motivation or
involvement coming from the White House?
Mr. George. That is correct, sir, nothing as of now.
Mr. Davis. Thank you very much. I yield back.
Mr. Cummings. Would the gentleman yield?
Mr. Davis. Yes.
Mr. Cummings. Mr. George, I want you to understand
something. I've been sitting here listening to the other side.
You know, we're no potted plants over here. And I've gone on
numerous television shows, and they've asked me, do I trust you
and things of that nature? I said I have questions, and I will
reserve judgment. I have--and I want to make that very clear.
And for us to inquire about things that may have been left out
of a report, and we even used that in hindsight it may have
been a little different, but I'm going to tell you, that's my
job to ask questions, and I will ask them, just like I would
expect the chairman to ask them. So, you know, I'm glad--and I
think it was--I think it's good that you came in here to
clarify that. You know, I don't go out there and say, oh,
George is a horrible person. I said let--I don't understand
this, so let him come in with his people and explain it. I just
want to make that clear to you. All right?
Mr. George. I appreciate that.
Mr. Cummings. All right.
Mr. George. Thank you.
Chairman Issa. Thank the gentleman.
We now go to the gentleman from--the gentleman from North
Carolina has been pushed off by the gentleman from Tennessee.
If you're going to argue, I'll take the time.
Mr. Duncan. I'll yield. I'll yield to the chairman.
Chairman Issa. Thank you. I recognize the gentleman, and
I'll take a little of his time when they come back.
Mr. George, I just want to make sure to get a couple of
things straight. Earlier Mr. Tierney was--was inquiring about
what I have as a count, he called it 5,500, I have 5,617
different emails that came up as hits based on key word
searches of a number of IRS employees, and those key word
searches, obviously, we've talked about the 9/12, the (c)(4).
Now, Lois Lerner made a series of denials and statements
and attempted to take the Fifth before this committee. I don't
see her listed as some--as somebody that you did a search on in
this group. It's up on the board. Can we inquire as to whether
a similar search has been done on her emails?
Mr. George. You know, sir, I have--my deputy, who conducted
or authorized----
Chairman Issa. As these are all Cincinnati people, and,
again, this committee is not presuming there is political
intent. We're looking for the communication to find out some--
why something even the President has said was wrong went on.
Mr. McCarthy. All right. This was a search that was done
during the course of the audit. It was a limited search. But
we're not going to go into any----
Chairman Issa. Current----
Mr. McCarthy. --current----
Chairman Issa. Current----
Mr. McCarthy. --activities.
Chairman Issa. Okay. Well, then I'll just use the time
briefly to say, certainly when somebody comes before this
committee and refuses to answer questions in their official
conduct, we would hope that you have preserved those records.
Additionally, it is the intent to work with Justice and
yourself to make sure that individuals who take the Fifth
before this committee not only appropriately have their
official mail checked, but because there has been a record of a
number of individuals using private mail to circumvent official
mail auditability, that you would also make efforts with the
Justice Department, if appropriate, to determine whether or not
they may have used such a technique, since that has been
repeatedly seen by this committee.
I'm not asking for your answer. I realize that there are
ongoing investigations as to possible wrongdoing.
Mr. George. I would just say the FBI, Justice Department
utilize different----
Chairman Issa. They have warrant authority, right?
Mr. George. Well, among other things. And, again, I'm not
going to confirm or deny an investigation, sir, at this time.
We're--it's a review----
Chairman Issa. Okay.
Mr. George. --from our perspective.
Chairman Issa. Now, your best efforts--and Mr. Duncan, if
you need your time back, let me know.
But your--your best effort, if I understand correctly,
you're going to have your people, and I know we're going to
work on it off-line, you're going to have your people make
every effort to take what we currently know, which is on a key
word basis, 96 out of--out of 96 groups come up as Tea Party or
9/12 Patriot, 7 come up as progressive, and currently, you
don't have any specific knowledge of time delays that occurred.
We have a lot of knowledge that these were, as you said, 500 or
so days, but the breakdown of groups that may have been caught
up in the net that may not have been conservative or may have
used ``progressive'' but not been liberal groups, you're going
to make every effort to get that information and give it to us
in an acceptable format?
The gentleman, Mr. McCarthy.
Mr. McCarthy. Mr. Chairman, if I could, one of the
questions that came up was we get a lot of questions about the
298 cases and what are the names on there. And as the inspector
general testified, we don't want to be in a position of trying
to characterize things as liberal or conservative. One of the
things that we have been able to do and we did very early on in
the process is when we received the 6103 request from the Ways
and Means Committee and the Senate Finance Committee, we
provided the list to them. So Congress has these lists. If it
would be appropriate for Congress to do an analysis within that
list of 298 of who's liberal and who's conservative, I don't
know if that would--that would be an option that would satisfy
what you're looking for.
Chairman Issa. Okay. The ranking member and I have agreed
that we'll--we'll find a way to try to do that within our
halls.
Mr. George, you've been a Federal employee for, what, a
short 20 years or so?
Mr. George. 25.
Chairman Issa. 25. So compared to the first panel, you're--
you're a newcomer.
Mr. George. Yes.
Chairman Kutz. Mr. Kutz, how long have you worked for the
Federal Government?
Mr. Kutz. About 23 years.
Chairman Issa. Mr. McCarthy, including your time here?
Mr. McCarthy. About 13 years, sir.
Chairman Issa. Now, Mr. McCarthy, you served here under--
under a Democratic chairman, so I'm not going to ask you any
questions for a moment, nor do I assume your politics.
Mr. George and Mr. Kutz, in your regular dealing, both
yourselves and the people you deal with through Treasury at
IRS, do you routinely either tell people what your politics
are, Republican, Democrat or other, or do you routinely ask
them what their politics are?
