U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

39–006 

" ! HOUSE OF REPRESENTATIVES 113TH CONGRESS

2d Session 

REPORT

2014

113–414 

Union Calendar No. 305 

REFERRAL TO THE HONORABLE ERIC H. HOLDER, JR., ATTORNEY 

GENERAL, OF FORMER INTERNAL REVENUE SERVICE EXEMPT 

ORGANIZATIONS DIVISION DIRECTOR LOIS G. LERNER FOR POSSIBLE CRIMINAL PROSECUTION FOR VIOLATIONS OF ONE OR 

MORE CRIMINAL STATUTES BASED ON EVIDENCE THE COMMITTEE HAS UNCOVERED IN THE COURSE OF THE INVESTIGATION OF IRS ABUSES 

Mr. CAMP, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

MINORITY AND DISSENTING VIEWS 

APRIL 11, 2014.—Committed to the Committee of the Whole House on 

the State of the Union and ordered to be printed 


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(III)

LETTER OF SUBMITTAL 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC, April 11, 2014. 

Hon. JOHN BOEHNER, 

Speaker, House of Representatives, 

Washington, DC. 

DEAR MR. SPEAKER: On April 9, 2014, by a vote of 23 to 14, the 

Committee on Ways and Means voted to submit the referral to the 

Honorable Eric H. Holder, Jr., Attorney General, of former Internal 

Revenue Service Exempt Organizations Division Director Lois G. 

Lerner for possible criminal prosecution for violations of one or 

more criminal statutes based on evidence the Committee has uncovered in the course of the investigation of IRS abuses to the U.S. 

House of Representatives. Minority views are included. 

Sincerely, 

DAVE CAMP, 

Chairman. 


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Union Calendar No. 305 

113TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 113–414 

REFERRAL TO THE HONORABLE ERIC H. HOLDER, JR., ATTORNEY GENERAL, OF FORMER INTERNAL REVENUE SERVICE EXEMPT ORGANIZATIONS DIVISION DIRECTOR LOIS G. LERNER FOR POSSIBLE CRIMINAL 

PROSECUTION FOR VIOLATIONS OF ONE OR MORE CRIMINAL STATUTES 

BASED ON EVIDENCE THE COMMITTEE HAS UNCOVERED IN THE 

COURSE OF THE INVESTIGATION OF IRS ABUSES 

APRIL 11, 2014.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. CAMP, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

MINORITY AND DISSENTING VIEWS 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC, April 9, 2014. 

Hon. ERIC H. HOLDER, Jr., 

Attorney General, Department of Justice, 

Washington, DC. 

DEAR ATTORNEY GENERAL HOLDER: The Committee on Ways and 

Means (Committee) of the U.S. House of Representatives has discovered information in the course of its ongoing investigation of the 

targeting by the Internal Revenue Service (IRS) of taxpayers on the 

basis of their political views. This information suggests willful misconduct by an IRS official, and also suggests that she may have 

violated multiple federal criminal statutes. 

Rule X.1(t) of the Rules of the House of Representatives for the 

113th Congress delegates to the Committee legislative jurisdiction 

over ‘‘[r]evenue measures generally,’’ including the Internal Revenue Code (IRC or Code) and the Department of Treasury (Treasury), which includes the IRS. As a result, the Committee is responsible for considering all legislation that raises the revenue required 

to finance the federal government. The raising of such revenue depends on voluntary compliance with the IRC, which is undermined 


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1See also Rule X.2(b)(1), Rules of the House of Representatives, 113th Congress (vesting Committee with authority to oversee and evaluate whether laws written by Committee are being 

administered consistent with congressional intent and whether such laws should be changed); 

cf. IRC 6103 (expressly authorizing Committee review of certain material). 

2See IRC 7803 (setting out the authorities of the IRS Commissioner), see also Internal Revenue Manual (IRM) 1.1.23.5 (providing that Director of EO reports directly to Deputy Commissioner of TE/GE and, among other duties, ‘‘supervises and is responsible for the activities of . . . 

EO Rulings and Agreements and EO Examinations functions’’). 3See generally, Citizens United v. Fed. Elec. Comm’n, 558 U.S. 310 (2010). 

when taxpayers and exempt organizations perceive that the administration of the IRC is unfair or, worse, is biased against them. 

Oversight of the IRS, and particularly investigation of IRS activity 

that could undermine voluntary compliance with the IRC, is thus 

a fundamental obligation of the Committee.1 It is pursuant to this 

authority and in discharge of this obligation that the Committee 

has investigated allegations that the IRS mistreated certain taxpayers and exempt organizations on the basis of their political beliefs. 

During the course of its investigation, the Committee has obtained information that reveals that former IRS Exempt Organizations Division (EO) Director Lois G. Lerner, while acting in her official capacity, may have violated one or more criminal statutes. 

Specifically, the Committee’s investigation has uncovered conduct 

by Lerner that includes the following: 

1. Lerner used her position to improperly influence agency 

action against only conservative organizations, denying these 

groups due process and equal protection rights under the law 

as guaranteed by the U.S. Constitution, in apparent violation 

of 18 U.S.C. 242; 

2. Lerner impeded official investigations by providing misleading statements in response to questions from the Treasury 

Inspector General for Tax Administration (TIGTA), in apparent 

violation of 18 U.S.C. 1001; and 

3. Lerner risked exposing, and may actually have disclosed, 

confidential taxpayer information, in apparent violation of IRC 

6103 by using her personal email to conduct official business. 

These findings, supported by the evidence described below, suggest that Lerner may have violated multiple criminal statutes. The 

Committee asks that you pursue this evidence and ensure that the 

victims of IRS abuse do not also suffer neglect from the criminal 

justice system. 

I. LERNER SHOWED EXTREME BIAS AND PREJUDICE IN EXERCISING

HER POWER AND INFLUENCE OVER THE NON-PROFIT SECTOR

As EO Director, Lerner had authority to act on behalf of the 

IRS.2 Lerner willfully used her authority to subject specific organizations to adverse treatment in defiance of IRS controls. Lerner directed subordinates to subject specific right-leaning groups to increased scrutiny and audits, and even the denial of exempt status. 

a. Lerner’s targeting of Crossroads GPS & blind eye to Priorities 

USA 

On October 19, 2010, Lerner explained to a group of Duke University students that 501(c)(4) organizations were spending money 

on campaign activity in the wake of the Citizens United decision.3

She said, ‘‘[E]verybody is screaming at us, ‘fix it now before the 


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4Transcribed from http://www.youtube.com/watch?feature=player_embedded&v=EH1ZRyq1iM, Exhibit 1. 5See Letter from Assistant Majority Leader Dick Durbin to IRS Commissioner Doug Shulman 

on October 12, 2010. Available at: http://www.durbin.senate.gov/public/index.cfm/ 

pressreleases?ID=833d8f1e-bbdb-4a5b-93ec-706f0cb9cb99. 6 Exhibit 1. 

7Democracy 21 describes itself as a ‘‘nonprofit, nonpartisan organization that . . . promotes 

campaign finance reform, lobbying and ethics reforms . . . and other government integrity 

measures.’’ See ‘‘Petition for Rulemaking On Campaign Activities by Section 501(c)(4) Organizations’’ at 10. Available at: http://www.democracy21.org/uploads/ 

D21_and_CLC_Petition_to_IRS_7_27_2011.pdf. 8See Democracy 21 ‘‘Letters to the IRS.’’ Available at: http://www.democracy21.org/wp-content/uploads/2013/05/Letters-to-IRS.pdf. 9See http://www.democracy21.org/wp-content/uploads/2013/05/Letters-to-IRS.pdf. 

10See fn 7. 11 IRS00000122502–122505, Exhibit 2. See fn 8 for ‘‘Petition for Rulemaking.’’ 12See id. 13See id. 14See Letter from House Ways and Means Committee Chairman Dave Camp to IRS Acting 

Commissioner Daniel Werfel of September 20, 2013 (requesting returns and return information 

of right-leaning American Crossroads, Crossroads GPS, and Americans for Prosperity, as well 

as left-leaning Priorities USA, Priorities USA Action, and Organizing for Action), Exhibit 3. The 

documents show no special scrutiny of the left-leaning groups. 

election. . . .’ ’’ 4 At the same time, Assistant Senate Majority Leader Dick Durbin, wrote then IRS Commissioner Doug Shulman to 

demand an investigation of Crossroads GPS.5 Lerner explained to 

the students, ‘‘I won’t know until I look at their 990s next year 

whether they have done more than their primary activity as political or not, so I can’t do anything right now.’’ 6 While Lerner’s public comments seemingly cast a wide, unbiased net across the entire 

501(c)(4) spectrum, her private actions were different. 

Documents produced to the Committee further link Lerner’s actions with complaints from Democracy 21.7 Those complaints chiefly focused on Crossroads Grassroots Policy Strategies (Crossroads) 

and other right-leaning groups, but also cite left-leaning groups 

such as Priorities USA.8 On October 5, 2010, just two weeks before 

her remarks at Duke University, Fred Wertheimer of Democracy 

21 and Gerald Hebert of the Campaign Legal Center (CLC) wrote 

to then-Commissioner Shulman and Lerner to, ‘‘Request for IRS investigation to determine whether Crossroads GPS’ is operating in 

violation of tax status.’’ 9 Later, on July 27, 2011, Democracy 21 

and CLC sent the IRS a self-styled, ‘‘Petition for Rulemaking On 

Campaign Activities by Section 501(c)(4) organizations,’’ in which 

they raised concerns about the political campaign activities of 

501(c)(4) exempt organizations, including Crossroads and Priorities 

USA.10 Finally, on December 14, 2012, Democracy 21 requested a 

meeting with Lerner to discuss its July 27, 2011 petition.11

Lerner quickly organized a meeting for Democracy 21 not only 

with herself, but also with the Office of Chief Counsel and the Office of Tax Policy at the Department of the Treasury for January 

4, 2013.12 In preparation for the meeting, Lerner asked David Fish, 

then acting Director of EO’s Rulings and Agreement Division, and 

Andy Megosh with EO Guidance, for all ‘‘letters these orgs sent in 

asking for c4 guidance. . . .’’ 13 While Democracy 21’s petition 

raised concerns about groups across the political spectrum, documents IRS produced to the Committee show an aggressive and improper pursuit of Crossroads by Lerner, but no evidence she directed reviews of similarly situated left-leaning groups.14

For example, on January 2, 2013, the IRS’s Chief for Media Relations circulated a ProPublica article to Lerner and Nikole Flax, 

then chief of staff to Acting Commissioner Steve Miller, among othVerDate Mar 15 2010 06:01 Apr 17, 2014 Jkt 039006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR414.XXX HR414

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15 IRS0000122515–6, Exhibit 4. 16 Available at: http://www.propublica.org/article/watchdogs-to-irs-reject-rove-groups-tax-application. (The article updates an earlier ProPublica story from December 14, 2012 that was 

based on an IRS- leaked copy of Crossroads application for exempt status.) 17 Exhibit 5. A ‘‘referral’’ is, in lay terms, a complaint; pursuant to the IRM it means: 

A. A document or other communication, including an electronic communication, received by 

EO Classification-Referrals from a source outside the Internal Revenue Service, which alleges 

possible noncompliance with a tax law on the part of an exempt organization, political organization, taxable entity, or individual. 

B. An internal document (referral) prepared by an Internal Revenue Service employee and 

forwarded to EO Classification-Referrals, which identifies current or potential noncompliance 

discovered during either the processing of an assigned case, or at any other time in the performance of official duties. 

IRM 4.75.5.2(05–13–2005). 

18 IRS0000378449 (displaying calendar entry), Exhibit 5. See also, Complaint of Van Hollen 

et al. v. IRS (D.D.C. August 21, 2013) at 41 (noting that ‘‘On January 4, 2013, representatives 

of Democracy 21 and the Campaign Legal Center met with Ms. Lerner and other IRS officials 

regarding the petition for rulemaking.’’). Available at: http://www.democracy21.org/wp-content/ 

uploads/2013/08/Complaint-August-20-final-for-filing.pdf. 19 IRS0000122549–122551, Exhibit 6. The PARC is responsible for determining whether allegations of improper political activity by an exempt organization merit an audit. See 

IRS0000378444–378446, IRS Memorandum to Congress, ‘‘IRS Exempt Organizations Processes 

with Respect to Examinations,’’ Exhibit 7. At the direction of Lois Lerner, Nanette Downing created a special process for reviewing complaints of political activity by exempt organizations following the Citizens United decision. See Subcommittee on Oversight, Committee on Ways and 

Means, U.S. House of Representatives, Interview of: Nanette Downing, December 6, 2013 at 33– 

37, Exhibit 8. 

ers, ‘‘FYI—Here is the latest inbound for ProPublica.’’ 15 Following 

was an article titled: ‘‘Watchdog Groups Again Call on IRS to Deny 

Tax-Exempt Status to Karl Rove’s Crossroads GPS, Cite $70 Million in 2012 Campaign Expenditures as Prima Facie Evidence 

Group is Campaign Operation, not Social Welfare’ Group.’’ 16 The 

‘‘watchdog’’ groups to which the article refers are Democracy 21 

and Campaign Legal Center (CLC). This email prompted Lerner to 

give notice to Flax and others about the meeting scheduled for January 4 with these groups: 

Just FYI for everyone’s information I received the incoming and will refer it to Exam as we do with any complaint. 

Ruth Madrigal, Vickie Judson and I are meeting with Democracy 21 and some others regarding their request for 

guidance on c4. This has been set up for some time. I plan 

to have David Fish there and begin the meeting by telling 

them we cannot discuss specific taxpayers. . . . We will be 

very cautious.17

Notwithstanding Lerner’s apparent careful adherence to the rule 

against discussing specific cases with people outside of the IRS, 

emails with her subordinates show a focused interest in Crossroads 

immediately following the meeting. Again, these emails show no 

apparent interest in left-leaning groups. 

Lerner’s calendar shows the January 4, 2013 meeting with Democracy 21 blocked off for 11:00 AM–Noon and, based on Lerner’s 

subsequent actions, it is clear that the meeting went forward as 

planned.18 Before or soon after the meeting, Lerner apparently contacted Tom Miller (EO Technical) to ask about the status of Crossroads (whether the group had been audited or selected for audit) 

because he replied by email at 1:55 PM the same day that the 

group had twice been before the Political Action Review Committee 

(PARC), in November 2010 and June 2011, but was not selected for 

audit.19

Following Tom Miller’s response, Lerner sent an email to Nanette Downing, the Director of the EO Examinations Unit in Dallas, TX, demanding to know why Crossroads had not been audited. 


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20 Exhibit 6. 21See id. 22See id. 23Subcommittee on Oversight, Committee on Ways and Means, U.S. House of Representatives, Interview of: Victoria Ann Judson, Wednesday, September 11, 2013, at 57 (quotation 

marks added), Exhibit 9. 24See IRS00071224–71226, Exhibit 10. 

I had a meeting today with an organization that was 

asking us to consider guidance on the c4 issue. To get 

ready for the meeting, I asked for every document that 

(sic) had sent in over the last several years because I knew 

they had sent in several referrals. I reviewed the information last night and thought the allegations in the documents were really damning, so wondered why we hadn’t 

done something with the org. The first complaint came in 

2010 and there were additional ones in 2011 and 2012. 

. . . The organization at issue is Crossroads GPS . . . I 

know the org is now in the ROO—based on allegations 

sent in this year, but this is an org that was a prime candidate for exam when the referrals and 990s first came 

in.20

* * * * * * * 

You should know that we are working on a denial of the 

application, which may solve the problem because we probably will say it isn’t exempt. Please make sure all moves 

regarding the org are coordinated up here before we do 

anything.21

On the following Monday, January 7, 2013, Lerner sent a followup email to Downing which states, ‘‘As I said, we are working on 

the denial for the [Crossroads] 1024, so I need to think about 

whether to open an exam. I think yes, but let me cogitate a bit on 

it.’’ 22 Interviews of IRS personnel and a review of Crossroad’s file 

shows that Lerner was in fact actively seeking to ensure a denial 

of the group. 

In a transcribed interview of Victoria Judson, Associate Chief 

Counsel (Tax Exempt & Government Entities), Committee staff 

asked Judson about Lerner’s interest in Crossroads: 

Q: I think you said that it was in the spring of 2012 that 

you discussed with Ms. Lerner a Crossroads GPS case and 

she gave you advance notice that that might be a denial. 

Is that correct? 

A: That’s the best of my recollection. And I don’t know 

if I would characterize it as ‘‘discuss’’ as opposed to ‘‘she 

told me that . . .’’ 23

Lerner’s plan to deny the Crossroad application is evident from 

the work log for the Cincinnati-based revenue agent assigned to 

the case, as after her January 4, 2013 meeting with Democracy 21, 

the agent sprung into action. In the seven business days following 

her meeting, the revenue agent Joseph Herr, logged more time on 

the application than the entire year preceding.24 But more, the log 

shows that Herr was directed to reach a particular result with 

Crossroads. Herr’s log shows, in part: 

On January 4, 2013, Herr notes a conference call with 

EOT [Exempt Organizations Technical Division] in DC 


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25See id. 26See id. 27 IRS0000063029, Exhibit 11. 28 Exhibit 9. 29Telephone briefing by IRS staff to Oversight Subcommittee staff of September 3, 2013. 30See http://www.democracy21.org/wp-content/uploads/2013/05/Letters-to-IRS.pdf. 31See Email from Lois Lerner to Sharon Light of January 24, 2013, IRSC007157–60, Exhibit 

12. N.b. Democracy 21 is highly critical of Organizing For Action. See, e.g., ‘‘ Statement by Fred 

Wertheimer’’ January 22, 2013 (stating with reference to the formation of Organizing For Action 

that, ‘‘In taking this step, the President has opted for the ends justify the means’ approach that 

is fraught with danger. It opens the door to opportunities for government corruption.’’) Available 

at: http://www.democracy21.org/money-in-politics/press-releases-money-in-politics/statementby-fred-wertheimer-president-obama-opts-for-the-ends-justify-the-means; see also, ‘‘Is Organizing 

For Action Too Close To The White House?’’ National Public Radio (March 19, 2014) (quoting 

Democracy 21’s Fred Wertheimer, ‘‘The best thing the president of the United States could do 

is shut [Organizing for Action] down. This is a danger to the integrity and credibility of his presidency.’’) Available at: http://www.npr.org/2014/03/19/291312006/is-organizing-for-action-tooclose-to-the-white-house. 32See Exhibit 12. 

where specific guidance is given to him on ‘‘how to best 

proceed with the [Crossroads] case.’’ 

On January 7, this guidance from EOT was memorialized in Herr’s time sheet, ‘‘[b]ased on conference begin reviewing case information, tax law, and draft/template advocacy denial letter, all to think about how best to compose 

the denial letter.’’ 25

In the next journal entry from Herr, he notes,‘‘[w]rite-up summary of idea on how I plan to make denial argument and share 

with Sharon Light, the Special Advisor to EO Director in Washington DC, for her opinion on whether the idea seems valid.’’26 Nowhere in his 2012 log entries is there any discussion of denial. In 

fact, in an analysis of the Crossroads application in November 

2011, among many others, EO Technical lawyer Hillary Goehausen 

makes no recommendation for denial.27

The Committee subsequently learned that the agency was in the 

process of denying Crossroads’ application for exempt status and 

selecting them for audit. Judson informed staff the organization 

would be receiving a proposed denial letter.28 An IRS representative separately told staff that Crossroads had also been selected for 

audit.29 The evidence shows that without Lerner’s intervention, 

neither adverse action would have been taken against Crossroads. 

Again, the Committee has found no record of Lerner pursuing similarly situated left-leaning groups, despite receiving similar public 

complaints.30

In fact, during the same time period Lerner was engineering a 

denial and audit of Crossroads, documents show Lerner had a favorable disposition toward left-leaning groups, including considering future employment with one. In response to a news story 

about the formation of Organizing For Action, a 501(c)(4), Lerner 

remarked to EO Senior Technical Advisor Sharon Light, ‘‘Oh— 

maybe I can get the DC office job!’’ 31 Light then forwarded Lerner’s 

comment to Holly Paz wondering if Lerner was considering retirement to pursue a potential job opportunity at this left-leaning 

group.32

b. Evidence suggests Lerner targeted other right-leaning groups 

Evidence discovered by the Committee also suggests that Lerner 

targeted other right-leaning groups. On January 2, 2013, 

ProPublica separately published an article titled, ‘‘Controversial 

Dark Money Group Among Five That Told IRS They Would Stay 


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33See http://www.propublica.org/article/controversial-dark-money-group-among-five-thattold-irs-they-would-stay-out. 34 IRS0000122510, Exhibit 13. 35 fn 33. 36Telephone briefing by IRS staff to Oversight Subcommittee staff of September 3, 2013. 37Telephone briefing by IRS staff to Oversight Subcommittee staff of March 27, 2014. 38See Subcommittee on Oversight, Committee on Ways and Means, U.S. House of Representatives, Interview of: Joseph H. Grant, Sept. 20, 2013, at 39, Exhibit 14. Under questioning: 

Q: Would it be appropriate for a manager at IRS to refer a specific taxpayer to Exams or to 

intervene on their own on—I mean, their own volition to Determ[ination]s? 

A: I believe it would be completely—it would not be appropriate to intervene on their own. 

So—and I’m not aware of that occurring. 

See also, Testimony IRS Commissioner Douglas Shulman before the U.S. House Committee 

on Appropriations Subcommittee on Financial Services and General GovernmentHearing on the 

FY 2013 Internal Revenue Service Budget, March 21, 2012. Per Shulman: 

[W]e have the safeguards built in to this process so that no one person can decide to examine 

an organization based on political activities. So you’ve got your peers watching. You can’t just 

get a case, go off in the corner, and run with your own agenda. Available at: http://appropriations.house.gov/uploadedfiles/hhrg-112-ap23-wstate-dhshulman-20120321.pdf. 39 IRS, FINAL REPORT, PROJECT 302 Political Activities Compliance Initiative at 3 (emphasis added). Available at: http://www.irs.gov/pub/irs-tege/final_paci_report.pdf. 

