IRS officials gave false or misleading information on numerous occasions regarding its now discredited practice of targeting conservative groups that sought nonprofit status.
A Treasury inspector general's report issued May 14 found the IRS used "inappropriate criteria," beginning in March 2010, to identify potential political groups seeking nonprofit status based on their names and policy positions. It also found that a high-level IRS official in Washington learned in June 2011 that the criteria targeted groups with specific conservative names, such as "tea party," and conservative descriptors, such as concern with government spending and debt.
Nevertheless, the IRS failed to publicly acknowledge the problem until May 10 — four days before release of the IG report — even though allegations of harassment surfaced in news accounts in February 2012 and Congress pressed the IRS for information.
Here are several specific incidents in which IRS officials gave false, misleading or incomplete information to Congress and the public:
IRS Used 'Inappropriate Criteria'
At issue is the IRS process, from March 2010 to July 2012, for reviewing applications filed by organizations seeking 501(c)(4) nonprofit status. Such groups are considered "social welfare" organizations, but they can be involved in politics as long as it is not their "primary activity" — a vague term that the inspector general's report says led to abuse because of poor management guidance. Specifically, the IRS Determinations Unit in Cincinnati, Ohio, began in March 2010 to flag groups with conservative descriptions, such as "tea party" or "patriots," for extensive and lengthy reviews.
Lerner, director of the IRS' exempt organizations division since 2005, acknowledged the agency's mistakes shortly before release of the IG report. Lerner did so at an American Bar Association meeting on May 10, as reported by the Associated Press. Later that day, Lerner was asked in a media conference call how she learned of the problem, and she said "we started seeing information in the press that raised questions for us." The press began reporting on conservative groups complaining about harsh scrutiny from the IRS in early 2012.
Later in the conference call, she was asked again about the timing and responded, "I didn't know exactly what was going on. I was seeing the same things in the press that you were."
But that's directly contradicted by the report issued four days later by the Treasury inspector general for tax administration.
The inspector general report says that Lerner was briefed June 29, 2011 on the criteria that was developed and used by the agency's Determinations Unit.
Lerner, who was identified in the report by her title "Director, EO," had "raised concerns over the language of the BOLO ['be on the lookout'] listing criteria" and "instructed that the criteria be immediately revised," the report said. Lerner's office broadened the criteria to "focus on the potential 'political, lobbying, or [general] advocacy' activities of the organization," according to the report.
In January 2012, the Determinations Unit then changed the criteria again to "political action type organizations involved in limiting/expanding government, educating on the constitution and bill of rights, social economic reform/movement" because the unit felt the criteria "was too generic." The IG report says Lerner learned of the change in criteria in April 2012.
IRS Asked 'Unnecessary' Questions
The report also said that Lerner learned in early 2012 that the IRS sent letters to applicants seeking nonprofit status that asked "unnecessary, burdensome questions," including asking groups to identify their donors and issues important to them.
The report says Lerner on Feb. 29 "stopped any more additional information request letters from being issued" until a review could be conducted and new guidelines could be issued. Lerner's senior technical advisor conducted the review. On April 25, 2012, the internal review turned up evidence of what the IG report called "a list of troubling questions." Lerner's office identified seven "unnecessary" questions, including requests to identify donors and policy issues important to the group, the report says.
Ultimately, the IG report said that it reviewed the case file information for 170 organizations that received such letters and found that 58 percent "had received requests for information that was later deemed unnecessary" by Lerner's office.
The IRS at the time didn't disclose the existence of any of these problems, but there were news stories in which conservative groups complained about the questionnaires. In response to news accounts, the House Committee on Oversight and Government Reform wrote to Lerner on March 27, 2012. The House letter provided Lerner with a list of questions that the IRS sent to conservative groups and asked her to justify them. IRS questions contained in the letter included requests that the groups disclose donor information and identify policy issues important to them
At this point, Lerner's office had completed its review and was aware of the extent of the problem, and Lerner herself had taken steps to address it. But she made no mention of it in her May 4, 2012 response to the committee. Instead, she explained to the committee that IRS sends such letters "in the ordinary course of the application process."