Mr. George. You know, Mr. Chairman, with the exception of
this gentleman, because of the fact that I hired him----
Chairman Issa. We--we----
Mr. George. --from this committee, so I could guess what
his leanings were----
Chairman Issa. Or at least who liked him a lot, although we
liked him on both sides of the aisle, but doubtless, he's a
good professional.
Mr. George. I have no idea whatsoever of the political
persuasion of any other member of my 800-person staff. Never
once have I had a conversation with them about their political
persuasion.
Mr. Kutz. I----
Chairman Issa. Yes. Go ahead.
Mr. Kutz. I have not either with my staff or with IRS
officials. That is not the kind of thing I would feel
comfortable talking about.
Mr. George. And I need to amend it. IRS, nor with the IRS,
none.
Chairman Issa. That's good. And that's the way I think we
want it to be, and I thank you.
The gentleman from Massachusetts, Mr. Lynch, is recognized.
Mr. Lynch. Thank you, Mr. Chairman. Mr. George, sometimes
there's--in cases like this, that are controversial, there's
collateral damage among the innocent, and I want to ask you a
line of questioning here about the IRS Office of Chief Counsel.
It's my understanding that the IRS Office of Chief Counsel
periodically provides the Exempt Organizations Unit with
guidance regarding how to process applications of 501(c)(4) tax
exempt status. Is that correct?
Mr. Kutz. Yes. That's my understanding.
Mr. Lynch. Okay. Thanks, Mr. Kutz.
In the past, the chairman has described that involvement by
the IRS Office of Chief Counsel as, ``unusual,'' ``atypical''
and, ``a break from ordinary procedure.''
Now, contrary to those descriptions, several IRS employees
that have been interviewed by the committee have basically said
that the decision to consult with the Counsel's Office is
consistent with their usual practice. For example, Mr. Hull's
direct successor as the tax law specialist in the Washington,
D.C., office, by the way, a self-described Republican, stated
that it was, ``common for us to ask for their assistance in
review.'' And further she said, it was for the purpose of an
extra--an extra pair of eyes, additional attorneys to weigh in
on the application of this area of the law. She goes on and
says, to review the kind of, I would say, well, hazards of
litigation, you know, whether there could be a strong argument
made later on down the line on the decisions that we made and
whether the kind of--whether this was worth it going forward to
deny an organization, for example, or approve them.
Similarly, there's another Technical Unit Group manager who
as well described the chief--the office of--excuse me, the
chief off--Office of Chief Counsel for the IRS as offering
similar services.
In your investigations, is it--is it ordinary practice for
different units on specialized questions to seek guidance from
the Office of Chief Counsel for the IRS?
Mr. Kutz. We don't have detailed understandings of that.
What we do know is in our timeline in our appendix to our
report, there is a reference to some meetings with chief
counsel that happened as part of the Tea Party and other
criteria with respect to our audit, so we can only speak to
that limited piece of information.
Mr. Lynch. Okay. Then let's get to those points, then. In
several case there have been--it's been alleged that there have
been considerable delays that were motivated by a desire to
stop the granting of (c)--you know, tax exempt status to some
of these groups by going to chief counsel.
Has your investigation shown that any of the attempts of
conferring with the Office of Chief Counsel were--were done for
the purpose of deliberate delay?
Mr. Kutz. We don't have any details on intent necessarily.
What we do know is that it was part of the confusion and the
delay story. And, of course, we concluded ineffective
management overall was the cause of what happened here. So it
was part of that, but we found we have no indications of
intent, but we did not interview anyone directly from the
Office of Chief Counsel.
Mr. George. And I've been told by the auditors that
actually conducted the audit that, no, we do not have
information to that effect, sir.
Mr. Lynch. Okay. Mr. George, let me ask you, when you were
here last time, we talked about three categories of groups that
were given extra scrutiny by the IRS. There were some
progressive groups that were--were listed. The vast majority
were conservative groups, but there was also a category that
was described as individuals who were critical of the way the
government was being run. That was--that came out of a hearing.
Do you have any recollection of facts or circumstances
around that last category, people who were critical of the way
the government was being run?
Mr. George. To make it clear, though, our audit did not
characterize people by progressive or conservative. And then
that last category was a category that the Internal Revenue
Service itself devised when it, well, you know, went away from
the Tea Party, you know, upper case, lower case Tea Party----
Mr. Lynch. Okay.
Mr. George. --name, and so----
Mr. Lynch. Okay. So let me get this straight. I just want--
this is a fine point. So the IRS actually adopted the category
here for greater scrutiny.
Chairman Issa. I'd ask unanimous consent the gentleman have
an additional 15 seconds. Without objection.
Mr. Lynch. Thank you, sir. The--so the IRS actually came up
with this--this term, this Be on the Look Out for individuals
who were making application who were critical of the way the
government was being run?
Mr. Kutz. It was not on the Be on the Look Out. It was in a
memo--a briefing that Lois Lerner had in June of 2011. In our
report, it's showing Figure 3 as some of the expanded criteria
that were used. The only thing in the BOLO's was the Tea Party.
These other criteria like 9/12, Patriots, issues include
government spending, government debt or taxes, the one you
mentioned here, statements in the case file criticize how the
country's being run, those were being used by the screeners
when Lois Lerner asked, what's actually going on to screen
cases for political advocacy. So that came from the screeners
who were actually looking through the cases and funneling to
the political advocacy pile, if you will.
Mr. Lynch. Okay. So----
Chairman Issa. Thank you. We now recognize the gentleman
from North Carolina, Mr. McHenry.
Mr. McHenry. Thank you, Mr. Chairman.
At the heart of this hearing today and this ongoing
investigation about the IRS is that we have millions of
Americans that live in fear of their government. And that's not
whether you're a liberal or a conservative, you're a Democrat
or Republican, or you don't care at all about politics, you
don't want to live in fear of your government. And that's
what's frightening about this. And the more that we've
investigated here in the House, the more that we find that is
disturbing, deeply disturbing. And so when we--when we talk
about this question about, you know, these--these cases being
shipped from Cincinnati up to Washington, some want to believe
it's because these were hard or complex cases, but what we
found in our investigation is we have cases that were sent from
Washington--from Cincinnati to Washington based on news reports
about a class of Tea Party folks.
