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Treasury Knew of I.R.S. Inquiry in 2012, Official Says Treasury Knew of I.R.S. Inquiry in 2012, Official Says
(about 4 hours later)
WASHINGTON — The Treasury Department’s inspector general told senior Treasury officials in June 2012 he was auditing the Internal Revenue Service’s screening of politically active organizations seeking tax exemptions, disclosing for the first time on Friday that Obama administration officials were aware of the matter during the presidential campaign year. WASHINGTON — Congressional Republicans, not resting with the Internal Revenue Service scandal, are moving to broaden the matter to an array of tax malfeasances and “intimidation tactics” they hope will ensnare the White House.
At the first Congressional hearing into the I.R.S. scandal, J. Russell George, the Treasury inspector general for tax administration, told members of the House Ways and Means Committee that he informed the Treasury’s general counsel of his audit on June 4, and Deputy Treasury Secretary Neal Wolin “shortly thereafter.” Republican charges range from the clearly questionable to the seemingly specious, and they grow by the day. On Friday, lawmakers sought to tie the I.R.S. matter to the implementation of President Obama’s health care law, which will rely heavily on the agency. Whether they succeed holds significant ramifications for Mr. Obama, who will soon know if he is dealing with a late spring thunderstorm that may soon blow over or a consuming squall that will leave lasting damage.
It remained unclear how much the disclosure would affect the broader debate over the I.R.S.'s problems. Complaints from Tea Party groups that the I.R.S. was singling them out became public in 2012, through media accounts. Representative Dave Camp, Republican of Michigan, the usually mild-mannered chairman of the House Ways and Means Committee, set the tone Friday at Congress’s first hearing on the targeting of conservative groups by the I.R.S., laying out details, from the alleged threatening of donors to conservative nonprofit groups to the leaking of confidential I.R.S. documents.
Mr. George told Treasury officials about the allegation as part of a routine briefing about ongoing audits he would be conducting in the coming year, and he did not tell the officials of his conclusions that the targeting had been improper, he said. In that context, he said, the screening of Tea Party groups for special scrutiny was not the scandal itself but “just the latest example of a culture of cover-ups — and political intimidation — in this administration.”
Still, the inspector general’s testimony will most likely fuel efforts by Congressional Republicans to show that Obama administration officials knew of efforts to single out conservative groups applying for tax-exempt status for additional scrutiny, but did not reveal that knowledge during President Obama’s re-election campaign. “It seems like the truth is hidden from the American people just long enough to make it through an election,” Mr. Camp said.
Representative Paul D. Ryan, Republican of Wisconsin, who joined the Republican ticket as the vice-presidential candidate later in the year, said, “That raises a big question.” Taken aback, the ranking Democrat on the committee, Representative Sander M. Levin of Michigan, modified his prepared remarks to warn, “If this hearing becomes essentially a bootstrap to continue the campaign of 2012 and to prepare for 2014, we will be making a very, very serious mistake.”
Representative Dave Camp of Michigan, the House Ways and Means chairman, said in opening the hearing, “This appears to be just the latest example of a culture of cover-ups — and political intimidation — in this administration. It seems like the truth is hidden from the American people just long enough to make it through an election.” Republicans raised a long list of issues. Mr. Camp contended, for instance, that a White House official’s divulging of a private company’s tax status constituted “a clear intimidation tactic.” The 2010 incident involved an offhand comment by the White House economist Austan Goolsbee that Koch Industries had not paid corporate income taxes because it pays taxes through the personal income tax code. As it turned out, that was not true, but the assertion was made in a discussion of tax reform ideas, not politics.
The hearing quickly turned into partisan jousting, with House Republicans pressing to expand the inquiry to other tax misdeeds closer to the White House, while Democrats tried to keep the focus narrow and under the purview of an I.R.S. chief appointed by President George W. Bush. The Republicans also criticized the publication of donors to the National Organization for Marriage, a group opposed to same-sex marriage. That donors list surfaced mysteriously in March 2012 from a whistle-blower whose identity is still unknown. The whistle-blower apparently obtained it by simply requesting it from the I.R.S. 