Out of Politics, Then Didn’t’’ that was circulated within the IRS.33

Forwarding the ProPublica article, Lerner asked Holly Paz, David 

Fish and Sharon Light to ‘‘meet on the status of these applications 

please. Can we talk Friday?’’ 34 The five groups named in the article are: 

Æ Americans for Responsible Leadership 

Æ Freedom Path 

Æ Rightchange.com 

Æ America is Not Stupid 

Æ A Better America.35

Information later provided to the Committee regarding IRS EO 

examinations processes showed that four of the five groups were 

subject to extra-scrutiny; two of the groups were placed in the IRS’ 

surveillance program, called a ‘‘Review of Operations,’’ and two 

were selected to be put before the Political Activity Review Committee, which determines whether a group will be audited.36 Ultimately three of the groups were selected for audit.37

c. Lerner’s defiance of internal controls and abuse of authority 

The evidence demonstrates Lerner acted in defiance of IRS internal controls. Internal IRS policies and procedures, which would be 

well known to Lerner, deter any one person from deciding the disposition of a group based on political or personal animus. Joseph 

Grant, former Commissioner of the Tax Exempt and Government 

Entities Division, and former boss of Lerner, told the Committee in 

a transcribed interview that it would be ‘‘completely’’ inappropriate 

for a manager to target a specific organization for exam or adverse 

determination.38 The IRS put in place these safeguards ‘‘in the 

1990’s to ensure equity and transparency and that no one individual could select organizations within certain classes for examination.’’ 39

These safeguards are reflected in current EO Examinations Unit 

procedures adopted during Lerner’s tenure that she nonetheless 

circumvented. From the FY2013 EO work plan: 

EO will have a PARC (Political Action Review Committee) operating at all times comprised of three experienced career civil servant employees. . . . PARC operations are overseen by the Managers of EPR and EOCA; 


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40 IRS0000410461–62, Exhibit 15. ‘‘EPR’’ refers to Examinations Programs & Review and 

EOCA to Exempt Organizations Compliance Area. See also, IRS Exempt Organizations FY 2012 

Annual Report & FY 2013 Work Plan at 2. Available at: http://www.irs.gov/pub/irs-tege/ 

FY2012_EO_AnnualRpt_2013_Work_Plan.pdf. 41 Exhibit 7. 42 Exhibit 6. 43 Internal Revenue Bulletin: 2013–2, Jan. 7, 2013, Rev. Proc. 2013–9, sec. 7.01. 44See Section 1001(a)(4) of the Internal Revenue Service Restructuring and Reform Act of 

1998, Pub. L. No. 105–206, 112 Stat. 685, 26 USC 7801 note. The provision requires: 

The Commissioner of Internal Revenue shall . . . ensure an independent appeals function 

within the Internal Revenue Service, including the prohibition in the plan of ex parte communications between appeals officers and other Internal Revenue Service employees to the extent 

that such communications appear to compromise the independence of the appeals officers. 45See id. 

however, they shall not override or influence any case selection decision of the PARCs.40

The PARC determines whether organizations about which referrals are made are to be subject to audit.41 The PARC had twice refused to target Crossroads, yet Lerner stated to the head of EO Examinations that, ‘‘we are working on the denial for the [Crossroads] 

1024, so I need to think about whether to open an exam. I think 

yes, but let me cogitate a bit on it,’’ in defiance of IRS policy.42

Lerner makes clear that she believes she is entitled to approve or 

disapprove an application or subject an organization to an audit 

based on her say so alone and irrespective of the PARC’s decision. 

d. Lerner Seeks to Influence the IRS’ Independent Appeals Process 

In addition to IRS safeguards against interfering in the determinations and exams functions, there are internal controls in place 

with regard to the IRS’s Appeals Division that Lerner sought to circumvent. If EO Determinations reaches the conclusion that an application for exempt status does not satisfy the requirements under 

the Code, the IRS generally will issue a proposed adverse determination letter to the applicant and give notice of the opportunity 

to appeal.43 The Appeals Division is independent of the EO Division and thus outside of the EO Director’s chain of command.44

Furthermore, as a matter of law and not just IRS policy, ex parte 

communications between appeals officers or settlement officers and 

other IRS employees, to the extent that those communications appear to compromise the independence of Appeals, are prohibited.45

An email from Lerner to the Chief of IRS Appeals, Chris Wagner, 

on January 31, 2013, shows she sought to influence the independent appeals process notwithstanding a prohibition against 

such contact. Lerner offers unsolicited advice about how to handle 

incoming c4 denials: 

I gave [your people] a heads up that, in the next few 

months we believe they will get a lot of business from our 

[taxpayers] regarding denials on 501(c)(4) applications. I 

explained the issue is whether they are primarily involved 

in social welfare activities and whether their political 

intervention activities. . . I explained the issue was very 

sensitive and visible and there is a lot of interest—Congress, press, political groups, you name it. . . . I offered a 

general tutorial session (noncase-related) on the law and 

the complexities because—as I pointed out. . . . I told 

them this is a place where we have worked very hard to 

be consistent and have all our cases worked by one group, 


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46 IRS0000122863–122864, Exhibit 16. 47See Exhibit 16. The applicable Revenue Procedure allows Appeals to seek technical advice 

from EO, but that request for advice would come from Appeals in the first instance and would 

be documented, not behind the scenes. 48 EO Director’s responses to 3 questions asked by Director Paterson, produced to the Committee by the Treasury Inspector General for Tax Administration, Exhibit 17. See also, telephone briefing by TIGTA staff to Oversight Subcommittee staff of September 12, 2013. 49 Exhibit 17. 

and suggested they might want to do something similar. 

(PS we are under audit by TIGTA because of allegations 

of political bias on these cases). . . . If you think it would 

be useful to have a meeting on this—let me know.46

Ironically, Lerner’s communication closes with, ‘‘Hope this 

doesn’t [sound] like I’m trying to run your shop.’’ The purpose of 

this email could not be clearer. Lerner explained that her team 

worked very hard both to get what Lerner characterized as a highly technical law right and also to apply it consistently to the circumstances of each applicant. She further characterized the cases 

as ‘‘sensitive and visible’’ and suggested that Wagner should consult her.47 Notwithstanding agency safeguards, the message from 

Lerner to the Appeals chief was unequivocal: EO got these denials 

right and Appeals should affirm them. 

II. LERNER PROVIDED THE TREASURY INSPECTOR GENERAL WITH

MISLEADING STATEMENTS

The Committee has found documents that suggest Lerner’s written statement to TIGTA, submitted during the course of TIGTA’s 

audit, was knowingly misleading (Reference Number: 2013–10– 

053). The document titled, EO Director’s responses to 3 questions 

asked by Director Paterson, which Lerner drafted and submitted to 

TIGTA on November 2, 2012, contained specific statements that 

are contradicted by the documentary evidence reviewed by the 

Committee.48

TIGTA asked: 

When did you become aware the IRS was targeting applications for tax exemption that mention: 1) the ‘‘Tea 

Party,’’ ‘‘Patriots,’’ or the ‘‘9/12 Project’’, 2) government 

spending, government debt or taxes, 3) education of the 

public by advocacy/lobbying to ‘‘make America a better 

place to live’’, or 4) criticizing how the country is being 

run? 

Lerner began her response with the statement: 

In early 2010, EO Determinations witnessed an uptick 

in the number of applications for 501(c)(3) or 501(c)(4) status that contained indicators of potentially significant 

amounts of political campaign intervention (‘‘advocacy organizations’’).’’ 49

Lerner here seeks to establish that there was an increase in the 

number of applications received in Cincinnati that contained political campaign activity to minimize her responsibility for the targeting. However, the statement is the first of a compilation of misleading half-truths. 

Just a few months before, on July 17, 2012, Lerner sent an email 

to Holly Paz and Nikole Flax offering comments on a talking point 


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10 

50 IRS0000179271, Exhibit 18. 51 IRS0000179269–179270, Exhibit 19. 52 IRS0000179389–179390, Exhibit 20. 53 Exhibit 17. 

drafted for then-Deputy Commissioner for Services and Enforcement Steve Miller about a perceived uptick in political advocacy 

cases: 

Only one comment—I know we don’t have published SOI 

stats for the uptick, but our Cincy folks saw it happening—can we get Nikole whatever ‘‘inside’’ info we have 

that led to that conclusion—she can then figure out how 

to use it.50

Holly Paz sought assistance from Nanlee Park,51 who responded 

later that evening and included Lerner on the response: 

[A]s Holly pointed out in her comment, we do not have 

a reliable method for tracking data by issue such as political activity. This is consistent with our congressional responses where we had explained we would have to manually go through each application, etc. 

Because of the above points, the first bullet that presently reads as: Starting in 2010, EO observed an increase 

in the number of section 501(c)(3) and section 501(c)(4) determination applications from organizations that appeared 

to be potentially engaged in political advocacy activities. 

Recommend it be revised (i.e., along the lines of the following): For about the past five years [alternative verbiage: From FY 2008 through June 30th of FY 2012], EO 

has observed an increase in the number of section 501(c)(4) 

determination applications filed, as well as a general upward trend in section 501(c)(3) application filings.52

Despite being told that ‘‘political advocacy activities’’ could not be 

substantiated in her proposed talking point, Lerner used almost 

the exact same words in her response to federal law enforcement. 

Lerner knew her answer could not be substantiated, and yet provided it in response to TIGTA’s audit in an attempt to minimize 

her role in the agency’s management failures. 

Lerner then answered the question of when she first learned ‘‘the 

IRS was targeting applications . . . that mention . . . the ‘Tea 

Party,’’ by saying that she: 

First became aware that the BOLO referenced ‘tea party’ 

organizations and EO Determinations was using the above 

criteria to determine what organizations met that description when I was briefed on these cases on June 29, 2011.53

This half-truth appears calculated to obscure her knowledge that 

‘‘Tea Party’’ cases were being treated differently, in part, at her direction, and far earlier than she acknowledged. A series of emails 

show that Lerner knew as early as April 2010 that tea party cases 

were being flagged and held in Cincinnati. 

• On April 28, 2010 Lerner was told by email, ‘‘there are 13 tea 

party cases out in EO Determinations.’’ The attached spreadsheet 

even identifies the issue involved ‘‘whether a tea party organization 

meets the requirements under 501(c)(3) and is not involved in politVerDate Mar 15 2010 06:01 Apr 17, 2014 Jkt 039006 PO 00000 Frm 00014 Fmt 6659 Sfmt 6602 E:\HR\OC\HR414.XXX HR414

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54 IRS0000141809–141811, Exhibit 21. 55 IRS0000167872–167873, Exhibit 22. Pursuant to the Internal Revenue Manual (IRM) 

7.29.3.2 (07–14–2008), Sensitive Case Reports are written for the benefit upper management. 56 IRS0000163358–163359, Exhibit 23. 57 IRS0000147507–147509, Exhibit 24. 58 IRS0000147510–147513, Exhibit 25. 59 Exhibit 25. 60 IRS0000062811-28, Exhibit 26. 61 Exhibit 26. 

ical intervention’’ and notes that there is a grouping of tea party 

cases.54

• On May 13, 2010, Lerner responded to a detailed summary of 

the tea party cases and even inquires about the status of the cases. 

Upon review of the email, she asked follow-up questions regarding 

the tea party cases, ‘‘[Are the] tea party cases—applications for c3? 

What’s their basis?’’ In response, she is explicitly told ‘‘[w]e have 

tea party cases here in EOT in Cincy. In EOT, there is a (c)(3) application. In Cincy there are 10 (c)(4)s and a couple of (c)(3)s.’’55

• In an email dated August 3, 2010, Lerner specifically asked 

her assistant to print out a Sensitive Case Report (SCR) on the 

handling of the tea party cases, for her review. The SCR noted that 

the cases were being held due to the likelihood of attracting media 

attention, contrary to Lerner’s assertion that the targeting was 

prompted by the ‘‘uptick in applications’’ with these characteristics.56

• On January 1, 2011, Lerner received an SCR that flagged 

issues with ‘‘tea party organization[s].’’ 57 The next day, Lerner responded, ‘‘Tea Party Matter very dangerous. . . . Counsel and Judy 

Kindell need to be in on this. Cincy should probably NOT have 

these cases.’’ 58 Less than hour later, Lerner appeared to be directing staff to find a way to deny both c3 and c4 applications—‘‘[I]t 

would be great if we can get there without saying the only reason 

they don’t get a 3 is political activity.’’ 59

These email exchanges memorialize Lerner’s knowledge that, as 

early as April 2010, the IRS was targeting applications for tax-exemption involving the name ‘‘Tea Party’’ and holding these cases 

pending review from EO Technical in Washington, D.C. 

III. LERNER USED HER PERSONAL EMAIL FOR OFFICIAL BUSINESS, IN- CLUDING CONFIDENTIAL RETURN INFORMATION; FURTHER INVES- TIGATION COULD REVIEW UNAUTHORIZED DISCLOSURE

In an email dated October 29, 2012, Lerner sent TIGTA’s draft 

chronology containing confidential return information of taxpayers, 

protected by 26 U.S.C. section 6103, to her personal email address: 

From: Lerner Lois G 

Sent: Monday, October 29, 2012 10:51 AM 

To: ’tobomatic@msn.com’ 

Subject: Fw: Revised timeline 

Attachments: Long Political Advocacy Timeline HOP comments.doc 

Lois G. Lerner————————————— Sent from my 

BlackBerry Wireless Handheld 60

A review of the redacted chronology shows that nine of the 17 

pages contain section 6103 material.61

The next evening, Lerner sent this material back to her official 

email address and to others in the IRS with her comments: 


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62 IRS0000062829, Exhibit 27. ‘‘Miles’’ is Lerner’s husband’s, Michael R. Miles, last name. The 

source of the name ‘‘Toby’’ is not known. 63 IRS0000322610, Exhibit 28. The application has since been approved and is available for 

public inspection. 64See IRM 11.3.1.14.2—Electronic Mail and Secure Messaging [Last Revised: 03–07–2008] 

(1) a. Employees may not use E-mail to transmit SBU [(Sensitive but Unclassified)] data 

unless they use the IRS Secure Messaging (SM) system . . . Both the sender and recipient must 

have SM in order for the E-mail to be protected. 

b. SBU information includes taxpayer data, Privacy Act protected information, some law enforcement information, and other information protected by statute or regulation . . . 

d. SBU data may not be sent to parties outside of IRS, including other government agencies 

, taxpayers, or their representatives . . . Employees cannot send E-mails containing SBU data 

outside the IRS network, even if specifically authorized by the taxpayer. (emphasis added) 65See IRC § 7213. Unauthorized disclosure of information. 66See id. 67Stephen Ohlemacher, ‘‘IRS official at heart of tea party scandal retires,’’ Associated Press, 

Sept. 23, 2013. Available at: http://bigstory.ap.org/article/irs-official-heart-tea-party-scandal-retires. 68 U.S. House Committee on Ways and Means Oversight Subcommittee Hearing on the Internal Revenue Service’s Exempt Organizations Division Post-TIGTA Audit, September 18, 2013. 

From: Toby Miles <tobomatic@msn.com> 

Sent: Tuesday, October 30, 2012 9:16 PM 

To: Paz Holly O; nancy.marks@irs.gov; Lerner Lois G 

Subject: Long Timeline from LOIS 

Attachments: Long Political Advocacy Timeline HOP comments.doc 

Looks pretty good—a couple questions/comments 62

More recently on May 4, 2013, EO Senior Technical Advisor 

Meghan Biss, apparently at Lerner’s request, sent a summary of 

One Fund Boston’s 501(c)(3) application, which consisted almost 

entirely of section 6103 material, to Lerner’s personal email address.63

Sending confidential taxpayer information to a personal email 

address is prohibited by IRS policy, but is not illegal.64 However, 

it is a crime to disclose taxpayer return information.65 If persons 

other than Lerner had access to her personal email account, 

tobomatic@msn.com, and accessed this protected section 6103 material, then Lerner may have violated a criminal statute for which 

the penalty is up to $5,000 fine and/or up to five years in prison.66

IV. CONCLUSION

Contrary to reports that IRS’ Administrative Review Board found 

no political bias or willful misconduct by Lois Lerner, the Committee’s investigation has uncovered such evidence.67 After reviewing 

these same emails, Acting Commissioner Danny Werfel himself 

conceded that there was evidence that raised questions about 

wrongdoing at the agency. At a September 18, 2013 hearing, Oversight Subcommittee Chairman Charles Boustany asked Werfel 

whether Lerner acted in violation of internal agency controls: 

Chairman BOUSTANY. Did Lois Lerner seek to intervene 

in the examinations process or audit process? 

Mr. WERFEL. I am not sure that I can fully answer that 

question because all those documents in Lois’ email file 

need to be further reviewed. I will say this, that there 

were emails that we turned over to you . . . that I thought 

raised questions, [which] I provided directly to TIGTA and 

I also provided them to the Accountability Review Board.68


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13 

Werfel’s testimony is the first public admission by an IRS official 

that evidence may show intentional wrongdoing; this concession is 

wholly consistent with the Committee’s investigation. 

Notwithstanding the Werfel Report and other IRS statements, 

the foregoing sets forth evidence that tends to show intentional 

wrongdoing, including targeting specific taxpayers for adverse 

treatment, making misleading statements to law enforcement, and 

the possible disclosure of confidential taxpayer information. The 

Committee requests that you act on the findings within this letter 

and the attached documentation to ensure the rights of law-abiding 

taxpayers are protected. Please contact Committee staff at (202) 

225-3625 if you have any questions. 

Sincerely, 

DAVE CAMP, Chairman. 


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W&M EXHIBIT 1 

Lois Lerner Discusses Political Pressure on IRS in 2010 

... And what happened last year was the Supreme Court, out of a block getting chipped 

away and chipped away in the federal election arena, the Supreme Court dealt it a huge 

blow overturning 100 year old precedent that said, basically, appropriations can give 

directly to political campaigns. And everyone is up in arms because they don't like it. 

Federal Election Commission can't do anything about it - they want the IRS to fix the 

problem. The IRS laws are not set up to fix the problem. (c)(4)s can do straight political 

activity. They can go out and pay for an ad that says 'vote for Joe Blow.' That's 

something they can do as long as long as their primary activity is their (c)(4) activity, 

which is social welfare. So everybody is screaming at us, 'fix it now before the election, 

can you see how much these people are spending?' I won't know until I look at their 990s 

next year whether they have done more than their primary activity as political or not, so I 

can't do anything right now. 

Transcribedfrom a video 0/ Lois Lerner speaking to a group 0/ sludents at the Duke University Sanford 

School o/Public Policy's Foundation Impact Research Group, October 19, 2010. 
15 


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W&M EXHIBIT 2 

From: 

Sent: 

To: 

Subject: 

lemerLoisG 

Wednesday, December 19, 2012 10:39 AM 

Fish David l.; Megosh Andy 

FW: Meeting with Democracy 21 and Campaign Legal Center 

Can I get copies of aU letters these orgs sent in asking for c4 guidance -Thanks 

.&.u~..&..... 

Director of Exempt Organizations 

From: Kathryn Beard {mailto· 

Sent: Wednesday, December 19, 2012 11:30 AM 

To: Lerner lois G 

Subject: RE: MeeUng with Democracy 21 and Campaign legal Center 

Lois, 

The five people attending the meeting will be Fred Wertheimer and Donald Simon from Democracy 21 and 

Paul Ryan, Tara Malloy and Gerald Hebert from the Campaign Legal Center. 

Thanks and we look forward to receiving the invitation. 

Kathryn Beard 

Communications & Research Director 

Democracy 21 

2000 Massachusetts Ave NW 

From: Lerner lois G [mailto:LoIs.G.Lemer@lrs.govj 

Sent: Wednesday, December 19, 2012 10:48 AM 

To: Kathryn Beard Cc: Sandifer Theodora 

Subject: RE: Meeting with Democracy 21 and Campaign Legal Center 

My secretary, Theodora Sandifer, will send an invitation, and will provide you with information 

about how to get to us once you reach the building. Will anyone other than you and Mr .. 

Wertheimer be attending? 

IRSOOOOI22502 
16 


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.&My!..&.... 

Director of Exempt Organizations 

From: Kathryn Beard [mai!to' 

Sent: Wednesday. December 19. 2012 10:21 AM 

To: Lerner lois G 

Subject: RE: Meeting with Democracy 21 and Campaign Legal Center 

Lois, 

January 4" at llam works for Mr. Wertheimer and the Campaign Legal Center. 

Thanks, 

Kathryn Beard 

Communications & Research Director 

Democracy 21 

From: Lerner lois G [mailto·Lojs.G.Lemer@irs.ooy] 

Sent: Tuesday. December 18. 2012 3:44 PM 

To: Kathryn Beard 

Cc: Sandifer Theodora; Marx Dawn R 

Subject: RE: Meeting with Democracy 21 and Campaign Legal center 

W&M EXHIBIT 2 

I have spoken with my colleagues. We can meet Friday. January 4th at 11 :00. let us know if 

that works and we will send out an Invitation . 

.&My!..&.... 

Director of Exempt Organizations 

From: Kathryn Beard (mailto· 

Sent: Monday. December 17. 2012 1:26 PM 

To: Lerner lois G 

Subject: RE: Meeting with Democracy 21 and Campaign Legal Center 

Great. Thank you very much. 

Kathryn Beard 

IRSOOOO122503 
17 


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Communications & Research Director 

Democracy 21 

2000 Massachusetts Ave NW 

From: Lerner Lois G [rnallto:19is.G Lemer<!i!irs.ooyl 

Sent: Monday, December 17, 2012 12:06 PM 

To: Kathryn Beard 

Cc: Sandifer Theodora 

Subject: RE: Meeting with Democracy 21 and campaign Legal Center 

W&M EXHIBIT 2 

Let's see what we can put together. We'll gel back 10 you once we've reached my colleagues . 

.&.>11.&... 

Director of Exempt Organizations 

From: Kathryn Beard [mailto: 

Sent: Monday, December 17, 2012 11:46 AM 

To: Lerner Lois G 

Cc: San<flfer Theodora 

Subject: RE: Meeting with Democracy 21 and campaign Legal Center 

Dear Ms. Lerner, 

Thank you for getting back 10 me. 

After speaking with Mr. Wertheimer and Ihe Campaign Legal Center, they are all free all day on Friday, 

January 4, 2013. Whalever lime works best for you is fine with them. If that day does not work, I can try to find 

another day that they will be free. Thank you, 

Kathryn Beard 

Communications & Research Director 

Democracy 21 

2000 Massachusetts Ave NW 

IRSOOOO122504 
18 


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W&M EXHIBIT 2 

From: Lerner lois G [mailto:loiS.G.lerner@irsgovl 

sent: Friday, December 14, 2012 2:16 PM 

To: Kathryn Beard 

ee: Sandifer Theodora 

Subject: RE: Meeting with Democracy 21 and Campaign Legal Center 

Thank you for your Interest In meeting with us. Because all EO related guidance Is a joint 

effort by EO, IRS Chief Counsel and Treasury. It makes the most sense to have all three 

offices In attendance at the meeting. I have reached out to my counterparts and we can set 

something up for the first week In January. but schedules do not permit a meeting before 

then. Please provide some proposed dates/times and my secretary. Theodora Sandifer. 

will coordinate schedules . 

..&.>~.&-

Director of Exempt Organizations 

From: Kathryn Beard [mailto' 

Sent, Friday, December 14, 2012 12:25 PM 

To: Lerner loiS G 

Subject: Meeting with Democracy 21 and campaign legal Center 

Dear Ms. Lerner. 

I am writing on behalf of Fred Wertheimer. President of Democracy 2 I. to inquire about setting up a meeting 

for him and the Campaign Legal Center to meet with you to discuss the request for a petition for rulemaking on 

candidate election activities by Section 501 (c)( 4) groups. 

If possible. Mr. Wertheimer would like to set up a meeting sometime next week:. 

Thank you very much and I look forward to speaking with you. 

Kathryn Beard 

Communications & Research Director 

Democracy 21 

2000 Massachusetts Ave NW 

IRSOOOO122505 
19 


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OAve CAMP, MICHtGAN. 