Then we've also heard from Carter Hull that he had--he had
cases taken from him, and he's got 40 years of experience, and
given to somebody who has very little experience with these
cases. So the idea that it was complexity that drove this, it
doesn't appear to be the case.
What we find is that it was the politics that mattered, and
that leads us to be more fearful of what the IRS is doing.
Now, Mr. George, have you found anything counter to what
I've said?
Mr. George. Counter to what you said. No. I mean, the IRS
has one of the most important roles in the Federal Government,
it is one of the organizations that most Americans at one point
in their lives or another will have to interact with. It has to
have the trust of the American people. We live in a voluntary
compliance system, and if people don't trust that system, it
can undermine, you know, this Nation.
Mr. McHenry. Trust.
Mr. George. Trust, yes.
Mr. McHenry. Well, you know, I appreciate you all's
testimony and the work that you do on a daily basis to be that
oversight, that inspect--you know, that inspector generals are
there for that purpose. Regardless of what administration's in
power, there needs to be a check on this.
And so going back to the first panelist's testimony, I
referenced Mr. Hull, but also Ms. Hofacre, she testified that
she accidentally sent this BOLO, this Be on the Look Out list,
to Washington personnel. Have you found that in your
investigation?
Mr. Kutz. We--we didn't see that, no.
Mr. McHenry. You did not see? She testified to it on the
first panel. So it--so--so then it leads to the question, so if
she accidentally sent this to Washington leadership, shouldn't
they have known this was happening?
Mr. Kutz. All we know is according to Lois Lerner, this
briefing I mentioned a minute ago to Congressman Lynch, Lois
Lerner started asking questions and was first briefed in June
of 2011. That's what we know at this point. There could be more
information, but that's what we know based upon our audit.
Mr. McHenry. Okay. Well, with that, I'd like to yield the
balance of my time to my colleague----
Chairman Issa. Would the gentleman yield just 15 seconds
first over here?
Mr. McHenry. Happy to yield to the higher ranking
individual.
Chairman Issa. We're not higher ranking.
There's been a lot of debate here, and I know you're not
tax experts, but if I understand the letter of the law on
501(c)(4)'s, primary group was--was (c)(4)'s, 501(c)(4)'s must
have the majority of their activity not, if you will,
political, not advocacy.
Mr. Kutz. Social welfare, yes.
Chairman Issa. Social welfare. And throughout this audit
and the targeting, did you find that they were using that
standard, in other words, looking for, was it less than 51--or
less than 49--49 percent or less, or did you find that they
were looking for nuances? And the reason I ask that is, as you
know from your audit, in 2010 or shortly afterwards, they began
asking for what did you do in the last cycle, in other words,
auditing as though they had granted something which they hadn't
yet granted.
And the reason I ask that is I just want to know, is there
any semblance of information that they were not using, if you
will, the existing law, but looking for advocacy that could
have been certainly well less than 50 percent?
Mr. Kutz. I heard Ms. Hofacre say the 50 percent. I think
that must be an unwritten rule, because we haven't seen it in
writing as far as I know. But our issue was using names and
policy positions is the wrong thing to do. And the basis of our
audit was the substance of the case, which is what we looked
at, whether there was significant campaign intervention in the
file, and that's what we recommend IRS should be doing going
forward.
Chairman Issa. Thank you. I yield back.
Mr. Jordan. Well, I thank the gentleman. I have just a
couple seconds, if I could.
Mr. George, the fact that you referred a case to the
Department of Justice for willful misconduct regarding the 6103
and political donor, and Justice chose not to prosecute, does
that cause you concern about the Department of Justice
investigation of this issue?
Mr. George. It--it does not, sir, just because of the
various standards.
Mr. Jordan. Has--has the new FBI director contacted you?
Have you talked to Mr. Comey about the IRS targeting case?
Mr. George. No, no.
Mr. Jordan. Have you been in contact with the FBI?
Mr. George. Yes.
Mr. Jordan. How many times--since the case was launched,
how many times have you had conversations with the FBI?
Mr. George. We've had meetings with various senior FBI----
Mr. Jordan. Can you give me a number?
Mr. George. Two.
Chairman Issa. Okay.
Mr. Jordan. Two meetings?
Chairman Issa. Thank the----
Mr. Jordan. Just two meetings?
Mr. George. Yes.
Chairman Issa. Okay. Thank the gentleman.
We now go to the gentlelady from California, Ms. Speier.
Ms. Speier. Thank you, Mr. Chairman.
Mr. George, I have the highest regard for inspector
generals. We can't do our job in this committee if we don't
have inspector generals that will guide us, show us where the
red flags are, but we need objective IG's that are not in any
way going to spin something one way or the other. So let me ask
you this: Last week, almost 8 weeks after you published your
audit, our committee received an email dated May 3rd that
revealed that you had tasked the head of your investigation
office to run a search of IRS employee emails. According to
your head of investigations, the purpose of the email search
was to determine, and I quote, ``if an email existed that
directed the staff to target Tea Party and other political
organizations.''
So you were looking for any evidence that staff was
directed to target Tea Party groups as well as any other
political organization. That's what the email said. Correct?
Mr. George. I don't know verbatim what the email said, but
I do know what I instructed my deputy for investigations. I was
informed by an auditor, or maybe someone from the counsel's
shop, I'm not sure which division, but----
Mr. Kutz. Representative, IRS--we were looking for an email
IRS told us existed. Okay? That's--let me make sure I clarify
that.
Ms. Speier. All right. So let me go on. The email goes on
to explain how this search was supposed to work. This is what
your head investigator wrote, ``audit provided us with a list
of employees in question, key word search terms and a time
frame for the emails. We pulled the available IRS emails, which
resulted in 5,500 response emails.''