Steven T. Miller, the acting I.R.S. commissioner, who has resigned, called the agency’s actions “obnoxious,” but told the House Ways and Means Committee they were not motivated by partisanship. And in testy exchanges, he said he had not misled Congress, even though he did not divulge the targeting efforts of a Cincinnati unit examining 70,000 applications for tax exemption. Linkage to the health care law came through Sarah Hall Ingram, a longtime I.R.S. official who has headed the agency’s Affordable Care Act implementation program since December 2010. Before that, she led the I.R.S.’s tax-exempt and government-entities division, which contained the political targeting effort.
“This is an audit, and it’s helpful,” Representative Tim Griffin, Republican of Arkansas, said of the investigation of I.R.S. targeting by the Treasury inspector general for tax administration, “but it’s the tip of the iceberg.”
But the inspector general made clear that effort did not reach the attention of high-level I.R.S. officials until 2011 at the earliest.
The inspector general gave Republicans some fodder Friday when he divulged that he informed the Treasury’s general counsel he was auditing the I.R.S.’s screening of politically active groups seeking tax exemptions on June 4, 2012. He told Deputy Treasury Secretary Neal Wolin “shortly after,” he said. That meant Obama administration officials were aware of the matter during the presidential campaign year.
The disclosure last summer came as part of a routine briefing of the investigations that the inspector general would be conducting in the coming year, and he did not tell the officials of his conclusions that the targeting had been improper, he said.
Treasury officials stressed they did not know the results until March 2013, when the inspector presented a draft.
“Treasury strongly supports the independent oversight of its three inspectors general, and it does not interfere in ongoing I.G. audits,” the department said in a statement Friday evening.
Still, Inspector General J. Russell George’s testimony fueled efforts by Congressional Republicans to ensnare Mr. Obama in the swirl of scandals suddenly besetting the White House. Representative Paul D. Ryan, the Wisconsin Republican who joined the national ticket as the vice-presidential candidate last year, said of the revelation, “That raises a big question.”
Republicans hit hard on the divulging of confidential tax information, hinting of intimidation not only by the I.R.S. but also by the White House.
In March 2012, the Human Rights Campaign and the Huffington Post made public confidential tax documents from the National Organization for Marriage. The Human Rights Campaign said it obtained the documents from a “whistle-blower” who mailed them to the gay rights group’s Washington headquarters.
In a similar incident, ProPublica, an investigative journalism Web site, asked the I.R.S.’s Cincinnati office for the applications of 67 nonprofits, both liberal and conservative. When the I.R.S. responded, it inadvertently included applications for nine conservative groups that had not yet been granted tax-exempt status, a violation of confidentiality law.
When ProPublica realized what it had — including the application from Crossroads GPS, the conservative group founded by Karl Rove and other Republican strategists — it alerted the I.R.S., which warned the journalists that “publishing unauthorized returns or return information was a felony” punishable by up to five years in prison. ProPublica ProPublica redacted certain details and published the documents anyway.
Representative Peter Roskam, Republican of Illinois, hit on a different explanation. “On the one hand, you’re arguing today that the I.R.S. is not corrupt, but the subtext of that is you’re saying, ‘Look, we’re just incompetent,’ ” Mr. Roskam said. “It is a perilous pathway to go down.”
One release that turned out to be advertent was last Friday’s disclosure of the agency’s conservative targeting. Steven Miller, the ousted I.R.S. commissioner, confessed that the agency’s apology was prompted by a question planted by the agency at an American Bar Association meeting. At that meeting, Lois Lerner, the head of the I.R.S.’s division overseeing tax-exempt organizations, was asked about an inquiry into the targeting issue, eliciting an apology that quickly leaked out of the closed-door session. The I.R.S. then scrambled to issue a formal release on the issue.
Mr. Miller divulged that the exchange was not an impromptu apology but a planned exchange between Ms. Lerner and Celia Roady, a tax lawyer at the Washington office of the Morgan Lewis law firm. That revelation only underscored the ham-handed way the scandal has burst into view.
Under fire, Mr. Miller called the agency’s targeting of conservative groups “obnoxious,” but he told the House Ways and Means Committee it was not motivated by partisanship. And in testy exchanges, he said he had not misled Congress, even though he did not divulge the targeting efforts of a Cincinnati unit examining 70,000 applications for tax exemption.