CHAIRMAN 

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Mr. Daniel Werfel 

Acting Commissioner 

Internal Revenue Service 

COMMITTEE ON WAYS AND MEANS 

1l02l0NGWORTH HOUSE Office BUIlDING 

{2021225-3625 

~:UJshington, EJQ: 2051Hli8 

httpdlwaysondmeans.house.gov 

September 20, 2013 

1111 Constitution Avenue, N.W. 

Washington, D.C. 20224 

Dear Mr. Werfel, 

W&M EXHIBIT 3 

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In order to conduct oversight on matters withinjurisdictiDn of the Committee on Ways 

and Means (Committee), including the administration of federal tax law, and pursuant to 

my authority under IRC §6103, I am writing to request certain returns and return 

information as to the following organizations. No later than October 4, please produce to 

tbe Committee all documents relating to the following organizations: 

American Crossroads 

Crossroads GPS 

Priorities USA 

Priorities USA Action 

Americans for Prosperity 

Organizing for Action 

I am designating six members of the Committee staff as my agents to receive returns and 

return information insofar as it is disclosed 

This document is a record of the Committee and is entrusted to tbe Internal Revenue 

Service for your use only in handling this matter. Additionally. any documents created by 

the Internal Revenue Service in connection with a response to this Committee document, 

including (but not limited to) any replies to the Committee, are records of the Committee 

and shall be segregated from agency records and remain subject to the control of the 

Committee. AccordinglY, the aforementioned documents are not "agency records" for the 
20 


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purpose of the Freedom of Infonnation Act. Absent explicit Committee authorization, 

access to this document and any responsive documents shall be limited to Internal 

Revenue Service personnel who need such access for the purpose of providing 

information or assistance to the Committee. 

Thank you in advance for your assistance in this matter. 

contact Ways and Means Committee s~t1J ••• 

~~AAAA)f~ Chairman :Y "V'" v .... ~ 

W&M EXHIBIT 3 
21 


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W&M EXHIBIT 4 

From: 

Sent: 

To: 

Ce: 

Subject: 

Lerner loisG 

Wednesday, January 02, 2013 4:29 PM 

Eldridge Michelle l; Flax Nikole C; lemons Terry l 

Sterner Christopher 8; Vozne Jennifer l; Zann Roberta 8; Kirbabas Mark J; Williams 

Grant Burke Anthony; Patterson Dean J 

RE: ProPublica: 501c4 questions .. says deadline today 

Just FYI for everyone's Information -I received the Incoming and will refer It to Exam as we do 

with any complaint. Ruth Madrigal, Vickie Judson and I are meeting with Democracy 21 and 

some others on Friday regarding their request for guidance on c4. This has been set up for 

some time. I plan to have David Fish there and begin the meeting by telling them we cannot 

discuss specific taxpayers, but are there to hear their general comments regarding potential 

guidance. We will be very cautious . 

.&.>p..&.... 

Director of Exempt Organizations 

From: Eldridge Michelle L 

Sent: Wednesday, January 02,20134:16 PM 

To: Flax Nlkole C; Lerner lois G; lemons Terry L 

Cc: Sterner Christopher B; Vozne Jenn/fer l; Zann Roberta B; Kirbabas Mark J; Williams Grant; Burke Anthony; Patterson 

DeanJ 

Subject: FIN: ProPublica: 501c4 questions .- says deadline today 

FYI--Here is latest inbound from Pro Publica. They are updating their story given a new letter sent 

to IRS by Democracy 21 and Campaign legal Center. Below is the cut and past version of that 

letter. 

I recommend that we just let this one sit and wait out the deadline. We can certainly decline 

comment on the letter sent to us --but gets more problematic on the issue of th e application 

based on previous correspondence. Please let me know if you have other thoughts. Thanks.--

Michelle 

Watchdog Groups Again call on IRS to Deny Tax -Exempt Status to Karl Rove's Crossroads GPS 

Wednesday, January 02, 2013 

Watchdog Groups Again Call on IRS to Deny Tax -Exempt Status to Karl Rove's Crossroads GPS, Cite $70 

Million In 2012 Campaign Expenditures as Prima Facie Evidence Group is Campaign Operation, not "Social 

Welfare" Group 

In a letter sent today to the IRS, Democracy 21, join ed by the campaign legal Center, again called on the agency to deny Karl 

Rove's Crossroads GPS tax -exempt status as a section SOl{c)(4) social welfare organization. 

According to the letter from the watchdog groups: 

IRSOOOO122515 
22 


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W&M EXHIBIT 4 

According to the Center for Responsive Po lities (CRP), Crossroads GP$ spent $70 million on independent expenditures to elect 

Republlcan candidates or defeat Democratic candidates in the 2012 elections. This is an extraordinary amount of money to be 

spent on influencing elections by a group which claims it is a "social welfare" organization. 

Indeed, Crossroads GPS and Its affiliated Super PAC, American Crossroads, together spent a total of $175 million on 

independent expenditures and electioneering communications to influence the 2012 election s-far more than any other 

outside spender, according to CRP. 

The letter from the watchdog groups continues: 

[Wle submit that the $70 million spent by Crossroads GPS just on campaign ads reported to the FEC in 2012 is prima facie 

evidence that the organization does have a !/primary purpose" to engage In campaign activities. The statement made by 

Crossroads GPS two years ago on its application for tax ·exempt status that its campaign activities will be "limited In amount, 

and will not constitute the organ fzatien's primary purpose" are simply not credible, in light of the actual practices of the 

organization and the tens of millions of dollars Crossroads GPS spent on campaign ads since then. 

As we have stated in previous letters, the misuse of "social we! fare" organizations as vehicles for campaign spending results in 

direct and serious harm to the American people because it hides from public scrutiny the identity of the donors funding the 

campaign spending. 

According to Democracy 21 President Fred Werth eimer: 

The apparent failure of the IRS to grant tax ~exempt status to Crossroads GPS, more than two years after Crossroads applied 

for status as a SOl(c){4) "social welfare" organization, provides some hope that the agency will do the right thing and rejec t 

the Crossroads GPS application. 

It appears clear that Crossroads GPS exists for the overriding purpose of influencing elections. Crossroads GPS founder Karl 

Rove is a political operative, not a "social welfare" activist. Crossroads GPS spent tens of mil lions of dollars on lV ads to elect 

and defeat candidates and is nothing more than a campaign operation posing as a "socia! welfare" organization. 

The IRS must not allow Crossroads GPS to get away with Its charade of claiming to be a "social welfare" org anization so it can 

hide the donors financing its campaign activities from the American people. Crossroads GPS must be held accountable for 

abusing the nation's tax laws to inject tens of millions of dollars in "dark money" into federal races. 

According to the letter sent today: 

ProPublica, a news organization, recently received and publicly disseminated the Form 1024, "Application for Recognition of 

Exemption under Section SOl(a}, filed by Crossroads GPS on September 3,2010, seeking recognitio n as a "social welfare" 

organization under section 501{c)(4) of the Internal Revenue Code. 50 far as we are aware, the IRS has yet to grant the 

application. 

In its application, Crossroads GP$ states that 50 percent of its activities will be devoted to "p ublic education/' 30 percent will 

be devoted to "influencfing) legislation and polfcymaking." and 20 percent will be devoted to "research." Application at 

2. Thus, when asked to provide a "detailed narrative description of all the activities of the organ izaUon - past, present and 

planned," Crossroads GPS fails to mention any activities devoted to influencing federal elections, and instead describes 100 

percent of its activities as involving efforts other than electioneering. 

Inconsistently, in response to a different question on the application, Crossroads GPS states that it plans to spend funds "to 

distribute independent political communications," but such activity "wi!! be limited in amount, and will not constitute the 

organization's primary purpose." Id. at 4. 

We have written to you on a number of occasions in the past two years regarding the enormous sums of money spent by 

Crossroads GPS to Influence the 2010 and 2012 federal elections. In those letters, we have challenged the organization's 

eligibility for section 501(c)(4) tax -exempt status. 

IRSOOO0122516 
23 


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January 04, 2013 

FrIday 

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W&M EXHIBIT 5 

IRSOOOO378449 
24 


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From: 

Sent: 

To: 

Subject: 

Lerner Lois G 

Monday. January 07, 2013 4:56 PM 

Downing Nanette M 

RE: Referral organization 

W&M EXHIBIT 6 

The reasons stated for not selecting earlier on that the org is for -profit is most disturbing. The 

other two reasoned that there was no 990 filed and It had a 1024 pendIng so let's send It to 

Cincy. That would make sense if this were a c3, but it doesn't If It Is a c4. They don't have to 

come into Clncy. If we only open audits on orgs that file 990s, that's a big hole in the 

system. Then you have newspapers telling us what the orgs are doing, but we never look. If 

the org has been around log enough to owe us a 990 and they aren't filing to hide what they 

are alleged to have done, It should be our job to go out and get the 990 and then determine 

whether the allegations-that are very strong-are true. 

As I said, we are working on the denial for the 1024, so I need to think about whether to open 

an exam. I think yes, but let me cogitate a bit on it. 

Do I have Information regarding the cases approved for exam previously and their 

priorities? I'd like to get some Into the field, but can't until I'm comfortable with thaI. Thanks 

.&N#.&.... 

Director of Exempt Organizations 

From: Downing Nanette M 

Sent: Monday, January 07,201312:19 PM 

To: Lerner lois G 

Subject: RE: Referral organization 

I pulled up referral files on this organization. We have received numerous referrals on this organization over the last 3 

years (25 In total). The system shows thet the organization did not file a form 990 unlil April 2 012. The first eight referrals 

were limited news article. They were put into 2 refe"al files and .ent to committee. There was no 990 filed and the 

committee notated that an application was pending. The file indicates that they submitted the referrallnf ormation to 

determinations. The reason for the non selection was due to the limited Information provided in the news article. These 

are the two referral non selection mentioned by Tom. 

Future referrals had additional information. We were instructed in August 2011 to hold all political referrals until dual track 

was finalized. All future referrals were associated together and included in the dual track. The PARe reviewed in 

December 2012 and selected it for examination. I have pulled the files and see that they went back to the committee in 

December 2012 for final committee review. 

From: Lerner lois G 

Sent: Friday, January 04, 2013 4:50 PM 

To: Downing Nanette M 

Subject: FW: Referral organization 

I had a meeting today with an organization that was asking us to consider guidance on the c4 

issue. To get ready for the meeting, I asked for every document that had sent in over the last 

IRSOOOO122549 
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W&M EXHIBIT 6 

several years because I knew they had sent in several referrals. I reviewed the Information 

last night and thought the allegations In the documents were really damning, so wondered 

why we hadn't done something with the org. The first complaint came In 2010 and there were 

additional ones in 2011 and 2012. 

I asked Tom Miller whether he recalled seeing referral committee notes on the referrals when 

he and Judy went down to look at the referrals. He looked them up, and as you can see below, 

the referral committee unanimously non -selected the case twice. I don't know where we go 

with thls-as I've told you before-I don't think your guys get it and the way they look at these 

cases is going to bite us some day. The organization at Issue Is Crossroads GPS, which Is on 

the top of the list of c4 spenders In the last two elections. It Is in the news regularly as an 

organization that Is not really a c4, rather It Is only doing political actMty -taking In money 

from large contributors who wish to remain anonymous and funneling It Into tight electoral 

races. Yet··twlce we rejected the referrals for somewhat dubious reasons and never followed 

up once the 990s were filed. 

I know the org is now In the ROO--based on allegations sent In this year, but this Is an org that 

was a prime candidate for exam when the referrals and 9905 first came I n. I worry that If the 

allegations In the present complaint only discuss this year, Exam will slot If for a future year 

because this year's 990 Isn't In yet. My level of confidence that we are equipped to do this 

work continues to be shaken. I don't even know what to recommend to make this better. I'm 

guessing If it hadn't been for us implementing Dual Track, the org would never be 

examined. And, I am not confident they will be able to handle the exam without constant 

hand holding--the Issues here are going to be whether the expenditures they call general 

advocacy are political intervention. 

Please keep me apprised of the org's status in the ROO and the outcome of the referral 

committee. You should know that we are working on a denial of the applic atlon, which may 

solve the problem because we probably will say It isn't exempt. Please make sure ali moves 

regarding the org are coordinated up here before we do anything . 

.&u¢.&.-

Director of Exempt Organizations 

From: MUier Thomas J 

Sent: Friday, January 04, 2013 1:55 PM 

To: Lerner lois G 

Subject: Referral organlza~on 

I looked at the file on that organization, which is currently In the "ROO Inventory" category. The 

organization was created in June 2010. It has twice previously been considered by the Re, in 

11/2010, and 612011. Both times it was not selected by unanimous vote, though some committee 

explanations are questionable. On the 11/2010 tracking sheet, two members not e that the 

organization had recently filed Form 1024, with one recommending forwarding the referral information 

to Determinations and the other transferring the case to the ROO. The third member wrote, however, 

that "the referral is on a for-profit entity .. ." which is in no way correct. Although it is understandable 

that recommending an examination could be considered premature at either point, especially as the 

organization did not file Forms 990 until late April 2012, when it filed one for the period 06/0 112010-

05/31/2011, and another for the period 06/01/2011-12131/2011 (presumably to change its lax year). 

IRSOOOOl22550 
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W&M EXHIBIT 6 

The file contains the classifier recommendation that the case be referred for field examination, but I 

did not see an indication when it would go back to referral committee. 

Tom Miller 

Thomas J. Miller 

Technical Advisor 

Exempt Orlaarliz,rtlc,ns Rulings & Agreements 

Phone: 

Fax: 

IRSOOOO122SS1 
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This summary discusses at a high level IRS Exempt Organlzaiions (EO) processes with 

respect to examinations and compliance checks of tax exempt organizations involved in 

political activity. 

An enforcemant review of a tax exempt organization falls Into one of two broad 

categories: examinations and compliance checks; 

The IRS conducts examinations, also known as audits, which are authorized under 

Section 7602 of the Intemal Revenue Code. An examination is a review of a taxpayer's 

books and records to determine tax liability, and may involve the questioning of third 

parties. For exempt organizations, an examination also determines an organization's 

qualification for tax-exempt status. EO conducts two different types of examinations: 

correspondence and field examinations. A correspondence examination Is conducted 

remotely solely through the Issuance of information document requests to the taxpayer 

by the examiner. During a field examination the examiner conducts In-person 

interviews of the taxpayer's representatives in addition to Issuing Information document 

requests. 

A compliance check is a review to determine whether an organization Is adhering to 

recordkeeping and Information reporting requirements and/or whether an o.rganlzatlon's 

activities are consistent with its stated tax-exempt purpose. Atthough during a 

compliance check the examiner may contact the taxpayer, it is not an examination since 

it does not Involve review of the taxpayers books and records and does not directly 

relate to determining a tax liability for any particular period. See Publication 4386, 

Compliance Checks, for further details. 

As a result of the Advisory Committee for Tax Exempt and Government Entilfes (ACT) 

recommendation, EO established the Review of Operations (ROO) in 2005. Its initial 

vision was to follow-up on exempt organizations within three to five years of recognition 

of exemption in order to assess whether the organizations are operating as stated In 

their applications for exemption. The ROO conducts compliance reviews on 

organizations. It is authorized to determine whether an organization's actiVities are 

consistent with its stated tax-exempt purpose and whether the organization Is adhering 

to recordkeeplng and reporting requirements. However, unlike a compliance check, the 

ROO does not make taxpayer contact In addition, because the ROO does not conduct 

an examination, it is not authorized to examine an organization's books and records or 

ask questions regarding tax nabilities or the organization's activities. 

EO Determinations makes referrals to EO Examinations when questionable activity Is 

likely to occur, e.g., future operations may impact exempt status. generale Unrelated 

BusinesS Income (UBI) or other tax liabilities. or necessitate a change In private 

foundation classification (IRM 7.20.1.5.2). EO Determinations started sending referrals 

to the ROO In a'pproximately July 2006. At that time, specialists in EO Determinations 

were required to complete a Form 6038 and a Form 6038 Attachment In March 2009, 

the Form 6038 was discontinued for cases closed through the screening program and 

replaced with a version of Form 14261, Memorandum 10 Fne. The procedures were 

also changed and required the specialist to complete a Form 6038·attachment only If 

the specialist made a referral to the ROO. In 2011, the Form 6038 and attachments 

W&M EXHIBIT 7 

IRS0000378444 
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were discontinued and replaced with the Form 14261 and Form 14266 for the ROO 

-referrals. See IRM 7.20.1.5.2 for additional information. 

The initial vision for the ROOhas been expanded to include the building of cases for EO 

Examinations for various compliance Initiatives. The initial review conducted by the 

ROO allows for a more focused examination thus increasing the overall effectiveness of 

EO Examinations. In 2011, EO began building a Dual Track process to use data 

analytics and referrals to determine if exempt organizations have compliance issues 

relaled to political activities. Procedures were approved in October 2012. Cases 

identlfled in the Dual Track process, Including those identified through data analytics 

and referrals, first are routed to the ROO for case development and research. These 

cases then are routed to a Committee for review and decision on whether an 

examination is warranted. Dual Track Data AnalyUcs and Referral examination cases 

were first aSSigned to the field late October 2012. The Director, EO suspended 

examlnalfon case work November 16, 2012, pending the development of additional 

guidance. On February 4,2013, the directive to resume examination work was given. 

The first Dual Track examination case was started in March 2013. 

On June 3,.2013, the new TEGE leaderShip team made a decision to temporarily 

suspend all Dual Track examinations until a review of the procedures and process Is -

completed. During the summer of 2013, a cross functional team was crealed to review 

the selection and data analytlcs criteria and made recommendations. TEGE leadership 

Is still evaluating the team's recommendations. Although several Dual·Track cases 

were started in March 2013, taxpayer contacts remain suspended. 

In response to a congressional request, the IRS reviewed the 493 cases that were on 

the advocacy case tracking spreadsheet as of May 9, 2013, to determine whether they 

were considered by the ROO or are currently under examination. EO Examinations has 

re~eived a total of 53 referrals on 24 organizations identified on the list. None of these 

referrals were from EO Determinations. Referrals can come from various sources, 

including, external'stakehoklers, other areas of the Federal government, and taxpayers. 

Eleven referrals went through the Dual Track process, and 13 referrals were determined 

by career civil servant classifiers not to have political allegations and thus did not go 

through Dual Track. Flve organizations were identified through data analytics of the 

Dual Track process. Out of 16 Dual Track cases (11 referrals and five data analytlcsl, 14 

have been reviewed by the ROO and two are currently In the ROO review process. 

(See the following summary). 

EO Examinations separately Identified 60 organiZations that were referred to EO 

Examinations from EO Deter(l1inations during the period of 2012 through 2013. 

However, EO Examinations has not taken any actions on these referrals for two 

reasons. First, they were not acted on because they were referrals for future year 

follow-ups, Second, they have not been acted on because in reviewing the ROO, Dual 

Track and examination processes during the summer of 2013, new TEGE leadership. 

decided to return Ihese referrals to EO Determinations for further review to ensure the 

referrals were appropriate. Accordingly, no EO Determinations referrals of political 

advocacy cases have resulted in review by the ROO or processing through the Dual 

Track system. 

W&M EXHIBIT 7 

IRS0000378445 
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W&M EXHIBIT 7 

A. Referrals: 

1) Eleven referrals went through Dual Track process: 

a. Selected for examination: (None assigned to field groups) 3 

b. Not selected for examination: 1 

c. Awaiting Committee Review: 5 

d. Transferred to ROO for research and review: 2 

2)Thlrteen referrals were determined by career classifiers not to 

have political allegations, so did not go through the Dual Track 

process 

a. Selected for examination (None assigned to field groups) 2 

b. Not selected for examination: 6 

c. Awaiting classification 5 

B. Dual·Track Data Analytics: 

- Selected for examination (None assigned to field groups) 5 

IRS0000378446 
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RPTS BLAZEJEWSKI 

DCMN HOFSTAD 

COMMITTEE ON WAYS AND MEANS. 

U.S. HOUSE OF REPRESENTATIVES. 

WASHINGTON. D.C. 

INTERVIEW OF: NANETTE DOWNING 

Friday. December 6. 2013 

Washington. D.C. 

W&M EXHIBIT 8 

1 

The interview in the above matter was held in Room 1102, 

Longworth House Office Building. commencing at 10:13 a.m. 
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W&M EXHIBIT 8 

33 

we finish a project, you know, folks are trained, if we get 

something on it, it won't be a formal project. So 501(c) (3)s and 

politicals was just normal -- process as any other referral. It 

still would go through just a normal committee, because it' 5 very 

sensitive. 

Then, 2010, Citizens United came out. We started getting 

referrals on 501(c)(4)s, political, we started getting 

congressional. 

Q Uh-huh. 

A You know, folks above me came and said, how are you 

going to deal with these? We know this is going to be very --

Q Who was that? Who would have come and asked you? 

A Lois, up the chain, you know. 

Kind of like for your work plan, what are you going to do, 

how are you going to do this? We had to take a step back. We 

said, this is a new area, we need processes, we need procedures, 

we need training. 

Q Right. 

A At that time, we said, stop (c)(3) referrals because 

we want to make sure we're being consistent with them all. 

So, you know, this was the end of 2010. 2011, we 

developed -- you know, they tasked to me, what are you going to 

do, as the Director? I put a team together, a cross-functional 

team, said, how are we going to do this? And we wanted to use, 

you know, what we learned from the (c)(3) political stuff, you 
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W&M EXHIBIT 8 

34 

know, and the past project we had, what worked best. TIGTA had 

come in and looked at it. 

But we also had something new; we had the new 990. We had 

new data. You know, we were coming up with a strategy of the new 

990. The Oversight Board was asking us, how are you going to use 

all this new data from the 990? We came up with a strategy of 

all these potential queries of how we could use the 990. And, 

you know, a piece of it was political, a piece is fraud, nonfiler 

stuff, different things, and we had some with political. So we 

said, this is new than when we did PACI. We know we've got 

referrals, we know we've got data analytics, and we came up with 

this dual-track approach. 

So we came up with this concept in a picture, but then we 

sti 11 had -- we said, we cannot start exams unti 1 we have processes 

in place, procedures, and train our folks. We built processes. 

We built definitions. We had to build training from my 

classifiers, and we did -- and the ROO folks and my committee 

members. We knew how sensitive this would be, that we wanted very 

tight controls and we wanted some extra safeguards in place. 

So. I mean, just a very high-level overview. If a referral 

comes in with a pol itical allegation. it goes to the ROO to review. 

to do all that publicly available information. to see if they 

see any potential reasonable belief that. yes, there's political 

activities going on or maybe -- you know, a referral. Maybe 

they're just confused and it's lobbying stuff. The ROO will do 
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that review. 

W&M EXHIBIT 8 

35 

And then we set up committee members. that the committee 

members look at the ROO review. And that commi ttee of three then 

makes that fi na 1 deci s i on whether or not there's reasonable be 1 i ef 

that an exam should be done. 

Q Let me ask about the PARCo Is that the term for the 

political committee? 

A Uh-huh. 