So they used key words to search to identify the emails
they wanted to review. Is that right? They used key search
words.
Mr. George. Yes, yes.
Ms. Speier. All right. Earlier this week the ranking member
of our committee, Mr. Cummings, wrote to you to request the
specific search terms that your staff used to pull these
emails, and late last night we received a document from your
office that lists them out. It's a very short list. According
to this document, your staff used only four key word search
terms, and this is what they were: Tea, Patriots, 9/12, and
(c)(4).
Now, that seems completely skewed, Mr. George, if you are
indeed an unbiased, impartial watch dog. It's as if you only
want to find emails about Tea Party cases. These search terms
do not include any progressive or liberal or left-leaning terms
at all. Why didn't you search for the term ``progressive''? It
was specifically mentioned in the same BOLO that listed Tea
Party groups.
Mr. George. You know, unlike--my colleague didn't complete
his answer. I was told that there was a specific email that
identified Tea Party, 9/12 and/or Patriot, and that--and that
this email was the, ``smoking gun.''
Ms. Speier. All right. You've said that. You've testified
to that before. We know that. Okay? But when you're doing a
search, you are an impartial third party. You know this BOLO
list had a number of other groups. Why wouldn't you--I mean,
it's not like it's costing you any more to search for these
other terms when you're searching 5,500 emails, correct?
Mr. George. Well, the BOLO lists that we were focused on
was on political activity. And we--again, and unless I'm
mistaken, the progressives were--and just if you want to
address this.
Ms. Speier. No. I've got a training workshop with
PowerPoints that lists both parties, lists progressive groups.
You've redacted it. Two bullets. We don't know what the second
bullet is. So, I mean, you've done a training program on this.
Did you not--why wouldn't you search for ``Occupy''?
Mr. George. Now I will ask Mr. Kutz to respond.
Mr. Kutz. Well, the emails we were looking for were ones
that IRS told us existed but could not find, and that was the
purpose of looking for the emails. You're talking about on the
limited search we did, which was to support information that we
were looking for. Now you're talking about the document I think
that we received on July 9th, 2013.
Ms. Speier. This is July 28th, 2010, is when----
Mr. Kutz. But when----
Ms. Speier. --the workshop was.
Mr. Kutz. --when we received it----
Ms. Speier. My point is this: If you are really impartial,
if you really are the third party, unbiased, then you would be
searching for all the terms, not just Tea Party, not just
Patriot. And you said in a letter to the Ways and Means
Committee ranking member, you described the scope of your audit
as follows: We reviewed all cases that the IRS identified as
potential political cases and did not limit our audit to
allegations related to the Tea Party.
How can you make that statement when the only groups or
only entities that were being searched for were Tea Party, 9/
12, Patriot?
Mr. George. Because most of the complaints that we received
were allegations that Tea Party, 9/12 and Patriots were being
targeted, ma'am.
Chairman Issa. Would the gentlelady yield for a question?
Ms. Speier. I certainly will.
Chairman Issa. Ms. Speier, I'm going to not be the devil's
advocate, but maybe help you here. The--if they had searched a
broader group and found what they were looking for, which would
have been somebody talking about targeting people for their
politics, that would have gone against what, I believe, has
been said repeatedly all day on your side of the aisle, which
was there is no evidence of people being targeted for their
politics or by their politics. The more extensive a group, if
we looked through every single email of every IRS employee, we
might find somebody talking about Republican or Democratic
activity.
Ms. Speier. But that's--isn't that what you're all--what
we're talking about here? We don't want them targeting one
group or the other. I don't think anyone's----
Chairman Issa. Well, but--but it wasn't about targeting
groups. His search, if I understand correctly, this search was
looking for whether there was political intent. And if they
looked further and found political intent, it would fly in the
face of what Mr. Cummings, Ms. Maloney and others have been
saying. So although they could have done more, I will tell you
from my personal observation, when we went to the IRS and began
a joint investigation with the new commissioner and they were
talking about search terms, they used these same four as their
suggestion.
Ms. Speier. But my point is only this, Mr. Chairman, in his
letter to Mr. Levin, he said that we reviewed all cases that
the IRS identified as potential political cases and did not
limit our audit to allegations related to the Tea Party. This
would suggest that, in fact, he did.
Chairman Issa. No. I agree with the gentlelady that a more
exhaustive search might find more. I only----
Ms. Speier. It might find nothing.
Chairman Issa. No. I understand it might find nothing if we
went through every employee of the IRS, but one of our
challenges, quite frankly, is that the inspector general works
for and with the IRS. The IRS gave us these same terms when we
were looking for things, so to the extent that you're unhappy
with their search, and you're welcome to be unhappy, the odd
thing is the IRS suggested these terms as the right terms. And
so the inspector general's here, but when Danny Werfel was here
yesterday, it would have been his employees that suggested
these same four words.
Ms. Speier. But, Mr. Chairman, the presumption of all of
these hearings has been that the President is trying to take
down his political enemies.
Chairman Issa. Madam----
Ms. Speier. I mean, that has been said over and over again.
Chairman Issa. Madam, only on your side of the aisle.
Ms. Speier. No, it hasn't. It was Mitch McConnell put out--
--
Chairman Issa. He is not in this--on this committee.
Ms. Speier. Well, that have been references made by any
number of members on your side of the aisle, and if you would
like me to get them out, I'll be happy to do so. But I think
the point is, we don't want to see the IRS targeting any group,
correct?
Chairman Issa. And we saw them targeting----
Ms. Speier. For political----
Chairman Issa. --based on the key words Tea Party.
Ms. Speier. Well, no, we saw them--they're targeting
because they got an influx of 501(c)(4)s, and as a result of
that they were trying to find a way to streamline the process.
And as it turned out, it didn't get streamlined, it ended up
taking more time.