In her recent conference call with reporters, Lerner acknowledged the letters sent to groups "were far too broad and they included things like asking for the organization's donor list, which generally is not what we do."
Heavy Workload to Blame?
Lerner cited a heavy workload as a reason for developing the inappropriate criteria. In her May 10 conference call with reporters, Lerner said applications for 501(c)(4) nonprofit status had "more than doubled," from 1,500 in 2010 to over 3,400 in 2012.
That's true, but the inspector general's report shows that development of the "inappropriate criteria" began in March 2010 and there was a slight decline in 501(c)(4) applications in the fiscal year that ended Sept. 30, 2010. The report said there were 1,751 applications for 501(c)(4) organizations in fiscal 2009 and 1,735 in fiscal 2010.
The IG timeline and report says that all these actions were taken before the end of fiscal 2010 and, subsequently, before there was an increase in 501(c)(4) applications:
Acting IRS Commissioner Steven Miller, who has resigned from his position effective next month, also cited an increase in 501(c)(4) applications during his May 21 testimony before the Senate Finance Committee. He said such applications doubled and cited the Citizens United court case decided Jan. 21, 2010 that allowed labor groups and corporations to spend an unlimited amounts of money to influence political campaigns.
IRS records show there was an increase over time, but neither Lerner nor Miller provided evidence that there was a significant spike less than two months after the Citizens United decision when the IRS first started to single out tea party and other conservative groups by name for review.
Did Miller Mislead Congress?
During the May 17 hearing, Republican Rep. Charles Boustany accused Miller of misleading Congress in his previous testimony and letters to the Ways and Means oversight subcommittee.
Who's right? Let's first examine what Miller knew and when he knew it.
He was asked at the May 17 hearing when he was made aware of the targeting — a word he takes issues with because he says it is a "loaded term." He said he learned of it in March 2012 through media accounts. At the time, Miller was the Deputy Commissioner for Services and Enforcement. Miller said, and the IG report confirms, he sent a team of IRS staffers from Washington, D.C. to Ohio to investigate in late March 2012.
Miller testified (43 minute mark) that he was aware of problems with processing applications at that time, but he said he did not know about the BOLO list until he got a report back on May 3, 2012 that outlined the extent of the problem, including requests for what the IRS and IG deemed "unnecessary" information and "inappropriate criteria."
"I thought there were problems with the processing of the cases," he said. "They came back with both pieces. Yes, there were problems with processing cases and there were problems with the listing."
More than two months after learning the scope of the problem, Miller appeared before the Ways and Means' oversight subcommittee on July 25, 2012. At that hearing, Rep. Kenny Marchant opened his line of questioning by saying he wanted to "focus on some of the smaller local groups that are claiming tax‑exempt status." He cited complaints of harassment and then asked Miller, "What kind of letter or action is taking place at this time that you are aware of?" Miller did not disclose problems he knew existed.
Miller responded by talking about how the agency works to "ensure consistency" in determining nonprofit status and that the process for approving applications was slowed by groups that don't understand the rules.
Here is an excerpt of that exchange, from the subcommittee transcript:
Miller clearly had more information he could have shared but didn't.
'Absolutely No Targeting'
One of the clearest cases of providing false information came from the IRS commissioner at the time, Douglas Shulman, an appointee of President George W. Bush.
At a March 22, 2012 hearing of the Ways and Means oversight subcommittee, Shulman was asked about reports of conservative groups being targeted and he assured the subcommittee that "there is absolutely no targeting."
That's obviously false.
On May 21, Shulman testified before the Senate Finance Committee, along with Miller and Treasury Inspector General for Tax Administration J. Russell George. Shulman said that he learned "sometime in the spring of 2012″ that "there was a list that was being used" to identify political groups for further review and that the term "tea party" was on the list. But, he added, that he did not know "the scope and severity of the list," and he "did not have a full set of facts" until the IG report was issued earlier this month.
Sen. Orrin Hatch said that Shulman should have "corrected the record and you should have done it long before today."
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