Q In the words of a report by the IRS. the purpose of 

the PARC is to ensure equity and transparency and that no one 

individual could select an organization within certain 

classifications for examination. 

A Uh-huh. 

Q Is that your understanding. that the true purpose is 

to prohibit one person from actually effecting these decisions? 

A Right. You know. I've got several different 

committees. like a church committee. 

Q Sure. 

A And it's when it's very sensitive that we don't want 

it in anyone person's hands to have to make that decision. 

Q I understand. If an ent ity is looked at by the PARC. 

is that kind of a one-time thing? Or can a group be referred to 

the PARC several times? 

A They could -- I mean. at the beginning. as we started. 

you know. we had this inventory. so when something went to the 
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W&M EXHIBIT 8 

36 

ROO, if we had already received 10 referrals, the whole packet 

went. But I would assume in the future, if I get a new referral 

in. it will go through the process again. 

And, in a way, that's like any of my referrals. You know, 

there are individuals who will send -- you know, I could get 50 

referrals. Well, it goes through a process, and it mi ght be that 

eventually they provide -- you know, it can't just be a referral 

saying, I don't like this person, I think they're doing something 

wrong. I mean, that's why we've got these safeguards in place, 

and that's why, you know -- there's got to be information for 

somebody to have a reasonable belief there's a potential area 

of noncompliance there. 

So, yes, you can send more, and it wi 11 go through the revi ew 

process. 

Q You mentioned safeguards that are in place. What are 

those? What types of safeguards are in place? 

A We 11, pa rt of the safegua rd is the commit tee of th ree. 

Q Right. 

A Part of the safeguard is we built this referral system. 

And this is something, you know. that from back years ago we didn't 

have, that the system automatically calculates and that the 

individual actually puts their comments in the system, whereas 

before it was all paper. 

We did -- so this is all dual-track. Before I briefed up, 

say, and I had all my processes in place, I'm ready to go, I've 
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W&M EXHIBIT 8 

37 

got my first small bucket that we're ready to examine. we had 

some folks come in and just do a consistency check. quality check. 

We built definitions. We built definitions of -- I'm trying 

to think of an example of some of the definitions. You know, what 

was the impact? You know. was it - - you know. if it's - - you know, 

what was the impact of the pol itical nature? Was it a speech that 

went out on the Internet? You know, just to help -- or was it 

one sign one time? You know. again. just some definitions to try 

to help them to give them some clear guidance on making those 

final decisions so that we were consistent. 

Q Does the PARC look at or consider whether or not a group 

has a ROO recommendation? 

A 

Q 

A 

Q 

a ROO? 

A 

Q 

A 

Do they consider the ROO? 

Is that known to the PARC as they look at a case? 

I can't be certain to answer that question. 

Would the PARC have information that was obtained by 

Yes, they will have the ROO file. 

They have the ROO file. 

And if the PARC needs to do additional research. that 

is part of their --

Q They also have the ability to --

A The ability to do additional research. 

EXAMINATION 

BY MS. ACUNA: 
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W&M EXHIBIT 8 

38 

Q So when they do additional research and when they have 

the ROO fi Ie, that all becomes part of the PARe fi Ie wi th respect 

to that referral? 

A Yes. Yeah. It will all go in the file. 

Q Okay. And that's electronically, as well, or just the 

hard copies? 

A No, it will all be put in the electronic file. 

Q So it will be loaded up into that system we were 

discussing? 

A Uh-huh. 

Q And can anyone person override a PARe decision? 

A No. No. 

Q So once the PARe makes a decision one way or the other, 

no one can come in and say --

A No. And I would expect -- I don't think you were in 

here when I talked about this. I would expect if anybody tried 

to do that, they would turn that in to TIGTA. We are not allowed 

to do that. 

Q Okay. 

Mr. Armstrong. Well, right now, we're at an hour. Do you 

want to take a break? 

Mr. Kaiser. Your call. 

Mr. Armstrong. It's up to you. 

Ms. Downing. I'm okay. 

Mr. Armstrong. Okay. Great. 
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RPTS COCHRAN 

DCMN HERZFELD 

SUBCOMMITTEE ON OVERSIGHT, 

COMMITTEE ON WAYS AND MEANS, 

U.S. HOUSE OF REPRESENTATIVES, 

WASHINGTON, D.C. 

INTERVIEW OF: VICTORIA ANN JUDSON 

Wednesday, September 11, 2013 

Washington. D.C. 

W&M EXHIBIT 9 

1 

The interview in the above matter was held at Room 1102, 

Longworth House Office Building, commencing at 10:05 a.m. 
38 


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Q Okay. 

W&M EXHIBIT 9 

57 

A I don't know of any - - I don't know what, if any, work 

my team may have done with respect to specific cases. 

Q Prior. Okay. 

Mr. Carlo. Chris, may I? 

Mr. Armstrong. Yes. 

BY MR. CARLO: 

Q I thi nk you sai d that it was in the spri ng of 2012 that 

you discussed with Ms. Lerner a Crossroads GPS case and she gave 

you advance notice that that might be a denial. Is that correct? 

A That's the best of my recollection. And I don't know 

if I would characterize it as discuss as opposed to she told me 

that 

Q That you had some --

A A heads-up about it. 

Q And that you didn't recall having any discussions with 

her about any other Tea Party-type cases? 

A The one thing I recall discussing with her was whether 

there were other cases as well and whether the cases that were 

coming reflected different sides of the political spectrum. 

Q Okay. And what did she tell you? 

A She told me they did. 

Q They did. What was it about Crossroads that made that 

the subject of thi s conversation? If there were other cases, other 

Tea Party cases, other cases on the other side of the political 
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W&M EXHIBIT 10 

EPIEO Case Chronology Record Pa2c 1 

Employer's or Organization's Name EIN 

Crossroads Grassroots Policy Strategies 27-2753378 Screener's Name Total 

GMuthert Time 

0.4 

Plan name and Plan Number Specialis('s Name Liz Hofacre 0.5 

Joseph Herr 

Reviewer's Name 

Date Individual Action Time Topics Discussed, Information/Amendments Follow- Contacted Cod. Requested or Other Action Taken Up 

Date 

IIJ01l2 Assigned case. 

212112 I 6 OF AC review & check completed no matches found; BOL 0 review & 

cbeck completed - no matches found. This is a high profile case; the news 

media bas been monitoring this organization. Conduct internet research on 

the organization. View advocacy communications by organization on You 

Tube. Review tax law related to organization RR 81~95. 2004-6. Draft 

Letter!312. 

WI12 Stephen Seak. EO 1,4 6 Discuss case with Stephen Seo~ coordinator for Advocacy Project Search 

Determinations internet for mention of organization in news media. Finishing review tax law 

and draftfnJ!l.tter. Send draft to Stephen for review. 

2116112 Stephen Seok, 4 2 Meeting with Advocacy Coordinator and Manager to review developmental 3108112 

Steve Bowling. Jetter. They suggested some changes to letter. Finish letter and mail to 

Jon Wadden organization and POA. 

2122112 Michael Bayes, 3 POA left voicemail message requesting an extension. I returned the caJl and 3122112 

POA granted the extension. 

2123112 Advocacy eases placed on hold 

3116112 2 Mail 60~day extension letter to organization and PDA. (Copy of Letter 1312 5115112 

included in mail; not included for case file copy) 

3119112 Michael Bayes, 3 POA left. voicemaU message. I return caU; PDA asked for more time. I 

PDA explained a 60..-day extension was sent on Friday. 

4123112 Advocacy cases requested to be turned in for review per program manager. 

5104112 Michael Bayes, 3 POA left message. 

POA 

5107112 Michael Bayes, 3 0.5 l left retwn message. POA returned my call. POA discussed the response. 1 

I11III said organization could send in the information they currently have available 

and that 1 would it to see if it sufficed, He also asked for some additional 

time (about a week). I said J would elevate the request for additional time. 

Action Codes Remarks 

I. Review file, applicalion, amendments/information 

2. Correspondence 

3. Telephone contacts 

4. Examination or conference 

A. Employer/Administratorrrrustee Office 

B. Representative's Office 

C. DistriclOffice 

Fo,,, 5464-A (4·97) Calalog Number 24265N DcparunentoflheTreasuryInlemal Revenue Service 

IRS0000071224 
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W&M EXHIBIT 10 

EPIEO Case Cbronolof!Y Record Pa!!:e 2 

Employer's or Organization's Name EIN 

Crossroads Grassroots Policy Strategies 27-2753378 Screener's Name Total 

GMuthert Time 

0.4 

Plan name and Plan Number Specialist's Name Liz Hofa<:re 0.5 

Joseph Herr 

Reviewers Name 

5109/12 Mich!~Bayes. J Received approval for extension. J caned POA to let him know. 5122112 

5122112 Mich~~~.yes. 3 POA left voicemail stating response was sent overnight 

5123/12 2 Receive response 

6107112 1 5.5 Begin review of large response. Create spreadsheet to analysize cost of each 

television ad and track whether political or advocacy. 

6108112 1 2 Continue analysis of response. 

6125112 Send infonnation to EOT to get their aid in analyzing cases. 

6125112- Note: Specialist was instructing seven separate sessions of CPE the weeks of 

8117112 1une 25 through August 17. 

9117112- Specialist on leave 

9121112 

9127112 1 2 As requested from EDT, draft a briefing on my thOUghts on case and how 

case might be worked. Submit by email to Andy Megosh and request to 

schedule conference call 

1104113 4 2 Conference caU with EOT and acting area manager on how best to proceed 

with case. 

1107/13 1 2 Based on conference begin reviewing case information, tax law, and 

draft/template advocacy denial letter. aU to think about how best to compose 

the denial letter. 

1109113 1 7 Work on analyzing case and drafting deniallettcr 

1II0II3 1 7 Work on analyzing case and dratling denial letter 

1111113 1 7 Work on analyzing case and draftin!!. denial Jetter 

Action Codes Remarks 

l. Review file, application, amendments/information 

2. Correspondence 

3. Telephone contacts 

4. Examination or conference 

A. Employer! Administratorffrustee Office 

B. Representative's Office 

C. District Office 

Fom, 5464-A (4-97) ~menlofihcTrellSury· 

Internal Rtvenu~ Service 

IRS0000071225 
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W&M EXHIBIT 10 

EP/EOC ase Ch rono OIlY R ecor d Page 3 

Employer's or Organization's Name EIN 

Crossroads Grassroots Policy Strategies 27-2753378 Screener's Name Total 

G Muthert Time 

0.4 

Plan name and Plan Number Spcciallst's Name Liz Hofacre 

Joseph Herr 

0.5 

Reviewer's Name 

1/14/13 I 2 Write-up summary of idea on how I plan to make denial argument and share 1122113 

with Sharon Light for ber opinion on whether the idea seems valid. 

5102/13 4 I Call with Andy Megosh from EOr to diseu" draft denial letter. 

SI081J3 1 9 Review case materials. Review draft denial letter of similar c~e, Prepare 

spreadsheet to help analyze ads, Begin draft of denial using the similar case 

as template. 

5/09/13 1 S Continue spreadsheet to help analyze ads. 

similar case as template. 

Continue draft of denial using the 

5/10/13 1 4.5 Continue spreadsheet to help analyze ads, Continue draft of denial 

5/13113 I 3 Continue working on draft aneHer 

5/14/13 I 2 Continue working on draft of letter 

5115113 I 2 Continue working on draft oftener 

5117113 1 2 Continue working on draft of letter 

5/30/13 I 4 Complete first working draft of denial letter. Send draft along with 

spreadsheet analysis to Sharon Light for review by EDT. 

Action Codes Remarks 

1. Review lite, appiicalion, amendments/information 

2. Correspondence 

3. Telephone contacts 

4. Examination or conference 

A. Employer! Administratorrrrustee Office 

B. Representative's Office 

C. District Office 

Fonn ;:)'tU't-ft, (4·97) 

InttmlllRevenueService 

Clllalog Number 24265N Department of the Treasury· 

IRS0000071226 
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W&M EXHIBIT 11 

EOOPcllloeal~ca_.~byroT~1111!&111 

lRSOOOOO63029 
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W&M EXHIBIT 12 

From: 

Sent: 

To: 

Subject: 

Retirement talk? 

From: Lerner Lois G 

Ught Sharon P 

Thursday, January 24, 2013 10:48 AM 

Paz Holly 0 

FW: EO Tax Journal 2013-15 

Sent: Thursday, January 24, 2013 11:46 AM 

To: Ught Sharon P 

Subject: RE: EO Tax Journal 2013-15 

Oh-maybe I can get the DC office job! 

.&<> fl,,&..a 

Director of Exempt Organizations 

From: Ught Sharon P 

Sent: Thursday, January 24, 2013 11:35 AM 

To: Lerner Lois G; Paz Holly 0; Fish David L 

SUbject: RE: EO Tax Journal 2013-15 

This is the most informative artide I've read about it http:{(www,theatlantic,com/oolitics/archive!2013/01/howorganizing-for-action-plans-to-keep-obamas-foot-soldiers-enlisted/267384/. 

Right now, the Obama campaign site includes info about this new org., featuring a blog from the new executive director 

who is leaving the White House to run it from Chicago, They'll also have a DC office, 

Since Priorities USA did not file a 1024, I woul d think they would follow the same self-dedaring path here, But maybe 

not. 

From: Lerner Lois G 

Sent: Thursday, January 24, 2013 11:26 AM 

To: Paz Holly 0; Fish David L 

Ce: Ught Sharon P 

Subject: RE: EO Tax JoumaI2013-15 

I know--this is the second article I've read about this. You may want to look for the earlier one-

-it may say whether they intend to apply 

.&<> fl,,&..a 

Director of Exempt Organizations 

From: Paz Holly 0 

Sent: Thursday, January 24, 2013 10:05 AM 

IRSC007157 
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W&M EXHIBIT 12 

To: Lerner Lois G; FISh David L 

Ce: Ught Sharon P 

Subject: RE: EO Tax )ournaI2013-15 

I am not aware that we have received this but will check. It is hard to have certainty without the org's EIN though. 

From: Lerner Lois G 

Sent: Thursday, January 24, 2013 8:27 AM 

To: Paz Holly 0; Fish David L 

Subject: Fw: EO Tax Journal 2013 -15 

Has this org actuAlly come in? If so, do we have it in DC? We need to be careful to make sure we are comfortable. I am 

not going to ABA because I am not feeling great so will be in later today. Thanks 

lois G. Lerner----~-------------------

Sent Irom my BlackBerry Wireless Handheld 

From: paul streckfus [mailt 1 Sent: Thursday, January 24, 2013 05: 11 AM Eastern Standard lime 

To: paul strecklus > 

Subject: EO Tax Journal 2013-15 

fYomt£he,V~ofPt:M.WS~ 

EcU.t<:>.-, EO TCf.1l/JO'f.M'vtalEmail Update 2013-15 (Thursday, January 24, 2013) 

Copyright 2013 Paul Streckfus 

1 - New (c)(4) to Supersede DNC? 

2 - IRS Denies Organization for Benefitting Musicians a nd Music Companies 

1 - New (c)(4) to Supersede DNC? 

Dem Officials Fret over New Obama Nonprofit 

By James Hohmann, Politico, January 23,2013 

Some key Democrats worry that President Obama's new Organizing for Action group will marginalize the 

traditional party apparatus, cannibalizing dollars and volunteers while making it harder to elect down -ballot 

candidates, 

State party leaders grumbled Tuesday at the Democratic National Committee's meeting in Washington about a 

lack of detail on how exactly the new tax -exempt advocacy organization will work. "It's still a big question 

mark right now," said Minnesota Democratic chairman Ken Martin. "We were told before the end of this 

campaign that all of that [the Obama campaign machi nery] would fold into state parties, Now we're being told 

something different, which is they're going to set up this 501(c)(4)," 

Martin backs the idea of the new strncture in theory but worries that the organizations responsible for actually 

electing Democrats will get left behind in the chase for donors and activists, "I'm not a dummy," he said, "I 

understand post-Citizens United the necessity to set up vehicles for different types of money to flow, but the 

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W&M EXHIBIT 12 

reality is you can't strip the party bare and ex pect in four years that we're going to be able to pick up the pieces 

and get a Democrat elected president if you've completely stopped building capacity within the party," 

Obama's White House intends for OFA to serve as a perpetual grass -roots arm, energizing supporters in favor 

of the president's policies. Rather than focus on fundraising and candidates, leaders said last week that they will 

engage -- at least initially -- in harnessing Obama's network of supporters and volunteers. Nonprofit status 

allows Obama to raise unlimited money from both individuals and corporations, which the DNC and individual 

state parties cannot do. But it prevents OF A from directly participating in elections. 

"People are very concerned. They don't know where it will lead," sa id North Carolina Democratic Party 

Chairman David Parker. "The concerns vary. Nothing in particular, and everything in general.... There's always 

a question of what does a successful reelection campaign do after the show is over. Is there another play to be 

involved with? Or what? And we're in the 'or what' stage?" 

"I would love to know," he added. "It's like the three wise men come to [King] Herod, and Herod says,' Well, 

this is really cool. After you find the baby Jesus, come back and tell me where he is so that I too may go 

worship,'" Parker added. "Now, was he acting in good faith or did he kill all the children in Bethlehem? I don't 

know how the story ends." 

Other Democratic leaders huddling at the Omni Shoreham Hotel would not go so far on the record the day after 

the president's inaugnration, but they view the post -election shuffle with just as much apprehension. 

"Essentially, it's an end ron around the DNC and state parties," said a third state chairman. "For the long -term 

health of our party, I don't think it is the way to go. I don't think fighting for donors is the way to do it.... We've 

won five of the last six popular votes in the general elections, so som ething's working. 

"The simple truth of the matter is that OFA 4.0, or whatever it is now, is not going to work to elect our local 

legislators," the chairman added. "It's not going to work to elect our local governors. It's going to work to push 

the president's agenda. I come from a state where the president's not very popular. My elected Democrats are 

not always going to line up with him, and getting the activists all juiced up over it doesn't help elect 

Democrats. " 

On Sunday, the new group welcomed thous ands ofObama supporters to another Washington hotel for a 

"Legacy Conference" to discuss ways they might support the president's legislative agenda. fudiana Democratic 

Chairman Dan Parker welcomes any outside help. He also notes that parties have unique f unctions that cannot 

be replicated, including direct coordination with party nominees. "In each state, it's going to be interesting to 

see how they work with the parties because I don't know if they can," he said. 

DNC Chairwoman Debbie Wasserman Schultz, who was reelected unanimously at Tuesday afternoon's 

meeting, pronounced herself "thrilled" by the new arrangement and pledged to ''work closely" with OFA. 

"Organizing for Action will enable us to keep our volunteers engaged through issue advocacy [and] to help pass 

the president's legislative agenda while training the next generation of grass -roots organizers and leaders," she 

said. "We will march forward with OFA to build the strongest progressive beachhead ever seen by electing 

leaders across the country whose values match our hearts and whose determination needs our commitment." 

Behind the scenes, though, the new incarnation of OF A will undoubtedly diminish the DNC's relevance and 

overshadow Wasserman Schultz. Many insiders believe Obama's decision to at low her to stay on as chairman 

for another term suggests a lack of interest in the party as much as a vote of confidence in her leadership. 

Separating OF A and the DNC allows the White House to avoid relying on the Florida congresswoman as a 

spokeswoman. A poll conducted for the Obama campaign last year ranked Wasserman Schultz dead last as an 

effective surrogate. The new model allows those who are actually in Obama' s inner circle to speak for him, 

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W&M EXHIBIT 12 

including Jim Messina (Obama's fonner campaign manager who will chair the group), Jon Carson and David 

Plouffe. An OF A spokeswoman did not respond to a request for comment. 

Many rank~and~file committee members. especially those who do not chair state parties, were much more 

positive about the new endeavor. Gus Bi ckford, a Massachusetts national committeeman~ noted that OPA and 

his state party worked together well during the 2012 election. That was true, he said, even though the Obama 

campaign was focused on winning neighboring New Hampshire while the state party's priority was electing 

Elizabeth Warren to the Senate. "We didn't fight against each other," he said. 

He does not expect infighting for limited resources. "I'm not naIve as to how political fundraising works," said 

Bickford. "From what I do know ... I don't think so ... I'm not a person to say it's a bad thing." 

Oregon national committeewoman Laura Calvo said local Democrats already have lots of experience partnering 

with outside advocacy organizations like labor or abortion rights groups. "So far, it's so br and new that the 

word really hasn't trickled down to something that's concrete, that you can sit down and read. Personally, I 

think it's pretty exciting," she said. "Sometimes the structure and the logistics and the priorities don't quite 

match up .... So that causes what I would call hiccups, but there's never been a major problem as far as I can 

see." 

She said her state party, because Oregon's not a swing state, has a stable structure that could win without 

national help in 2012. "We were pretty much left t 0 our own devices, and the party really pulled through," said 

Calvo. "The more progressive voices there are out there, the better off we are." 

2 - IRS Denies Organization for Benefitting Musicians and Music Companies 

I recognize that, because of the section 7428 declaratory judgment provisions, the IRS feels compelled to make 

all possible argnments in denial leiters to (c)(3) applicants, hoping that on judicial review a judge will find an 

argnment for denial he or she agre es with. 

In denial leiter 201303018, reprinted below, the IRS's National Office cites 13 revenue rulings (all from the 

sixties and seventies -- the golden age of EO revenue rulings) and four court cases, but did the IRS make its 

case? (Aside: why many org anizations don't protest remains a mystery.) 

To me the underlying issue, based on the facts set forth, is whether the applicant is engaged in some sort of 

commercial endeavor or something else. Also, I'd like to know more about its funding, which is descr ibed 

thusly: "Your primary source of income is from gifts, grants, and contributions. You also receive somt income 

from membership, consulting, and other fees," That doesn't sound like your typical commercial endeavor, 

unless the focus is on consulting inc orne. An important factor here may be the statement that "Although Y 

software is free, you will charge a flat fee for your hosting services." Are the hosting services a significant 

source of revenue? 

In its rationale for denying the applicant, the IRS sta tes: "You do not conduct any public discussion groups, 

forums, panels, lectures Of similar programs; all of your educational instruction occurs online on your website 

and blog." While this may be true, is the IRS saying more traditional educational program s are favored over 

websites and blogs? Surely not. I suppose this sentence needs to be read in context with the next sentence, 

which states: "These activities are best described as providing product information and are analogous to a 

product manual, which does not rise to the level of educational as required under I.R.C § 501(c)(3)." But this 

raises another question: is the IRS saying providing product information is not educational? Are product 

manuals not educational and presumably commercial endeavors? I f these two sentences are not head -scratching 

enough, the next sentence states: "Furthermore, you are not described in I.R.C. § 501(c)(3) as a charitable 

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From: 

Sent: 

To: 

Cc: 

Subject: 

Lerner lois G 

Wednesday. January 02. 2013 11:42 AM 

Paz Holly 0; Fish David l; Light Sharon P 

Marx Dawn R 

FW: latest artide 

I'd like to meet on status of these applications please. Can we talk Friday? 

.&.> ¢.&.,." 