And the question for us is whether or not these entities
are exclusively for social welfare purposes, which they are
not, and that goes to the fact that the law says exclusively
for social welfare purposes, and it was the IRS in a regulation
that made it primarily, and now we're looking at these IRS
agents and trying to--and expecting them to be able to
determine if something's primarily or not. Unless you do a
specific audit of every organization, you're never going to
know if it's primarily for social welfare programs.
Chairman Issa. Ms. Speier, I couldn't agree with you more
that you'll never know unless you were to audit all of them.
What I will find interesting is the number of 501(c)(4)s during
the 2009-2010 period went down, and the special scrutiny of Tea
Party groups began at application number one, and then went on
with application number 10. By the time there was an influx,
they were well along their targeting. Their targeting began at
number one.
Last time I checked, and I go back to Euclid for my
mathematics, I'm that old, but the fact is one is such a lonely
number that I wouldn't call it a rush or an influx or a large
group. It just seems to be the loneliest number, and that's
when this began, is with the first one. That's how this thing
gets to be one, then five, then hundreds, and people realize
that they began targeting and sending to Washington before
there were a dozen applications.
And so one of the challenges we face with Mr. Cummings,
yourself, and myself, is we may find other misconduct at the
IRS, and we are asking the IG to use his resources to help find
them if they exist. But the key words, the BOLO and so on,
predominantly began almost--early on, and they began with this
Tea Party question.
The gentlelady's and many of us question about what the
right amount is to be a 501(c)(4) and whether, as the Acting
Commissioner has said, 60 percent and you can self-declare. You
can do 40 percent politics according to the Commissioner, self-
declare, and you're fine. That's the current decision by the
Commissioner, and that's over and above the current law, which
would still be 50 plus 1.
So I'll work with the gentlelady on all kinds of reforms,
but we're trying to stay focused. And I will say once again, we
do not intend on going anywhere except the facts and the
testimony lead, and currently there are no allegations by any
of the witnesses about the President being involved. We are at
the point of Lois Lerner and the Office of the Counsel. That's
where we are in our investigation, and we'll continue, and
you're welcome to come to the interviews as we----
Ms. Speier. I would love to. Thank you, Mr. Chairman.
Chairman Issa. Thank you.
Mr. Kutz. Mr. Chairman?
Chairman Issa. We now go to the gentlelady--oh, yes, Mr.
Kutz?
Mr. Kutz. I just want to say, I mean, what Mr. George
submitted at the beginning of the hearing is called the BOLO
advocacy cases iterations. It was given to us May 17, 2012, and
represented by the IRS to be the entire set of BOLOs that were
used for political advocacy. We're not making this up. We've
submitted it for the record.
If IRS was doing something beyond that, they never made it
apparent to us in an entire year of doing an audit. So I just
want to make that clear. If other people were misused, we're
very concerned about that, but IRS is the one that asserted to
us in this email and a document Mr. George submitted for the
record that the entire population of BOLOs used for political
advocacy is on the document that says Tea Party until Lois
Lerner changed it to advocacy in July of 2011.
I just want to make that clear. That's a key piece of
evidence for us. And they never changed their story for a year.
When Ms. Lois Lerner came up May 10th, she didn't apologize for
anything else except the evidence that she gave us. I just want
to make that clear to everybody.
Chairman Issa. Thank you.
We now go to the gentlelady from New York, Mrs. Maloney.
Mrs. Maloney. Thank you. I want to follow up on the
gentlelady's mention of a screening workshop on July 28th which
clearly states in their training manual, look for terms such as
Republican/Democrat, look for donkey/elephant, look for Tea
Party, and look for progressives. So they were training
according to their own training manual that they were to look
for progressives when they were looking for this, ``political
activity.''
So I think it's very clear that in their training manual
they were saying look for political activity, Republican/
Democratic, conservative/liberal, and Tea Party and
progressive. Would you--did you have this training manual? Did
you ever see this training manual?
Mr. George. Mrs. Maloney, we received that document last
Tuesday.
Mrs. Maloney. Okay.
Mr. George. And this is over a year of conducting an audit,
they withheld that document.
Mrs. Maloney. But do you know why you never received this
document?
Mr. George. We do not, and it raises concerns about other
documents that they may not have been sharing with us.
Mrs. Maloney. But you also looked at, according to your
testimony, over 5,500 emails, and did they not come across any
claims relating in any way, shape, or form in all these 5,000
emails to the training session of what they are to look for?
Mr. George. As we weren't looking for that, that was not
one of the search terms used to review the 5,000 emails.
Mrs. Maloney. Well, would you agree, now that we have the
training manual, that the IRS was training their employees to
likewise look at progressives?
Mr. George. We will have to review that and make that
determination. That, unfortunately, would require us either to
amend the audit, which is a possibility, or, as I've indicated
before I think you arrived, I've instructed my staff to conduct
an audit to see how the other Be On the Look Out, BOLO lists
were utilized. Unfortunately, most of this has to wait until
after we've completed our work with the FBI, with the
Department of Justice Civil Rights Division, and ourselves for
fear of interfering with that matter.
Mrs. Maloney. Well, is it clear from this training manual
that they were asking them to look at progressives, too?
Mr. George. I am not sure. I really----
Mrs. Maloney. Well, I think you should look at it and study
it--it says progressive real big--and get back to us on whether
you think the training manual included progressives.
And, Mr. George, you've been in politics a long time. You
know that there are Democrats and Republicans out there. You
know that there's liberals and conservatives. It's hard for me
to believe in my--I am--it's beyond belief that you would
conduct an audit that only looked at Tea Party. That makes no
sense whatsoever.
I know that I wrote a letter of recommendation in support
of you, even though you were Republican, because we worked
together and I respected your work. Yet I cannot believe that
you called for an audit that only looked at Tea Party when you
know that there's a whole array of political activity. That's
called targeting. That's called going after people.