He called the group’s centralization of applications from groups with names that included the words “Tea Party” or “patriots” simply “foolish mistakes” that “were made by people trying to be more efficient in their workload selection.”He called the group’s centralization of applications from groups with names that included the words “Tea Party” or “patriots” simply “foolish mistakes” that “were made by people trying to be more efficient in their workload selection.”
With two additional hearings already scheduled for next week, it is clear the focus of Congressional inquires will extend well beyond the selection of conservative groups for special scrutiny of their tax-exemption applications.
Mr. Camp pressed Mr. Miller and Mr. George on the releasing of tax information on Koch Industries, the giant family business of the conservative benefactors Charles and David Koch, by a former White House economist, Austan Goolsbee. He also hit on the publication of donor lists for the National Organization for Marriage, which opposes same-sex unions, and the release of confidential applications for tax-exempt status to the investigative reporting outfit ProPublica.
The incidents of releases of confidential tax information were referred to the inspector general for investigation, but were found to be inadvertent, the witnesses said.
When Republicans asked Mr. Miller whether the targeting of conservative groups was divulged to Obama administration officials outside the I.R.S., Mr. Miller said “that would be a violation of law.”
“I would be shocked” if that occurred, he said.
Mr. Miller did concede that the I.R.S.'s apology for targeting was prompted by a question planted by the agency last Friday at an American Bar Association meeting. At that meeting, Lois Lerner, the head of the I.R.S.'s division overseeing tax-exempt organizations, was asked about an inquiry of the targeting issue, eliciting an apology that quickly leaked out of the closed-door session. The I.R.S. then scrambled to issue a formal release on the issue.
Mr. Miller divulged that the exchange was not an impromptu apology but a planned exchange between Ms. Lerner and Celia Roady, a tax attorney at the Washington law firm Morgan Lewis. That revelation only underscored the ham-handed way the scandal has burst into view.
President Obama has tried to get on top of the scandal, condemning the program, vowing changes and requesting Mr. Miller’s resignation. But many Republicans have greeted each of these moves scornfully. Mr. Miller, as an acting I.R.S. chief, was likely to step down in June anyway, unless nominated for the permanent position.
Joseph Grant, commissioner of the I.R.S.'s tax-exempt and government-entities division, announced Thursday that he, too, would be leaving in the next month. But Republicans jumped on news Thursday evening that Mr. Grant’s predecessor, Sarah Hall Ingram, who led the division when the targeting operation began, is now in charge of the I.R.S. division overseeing implementation of parts of the president’s health care law.
Ms. Ingram’s name did not appear anywhere in the inspector general’s report of the program, nor had Republicans singled her out for criticism until now. But Republicans were eager to link the I.R.S. scandal with their opposition to the health care law.
“Stunning, just stunning,” said Senator Mitch McConnell of Kentucky, the Republican leader.
According to the inspector general’s report, Mr. Miller was aware of the political targeting in March 2012, sending a team from I.R.S. headquarters in Washington to discuss it with the program’s leaders in Cincinnati. Yet a month later, Mr. Miller, then the deputy I.R.S. commissioner for enforcement, wrote a letter to Republican senators saying there was no targeting of conservative groups.
“There is a penalty for lying to Congress,” Mr. Boustany said.
The hearings will continue next week. On Tuesday, the Senate Finance Committee will hold its hearing, and its Democratic chairman, Senator Max Baucus of Montana, hopes to question Douglas Shulman, a Bush administration appointee who was I.R.S. commissioner during most of the targeting program.
On Wednesday, the House Oversight and Government Reform Committee and its combative chairman, Representative Darrell Issa of California, will hold its first hearing on the matter, and will question Ms. Lerner, who appears to have had knowledge of the program almost from its inception in 2010. Last Friday, when she apologized for I.R.S. conduct, she told reporters she learned of the program through news reports last year.
Representative Jim Jordan, Republican of Ohio and a member of the oversight committee, has already accused Ms. Lerner of lying to Congress.
“Our job is to, in an appropriate fashion at the right pace, pursue the truth,” Mr. Jordan said.