Director of Exempt Organizations 

From: RaJ( Nikole C 

Sent: Wednesday, January 02, 2013 12:32 PM 

To: Lerner lois G; Marks Nancy J; Ash David L 

SUbject: latest article 

hUp:/lwww.propublica.org/article/controversial ~dark..",oney:9roup:amonq.fiVe·that-toJd~irs-they-would-stav=out 

W&M EXHIBIT 13 

IRSOOO0122510 
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RPTS HUMISTON 

DCMN SECKMAN 

SUBCOMMITTEE ON OVERSIGHT, 

COMMITTEE ON WAYS AND MEANS, 

U.S. HOUSE OF REPRESENTATIVES, 

WASHINGTON, D.C. 

INTERVIEW OF: JOSEPH H. GRANT 

Friday, September 20, 2013 

Washington, D.C. 

W&M EXHIBIT 14 

1 

The interview in the above matter was held at Room 1102, 

Longworth House Office Building, commencing at 10:04 a.m. 
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Q Okay. 

W&M EXHIBIT 14 

39 

A You know. hypothetically, if, you know. somebody had 

come to me with --

Mr. Pollack. I wouldn't even give a hypothetical. The 

answer is you don't recall it ever happening. 

that. 

Mr. Lyons. Let's let him answer. 

Mr. Grant. I never did it. 

Mr. Lyons. Counsel. 

Mr. Grant. That's fine. I just never had occasion to do 

BY MR. ARMSTRONG: 

Q Sure. That's fair? 

A I suppose some set of circumstances could be put 

together where. you know. I might have felt a need to do that. 

but I never did. 

Q Are you aware of an instance where -- where an executive 

at the IRS did that? 

A No. 

Q Would it be appropriate for a manager at IRS to refer 

a specifi c taxpayer to Exams or to intervene on the; r own on - - I 

mean. their own volition to Derms? 

A I believe it would be completely -- it would not be 

appropriate to intervene on their own. So -- and I'm not aware 

of that occurring. 

Q Rather than passing along. 
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• If it appears that a return has not been filed because the organization has 

not been operating more than a year, the case is returned to the 

Classification Referrals manager to set up as a future-year referral. The 

case will be resent to the ROO unit when the return is filed or becomes 

delinquent. (Note: The Referrals Manager runs a monthly Future-Year 

Referrals Report and processes the required returns). 

W&M EXHIBIT 15 

Step 3(c) Other 501(c) organizations that have filed a return 

Step 4 

Step 5 

These referrals are sent to ROO. 

The referrals are researched by Classification-Referrals to determine whether the 

entity was examined previously under the Political Activity Compliance Initiative 

(PACI), and the result of that examination. If it has been examined, the prior case file 

is retrieved and forwarded to the ROO for consideration along with the current 

allegation. 

The ROO secures the filed Form 990 along with any other relevant returns, such as 

Form 990-T and Form 1120-POL. 

Step 6 

The ROO tests the organization's Form 990 against the risk models using a check 

sheet to see whether the risk models would have identified the alleged violation. (If no 

return has been filed, this step is skipped). ROO also completes a lead sheet on the 

case. 

Step 7 

Step 8 

The case file nncluding the referral) is returned to Classification-Referrals for updating 

the referral database and is forwarded for review by a Political Activities Referral 

Committee (PARC). 

The PARC reviews the case file and determines whether the case should be one of 

the following: 

• Future Year Referral 

• Not selected for Examination 

• Selected for Compliance Check 

• Selected for Examination (OCEP) 

• Selected for Examination (field) 

• Selected for Examination (not political) 

• Transfer to ROO (for additional research) 

20f5 

IRS0000410461 
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W&M EXHIBIT 15 

EO will have at least one PARC operating at all times comprised of three experienced 

career civil servant employees. PARC positions generally are filled on a rotational 

basis for a minimum period of one year. The EPR Manager will solicit and assign 

volunteers for the PARes. PARC operations are overseen by the Managers of EPR 

and EOCA; however, they shall not override or influence any case selection decision 

of the PARCs. 

Step 9 

If the case is Selected for Examination, the PARC determines whether the case is a 

"high priority', which results in the case being forwarded to Case Selection and 

Delivery (CS&D) for immediate assignment to a group (See Step 10), or "other,' which 

results in the case being retained in Classification pending receipt of a case order. 

If the IRS concluded in a prior examination that a 501 (c)(3) organization had 

intervened in a political campaign, the case will automatically be classified as "high 

priority: 

Otherwise the PARC considers the following factors to determine whether it should be 

categorized as a "high priority": 

• The amount of money expended (measured either in absolute terms or in 

relation to the organization's other activities). 

• The size of the audience exposed to the alleged intervention. For instance, 

whether the audience consisted of thousands of people versus 100 or fewer. 

• The significance of the political campaign. For instance, whether the election 

was for a national office in a closely contested race. 

• The frequency of the alleged intervention. For instance, whether the 

intervention occurred five or more times, versus a one-time event. 

• The degree of specificity used to identify the candidate or the 

supporUopposition. For instance, whether it was very clear whom the exempt 

organization was supporting or opposing. 

• The degree of candidate participation in the alleged intervention. For instance, 

whether the candidate was an officer or director of the exempt organization and 

used the organization's resources to promote his or her candidacy. 

• The degree to which the organization is soliciting contributions to support its 

political campaign intervention. For instance, whether the organization 

constructed a mechanism to solicit political contributions, versus a one-time 

donation by the organization. 

• Any other relevant factors. 

3 of 5 

IRS0000410462 
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From: 

Sent: 

To: 

Subject: 

Lerner Lois G 

Thursday, January 31, 2013 1:07 PM 

Wagner Christopher (Chief Appeals) 

A Couple Items 

W&M EXHIBIT 16 

I just got off our quarterly meeting with Appeals and wanted to raise a couple Issues to make 

sure we are ail on the same page. I'm raising with you because I am not familiar enough with 

your organization to know where I should be gOing, and at least with the second item, I think 

you do need to be aware, 

1. Apparently Appeals is going through a Lean Six Sigma process. One thing they brought to 

our attention is that Appeals believes the time between when a TP first requests to go to 

Appeals and the time the case gets to Appeals Is too long. They have provided us with data, 

but also told us they think It Isn't very good -so we're not sure of their basis for the claim that 

things are taking too long. They have spoken to some of our managers about the process, but 

without data that we can look at and an explanation about how they are going about this, It is 

hard to understand where the starting point Is and where the pain points may be. They have 

not met with either Holly and Nan, who are the Directors ofthe programs they are looking at, 

and who I believe could save them a lot of time. Thought you might want a briefing on this 

from them-you may be perfectly OK with their approach, but we are baffled. 

2, During the meeting I gave them a heads up that, In the next few months we believe they will 

get a lot of business from our TPs regarding denials on 501 (c)(4) applications. I explained the 

issue is whether they are primarily Involved In social welfare activities a nd whether their 

political intervention activities, along with other non -social welfare activities mean they don't 

meet the c4 requirements. I explained the issue was very sensitive and visible and there is a 

lot of interest--Congress, press, political gr"oups, you name it. I personally have been up to 

the Hill at least 8 times this past year to explain the complexities of the rules --they are not 

black and white and they are not always intuitive. I offered a general tutorial session (noncase-related)on the law and the complexities because --as I pointed out-this is a new issue 

driven by a recent Supreme Court case expanding spending In elections to corporations, and 

a desire of some to make the expenditures without having their names show up on Federal 

Election Reports. The fact that these orgs can do some of this activity and still be a c4 further 

complicates the issue. I told them this is a place where we have worked very hard to be 

consistent and have all our cases worked by one group, and suggested th ey might want to do 

something similar. (PS we are under audit by TIGTA because of allegations of political bias on 

these cases) If I were you, this is definitely something I'd want to be aware of and have a high 

level person overseeing and reporting regula rly to me, You were in TEGE long enough to 

understand how dangerous what we do can be. 

From the call, I could tell you have a lot of acting folks who will be coming and going over the 

next year--I feel that pain. But, from my perspective, that only makes high level inVOlvement 

more imperative. If you think It would be useful to have a meeting on this --let me know. 

Hope this doesn't should like I'm trying to run your shop --have enough trouble with my own. ( -

IRSOOOO122863 
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W&M EXHIBIT 16 

.&up..&.... 

Director of Exempt Organizations 

IRS0000122864 
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Document: EO Director's responses to 3 questions asked by Director 

Paterson. 

Purpose: To document the responses of the EO Director regarding the 

criteria for identifying advocacy cases. 

Source: Lois Lerner, EO Director 

1. To the best of your knowledge, did any individual or organization 

outside the IRS influence the creation of criteria targeting applications for 

tax exemption that mention: 1) the "Tea Party," "Patriots," or the "9/12 

Project", 2) government spending, government debt or taxes, 3) education 

of the public by advocacyllobbying to "make America a better place to 

live", or 4) criticizing how the country is being run? 

No. To the best of my knowledge, no individual or organization outside the IRS 

influenced the creation of these criteria. 

2. To the best of your knowledge, did IRS or Tax Exempt and Government 

Entities Division management sanction the use of criteria targeting 

applications for tax exemption that mention: 1) the "Tea Party," "Patriots," 

or the "9/12 Project", 2) government spending. government debt or taxes, 

3) education of the public by advocacyllobbying to "make America a better 

place to live", or 4) criticizing how the country is being run? 

3. When did you become aware the IRS was targeting applications for tax 

exemption that mention: 1) the "Tea Party," "Patriots," or the "9/12 

Project", 2) government spending, government debt or taxes, 3) education 

of the public by advocacyl/obbying to "make America a better place to 

live", or 4) criticizing how the country is being run? 

In early 2010, EO Determinations witnessed an uptick in the number of 

applications for § 501 (c)(3) or 501 (c)(4) status that contained indicators of 

potentially significant amounts of political campaign intervention ("advocacy 

organizations"). EO Determinations first became of aware of this uptick in 

February 2010, when an EO Determinations screener identified a § 501 (c)(4) 

applicant that planned to spend a significant amount of its budget on influencing 

elections, which he believed was like organizations that had been receiving 

media attention for purportedly seeking classification as § 501 (c) (4) social 

welfare organizations but operating like § 527 political organizations. He alerted 

his manager of the potential "emerging issue." 

To ensure consistent treatment of applications, EO Determinations had long 

been alerting its specialists to emerging issues by sending emails describing 

particular issues or factual situations warranting additional review or coordinated 

processing .. Because it was difficult to keep track oLall of these separate email 

W&M EXHIBIT 17 
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alerts, EO Determinations staff requested a consolidated list of all such alerts. 

EO Determinations was developing the Be On the Lookout (BOLO) list in early 

2010. The BOLO, which is an Excel spreadsheet, provides a centralized source 

of regularly updated information to EO Determinations specialists about 

potentially abusive organizations or fraud issues, issues and cases requiring 

coordinated processing, emerging issues and issues for which to watch. The 

BOLO currently includes four tabs: (i) Potential Abusive, (2) Emerging Issues, 

(3) Coordinated Processing, and (4) Watch List. 

The first BOLO list contained the following entry on the Emerging Issues tab: 

"These case involve various local organizations in the Tea Party movement are 

applying for exemption under 501 (c)(3) or 501 (c)(4) [SiC]: That description was 

added to the BOLO to help specialists identify cases involving potentially 

significant political campaign intervention for assignment to a particular 

Determinations group so that they could be consistently processed in accordance 

with advice provided by EO Technical. The language used on the BOLO was 

selected by Determinations specialists with the involvement of a front-line 

manager in EO Determinations. At this time, the language was not reviewed or 

approved by executive management. 

As the number of advocacy cases grew, the Acting Director, EO Rulings & 

Agreements wanted to ensure that EO Determinations was not being overinclusive in identifying such cases (including organizations that were solely 

engaged in lobbying or policy education with no apparent political campaign 

intervention). In addition, in light of the diversity of applications selected under 

this "tea party" label (e.g., some had "tea party· in their name but others did not, 

some stated that they were affiliated with the "tea party" movement while others 

stated they were affiliated with the Democratic or Republican party, etc.), the 

Acting Director, EO Rulings & Agreements sought clarification as to the criteria 

being used to identify these cases. In preparation for briefing me, the Acting 

Director, EO Rulings & Agreements asked the EO Determinations Program 

Manager what criteria Determinations was using to determine whether a case 

was a "tea party" case. Because the BOLO only contained a brief reference to 

"Organizations involved with the Tea Party movement applying for exemption 

under 501 (c)(3) and 501 (c)(4)" in June 2011, the EO Determinations Program 

Manager asked the manager of the screening group what criteria were being 

used to label "tea party" cases ("Do the applications specify/state' tea party'? If 

not, how do we know applicant is involved with the tea party movement?"). The 

manager of the screening group responded that, "The following are issues that 

could indicate a case to be considered a potential 'tea party' case and sent to 

Group 7822 for secondary screening. 1. Tea Party', 'Patriots' or '9/12 Project' is 

referenced in the case file. 2. Issues include government spending, government 

W&MEXHIBIT 
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debt and taxes. 3. Educate the public through advocacyRegislative activities to 

make America a better place to live. 4. Statements in the case file that are 

critical of the how the country is being run.· 

As TIGTA's interviews with EO Determinations employees revealed, the BOLO 

description and the above-referenced list of criteria used by EO Determinations 

to determine which cases feU under the BOLO description were their shorthand 

way of referring to the group of advocacy cases rather than targeting any 

particular group. Applications that did not contain these terms, but that contained 

indicators of potentially significant political campaign intervention, were also 

referred to the group assigned to work such cases. 

I first became aware that the BOLO referenced "tea party" organizations and EO 

Determinations was using the above criteria to determine what organizations met 

that description when I was briefed on these cases on June 29, 2011. I 

immediately directed that the BOLO be revised to eliminate the reference to "tea 

party" organizations and refer instead more generally to advocacy 

organizations. The BOLO was revised on July 11, 2011; the "issue name" was 

changed from "Tea Party" to "Advocacy Orgs', and the "Issue Description" was 

changed to 'Organizations involved with political, lobbying, or advocacy for 

exemption under 501 (c)(3) or 501 (C)(4)." 

were trying to edit the description to 

nrrlaniizaltiorls. Per my direction, the BOLO was updated on May 

, 201 The separate entries for Occupy groups and ACORN successors were 

deleted and the advocacy organization description was revised to read, 

"501(c}(3), 501 (c)(4), 501(c)(5), and 501 (c}(6) organizations with indicators of 

significant amounts of political campaign intervention (raising questions as to 

exempt purpose andlor excess private benefit). Note: advocacy action type 

issues (e.g., lobbying) that are currently listed on the Case Assignment Guide 

(CAG) do not meet this criteria." 

At the same time that I directed the BOLO be revised, I also directed the Acting 

Director-of.EO Rulings & Agreements to.implement procedures.for-updating.the 

W&M EXHIBIT 17 
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BOLO that included executive-level approval. On May 17, 2012, the Acting 

Director of EO Rulings & Agreements issued a memorandum that set forth such 

procedures, which require that all additions and changes to the BOLO be 

approved by the manager of the emerging issues coordinator, the EO 

Determinations Program Manager, and the Director, Rulings & Agreements. 

W&M EXHIBIT 1i 
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From: 

Sent: 

To: 

Subject: 

Importance: 

Lerner lois G 

Tuesday, July 17, 2012 9:51 AM 

Paz Holly 0; Flax Nikole C 

RE: Emailing: c4 talking paints 7-16-12.doc 

High 

W&M EXHIBIT 18 

Only one comment--I know we don't have published SOl stats for the uptick, but our Ciney folks saw it happening --can 

we get Nikole whatever tllnsidell 

info we have that led tb that conclusion --she can then figure out how to use it. 

lois G. Lerner 

Director of Exempt Organizations 

----Original Message---

From: Paz Holly 0 

Sent: Tuesday, July 17, 2012 7:23 AM 

To: Flax Nikole C; Lerner lois G 

Subject: Emailing: c4 talking pOints 7 -16-12.doc 

I have added some edits and comments to Lois'. I am checking on numbers and will get back to you ASAP. 

IRSOOO0179271 
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From: 

Sent: 

To: 

Subject: 

good 

lois G. Lerner 

Director of Exempt Organizations 

---Original Message----

From: Paz Holly 0 

Lerner lois G 

Tuesday, July 17, 2012 9:46 AM 

paz Holly 0 

RE: Emailing: c4 talking points 7-16-12.doc 

Sent; Tuesday, July 17, 2012 10:44 AM 

To: Lerner Lois G 

Subject: RE; Emailing: c4 talking paints 7 -16-12.doc 

That is who I am checking with. 

--~-Original Message-~-­

From: Lerner lois G 

Sent; Tuesday, July 17, 201210:42 AM 

To: Paz Holly 0; Flax Nikole C 

Subject: RE; Emailing; c4 talking points 7 -16-12.doc 

Contact Nalee-she knows all about the response. 

lois G. Lerner 

Director of Exempt Organizations 

-~---Orlginal Message---

From: Paz Holly 0 

Sent: Tuesday, July 17, 2012 10:08 AM 

To; Flax Nikole C; Lerner Lois G 

Subject: RE; Emailing: c4 talking points 1-16-12.doc 

W&M EXHIBIT 19 

The 501 numbers I was looking at were closures (that's aU 501 has that is relevant to this questionj. t think the numbers 

in Boustany response must 

be receipts. I am checking and will get back to you. 

---Original Message----

From; Flax Nikole C 

Sent: Tuesday, July 17, 2012 9;21 AM 

To; Paz Holly 0; Lerner Lois G 

Subject; RE; Emamng: 04 talking paints 7 -16-12.doc 

IRSOOO0179269 
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W&M EXHIBIT 19 

On the point whether there was an increase in c4 applications ~ in the Boustany response we show that applications did 

increase. looks like the figures are different from what you pulled from 501 so we need to track this down as I think it is 

an important point. 

From Soustany~ c4 applications 

2008 -1410 

2009 -1571 

2010 -1591 

2011- 2242 

2012 - 1715 (through April 1, 2012 -- ilthis pace stands all year would be a significant increase) 

-----Original Message----

From: Paz Holly 0 

Sent: Tuesday, July 17, 2012 7:23 AM 

To: Flax Nikole C; Lerner Lois G 

Subject: Emailing: c4 talking points 7 -16-12.doc 

I have added some edits and commenlsto Lois'. I am checking on numbers and will get back to you ASAP. 

IRSOO00179270 
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From: 

Sent: 

To: 

Cc: 

Subject: 

I'I! ask exam 

Lerner Lois G 

Wednesday, July 18, 2012 8:55 AM 

Flax Nikole C; Park Nalee; Lowe Justin; Urban Joseph J 

Mistr Christine R 

Re: Emailing: c4 talking points 7-16-12.doc 

Lois G. Lerner·····-_··_·······_·- Sent from my BlackBerry Wireless Handheld 

··--Original Message······ 

From: Nikole Flax 

To: Nalee Park 

To: Lois Call In Number 

To: Justin Lowe 

To: Joseph Urban 

Cc: Mistr Christine R 

Subject: FW: Emailing: c4 talking paints 7 -16-12.doc 

Sent: Ju118, 2012 9:52 AM 

The chart is very helpful, thanks. 

W&M EXHIBIT 20 

Can Steve get a chart like this first one with exam numbers· c3s, c4s, and totals or each of the years listed? Thanks 

From: Park Nalee 

Sent: Tuesday, July 17, 2012 7:53 PM 

To: Flax Nikole C 

Cc: Lerner Lois G; Paz Holly 0 

Subject: RE: Emailing: c4 talking points 7 -16-12.doc 

Per lois, I took a look on the talking points based on what we've told 

Boustany about c4 application nu mbers. 

First, under Legal Requirements, I added a few suggested (tracked) changes, 

including a couple bullets. Feel free to ignore or accept. 

Regarding the reference to c4 application numbers in the first bullet under 

Background, see comment [NlP4j. Comment is referring to the second 

attachment here, which is a summary on the numbers of applications received 

for c3s and c4s, total app closures (including specifically c4 apps), and 

application approvals for c3s and c4s • starting from FY 2008. All these 

numbers were provided in Boustany responses, except for FY 2012 data through 

June 30th (which were collected as part of hearing preparations· i.e., 

Descriptions for Updated Stats 7/3/2012) and unless otherwise noted (i, e., 

in Issa). You/STM should already have all this data in the hearing prep 

IRSOOOO179389 
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binders, but I just consolidated them into this one ~sheeter for an easier 

trend/comparison read. 

Also, as Holly pointed out in her commen~ we do not have a reliable method 

for tracking data by issue such as political activity. This is consistent 

with our congressional responses where we had explained we would have to 

manually go through each application, etc, 

Because of the above points, the first bullet that presently reads as : 

Starting in 2010, EO observed an increase in the number of section SOl(c)(3) 

and section 501(c}(4} determination applications from organizations 

that appeared to be potentially engaged in political advocacy activities. 

Recommend it be revised (i.e., along the lines of the following): 

for about the past five years [alternative verbiage: From FY 2008 through 

June 30th of FY 2012J, EO has observed an increase in the number of section 

501(c)(4) determination applications filed, as well as a general upward 

trend in section SOl{cH3) application filings. 

Nalee 

W&M EXHIBIT 20 

IRS0000179390 
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From: 

Sent: 

To: 

Cc: 

Subject: 

Attachments: 

Grodnitzky Steven 

Wednesday, April 28, 2010 5:23 PM 

Lerner lois G; (hoi Robert S 

Letourneau Diane L; Grodnitzky Steven 

5CR Chart 

SCR report Table 2010 Final.doc 

Please find attached a copy of the SCR chart for cases in EO Technical for the period ending April 28. 2010. 

W&M EXHIBIT 21 

Of note, we added one new SCR concerning 2 Tea Party cases that are being worked here in DC. Currently, there are 13 

Tea Party cases out in EO Determinations and we are coordinating with them to provide direction as to how to develop 

those cases based on our development of the ones in DC. We also closed one significant case last month - American 

Pakistan Foundation - providing relief to displaced persons in Pakistan. 

Steven Grodnitzky 

Acting Manager, EO Technical 

Rulings and Agreements, TEGE 

Internal Revenue Service 

phone 

fax 

IRSOOOO141809 
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Name of 

OrgfGroup 

PrescottTeaParty, 

LLC"" 

Albuquerque Tea 

Po "" America!1 aldsbln 

"'"""""" 

SloograssFamily 

.Iewlsn Giving Online. 

toc 

G_ 

#/Mana .... 

I=:""" 

1t8!enBoock 

ElN Received 

27.()484865 4I2f2010 

"'" OO..()513502 

27.0726675 """""'" 1017100 

EOT 

''''''''' .., 

=atl 

EOT118108 

51.0228088 cro""" 

smJOO 

EOr 

11/WOO 

Cincimatl 

1111108 

Eor 

, .... 