Some Republicans in their public statements, and I have a
list of them, have tried to smear the President and said he did
this and he did that. I would say that your audit tried to
smear, to smear I don't know who, someone, or tried to blame
someone by excluding a whole swath of the political
establishment. I think an eighth-grade class that was asked to
do an audit of what was happening politically for people asking
for status would look at both sides. That's common sense.
How in the world did you get to the point that you only
looked at Tea Party when liberals and progressives and Occupy
Wall Street and conservatives are just as active, if not more
active, and would certainly be under consideration. That is
just common plain sense. And I think that some of your
statements have not been--it defies--it defies logic, it defies
belief that you would so limit your statements and write to Mr.
Levin and write to Mr. Connolly that of course no one was
looking at any other area.
It's common sense if they have certain regulations that
they thought was the law--I think the law should be changed, I
don't think there should be any exemption or tax deduction for
political activity. But you know that there's political
activity on both sides, right? Why wouldn't you look at both
sides? That would be the fair thing to do. That would be the
commonsense thing to do. That would be an appropriate audit.
It's like saying look for wrongdoing in the bank but only look
at overdraft fees. Everybody knows there are a lot, a whole
swath of areas that you could look at.
So to limit it defies logic, defies--I am mystified that a
distinguished professional would put forth an audit that looks
at only a very thin sliver when the training documents, when
the letters, when plain common sense dictates that there is a
whole array of political activity in our great country.
Chairman Issa. I thank the gentlelady.
And I know there wasn't a question there, but, Mr. George,
I think you've got an answer.
Mr. George. Yes, thank you, sir, I appreciate this.
Mrs. Maloney, first of all, we received allegations from
Members of Congress and from media reports about a particular
activity that was occurring, all right? And it wasn't just Tea
Parties, it was patriots, it was 9/12. So we were charged, you
know, both through a request from Congress, as well as through
our audit process, and this was in our audit plan, to look at
how tax-exempt organizations were treated.
Now, never once did I ever indicate that we would limit our
review to just how these particular groups were treated.
Mrs. Maloney. But you did.
Mr. George. Well, ma'am, it takes a year. This audit took a
year. And, yes, if you wanted us to wait another year before
completing, you know, a fuller audit, we can, but that doesn't
serve the American people, it doesn't serve the IRS well. Once
we find the IRS is engaged in inappropriate behavior--and there
are many examples of this--we alert them so that they can stem
that behavior so that American taxpayers aren't unduly harmed
and that the IRS can take corrective action.
And so now I hope this discussion obviously will benefit
any other group that might be inappropriately targeted, for
lack of a better word, or treated by the Internal Revenue
Service. And you would, I think, acknowledge, groups,
501(c)(4)s, regardless of their political persuasion, should
not have had to wait 3 years to get their status approved. That
was wrong. I don't care what political party or political view
they hold, Mrs. Maloney. I don't care. I do care that the IRS
does the job it's supposed to do, and it didn't. It was gross
mismanagement and it was poorly handled, and it was released
before our report was----
Mrs. Maloney. I would say that your audit was
mismanagement. And I would say that it----
Chairman Issa. The gentlelady's time has----
Mrs. Maloney. --had the effect of smearing----
Chairman Issa. The gentlelady's time has expired.
Mrs. Maloney. Point of personal privilege to respond.
Chairman Issa. To respond to, after your time is finished,
to making another attack on the witness?
Mrs. Maloney. No, no, no. To make a request of information
for this committee that will help us get to the bottom of this.
Chairman Issa. I look forward to seeing that in writing.
Thank you.
Mrs. Maloney. Okay.
Chairman Issa. We now go to the gentleman from California,
Mr. Cardenas.
Mr. Cardenas. Thank you very much, Mr. Chairman.
Mr. George, you testified earlier that your approach is to
call balls and strikes. I'd like to ask that you do that right
now. Mr. George, there has been a lot of discussion today about
whether you found any White House involvement or political
motivation in your report. I believe the statement on page 9 of
your written testimony made clear that you found nothing of the
kind--no documents, no witnesses, nothing. Is that right?
Mr. George. That is correct.
Mr. Cardenas. Okay. So given your clear statement, I'd like
to ask you about a number of statements our Republican
colleagues have made, especially since they are presumably
based on your report, and I want to ask you whether you have
identified any evidence to support their claims.
First, on May 14, 2013, Chairman Issa went on national
television and said this: ``This was the targeting of the
President's political enemies effectively and lies about it
during the election year so that it wasn't discovered until
afterwards.''
So my question is, during the course of your audit, have
you identified any evidence whatsoever that the IRS was
targeting the President's political enemies?
Mr. George. While we don't have access to the information
that the committee may have, our audit--and again please, sir,
it needs to be stressed that it was an audit, it was nothing
beyond that, although now there is an ongoing review, but our
audit did not find anything.
Mr. Cardenas. So, so far in the activities that you've been
engaged in, you haven't found any evidence?
Mr. George. That is correct.
Mr. Cardenas. Okay.
Mr. George. Well, as it related to the audit. We have an
ongoing matter that we're working with the Justice Department
as well as the FBI, and I am not privy to all of the
information that they have gathered.
Mr. Cardenas. So that's why I clarified my question. What
you're privy to, the activities that you've engaged in, in your
audit.
Mr. George. Yes, I have not thus far been informed of
anything that's untoward in that regard.
Mr. Cardenas. All right. On June 3, 2013, House
Appropriations Committee Chairman Hal Rogers stated, ``Of
course the enemies list out of the White House that IRS was
engaged in shutting down or trying to shut down the
conservative political viewpoint across the country, an enemies
list that rivals that of another President some time ago.''
So my question is this: During the course of your audit
have you identified any evidence relating to an enemies list
that came out of the White House?
Mr. George. No.
Mr. Cardenas. Okay. On June 19, 2013, Senator Ted Cruz said
this, ``President Obama needs to tell the truth. When Richard
Nixon tried to use the IRS to target his political enemies it
was wrong, and when the Obama administration does it, it's
still wrong.''