2&3398630 ~ 

EO< 

26-6552611 CineiMa!! ''''''' 

EO Technical 

Significant Case Report 

(April 28. 2010) 

... - r",Law 

Specialist 

Whelhera tia party organizalionmeets the Chip Hull 

requiremenlslXlder501{c)(3)andisoot 

invofvedlnpo!i!k:al~, 

=~~~~~: """ M ... "., C' 

~ t_'" ifies for C4sta!IJS 

:~:V:~=6:~ueto racial dlscrIminatioo nowqualjf!(\$ 

Whe/herHfv1OcperatorrocogniZedas "~Mt_ 

~amptl,lnderC4ql,laflf!eSforC4status 

:~~~~~ItIaI~ campaign-relatedsllillsqualiryforC4stalus 

·~~fors:~~~~~t andIorpml>idesimpermissible privatebenelit 

Whether k:antforVEBAs\alw; 

Estimated 

Completion 

Date 

CLOSED 

""""''' """"''' 

tilJUl2010 

W&M EXHIBIT 21 

statusiNextaction 

BnefingforTEGEGormlissionerm...sd1eOO1ed 

forMa 14¥>. 

Guidanceoompletedreviewofproposeddernal 

aodtl1en sent back to EaT to mak.e changes 

andGutdanc:e't/iltakea1lM/lookbef<:re 

...... " 

Submit proposed adversedatetml!'laliOl letter to 

~aflerbein9rev!ewedhYEOTgroup 

Noodtodelermlhev.mlher I~· t>::Yl 

IRSOOOO14181Q 
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W&M EXHIBIT 21 

''''100 established and furded by S\bSi(faryoforg ;ssue'llOUldhiWtl9l1impactoopnx:essiog 

EDT shortIybeforeorg'sbankruptcyqualif!eS- appliealion 

-- i=c:re~~Bf1ktuptcy MusIrn Mance in 3iTedLieber Cincinnati Appilcant for C3 slalu5 endorsed Obama on BrleI'edEOOi{'ootoron4l19110. Continue 

-- 5121101 itswebslte:ltspresidentwasunindiet&deo- restla!dlilgotherboa'drl1iltdlersandol'lk:en; 

EOT""" CO"I$piralorln 93 World Trade Center plot. ~~~~~Pdmfland -, """"'" ""'''''' :::10~:::~anoheallh 61'31>'2010 Received c::ommentsfromEOGoJd;roceamlnciW It1lematiooal "" making~asaresult.Thensendlo 

EOT2iOO camfadlme;;~~forC3 TEGECoulseI. """"',,.,..,., 1!tnenBerick 01-6186277 .- i ~~eamadfroml'M:!sl!'lle!ltis Justin Lowe AAellXlflftlrerleeof~TPstDmittedadditiOn<il 

Retirement not$\lbjeClto U8IT inforrnatlonaslOwheIhm"NRRlrsassetsare 

Inves1mentTrusl notSl.tlj«:l:IOUarTasassetsofthafederal 

gnwmment. Meeting with TEGE Counsel and 

EPweekrJ3I29lOrevlewand~asto 

nextsleps.CounseIreachedOUlIO 

PassTtYoug\sCounsel 10 eJqlIoreganlor·trust 

issueandwatingformply. Briel" EO executives 

wt.enirtormallorllsinfrtmCounooJ. 

T __ 

CinCinnati WhelherlnJs!eeofpooiedtrusl~~ished 6'''''"'' _. HoIdcodereoo::tofnght\lMhrelatedcasa ""100 for disabled persons mder Medicaid (FamiIyTnmofMass.),1hen sertd to COunsel for 

EDT progrMlQUlllif!eSforC3$1atu$ ~forfinaladllerse. 

~. ,= 

- 26· 211612010 'Nhettetorganii:Mion with ties to polygamist """"" SeotdoWe!opmer!ll6tteron41611 andSMt 

T,~ 

-~ 4728535 =~~~asapostOl~or ""'"' developmenllettertorela!edO!'g.m4J15110 

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-~ -- $Ub&lOOllaIIyrelaladlssue.Thensendtech. 

~;::utIA 3/TedL!ehef 99-00"'00 I;!Ll°1O WhelheraS$iesoflandtransactio!lsthat PeterHotiat ~~andprepMngdraftrl1llig-

"" aretakingplar.:erneratenyearpariodis andtheny,{ll.submittoGoidanceandCCfor 

""""" received in subje(::tlouarT. Waare6J(!lSCllnglOget 

EOTed1. mcremsts. 

I~~: """" 311f2010 'Nhettetanorganilationthatprovldesnon- .~~w Revlawingresponsatodave~~and 

""""""" assig!adill forfeitablesdlolarsllpslnMssAmarica moredeva!cpment maybe needed 

EOTec:h. ~tsqualifiestnder§501(c}(3)as.., 

afliiateofthaNalionalMissAmarica 

;.,;.;. 

IRSOOOO141811 
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From: 

Sent: 

To: 

Cc: 

Subject: 

Grodnilzky Steven 

Sunday, May 16, 2010 6:01 PM 

lemer lois G: Choi Robert 5 

Letourneau Diane L: Neuhart Paige; Douglas Akaisha 

RE: EO Tech. highlights and stats 

Ok, just let me know when you would like to chat about the case • 

•• n..()riginal Message~-­

From: Lerner lois G 

Sent: Saturday, May 15, 2010 11:17 AM 

To: Grodnitzky Steven: Choi Robert S 

Cc: Letourneau Diane l; Neuhart Paige 

Subject: Re: EO Tech, highlights and stats 

Thanks. letls talk about co-conspirator. We need Joe there lois G. 

lerner .. • .. ·_··_ .. _·_· .. ·_· Sent from my BlackBerry Wireless Handheld 

·--Original Message .. ·_· 

From: Steven Grodnitzky 

To: lois Call in Number 

To: RobChoi 

Cc: Diane Letourneau 

Cc: Paige Harrell 

Cc: Akaisha Douglas 

Subject: RE: EO Tech. highlights and stats 

Sent: May 13, 2010 7:54 PM 

W&M EXHIBIT 22 

We have tea party cases here in EOT and in Clncy. In EOT, there is a (c)(3) application and a (c)(4) ap plication. in Clney, 

there are 10 (c)(4)s and a couple of (c)(3)s. The organizations are arguing education, but the big Issue for us is whether 

they are engaged in political campaign activity. We are in the development process at this point here in DC, and I have 

asked the Tts and front line manager to coordinate with Cincy as to how to develop their cases, but not resoNe anything 

until we get clearance from you and Rob. 

The tea party cases, like the others on the list, are the subject of an SCR, and I customarily give Rob a heads up, but of 

course can let you know as well before anything happens. 

As to MANA, I had spoken with Ted about the case, and he did mention that Joe had a different view as to whether to 

request information about the unindicted coconspirator. 

I called the FTC and spoke with them about the possibility of an MOU and that we were interested in starting 

discussions. leah Frasier, the FTC point of contact, said that she would speak with her bosses and get back to 

me. 

From: Lerner lois G 

Sent: Thursday, May 13, 2010 7:04 PM 

IRS0000167872 
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To: Grodnitzky Steven; Choi Robert S 

Cc: Letourneau Diane l: Neuhart Paige; Douglas Akaisha 

Subject: RE: EO Tech. highlights and stats 

W&M EXHIBIT 22 

I like this format. David will kill you as I'd Ilk e to see If he can do a monthly 1 pager also. Tea Party cases --applications for 

c3? What's their basis? MANA--Judy and I have talked and I may be in a different place than Joe and Tom re: next steps. 

All cases on your list should not go out without a hea ds up to me please. Have we reached out to FTC to raise the 

possibility of an MOU? Akaisha -please start a notebook for me and update each month with new report. I'd like to be 

able to look back easily to see progress. Steve--remember to ccAkaisha on these. Thanks 

Lois G. Lerner 

Director. Exempt Organizations 

From: Grodnitzky Steven 

Sent: Thursday, May 13, 2010 6:10 PM 

To: lerner Lois G; Choi Robert 5 

Cc: Letourneau Diane l; Neuhart Paige; Grocinitzky Steven 

Subject: EO Tech. highlights and stats 

Please find below the April highlights for EO Technical, including case 

statistics, If you are looking for other types of information in the 

future, please let me know and I will provide for next month's highlights. 

April in EO Technical 

Statistics 

cases Received 

~~--~~Original Message Truncated .. _--

IRSOOO0167873 
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From: 

Sent: 

To: 

Cc: 

Subject 

Attachments: 

Follow Up Flag: 

Flag Status: 

Lemer Lois G 

Tuesday, August 03, 2010 5:52 PM 

Douglas Akaisha; Choi Robert 5; Ueber Theodore R; Neuhart Paige 

Letourneau Diane l 

FW: 5CRs for the Month of July 

W&M EXHIBIT 23 

July Bishop.doc; July Lehman Bros.doc; July Ballot Initiative.doc; July Bluegrass Family 

Health.doc; July Calhoun Academy.doc; July Credit Counseling.doc; July DOD.doc; July 

Emerge.doc; July EPM Civil Rights.doC; July Group ReclassiflCation.doc; July imagine 

Schools Non-Profit.doc; July Jewish Giving Online.doc; July MANA.DOC; July Methodist 

International.doc; July Miss America Foundation.doc; July Mortgage Foredosure.doc; 

July NRRIT.OOC; July TAG-l8.doc; July TeaParty.doc; July United Order Texas.doc; July 

WWF.doc; JuIyTennessee.doc; July Medical M.rUuana.DOC 

Follow up 

Flagged 

Akaisha--please print SO I can review. Everyone else--have we always sent to Mike Daly 

with no review time for me first? I realize I don't usually get to them in time, but I think I 

could with a few days notice. I'm a bit uncomfortable sending without r eading--thoughts? 

.&u¢.&...... 

Director, Exempt Organizations 

From: Ueber Theodore R Sent: Friday, July 30, 2010 7:58 AM 

To: Daly Richard M 

Ge: Chol Robert S; Neuhart Paige; Douglas Akalsha; !.erne, lois G 

Subject: FW: SCRs for !he Month of July 

Attached are the R&A SCRs for July. The list of SCRs are below. 

Thanks. 

Theodore R. Lieber 

Manager 

EO Technical Group 3 

(202) 283-8999 

From: G,odnitzky Steven 

Sent: Tuesday, July 27, 2010 4:06 PM 

IRSOOOOl63358 
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To: Ueber Theodore R 

Cc: Grodnitzky Steven 

Subject: SCRs for the Month of July 

Please find attached the SCRs for EO Technical and EO Determinations for tha month of July: 

(1) Kamehameha Schools 

(2) Lehman Heatth Care Trust 

(3) Ballolt Initiative Group of Missouri 

(4) Bluegrass Family Health 

(5) The Calhoun Academy 

(6) Credtt Counseling Compliance Project 

(7) Delta Dental of Delaware 

(8) Emerge Maine 

(9) EPM Civil Righls 

(10) Group Rulings 

(11) Imagine Schools 

(12) Jewish Giving Online 

(13) Muslim Alliance of North America 

(14) Methodist International 

(15) Miss America Foundation 

(16) Mortgage Foreclosure 

(17)NRRIT 

(18)TAG-18 

(19) Tea Party 

(20) United Order of Texas 

(21) World Wildlife Fund Inc. 

(22) Tennessee Pooled Assets 

(23) Compassionate Cannabis Information Center (medical mariju ana) 

Any questions, please let me know. 

Thanks. 

Steve 

Steven Grodnitzky 

Acting Manager, EO Technical 

Rulings and Agreements, TEGE 

Intemal Revenue Service 

pho~ 

fax:_ 

W&M EXHIBIT 23 

IRS0000163359 
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Nama of Group EIN Received 

OrgIGroup #lManagar 

~~::':'y 11N~4!11 lf4lZ010 

~ 

I~..!':'·· ~ '.a~ CIncim~ 

""- SI22iIl6 

EOT 

"""" ~Maine, """"" 41-8(18)17 

.............. """"'" _ ... y 1111106 

...... EOT 

I=-- ",." EPMCMtRIghIs I~er 1-""" C/nCirClatJ 

F""" 7I16lO9 

EOT 

12'1/00 

EO Technical 

Slgnlticant Case Report 

( January 31. 2011) 

Issue Tax Law Estimated 

Speclallst I c~j!tion 

=~~~~Wlg SiriBuI!er 1!JUalI~Ull 

~-reI8led!lkMs.QU8lifyfor§ 

501{()~4}$\aM: 

Status/Next aetion 

W&M EXHIBIT 24 

Elevated to 

Commlssk 

No 

IRSOO00147507 
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W&M EXHIBIT 24 

amed<lcatlorlal,&!'Id$Ol'MprivalllbeMlitio 

Itl&paslre:~Ih&~oflT!elb! 

VII: danlr\dMdu;el. 

~~HOO!UlC!!fe 3lfI!dUeoof ,~,' .:00 ~~VE;"~ofOl'l} :~~ ~ID" ,m~lJflISjlOf\Mla~le!Iertbl No 

'OT shorIIybefor&«if'$~qualifieJ 

""'1111 tnIer§501{e)(9)" 'Nhe1t!er1W1:¥l!U& 

~~~are 

"""""" l/SIIlIIeII 30-034r..o:73 4W~ 1;;!O~~~~ltl Slri_ 0212&'2011 

.~~=~~ No 

""""""'" '-'''''' EOn"" aJ(l)radille$ ~10(C3 

!~ Iv.;-- 1~~lfOeIQ 1/Slev(!I'l 1-6100.:1, W ... WIleIherlrn:omeeatnedfromirNeslmenl$ -,- 3131121,)11 -, SIiljed.IoUSIT, 

~TMlt 

MIlesseePooled m_ &Z.I....,.,..". -"""'. 3a'1=1i WhetI'!or\f\lSlM.rApooIoolN$tes\8bli$hed "." 03t3112(111 

=r~~:a::~maI~tter ""'" 

G_ faoiaatllllQpetSONmderMe6cald ""'" EOT programqwllllGsrOfC3Sfa1u$ S\lbmi(te(ltoCooAlselool1l2:lnO. "',,,,, I~Orderof I=.... 25- 2/1612{)10 

=?~:~r! """"'" ~4enialwiIh~~. I~ T~ 472Jl53S ~ 

WOOcImdlifeFtmd ,::;".,.. oz·,,,,,,,,, ,,,.'" 1==Ofsab """'" ""'''''' , ~~::::::'~O'dsHnt!O 

..... _ .. """"" ,,"00 ..,""'" :-::In :::1e~rm:Io~MIl. .- .,un ~~Is!lUed, Aw!)I"'YW;>ay« I~ F"""_ ""_. 'SOTed!. ~qo;a8fi$Su:lder§50t{e)(3)asoo ...... ,., Q!faialeoflheN..IionaIMitls.Ame!lca 

~S<:hOOIS """ 2<). 1011W2.006 Whelher"dIIlrtef~sI'louldbe~ ...,.... .WIl31/2Q.11 

.~==::a'~~~ No -. '590". 

_. exernp6ootmdef§501{c)(3). Woo.., 'Of 1omI10"~SIIbmitIOO$OI1llt8ddi111:ln81 

ma!eri!lisonl1f17NO. ~BW3IIIrIganew 

~~~,¥oflIehv&lbeserlila 

- laoo2/Roo ~~ WhelherorganiUllMilnwlvedlnrnortgage S".b," """''''' FOted($.ll"tlClIS&S ' ::::~~0l8pP1'OW~kloc. """"". rorecioaun:lactMtlesmeetlhe~ 

undet§501(~){J) ... """'" EOTdtsf\I!Ig.faikJre!Oest<Ibl;shadvar$l)~ 

1lIl0000oflhaease!l, 

IRS0000147508 
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W&M EXHIBIT 24 

EO 27~ 

0eIerm!ne1lorl 1354388 ~ 1~~~~IhaI~~ror JonwaddBll ~ ~under9llC1iOn501ic)(3}, 

IRSOOO0147509 
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W&M EXHIBIT 25 

From: 

Sent: 

To: 

Subject: 

Seto Michael C 

Wed.nesday, Februal)l 02, 201112:40 PM 

Fish David L 

FW: SCR Table for Jan. 2011 & SCR items 

Attachments: 5CR table Jan 2011.doc; 5CR Jan 2011 Park 51 MO.doc; SCR Jan 2011 Bluegrass MO.doc; 

SCR Jan 2011 000 MO.doc; 5CR Jan 2011 Emerge.doc; SCR Jan 2011 Methodist 

MO.doc; 5CR Jan 2011 Newspaper Cases Update MO.DOC; SCR Jan 2011 NRRIT 

MO.OOC; 5CR Jan 2011 Medical Marijuana.doc; SCR Jan 2011 Mortgage 

Foreclosure.doc; 5CR Jan 2011 Foreign Lobby Cases.doc; 5CR Jan 2011 Iowa 

Studentdoc; 5CR Jan 2011 Harvard Medical.doc 

From: Seto Michael C 

Sent: Wednesday, February 02, 20111:39 PM 

To: Ueber Theodore R; saUns Mary J; Seto Michael C; Shoemaker Ronald J; Smith Danny 0 

Subject:. FW: SCR Table for .lan. 2011 & SCR Items 

Below is lois' and Holly's directions on certain technical areas, such as newspapers, health care case, etc. Please do not 

allow any cases to go out before we have brief Lois and Holly. 

Attached Is the SCR table and the SCRs The SCRs that went to Mike Daly ends with "MD: I wilt forward the other 

SCRs that didn' went Mike as fyi. 

These reports are for your eyes only . .. not to be distributed. 

Thanks, 

Mike 

From: Lerner lois G 

Sent: Wednesday, February 02,201111:17 AM 

To: Paz Holly 0; Seto Michael C 

Ce: TriOI Daria J; Douglas Akaisha; Letourneau OIane l; KindeH Judith E; Ught Sharon P 

Subject: RE: SCR Table for Jan. 2011 

Thanks--even if we go with a 4 on the Tea Party cases, they may want to argue they 

should be 35, so it would be great jf we can get there without saying the only reason they 

don't get a 3 is political activity. 

I'll get with Nan Marks on the delta Dental piece. 

I'm just antsy on the churchy stuff --Judy--thoughts on whether we should go to Counsel 

early on this--seems to me lVe may want to answer all questions they may have earlier 

rather than later, but I may be being too touchy. I'll defer to you and Judy. 

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W&M EXHIBIT 25 

Z Street--I thought the elevated to TEGE Commish related to wheth er we ever had--that's 

why I asked. Perhaps the block is wrong •• maybe what we need is some notation that the 

issue is one we would elevate? 

I hear you about you and Mike keeping track, but I would like a running history. that's the 

only way I can speak to what we're doing and progress in a larger way. Plus we've 

learned from Exam··if they know I'm looking, they don't want to have to explain ··so they 

move things along. the 'clean" sheet doesn't give me any sense unless I go back to 

previous SCRs. 

I've added Sharon so she can see what kinds of things I'm interested in . 

.&.;p..&-

Director, Exempt Organizations 

From: Paz Holly 0 

Sent: Wednesday, February 02,201111:02 AM 

To: Lerner Lois G; Seto Michael C 

Cc: Trllli Darta J; Douglas Akaisha; Letourneau Diane l; Kindell Judith E 

Subject: RE: SCR Table for Jan. 2011 

T aa Party - Cases in Oeterm~ are being supervised by Chip Hun at each step ~ he reviews info from TPs. correspondence 

to TPs, etc. No decisions are going out of Cincy until we go all the way through the process with the c3 and c4 cases 

hE!'re. I believe the c4 will be ready to go over to Judy soon. 

HMO case (Delta Dental) ~ When you say to push for the next Counsel meeting. with whom in Counsel are you 

referring? The plan had been for Sarah to meet with Wilkins and Nan on this, We think this has not happe-ned but have 

not heard directly (unless Sarah has responded to your recent email on this case). I don't know that we at this level can 

drive that meeting. 

NRR'T~I will reach out to Phil to see if Nan has seen it. She was involved in the past but I don't know about recently. 

On United Order (religious order), proposed denials typically do not go to Counsel. Proposed denial goes out, we have 

conrerence, then final adverse goes to Counsel before that goes out. We can atter that in this case and boe f you after we 

have Counsers thoughts. 

Z Street was not elevated at Mike Daly's direction. He had us elevate it twice after the litigation commenced but said not 

to continue after that unless we are changing course on the application front and going fa ",'lard with processing it 

Ground Zero mosque (Park 51) - OUf general criteria as to whether or no! to elevate an SCR to SarahlJoseph and on tip 

is to only elevate when there has been acHon. Park 51 was elevated this month because it was just received. We. win 

now begin to review the 1023 but won't have anything to report for sometime. We wil! elevate again once we have staked 

out a position and are seeking executive concurrence. 

Wo (Mike and I) keep track of whether estimated completion dates are bei n9 moved by means of a track changes version 

of the spread sheet. When next steps are not reflected as: mel by the estimated time, we folio .... ' up with the appropriate 

managers or Counsel to cletermine the cause for the delay and agree on a due date, 

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W&M EXHIBIT 25 

From: Lerner Lois G 

Sent: Tuesday. February 01, 2011 6:28 PM 

To: Seta Michael e ee: Paz Holly 0; Trilli Darla J; Douglas Akaisha; Letoumeau Diane L; Kindell Judith E 

Subject: RE: SCR Table for Jan. 2011 

Thanks--a couple comments 

1. Tea Party MaUer very dangerous. This could be the vehicle to go to court on the issue 

of whether Citizen's United overturning the ban on corporate spending applies to tax 

exempt rules. Counsel and Judy Kindell need to be in on this one pi ease needs to be in 

this. Cincy should probably NOT have these cases --Holly please see what exactly they 

have please. 

2. We need to push for the next Counsel meeting re: the HMO case Justin has. Reach 

out and see if we can set it up. 

3. NRRIT -has that gone to Nan Marks? II says Counsel, but we'll need her on board. In 

all cases where it says Counsel, I need to know at what level please. 

4. I assume the proposed denial of the religious or will go to Counsel before it goes out 

and I will be briefed? 

5. I tlhink no should be yes on the elevated to TEGE Commissioner slot for the Jon 

Waddel case that's in litigation --she is well aware. 

6. Case involving heallhcare reconciliation Act needs to be briefed up to my level please. 

7. SAME WITH THE NEWSPAPER CASES-·NO GOING OUT WITHOUT BRIEFING UP 

PLEASE. 

8. The 3 cases involving settlements in Israel should be briefed up also. 

9. ground zero case--why "yes-for this month only" in TEGE Commissioner block? 

Also, please make sure estimated due dates and next step dates are after the date you 

send these. On a couple of these I can't tell whether stuff happened recently or not. 

Question--if you have an estimated due date and the person doesn't make it, how is that 

reflected? My concern is that when Exam first did these, they just changed the date so we 

always looked current, rather than providing a history of what occurred. perhaps it would 

help to sit down with me and Sue Lehman --she helped develop the report they now use. 

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From: Seto Michael C 

Sent: Tuesday, February 01, 2011 5:33 PM 

To: Lerner lois G 

Cc: Paz Holly 0; Trilli Darla J; Douglas Akaisha; Letourneau Diane l 

Subject: SCR Table for Jan. 2011 

Here is the Jan. SCR summary. 

W&M EXHIBIT 25 

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From: 

Sont 

To: 

Subject: 

Attachments: 

Lerner loisG 

Monday, October 29, 2012 10:51 AM 

'tobomatiC@msn.com' 

Fw: Revised timeline 

Long Political Advocacy Timolin. HOP comments.doc 

Lois G.lerner-·----·-·-··- Sent from my BlackBerry Wireless Handheld 

- Original Message -.-

From: Paz Holly 0 

Sent: Sunday, October 28, 2012 02:31 PM 

To: Lerner lois G; tobomatic@msn.com <tobomatic@msn.com>; Marks Nancy J; Light Sharon P 

Subject: Revised timeline 

Attached is a revised version of the timeline that Incorporates our discussion of last week and the revisions to the 

answers to the questions. Please note: 

W&M EXHIBIT 26 

1. In the meeting, we ran out of time and did not discuss anything after Jan. 2012 so piease review that portion closely, 

2. In the Oct. 19, 2010 entry, I added a comment about how many of the orgs did not have TP In their name but I 

wanted you to be aware that some of those orgs included in my count of non ·TP names had "patriot" or "912" in their 

names. 

3. Should we include EOD's rationale (albeit flawed) as to why it asked the donor question? EOD did explain to 

TIGTA that they were concerned that 527 donors would be a red flag for a c4 that engages In political activity. 

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W&M EXHIBIT 26 

Consistency in Identifying and Reviewing Applications for Tax -Exempt Status Involving Political 

Advocacy Issues 

Audit # 201210022 

Objective: To interview Exempt Organizations (EO) function management involved in developing the 

advocacy emerging issue to identify steps taken and develop a timeline of events . 

Background: We interviewed EO function officials to understand how applications are processed for 

organizations seeking tax-exempt status. We learned that there w~ ru:i:increase in the number of 

organizations applying for Section (§) SO 1 (c )(3) or 501 (c)( 4) whose applications contained indicators 0 f 

potentially significant amounts of political campaign intervention>'I,; February 2010, an EO 

Detenninations screener identified a § 501(c)(4) case that he.believed was similar to organizations that 

had recently heen the subject of much media attention for puq,ortedly seeki!lg classification as § 

501 (c)(4) social welfare organizations but operating like § 527 political org3!Jizations. The screener noted 

that this applicant indicated that it intended to spend, a significant amount ofiti(blldget on influencing 

elections. The screener elevated his concelns abou·t (his case through the management chain. The EO 

Detenninations Program Manager raised the issue with the Acting M~9ager of Ed T&~nical who 

requested that tbis case he transferred to EO Technical. itis EO Ruiiilgs & Agreemeiits\·standard practice 

with emerging issues (including credit cR~eling and mortgage' foreclosure) as well ascihese advocacy 

organizations to work some ofthe applic~iti~i,;s;h!EO TechniCal in order to get a better sense of the issues. 

EO Technical is then better able to advise Egpet"r)l1il)~tions 0 n~!:, p:ocessing of such cases and 

determine the most appropriate form ofadvlcp,,]"hichlDilY.fiI1lge frontyerhal or written advice on a 

particular application or appjicatj9ns to templat~'developm~~t letters, te11fRlate deDialletters, guide sheets, 

etc. In addition to seeki!l~;a~_vi"eifrbm and coordjnating»'!tl): EQiT~chnica( t he unusual numher of 

applications with poten!JaJPolitical campaign interVC:l)tioD. by orgftnh,ation seeking § 501(c)(3) or 

501(c)(4) exempt statuSc-alsg prompte~the EO functl~~,tO isolate thesii types of cases as an emerging 

issue warranting scrutiny hYi,rparticuhir Deterrninations.group to ensure consistent processing. 

:~~Si~vOhjngJ!!lt:n!j~llY significant pol itical campaign intervention 

59.thatlhey could be consistently processed in 

ac adescription was included on the Be On the Lookout 

lications, EO Detenninations had long been alerting 

irig~~mails describing particular issues or factual situations 

at ed processing. Because it was difficult to keep track of all of 

nations staff requested a consolidated list of all such alerts. EO 

Detenninations was ileveloping .. ,.. n the Lookout (BOLO) list in early 20 I O. The BOLO, which is 

an Excel spreadsheet, piovide~ a.c'f.Wialized source of regularly updated information to EO 

Determinations specialists al1~;it1j9h;ntially abusive organizations or fraud issues, issues and cases 

requiring coordinated procesSiiig: emerging issues and issues for which to watch. The BOLO currently 

includes fuur tabs: (1) Potential Abusive, (2) Emerging Issues, (3) Coordinated Processing, and (4) Watch 

List. 

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W&M EXHIBIT 26 

The first BOLO list contained the following entry on the Emerging Issues tab: 'These case involve 

various local organizations in tbe Tea Party ! movement are applying for exemption under 501(c)( 3) or 

501 (c)( 4) [sic]." The language used on the BOLO was selected by Determinations specialists with the 

involvement ofa front-line manager in EO Determinations. At this time, the language was not reviewed 

or approved by executive management. 

As the number of advocacy cases grew, the Acting Director, EO Rulings & Agreements wanted to ensure 

that EO Determinations was not being over -inclusive in identifying such cases (including organizations 

that were solely engaged in lobbying or policy education with no appar<:llt political campaign 

intervention). In addition, in light of the diversity of applications seleCted under this "tea party" label 

(e.g., some had "tea party" in their name but others did not, some stated that they were affiliated with the 

"tea party" movement while others stated they were affiliated,witb the Democratic or Republican party, 

etc.), the Acting Director, EO Rulings & Agreements sought clarification as to the criteria being used to 

identifY these cases. In preparation for briefing me, tbe-Acting Director, ECfRulings & Agreements asked 

the EO Determinations Program Manager what criteria Determinations was uSilig to determine whether a 

case was a "tea party" case. Because the BOLO only.tontained a briefreference'lo;~Organizations 

involved with the Tea Party movement applying for exemption under 501 (c )(3) and,501 (c)( 4)" in June 

2011, the EO Determinations Program M~nager asked the manag erofthe screening group what criteria 

were being used to label "tea party" casy(O'Do the applicatio~s{sp~ifY/state' tea party'? !fnot, how do 

we know applicant is involved with the t<;a J'lll1:)'~?vement?").' ,The manager of the screening group 

responded tbat, 'The following are issues~~t coU)~, indicate a case to be considered a potential 'tea party' 

case and sent to Ciroup 7822 for secondary scrlO!'ning~ L 'Tea Party' ,'Patriots' or '9/12 Project' is 

referenced in the case file ... 2. Issues include goveIn ment spending, government debt and taxes. 3. 

Educate the public throu.gbad,vocacy/legislativeliclivities to rnak~-Amedca~ better place to live. 4. 

Statements in the case:!1I~;tbat are cri,tieal of the ho,w the country is being run." 

As interviews witb Eorii~i~Jminatio ployees re-.:e~led, the BOLO description and tbe above -

referenced list of " ' . 0 s to determine whicb cases feU under the BOLO 

description.~ef' . the gh;.~p of advocacy cases rather than targeting any 

particula(;'gr§llp t~~~ terms, but that contained indicators of potentially 

signifld~lit.political referred to the group assigned to work such cases. 

AdditiO~:I~~ormati on 

details tbe ev~iUtion ofthe 

informed about k.,yevents. 

nternal Revenue Manuals (IRMs) and supplemental guidance to 

roval by appropriate management officials when the 

criteria is revised for e! associated with applications for tax -exempt starus. We did not 

identifY any guidelines. Disctigsions wilh the EO Director, Rulings and Agreements, confirmed that no 

procedures existed prior to May 17, 2012, but controls were subsequently instituted to ensure that any 

1 EO Detemllnauons indicates that it used the description "fea party" as a shOlihand way of referring to the group of advocacy 

cases rather than to target any particular group. As a result, cases that did not have "tea party" in their name or application 

were included in the group of advocacy cases. In this document, "tea party" is used generically to refer to this entire gron p of 

advocacy cases except where noted to refer to a specific organization. 

2 

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W&M EXHIBIT 26 

criterion that is established or edited is reviewed and approved at a higher level in the EO function . 

Moreover, we were informed that E 0 Determinations began revising IRM 7.20.4 (Emerging Issues) in 

October 2011, and we were provided with a draft ofthat IRM section, which contains procedures 

regarding the BOLO. All affected stakeholders bave provided comments on the draft IRM, which are 

currently being incorporated, and the exhibits to the IRM are under review by the IRS Office ofTa xpayer 

Correspondence. 

ResuIts: The initial case that started the emerging issue development ~as identified in February 2010. 

The EO Determinations office requested assistance from the EO Tecqnical office on how to process the 

cases. The Acting Manager EO Technical requested that this § 501(c)(4) case be transferred to EO 

Technical. In May 20 I 0, EO Determinations specialists weretold io ,coordinate "tea party" cases with a 

particular Determinations group. From April 2010 to October i010,' an EO Technical Tax Law Specialist, 

worked with a Determinations specialist to develop tbe cases hot transferred from Determinations to EO 

Technical. In October 2010, while waiting for guidance'jhiin the EO Teebriical office, the Specialist 

assigned the emerging issue cases stopped processing:t~em. In June 2011, thff9 Director was briefed 

on the issue, and she raised concerns about the criteri~ being used to identifY tlie c~~s and immediately 

directed that they be revised. The criteria were revised in July 20 11. In November20U, the EO 

Technical office provided draft guidance for processing the cases ,to the EO Determiiliticws office. In 

January 2012, additional information regli~~~J~tters were jssut;d~t~many of the organizai1bns. This 

resulted in media and Congressional attent;on,(lue,to the amotitifand types of infurmation being 

requested. In May 2012, training was give~'1o'lhii Spedalists pro4~sing the cases. A review of all the 

cases identified to date was also completed lq:aeterlhine' if any couldbhlosed. 

Conclusion: The initiaIgii~l';~:H,e,v,eloped byi~~'J30 ~eterminitions ~fuce referred to Tea Party 

organizations. In addi!iqp;jthe E6T~c),mical office more'than 20 nIonths (March 20 I 0 - November 2011) 

to provide written guidil~~~ o~ proces~iiig these case::, to the EO Detenninations office. 

3 

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W&M EXHIBIT 26 

Timeline of Events for tbe Political Advocacy Emerging Issue 

Date 

February 25, 2010 

Event 

Detenninations screener identified One § 501(c)(4) 

case that seemed similar to organizations receiving 

recent media attention for purportedly seeking 

classification as § 50 I (c)(4) social welfare 

organizations but operating like § 527 political 

organizations indicating a "high profile" cas,,; 

Screener noted that the applicant indicated that it 

intended to spend a significant amount of its,?udget 

influencing elections. The screen~r'Sma~ag~ri 

forwarded the issue up through management to the 

Acting Manager, EO Teclmiciil in Washington, D.C., 

who requested the case he:foYwarded to her. 

March I, 2010 Screener Manager asked one of his Specialists to 

search TEDS to identify other Te~lartyca ses or 

similar organizatiqru; in order to dete~e the scope 

of the issue in ili~.detl!nnination letter prdgram. 

Specialist continued,to ciiJijplete searche~ for 

additional cases untirth,e preCuiSor to the "B()L()" 

w~.~\~~~~~in May 20 t~, i . . .. 

March 16-17, 2010 /rgl)toti!lc~~~~ were idimtified.Acting Nlan~ger, 

. .. ... ,.. two more cases he transferred to 

April 5, 2010 

on, p.t. The Scre~ner Group Manager 

d ont§~OI(c)(3) ari~:\l~e § 50 1 (c)(4) case. 

NeW~cting·Mimager, EO Teclfuical, suggests the 

need' foia Sen;\ti~ Case Report on the Tea Party 

cases. ''E1?Dete~ili~li~ns Manager agrees. { ~', "'i;;' 

Two Tea ~arty cases assigned to EO Technical 

Sgecialist.! .' 

E() Determinations Screener developed list of 

18 ·Identified "Tea Party cases" during search of the 

TEDS: Three had already been approved as 

tax-exempt. 

Additional Details 

'Sp~ialist used Tea Party, 

Pitriot;,and 9/12 as part 

of th~'"dteria for these 

searches. 

Not all of the ten cases 

had "tea party" in their 

name. 

While the heading of the 

document listing these 18 

cases referred to "Tea 

Party" cases, not all of 

the organizations listed 

had "tea party" in their 

name. 

4 

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Date 

April 19, 2010 

April 25-26, 2010 

May 6, 2010 

May 17,2010 

May 26, 2010 

July 2,2010 

July 27, 2010 

W&M EXHIBIT 26 

Event Additional Details 

First Sensitive Case Report prepared by EO Technical. Sensitive Case Reports 

are shared to the Director, 

EO Rulings & 

Agreements and a chart 

summarizing all Sensitive 

Case Reports is provided 

to the EO Director 

Determinations Program Manager reqUests EO 

Technical contact for Specialist assi~ned to work,!ther 

Tea Party cases. Received contacis. EO Tecluiical 

Specialist sent development jette~ to one § 501(c)(4) 

and § 501(c)(3) Tea Partyc~se .• 

Prior to the BOLO development, an instruction to 

coordinate witl\a ·particular group all "Tea Party" 

applications was;~~i\~;yi~.~majl. 

Determinations Sii~c!alist,Y'ill~end development 

letters t~ EO Techn'ic~ISpeclali~tfor review prior to 

issuarice as part of EO ;T~~hnicai; (~ttempt to provide 

guidance to assist EO ri~;~rmiflations.':" . " ",' .;~, ,;, ~,;:/;'.' 

IlCrrechnica~Specialist cloi~4§ 501(c)(3) case as 

FiIffife " r~esied another ""\. 

EO TeCb;ji~al Specialist received first response from 

§ 501(c)(4thse. '\' ~\~'\ 

,Replacemeiit§ 501 (c)(3) case assigned to 

, 'E,O TecMlial Specialist. 

A Detenmnations Specialist identifies a case tha t 

appea;'s to have direct links to Tea Parties with 

possibly 30 state chapters. 

Prior to the BOLO development, an email was sent 

updating the description of advocacy applications and 

providing a coordinator contact for the advocacy 

cases. Description now reads, "These case involve 

Organization did not bave 

Htea party" in its name. 

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Date 

August 12, 2010 

August 2010 

October 2010 

October 19,2010 

Event 

various local organizations in the Tea Party movement 

are applying for exemption under 501(c)(3) or 

501(c)(4)." 

The Be On the Lookout (BOLO) listing was develop ed 

by a Detenninations Specialist tasked to create it in 

order to replace the existing practice of sending: 

separate emails to all Determinations emplo~; as to 

cases to watch for, potentially abusive'caSei;~ cases 

requiring coordinated processing and:.;iriergliig'issues . 

The political advocacy emerging issue was incliJd~d ,. 

onthe BOLO. The same qescrlptionnsed in the July , 

2010 email for the advocacy emerging issue was used 

for this initial BOLO listing, 

The responsibili,t)' for the advocacy emerging issue 

was moved to ~!if ' eterminatio~s group as part 

of a global group" , )Vithin EO 

Determinations, 

The advO,"ilcy cases wer~transferred tq another 

c 'netermin~t!o~il Speciali~< He did not WOrkOD the 

" 'c.s,es while ~;iting for guid.'jnce from EO Technical. 

Herec~ived ~~!ldv!,,,,,cy tracking sheet from the 

previous'De'ibrmiriatiQns"Speda~syesponsible for the 

-,cases. "','" .,' "~I]:;i;' ',>:~,',\ 

to the Acting Manager, EO Technical, describing the 

work completed on the Tea Party cases by 

EO Technical. Included is a listing ofthe cases the 

EO Technical Specialist assisted the Determinations 

Specialist with. 

W&M EXHIBIT 26 

Additional Details 

The language used on the 

BOLO was selected by 

Detenninations 

specialists with the 

involvement ofa frontline manager in EO 

Determinations. This 

language was not 

reviewed or approved by 

executive management. 

Determinations Specialist 

not sure who told him not 

to continue working on 

the cases while waiting 

for guidance, 

Per Director, Rulings and 

Agreements, tbere was a 

rnisconununication about 

not working the cases 

while waiting for 

guidance, She does not 

know who told the 

Specialist not to work the cases, 

The listing includes 40 

cases - 18 of which do 

not have "tea party" in 

their names. 

6 

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Date 

October 26, 2010 

November 16, 2010 

November 16-17, 2010 

November 17, 2010 

December 13, 2010 

Janlll1j\Y2?,2011 

Event 

EO Determinations Program Manager raises concern 

to the Manager, EO Technical, with the approach 

being used to develop the Tea Party cases. Why does 

the EO Technical Specialist need to review every 

development letter when a template letter could be 

approved and used 0 n all the cases? . i ' 

New coordinator contact for advocacy cases 

announced. 

A Determinations group manager raises concern to 

Determinations Area Manager, that they are still 

waiting for a developmentle~,er template from EO 

Technical for the Tea Parti:tases. The coordinator has 

received calls from taxpayetS'thecking on the status of , 

their applications. . 

EO Determinatio.ns'Program Manager gisctissed Tea 

Party cases withfi,j:p,al\e;,EO Techrlical:,Review of 

the cases by the EO'reciiii[9:1§peciali~t iqund that 

not all the cases have)qe same. issues, so a template 

l~~:~~.~~,~~t been dev~lo.ped..: . 

'EO,De[eiiliiti~tions Progriitn Manager asks Manager, 

",EO Techni~"'t fur a statuS· on the tea party cases. Tbe 

'M~!lager EO Teehnical, responds that they are going 

to discuss the 'cases with the Senior Technical Advisor 

}.? theEQ~ir~ctor sh~itly. s·· , ~"E: , ions Program Manager requests an . Tea Party cases from the Acting 

• . Ti:(jhilical. 

f--"'Jan-u-ary---C2"0"'1-;1-,-+A new . too~'6~~fthe Acting Manager, 

February 3,2011 

March 2, 2011 

March 30, 2011 

EO Technicalrole. 1""· 

.:i\.cting MlI~ager, EO Technical, provides an update to 

th~:Ep,D.et~hninations Program Manager on the cases 

beiUg worked by the EO Technical Specialist; letters 

are b!\irig developed and will be reviewed shortly. 

A Dcterminations group manager reminds EO 

Determinations Program Manager to fo !low up with 

EO Technical on the status ofthe Tea Pa tty cases. 

EO Detenninations receives Operational Assistance 

Requests from the Taxpayer Advocate Service office 

W&M EXHIBIT 2B 

Additional Details 

7 

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Date 

March 31, 2011 

April 13, 2011 

Event 

on two cases. 

EO Detenninations Program Manager states that while 

waiting for guidance from EO Technical, 

Detenninations Office still needs to work Tea Party 

cases to the extent possible. 

EO Technical mel with the EO Director's Senior 

Technical Ad . discuss two eases.'. She made 

recommendali velopniioht: 