My question to you is this: During the course of your
investigation, have you identified any evidence that the
administration tried to use the IRS to target the President's
political enemies?
Mr. George. We have not found anything to that effect, sir.
Mr. Cardenas. Okay. Senator Mitch McConnell recently issued
a video paid for by his political campaign in which he said
this, ``I don't know about you, but I think that the leader of
the free world and his advisers have better things to do than
dig through other people's tax returns. What they are trying to
do is intimidate donors to outside groups that are critical of
the administration.''
The question is this: During the course of your
investigation, have you identified any evidence that the
President or any of his advisers were digging through other
people's tax returns?
Mr. George. Not about the President. And as to his other
advisers, I'm not in a position to give you a definitive
answer, but we found no evidence thus far.
Mr. Cardenas. Okay. I think my point's clear, the
Republicans are engaged in a sustained campaign to falsely
smear the White House, and your report contradicts all of their
unsubstantiated accusations so far.
But also what I'd like to point out for the public, this is
a public hearing of a committee of the United States Congress,
and it appears that 298 applications were investigated and only
72 were Tea Party applications. What I would prefer as a member
of this committee, that I become to a committee and have
witnesses and be asking them questions about all 298
applications, not just the Tea Party applications, as the title
of this committee hearing is ``The IRS' Systematic Delay and
Scrutiny of Tea Party Applications.''
Therefore, I state for the record, the only organization
that clearly and blatantly focused on one type of application
is this committee. The title of this hearing, I'll say again,
is to investigate Tea Party applications, not all 298. And with
all due respect, when you look at 72 applications out of 298,
it is a small subset compared to the entire number of
applications.
So it's unfortunate that I'm called to a committee that I'm
a member of and yet I'm to participate in some kind of bias
toward what we should be asking.
I yield back my time.
Chairman Issa. Mr. George, do you want to respond to any of
the numbers or characterizations?
Mr. George. Well, Mr. Chairman, with all due respect, you
know, again, and I alluded to this earlier----
Chairman Issa. And please stay above the partisan portion
of his statement if you don't mind.
Mr. George. No, no, no, no. It's just that being an
inspector general is one of the most difficult jobs in the
Federal Government, okay? Because, believe me, when you're
walking into the Secretary's office or the Deputy Secretary or
whomever or the agency head, you are normally not coming in
with good news. You're coming in with bad news. You're
identifying ways that the function of the organization is not
operating well or, if you're lucky, you're coming in with ways
that they can operate in a better manner.
And I have to admit, I am a little concerned that this type
of forum could have a chilling effect on the operations of
inspectors general. I mean, again, I have been around for, you
know, a while, and so I've seen this before, but not to this
extent. And believe me, we shall be issuing some reports
shortly that's going to show a lot more of not the best
behavior on the part of the Internal Revenue Service, just as
we recently did with their $50, you know, million dollars'
worth of conferences and a few other things that we have
recently reported about.
And so those reports will be coming out. They have no nexus
to this at all. But I took an oath to uphold the law. I intend
to do so as long as I'm in this position. And we have to rely
on--believe me, when I was sitting in that back row as the
staff director under Steve Horn, we relied tremendously on both
GAO as well as IGs to help us do our jobs, and we could not
with a staff of five people have done it on our own.
So, believe me, I know the role of the IG. You know, Mr.
Horn, we never treated an IG office like this. I mean, if it
were an allegation of personal wrongdoing on my behalf or on my
organization's behalf, that's one thing, but to just try to
suggest that an audit could have been done differently, you
know, this is--you know, this is unprecedented, sir, too. This
is unprecedented.
Chairman Issa. I thank you. And I remember the late Steve
Horn. I served with him. There was nobody who worked harder and
looked more for the facts. And, quite frankly, Professor Horn
came to Congress with almost no politics, and we on the
Republican side always asked couldn't he be more Republican,
and the answer is, I can't be more honest. And I miss--I miss
Steve.
It's now the ranking member's opportunity to close.
Mr. Cummings. You know, I was feeling pretty good until
your last statement. I want you to be very clear, Mr. George.
You call balls and strikes. We call balls and strikes, too. The
700,000 people who sent me to this Congress did not send me
here just to sit and listen. They didn't do that. And if I have
questions, I'm going to ask them. The chairman, when he has
questions, he asks. When he has questions, where there's a
question of whether we can get a document, he asks. He
represents 700,000 people, I represent 700,000 people.
And I will--I--when I put up my hand to protect the
American people and uphold the Constitution every 2 years, I
mean it. I don't care whether the person is Republican,
Democrat, whatever. That's my job. That's my duty.
And so, you know, the mere fact that you were asked some
questions about a report that even you say, looking at it in
retrospect, you might have done things a little different, you
know, hello, welcome to the club.
And so, you know, I am--I've got to tell you, I'm glad you
came. I'm glad you brought your two associates. And I think you
all have done a very good job of answering the questions. But
give us some credit, too. On almost every single show I have
been on they have asked me, do you trust the IG? And you can go
back and check, and every single time I said, I want to get
information.
I'm a lawyer. I am trained to do this. Not necessarily to
attack anybody, but get answers. And any IG, if they present to
me something and I'm wondering, well, did I miss something or
is everything not here, I'm going to ask the questions.
And as I said, I don't have a monopoly on this one. Mr.
Issa would do the same thing. And so folks come and said, oh,
you know, the IG, we should never ask, you know, an IG, don't
ask him a question, don't question. No, no, no, no, no, no, no,
no. That's not how it operates.
And then there's another piece of this. I believe that,
this committee must be about not only oversight, but reform,
and in order to reform you've got to have good information.
It's got to be transparent. It's got to be complete, the whole
truth, nothing but the truth, so help me God. So the mere fact
that a question is asked, please, don't get insulted. I think
you should be grateful that we asked you to come back to
clarify, and you did it.