W&M EXHIBIT 26 

Additional Details 

This contradicts the 

Specialist's statement 

about not working the 

cases until guidance 

received from 

EO Teclmical and 

supports the statement of 

the Director EO Rulings 

& Agreements that there 

was a miscommunication 

about not working the 

cases while awaiting 

\l"idance. 

~~~~~~~~-=~ ~Z7~~~~~~-+------------~ June 1-2,2011 Acling Director, RlitmgS"'lq ~greements, requested 

June 1·6,2011 

criteria used to identlfY .. "Tea P!Uiy' cases frOIl): 

EOD~t.el1)linations Ma~.ager. EOI)eterminatio~. 

Mariage~;;'equested criterla from .ScreenirManager. '\~<:J,:'i f<_. \ <", " \. <' : " ,\.: ',., 

I\11the num1i~t[of advocacY;~~~esgrew, t he Acting 

Director, EO R,U!ings & Agreements wanted to make 

\ . DetermiMtions \Vss'not being overidentifYin~ ~uch ca~es(including .~.that were' solely ~ngaged in lohbying or .... '. "parent political campa ign 

in light of the diversity of 

this "Tea Party case" label 

in their name but others did 

not, some'stated in their activities that they were 

affiliated ~vlth the "tea part y' movement while others 

. stated th~ywere affiliated with the Democratic or 

Republ1canparty, etc.), the Acting Director, EO 

Rulirlgs :& Agreements sought clarification as to the 

criteria being used to identifY these cases. In 

preparation for the briefing with the EO Director, the 

Acting Director, EO Rulings & Agreements asked the 

EO Detenninations Program Manager what criteria 

Determinations was using to determine if a case was a 

"Tea Party case." Because the BOLO only contained a 

brief reference to "Organ izations involved with the 

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W&M EXHIBIT 26 

Date Event Additional Details 

Tea Party movement applying for exemption under 

501(c)(3) and 501 (c)(4)", the EO Determinations 

Program Manager asked Screener Manager what 

criteria were being used to label these cases ("Do the 

applications specifY/state' tea party'? Tfnot, how do 

we know applicant is involved with the tea party 

movement?"). Screener Manager provided criteria for 

identifYing potential "tea party" cases to EO 

Determinations Program Manager ("The,fullowing are 

issues that could indicate a case to be, considered a 

potential 'tea party' case"). InforlIllltl0!1 forWarded to 

Acting Director, Rulings and Ag."ements . 

June 6, 2011 EO Determinations Manage~ tefers to the 

EO Director's inquiry of May 26'" regarding a 

particular case after the Commi ssioner, Services and 

Enforcement, qu~tioned her about it. 

,\~, ,~' 

June 6, 2011 Determinations Piogr,am ¥an~g,er mentionsth,at her 

office needs guidance'from EO',Technical to ensure 

c,?osiste!1cy: ' . , 

June 29, 2011 ·A briefing was held with the EO Director. The The briefing paper for the 

b~i~fing papb~ noted that EO D"i~rminations was EO Director was 

s~ndipg cases'l1leeting any of the criteria below to a prepared by Tax Law 

deSigl]ated gtbtfp to be worked ; Specialists in l; \.h\;'·~::"',,' ','.' EO Technical and '.,;, ''T~~'Par~,'' "Patriots" or "9 112 Project" is EO Guidance, and was '\f;~ii;i:~rere ' i" ,. e case file. reviewed by the Acting 

. lSSu.es government spending, government Manager, EO Technical. 

debt;, or taxes. The EO Guidance 

. Educatj9n of the public via advocacy I lobbying to Specialist was the 

primary autbor ofthe 

t umake~erica a better place to live." briefing paper. 

Staterri~'n~s in the case file criticize how the 

c6i.iQIW is being run. During the briefing, the 

EO Director raised 

There were over 100 advocacy cases identified by this concerns over the 

time. It was decided to develop a guide sheet for language of the 

processing advocacy cases. BOLO criteria for 

advocacy cases. The 

EO Director directed that 

the criteria immediately 

be changed. 

9 

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Date 

July 5,2011 

July 5, 2011 

July 23, 2011 

July 24, 2011 

August 4, 2011 

August 4, 2011 

Event 

Conference call held with EO Technical, EO Director, 

and EO Detenninations Program Manager. They 

developed new criteria for identifYing tbe cases at 

issue. Detenninations Program Manager made 

changes to the BOLO. The "issue name" on the 

BOLO was changed to "advocacy orgs". The "issue 

description" was changed to "organizations involved 

with political, lobbying, or advocacy for exemption 

under 501(c)(3) or 501(c)(4)." 

Washington, D.C. Office will be putting l! document 

together with recommended actions for advocacy 

cases. 

EO Technical assigned ne\\, person to coordinate with 

EO Detenninations Office.' • 

Work commenc~on the guide sheet.wheti the Acting 

Manager, EO Teehnical, asks Tax LiiW'Specialists to 

draft list of thinM for EO Detenninatlori~ Specialists 

to look for when wgr)<ing advocacy cas~, ' 

EO ~ulings and AgreCJbents holds meeting with Chief 

Coume\'so everyone ii'sthe latest information onthe 

:advocacy is~u)" ' .. 

EO,Guidance,SpeciaJist ask(ifCounsel win review 

. , the advoCitcyprganizations pri or to 

,~ations;<!\cting Director, 

'.. s; responlls that Counsel will 

r~yj~:w priorJo },ssuance-.~' " 

EO Technical m~fwitb Chief Counsel to discuss two 

samplicases EO Technical requested from EO 

Determitiatlb,ns in April and May 2010, 

".EO Detennip~tions Program Manager sends a listing 

iof~ll' vocacy cases to Act~ Director, 

Ril.l~ ements, so EO Tecbnical can 

,':' of the cases on the TEDS. The 

was limited because the review 

was conducted through TEDS so the EO Technical 

specialist did not necessarily have the full application 

file, An EO Technical Specialist reviews the listing to 

detelmine if any could he closed on merit or closed 

with an adverse detelmination Jetter. This "triage" 

was considered a third screening, 

W&M EXHIBIT 28 

Additional Details 

10 

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Date 

September 21, 2011 

October 2011 

October 24, 2011 

October 25, 2011 

October 26, 2011 

October 30, 20 II 

Event 

Draft guide sheet sent fur review and comment to 

various EO employees in Washington, D.C. 

New person took over as Acting Director, Rulings and 

Agreements. 

An EO Technical frontline manager forwarded initial 

"triage" results of advocacy cases to EO 

Determinations Office. 

EO Determinations Program Manageds unClear, 

based on the categories and terminology used.in the 

spreadsheet, what Determinati?ns s~ould do with the 

triage results - close cases, de~elop further, etc. Also 

requests status of guidance. "from EO Technical. 

EO Technical Specialist providt~ further explanation 

ofthe triage results in an email to EO DetertiUnations 

Program Mana.!,:r. .. . 

EO DeterminatJdns;Progr"1" Manager contacts the 

Acting Manager, E()TeCimJ~al, asking additional 

questions regardini'the triag~fI;sults and requesting a 

status update on the EQ:rechnicat:gujd~nce for the 

l\4yq~3cyca~es. The D"t~~inati(,psYPr?gr~m 

< :Manager recti~~ a call frqA\§9,Ij\eone workiilg with olie (lfthe organizations. The person stated they 

W&M EXHIBIT 26 

Additional Details 

~7N7o-V-em~be~t~)~,·c720~1~1~~~,--~ ~f~;~-e-.g~u7id~e-s~he-e-t~is-s-en-t-to---+-----------------i or~.g.,~ .• ~.,a."'.I.~ .' ir congre,s. s.i~n .. :al Office on this 

11;\%':' EOernzlo comment!':;'''' 

Novemhe(6;;,2011 Acting'Managei;I,E""p"'; ,;r:;;-e-ch;-n7"ic"""al'-, w-,ic:7U7"ha-v-e""E""O---t--------i 

\":'~i~' Technical·Specialist':plj;>vide more details on triage 

.i " results. He ~lso infonhed the EO Determinations 

,.frogram t1~n'ager that the guidance is being reviewed 

.~~~t~r to i~~~~rice. 

November 6, 2011 

November 15, 2011 

AC"ti;ng Diiector, Rulings and Agreements, informs 

Act;~g:Manager, EO Technical, and EO 

Detenninations Program Manager that, based on the 

feedback he has received, the guidance developed will 

not work in its present form because it was written in 

technical terms tbat may not help Revenue Agents. 

Need EO Determinations Office input. 

EO Detem,inations Program Manager forwards 

EO Technical Specialist's triaae results to tbe 

11 

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Date Event 

EO Director's Senior Technical Advisor per the 

EO Director's request. 

Novemher 22,2011 Acting Manager, EO Technical, forwards the clarified 

triage results to the EO Determinations Program 

Manager. 

November 23-30, 2011 A new EO Determinations coordinator is assigned 

oversight of the advocacy cases by the group manager. 

The draft EO Technical guidance is providCd to the 

coordinator (Advocacy OrganizatiQ.nsGtiiile$h~el). 

The coordinator began working advoCacy cases after 

receiving the draft EO Technjcalguidance in . 

anticipation of a team being.ss~iiibled to work lbe 

December 7-9,2011 

December 16, 2011 

January 2012 

January 25, 2012 

February 27, 2012 

cases. 

An advocacy teal11qf Determinations. Specialists was 

set up to revje",,~}lJiieidentified ad"oc~!:\y cases; one 

Grade 13 from eiiCll.Defeimjnatio ns group, An 

employee from QJ~jity Assu?anc" was als'o part oftbe 

o Technicail\;?\idedc<l\ltacts for thell,l .. 

y team ,meeting wa,s held. 

tters reqtlesting additional 

licalions'containing incomplete or 

e issued by Determin ations 

,ai:!, on th6jJ: teading of the draft 

iii Gliide Sheet issued by EO 

.).£tcriteria was again updated to focus 

)UIY'on political advocacy. Tbe criterion was 

r ;.s "political action type organizations involved 

in limiting/expanding government, educating on the 

Constitution and Bill of Rights, social economic 

reform/movement." Coordinator contact changed as 

wen. 

Advocacy team member asks when he can 8ta1t issuing 

develo ment letters on advocac cases to a licants 

W&M EXHIBIT 26 

Additional Details 

12 

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Date 

February 27,2012 

February 29,2012 

February 29,2012 

February-March 2012 

March 6, 2012 

March 8, 2012 

Event 

again. 

EO Detenoioations Program Manager questions why 

advocacy team members are not issuing development 

letters. Advocacy team group manager had told team 

coordinator to stop developing template questions, not 

development letters. Miscommunication corrected on 

February 29,2012. 

EO Director requests the Acting Di rector. Rulings and 

Agreements, develop a letter to clearly infuim , advocacy applicants what is going to'bappen'ifthey 

don't respond to the developmetlt letters, and giving 

them more time fur their respdnses. 

EO Director stops any more ,development letters from 

being issued on advocacy casOs,un,\i1 new guidance is 

provided to EOpetenninations, "," 

Acting Directoh'RiIllhgs and Agre~inents, discussed 

with EO Determinati6'hs'Program Manager, having 

specialists print out; web site iilfonoation ahclasking 

. . s to v~rify the info;)ll!ltion instead of 

to print out;ti)~W~bsit~s. " 

Numerousne;Vs articles Oellin,tobe publish.ec;l with 

'complaints frbinTea Party 6i&iUllzations about the 

IRS:s·unfair\f~tment. Cong..~s~ also begins to show 

interest.,inthe IRS's Jreatment arTea Party 

comes Acting Group Manager ofthe 

EO Teclmical. established 

iewing ftrst mvorable determination 

lette! .' an advocacy case drafted by 

EO Determinations. 

EO Determinations forwarded an advocacy case it 

thought could be approved to EO Technical for 

review. 

W&M EXHIBIT 26 

Additional Details 

Questions include 

asking for donor 

information. 

13 

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Date 

March 8, 2012 

March 15,2012 

March 23, 2012 and 

March 27, 2012 

April 2012 

April 17, 2012 

Event 

information, that EO Determinations will allow them 

not to send donor names, but inform them that we may 

need it later. 

Acting Director, Rulings and Agreements, sends a 

draft letter on giving advocacy applicants additional 

time to respond to the additional information letters to 

EO Determinations Program Manager for comment. 

The EO Determinations Program Manager' raises a 

concern of giving organizations that are not compliant 

with standard response timelines speeianr"atment. 

EO Determinations received guidance on how to 

handle different scenarios, b~s"d upon the status of 

their advocacy cases. Thosej '50 I (c)( 4) organizations 

that have not responded to ii development lette r were 

issued another letter giving them ill, ,additioiial60 days 

to respond. These}etters were to be 'issued by 

March 16,2012::;' , ,., 

This additional t;me letter was a one -time occurrence. 

Technic~l Advisor to the TEiGE Commissioner and 

the,])~putyi(::ommissi{)J)~r, Services an!lEnfor~elllent, 

discussed cgl1,~~rns with'thelUe<!iuttentloh'!he Tea 

Party applications were rece!ymg. The CoIiiinissioner 

"s\<edTechni~~I\Advisor to·I~~.k into what was going 

on in EO Determinations and make recommendations. • "" , ,.', . , " '.( ,{~i· •• 

C , " received the EO Technical triage 

results':and the EO Technical Guide Sheet provided to 

EO Determinations. Template questions developed by 

the advocacy learn were also provided. 

W&M EXHIBIT 26 

Additional Details 

14 

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Date 

April 23,2012 

April 24, 2012 

April 25, 2012 

April 25,2012 

Event 

Technical Advisor to the TEiGE Commissioner visited 

Determinations office in Cincinnati, OH with a group 

of EO employees, and reviewed around half of the 

identified advocacy cases. 

Acting Director, Rulings and Agreements, requests 

that tbe EO Director's Senior Technical Advisor 

review all tbe development letters issued for the 

advocacy cases and identify troubling questions, 

which organizations received them, and which 

Specialists asked them. . 

Senior Technical Advisor to, the EO Director provided 

results of development letter review, including list of > 

troubling questions. . 

W&M EXHIBIT 26 

Additional Details 

Results included names 

of donors as a troubling 

guestion. 

Chief Counsel's Office provides additional Comments 

on draft advocaf~ guide sheet to E(). 

~--~IvI~a-y~8~,~2~Ol~2~--~D~e7te-rm~in-a~ti-on~'~ --a-g-er-l~'n~fu-nm--ed~th-~~E~O~-+-----------------+ 

employees from . ' '. D.C., plant,i"visit 

May 9, 2012 

Cincinnati, OH to pfcjyide traiiling.on the advocacy 

cases and perform a review ofth'e',cases to detenrune 

the;Appropr.iate action." ,~.,i"f ';' ., 

'Director, Rillings and Agreem~l]ts, asks about the . . ", . g the B6~9;, 

~~1vI~~~14~,720~1~2~-+ ~~--~~----~~~~-4~C~0-n~cl~ud7e~d-,i~n~li~gh~t-o~f--~ 

May 14-15, 2012 

lvIay 16, 2012 

Trainillg held in Cincinnati, OR on how to process the 

advocacy cases. An EO Director's Technical Advisor 

took over from EO Determinations coordination ofthe 

advocacy team. 

case law on what is 

educational, that 

upropaganda" activities 

should be considered part 

of an organization '8 

social welfare activities 

in analyzing whether it is 

primarily engaged in 

promoting social welfare. 

15 

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Date 

May 17, 2012 

May21,2012 

May 24, ,2012 

May 2012 

Event 

took around three weeks to complete. 

A worksheet is used to document Ibe reviews. 

The Director, Rulings and Agreements, issues 

memorandum outlining new procedures for updating 

tbe BOLO listing. The BOLO criteria was updated 

again. New criteria reads: .. so I( c)(3), 50 1(0)(4), 

501(c)(5), and 501(c)(6) organizations wilb indicators 

of significant amounts of political campaign ./ 

intervention (raising questions as to~elnpt pUrpose 

andlor excess private benefit). Nqte<advocacYaction 

type issues (e.g., lobbying) tbat ,ar€currently listOO on 

Ibe Case Assignment Guide (CAG) do not mect Ibis "j: 

criteria." " ' 

Counsel determines Ibat requested ,donor information 

can be destroyed!)r returned to tn~appliClint 'fi not 

used to make tbelipa\ d.terminatioii.ot'~:~';xempt 

status. It does riot.need to be kept in tbeadmmistrative 

record. -'>~.;;, ' .- ','. ':: . ", .. ~?,,', 

will be issu~ to, Ib ~~rg~izations uircitinjng 

,donor inio~tjon. ~~t~'1yed. ";,-> 

$Clipt was de~Io~4to infurrn,~me 

bave noi~onded to additional 

ts Ibat it iS'not necessary to send tbe 

thaf'tbbir applications have 

ditio«ilJparagraph was 

tter. 

vocacy cases was completed, 

ecialist working advocacy 

Technical employee to work 

Tedulictil emplOyee is 

!9pment letterS prior toiSsiulnee. 

e begins reviewing 100 percent of Ibe 

ket prior to closure. Quality 

view shifts from 100% review to sample 

review once a comfort level with the results of Ibe 

quality review of each bucket is achieved. 

A decision was made to refer cases to the Review of 

Operations Unit for follow-up if there are indications 

of political activity, but not enough to prevent 

approval of tax -exempt status. 

W&M EXHIBIT 26 

Additional Details 

Suggested additions and 

changes must be 

approved by !be Group 

Manager of!be emerging 

issues coordinator, the 

EO Detenninations 

Program Manager, and 

Ibe Director, Rulings and 

Agreements. 

16 

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W&M EXHIBIT 26 

Date Event Additional Details 

June 4, 2012 Draft letter developed to send to organizations that 

provided donor information. Letter will inform the 

organizations that the information was destroyed. 

June 7,2012 The Director, Rulings and Agreements, provides 

guidance on how to process the advocacy cases now 

that they have heen reviewed and divided into, 

categories. Any new cases received will go thfough 

the same review process prior to assigru,P~llt">" 

July 15, 2012 A ncw Acting Group Manager is overseeing the 

advocacy team, " ' " ' .. , 

'" 

17 

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From: 

Sent: 

To: 

Subject: 

Attachments: 

Toby Miles <tobomatic@msn.com> 

Tuesday, October 30, 2012 9:16 PM 

Paz Holly 0; nancy.marks_ Lerner lois G 

Long Timeline from lOIS 

long Political Advocacy Tlmeline HOP comments.doc 

Looks pretty good .. a couple questions/comments 

W&M EXH1BIT 27 

iRSOO00062829 
96 


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From: 

Sent: 

To: 

Subject 

Attachments: 

lois: 

Biss Meghan R 

Saturday, May 04, 2013 10:08 AM 

Lerner lois G; tobomatic@msn,com 

Summary of Application 

One Fund Boston.docx 

W&M EXHIBIT 28 

Attached is a summary of the entire application from One Fund Boston. It includes the information from their initial 

1023, our development letter, and their May 3 response. In it, ! also point out situations where the revenue rulings they 

cite aren't exactly on pOint. Additionally, where they reference other victim compensation funds, I included the 

information we have on those funds from internet research. 

As a note, the Aurora compensation fund may be an issue for the community foundation that made the payments. The 

CF is large enough (171 million on 2011 Form 990) that a 5 million payment to victims shouldn't jeopardize their 

exemption. But we wonlt know anything for sure until their 2012 Form 990 is filed. 

Also, this article re funds distributing money to victims is interesting: 

httP:Uwww.motherjones.com/politics/2013/04/where ~does-money-donated~victims-mass-shootings-go 

After you have had a chance to look over this document, we can have a discussion about it and any questions prior to 

your meeting with Steve. 

Thanks, 

Meghan 

IRS0000322610 
(97) 

MINORITY VIEWS 

Our opposition to this letter and to this process is not about any 

of us condoning the mismanagement in the Internal Revenue Service (IRS) Exempt Organizations division (EO). Democrats were 

among the first to call for Lois Lerner to resign and for her to be 

relieved from her duties. 

Indeed, the Department of Justice (DOJ) is investigating the entire matter to determine whether there should be criminal charges. 

They are working with the IRS and with the Treasury Inspector 

General for Tax Administration (TIGTA) to gain access to documents, conduct interviews and compel testimony. 

Nearly a year ago, the investigation by this committee started 

with a bipartisan request for documents on May 14. However, the 

investigation quickly went off those tracks with a declaration by 

Chairman Camp on May 17 that the IRS matter was the ‘‘latest 

example of a culture of cover-ups and political intimidation in this 

Administration.’’ That end to bipartisan efforts started a year-long 

pursuit of a failed effort to prove White House involvement, pursuit 

of a non-existent enemies list, and a search for non-existent evidence that the IRS targeted only conservative groups. 

The selective release of taxpayer information by the Republicans 

to make political points contradicts the very reason these taxpayer 

protections were enacted in the first place. The provision under 

which this information is being released—Section 6103(f)—was enacted in response to the inappropriate use of taxpayer information 

by the Nixon Administration. The very disclosure that is being 

made in this report violates the spirit of the taxpayer protections 

this Committee created. 

The Chairman claimed in the executive session that the only way 

he could notify the Attorney General of specific evidence of criminal 

activity by Ms. Lerner that the Chairman had found was to make 

all of this material—previously considered protected taxpayer information—public. 

But that is just not accurate. The DOJ has access to all of the 

same information. If the Chairman was afraid they might have 

missed something, he could have designated the Attorney General 

or a designee with his 6103 authority as Chair of the Ways and 

Means Committee—just as he did for the other Members of this 

Committee—for the Attorney General to review it. 

The Ways and Means Committee has never used this authority. 

In 1974, Chairman Mills, along with Ranking Member Schneebeli, 

acting on behalf of the Joint Committee on Taxation, filed in the 

House and made public the audit of President Nixon’s tax returns, 

which had been requested by the President himself. That process 

was a public service, letting the nation know that the President, 

like other Americans, would be paying his fair share of tax for the 


smartinez on DSK6TPTVN1PROD with REPORTS
98 

years under audit. This new action by the Committee serves no 

such purpose. After a year of investigation, $14 million spent, 15 Congressional 

hearings held, more than 60 staff interviews of IRS employees conducted and the review of over 660,000 internal IRS documents, it 

is now clear that Republican members of the Ways and Means 

Committee have decided that they do not want to be left behind in 

the Republican campaign to keep this so-called ‘‘scandal’’ going 

until November. 

This entire investigation has arisen from a fundamentally flawed 

report issued by the Inspector General which failed to indicate that 

progressive groups were selected for additional screening alongside 

‘‘Tea Party’’ groups. The report also failed to mention that the 

Head of Investigations at TIGTA reviewed 5,500 internal IRS 

emails and concluded that ‘‘there was no indication that pulling 

these selected applications was politically motivated.’’ 

The Republicans have hand selected information that they claim 

proves their case from the over 660,000 documents provided during 

this investigation. The Chairman gave Members only 24 hours to 

look at the evidence he selected to back up the assertions in the 

letter. Most egregiously, the Republicans have not provided all 

Committee Members with the necessary authority to look at any 

other documents beyond what they were provided so that Members 

could reach a conclusion on their own. 

However, the materials released to the public today confirm our 

position from the very beginning—that Democratic-leaning and 

progressive groups were subject to the same scrutiny as ‘‘Tea 

Party’’ and other Republican-leaning groups. Exhibit 21 (attached 

to the referral letter) contains a list of tax-exempt applications that 

were subject to additional review. 

Among that list are a group of Democratic-leaning organizations 

with the term ‘‘Emerge’’ in their name. According to a New York 

Times story dated July 20, 2011, Emerge Maine, Emerge Nevada 

and Emerge Massachusetts were all denied tax-exempt status after 

their applications were pending for over three years. These denials 

happened during the period of TIGTA’s audit, but they were not 

disclosed by the Inspector General in the audit report or during his 

testimony before Congress. These applications were processed in 

the same manner as the Tea Party cases as outlined in TIGTA’s 

audit report: 

• The cases were identified and screened for political activities; 

• They were transferred to Exempt Organizations Technical 

Unit; 

• They were the subject of a Significant Case Report (included in Exhibit 21 of the Republicans Letter); 

• They were subject to multiple levels of review within the 

IRS; and 

• They were reviewed by IRS Chief Counsel. 

Now that the documents have been made public, many relate to 

the application for 501(c)(4) status by Crossroads GPS. It is an organization operated by Karl Rove that spends tens of millions of 

dollars on political activities while claiming to be a tax-exempt ‘‘social welfare’’ organization. This Committee’s action has the effect of 


smartinez on DSK6TPTVN1PROD with REPORTS
99 

assisting campaign organizations like Crossroads. Crossroads GPS 

reported to the Federal Election Committee having spent $71 million during the 2012 election cycle, according to the Center for Responsive Politics. 

Questions about Crossroads GPS status as a 501(c)(4) have been 

around since 2010. If Republicans can shut down those questions, 

Crossroads GPS can continue to pour hundreds of millions of dollars into advancing Republican candidates without having to disclose their contributors, as can others like Americans for Prosperity 

and American Future Fund. 

We all share the objective of a thorough investigation and prosecution by the U.S. Justice Department, if justified, of any person 

who violated the law. We all share the objective of ensuring that 

the IRS is effectively administering procedures to protect every taxpayer from discrimination. Were these the Majority’s only objectives, today’s unprecedented political theatre would never have occurred. 

Making this Committee an arm of any campaign committee does 

a deep disservice to the proud traditions and legacy of the Committee on Ways and Means. 

SANDER LEVIN. CHARLES RANGEL. JIM MCDERMOTT. JOHN LEWIS. RICHARD E. NEAL. XAVIER BECERRA. LLOYD DOGGETT. MIKE THOMPSON. JOHN B. LARSON. EARL BLUMENAUER. RON KIND. BILL PASCRELL, Jr. 

JOSEPH CROWLEY. ALLYSON SCHWARTZ. 

DANNY K. DAVIS. LINDA SA ́ NCHEZ. 


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(100) 

DISSENTING VIEWS 

On Wednesday, April 9, 2014, the Ways and Means Committee 

took unprecedented action to refer Lois Lerner to the U.S. Department of Justice for possible criminal charges. 

I am very disappointed that for the first time in 40 years, the 

Republicans on this Committee decided to release taxpayer information to the public. I feel very strongly that this action flies directly in the face of the taxpayer protections which the Ways and 

Means Committee not only created, but also worked in a bipartisan 

manner to protect and uphold. 

As the Ranking Member of the Oversight Subcommittee, I take 

tax policy and the importance of congressional oversight very seriously. It is unfortunate that I was previously committed to participate in the Lyndon B. Johnson Presidential Library Civil Rights’ 

Summit with the current and former U.S. presidents and civil 

rights leaders on the day of this unprecedented Committee action. 

I even tried, unsuccessfully, to rearrange my schedule in order to 

attend this last-minute markup. 

Before departing, however, I was one of the first Members to review the tax documents when the Republicans made them available to the Committee. Had I been present at the hearing, I would 

have joined my colleagues in opposing this unnecessary political 

maneuver. 

To be clear, I do not support federal mismanagement or potential 

criminal activity, and I share the bipartisan sentiment supporting 

a thorough investigation by the U.S. Department of Justice. Yet, 

there are a number of ways to conduct responsible oversight, without political theatre, and I am disappointed that politics are taking 

center stage over the compelling issues of fairness, privacy, policy, 

and process. 

JOHN LEWIS. 

Æ 


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