And so just like Chairman Issa asked you a minute ago about
how you looked at your role, well guess what? And you gave a
great answer, and I was pleased to hear it, but guess what? I
expect the young lady who was here, Ms. Hofacre, and Mr. Hull,
who is now retired, I believe that they're the same way. I've
actually said it over and over again that I think that what--as
I read the transcripts, it seems that people came in, they were
hard-working Americans, giving their blood, sweat, and tears,
not making a whole lot of money, put their party hats to the
side and walked in there and tried to obey the law as best they
could. Then that means that maybe if the law was not right or
we need to change something, maybe we need to do that. You said
that there were management problems. Maybe we need to do that.
And so nobody is trying to attack you or anybody else. Just
trying to get to the facts. This is our watch. This is it. I've
said over and over again, we don't know how long we are going
to be here. But in this time, in this period, this is our watch
to be the very best that we can be, and we are better than what
we have been so far. You said it in so many words just a moment
ago: The IRS can be better.
And what I'm doing, Mr. Chairman, as I close, I am reaching
out trying to get to that better world, to that more perfect
IRS. That's what this is all about. Nothing less. Nothing less,
nothing more. It is simply that. And I want--I do not want to
see the IRS destroyed. I want it to be the very best that it
can be. And so with your help and the help of God we will
accomplish that.
Thank you, Mr. Chairman.
Chairman Issa. Thank you, Mr. Cummings.
I think Mr. Cummings is right, we don't know how long we're
going to be here. I lost one of my friends, Gideon Goren, today
suddenly after only 80 years on this Earth and 50 good years of
marriage.
So without further lamenting some parts of the day, I have
just a closing question for you, Mr. George. With what you and
your organization know today, do you know that there was
special scrutiny on organizations lumped together as the term
Tea Party, but obviously 9/12 and the other search terms, do
you know there was special scrutiny of those organizations and
that it was, in your opinion, inappropriate in--at least in the
time of delay?
Mr. George. Yes.
Chairman Issa. And as of what you know today, from what
you've been able to ascertain, I know it's ongoing, do you know
of similar treatment of specific scrutiny because of their key
name and delay for groups other than those? In other words, do
you know of progressive groups that as of today were
scrutinized for being progressive advocacy groups and delayed?
Mr. Kutz. We don't know that. The 202 names, as we
mentioned, we don't know who was what, okay?
Chairman Issa. Okay. So as this committee continues to
look, we will close today knowing that Tea Party groups,
patriot groups, 9/12 groups are held to have been--held up to
special scrutiny here in Washington, delay, including perhaps
the office of Lois Lerner and certainly individuals in the
Office of the Counsel caused an unreasonable delay to Tea Party
groups, and to this day we know of no specific equivalent among
groups, specifically left-wing groups, progressives, and so on.
That is what we have learned today. We certainly charge you
as our representatives with eyes and ears where we cannot look,
to continue looking, to use all your resources, and to leverage
other resources at the IRS to find this and other areas within
the IRS.
Now, many people have characterized today what I believe
and what I say. In closing, I believe that, in fact, Mr.
George, you and your team have done an excellent job. When I
look at the speed of your work, I wish for faster. When I look
at the quality of your work, I certainly want to send you back
to do more in many areas.
But I certainly know this: The IRS is an agency in crisis.
They cannot get their procurement right. We've seen that. They
cannot get their conference spending, at least in the past,
anywhere under control, and they used funds which were
inappropriate to fund those conferences.
This special scrutiny raises major concerns about whether
or not they even understand the criteria under the law of
501(c)(4)s in what they asked and how they asked, including
asking for donor information, including asking for the
specifics of political activity rather than the balance of
eligibility.
That and other areas give you, your three and others not
here today, a huge job, and I for one have confidence that you
will do that job, as all of our IGs work hard to do. And this
committee will continue, as it did with Steve Horn, to leverage
heavily the hard work and the 12,000 or so men and women that
work for IGs.
So I want to thank you. I want to make one closing
statement, and that is, hopefully we will stop asking people in
public or using in public what their political persuasion is
unless we're speaking to activities that they did, that those
activities may compromise their objectivity. Otherwise every
American has a right to belong to or not belong to any party,
to believe what they want to believe, and we want them to be
able to do that and exercise that.
So, again, I'm going to be the first to say, every one of
you, I'd like to get more out of you. I encourage you to work
both jointly and, quite frankly, I encourage you to meet with
the ranking member's staff any time you want, huddle with them,
listen to their concerns, and do the same, because this
committee charges you often from one side or the other, but we
charge knowing that your work is nonpartisan, your results are
given to both of us on a consistent basis, and by the way, also
to other committees of jurisdiction, without us asking. You
make the decision of who needs to know, and we appreciate that.
And with that----
Mr. Cummings. Will the gentleman yield----
Chairman Issa. Of course.
Mr. Cummings. --for just one question?
Chairman Issa. Of course.
Mr. Cummings. My staff tells me that in the interviews your
staff always asks the party affiliation. Can we then stop
within the interviews asking for party affiliation?
Chairman Issa. I appreciate that, and it's a fair question.
I believe that my--they have asked routinely whether somebody
describes or not, they've asked about political contributions
and even volunteering. I have instructed my people not to use
that as criteria for decision process.
We do have some people who actually campaigned for a
particular candidate and made contributions, but we have not
and did not use it today, I don't believe I heard it one time.
You know, I believe interviews need to ask all the questions
extensively, if appropriate, and we did do that. Candidly, it's
the reason I was happy not to hear it asked by my side of the
aisle today.
And with that, I thank the ranking member. This has been a
long day for you. You were here for the first panel, and I know
you could have accomplished a lot of what we're asking for
today if we let you have this day in the office.
And with that we stand adjourned.
[Whereupon, at 5:23 p.m., the committee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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