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89–864 PDF 2014

IRS ABUSES: ENSURING THAT TARGETING NEVER 

HAPPENS AGAIN 

HEARING 

BEFORE THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JULY 30, 2014 

Serial No. 113–135 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

Vacancy 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

STEPHEN CASTOR, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

(III) 

C O N T E N T S 

Page 

Hearing held on July 30, 2014 ............................................................................... 1 

WITNESSES 

Mr. David Keating, President, Center for Competitive Politics 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 8 

Mr. Hans A. Von Spakovsky, Manager, Election Law Reform Initiative, and 

Senior Legal Fellow, Edwin Meese III Center for Legal and Judicial Studies, The Heritage Foundation 

Oral Statement ................................................................................................. 16 

Written Statement ............................................................................................ 18 

Ms. Cleta Mitchell, Partner, Foley & Lardner LLP 

Oral Statement ................................................................................................. 26 

Written Statement ............................................................................................ 29 

Mr. James Sherk, Senior Policy Analyst in Labor Economics, The Heritage 

Foundation 

Oral Statement ................................................................................................. 37 

Written Statement ............................................................................................ 39 

APPENDIX 

The Hon. Michael R. Turner, a Member of Congress from the State of Ohio, 

written statement ................................................................................................. 74 

The Hon. Gerald E. Connolly, a Member of Congress from the State of 

Virginia, written statement ................................................................................. 75 

The Hon. Matthew Cartwright, a Member of Congress from the State of 

Pennsylvania, written statement ........................................................................ 77 

Staff Report ‘‘Making Sure Targeting Never Happens: Getting Politics Out 

of the IRS and Other Solutions ........................................................................... 78 

Oversight.house.gov Majority Staff Report, April 7, 2014 ................................... 101 

Screening Workshop Notes, July 28, 2010, submitted by Rep. Davis ................. 148 

Statement for the record from Prashant K. Khetan, Senior Counsel ................. 151 

(1) 

IRS ABUSES: ENSURING THAT TARGETING 

NEVER HAPPENS AGAIN 

Wednesday, July 30, 2014 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

WASHINGTON, D.C. 

The committee met, pursuant to call, at 9:34 a.m., in Room 2154, 

Rayburn House Office Building, Hon. Darrell E. Issa [chairman of 

the committee] presiding. 

Present: Representatives Issa, Mica, Turner, Jordan, Chaffetz, 

Walberg, Lankford, Meehan, Gowdy, Farenthold, Woodall, Massie, 

Collins, Meadows, Bentivolio, DeSantis, Maloney, Norton, Tierney, 

Connolly, Kelly, Davis, Cardenas and Horsford. 

Staff Present: Richard A. Beutel, Senior Counsel; Molly Boyl, 

Deputy General Counsel and Parliamentarian; Lawrence J. Brady, 

Staff Director; David Brewer, Senior Counsel; Sharon Casey, Senior Assistant Clerk; Drew Colliatie, Professional Staff Member; 

John Cuaderes, Deputy Staff Director; Adam P. Fromm, Director of 

Member Services and Committee Operations; Linda Good, Chief 

Clerk; Tyler Grimm, Senior Professional Staff Member; Mark D. 

Marin, Deputy Staff Director for Oversight; Laura L. Rush, Deputy 

Chief Clerk; Jessica Seale, Digital Director; Andrew Shult, Deputy 

Digital Director; Peter Warren, Legislative Policy Director; Rebecca 

Watkins, Communications Director; Tamara Alexander, Minority 

Counsel; Portia Brown, Minority Counsel; Aryele Bradford, Minority Press Secretary; Jennifer Hoffman, Minority Communications 

Director; Juan McCullum, Minority Clerk; Dave Rapallo, Minority 

Staff Director; Donald Sherman, Minority Chief Oversight Counsel; 

and Katie Teleky, Minority Staff Assistant. 

Chairman ISSA. The committee will come to order. 

Without objection, the chair is authorized to declare a recess of 

the committee at any time. 

The Oversight Committee exists to secure two fundamental principles. First, Americans have a right to know that the money 

Washington takes from them is well spent; and, second, Americans 

deserve an efficient, effective government that works for them. Our 

duty on the Oversight and Government Reform Committee is to 

protect these rights. Our solemn responsibility is to hold government accountable to taxpayers because taxpayers have a right to 

know what they get from their government. It is our job to work 

tirelessly in partnership with citizen watchdogs to deliver the facts 

to the American people and to bring genuine reform to the Federal 

bureaucracy. This is our mission. 

2 

Today’s hearing continues the committee’s oversight of the IRS 

and its targeting of conservative applicants for tax-exempt status. 

The committee continues to conduct a thorough and comprehensive 

investigation of the IRS’ targeting. 

From this oversight work, we know a great deal about the IRS’ 

targeting. We know that in 2010, as the President traveled the 

country criticizing the Supreme Court’s decision in Citizens United, 

the IRS began systematically scrutinizing and delaying tax-exempt 

applications. 

We know Lois Lerner talked about the political pressure on the 

IRS, ‘‘to fix the problem.’’ Again, to fix the problem caused by Citizens United. We know that Lois Lerner called conservative tax-exempt applicants, ‘‘very dangerous,’’ and ordered them through a 

multitier review. And we know that conservative tax-exempt applicants faced enhanced scrutiny, extensive delays, and inappropriate 

questions and requests from the IRS. 

While there is much the committee knows about the IRS targeting, there is still much more work to be done, and for that reason, the committee continues its oversight. Today, however, we 

start the discussion of steps that can be taken to restore confidence 

in the IRS and ensure that targeting never occurs again. 

Our mission on the Oversight and Government Reform Committee is to make government work better for the American people. 

We meet today for that reason, to make the IRS work better for 

the American taxpayer. 

Our investigation has made it clear that one reform is absolutely 

critical to improving the IRS. We must get politics out of the IRS. 

To accomplish this, yesterday we issued a new staff report outlining 15 significant potential long-term reforms to stop abuse and 

get politics out of the IRS. Here are some of the ideas. 

First, the IRS should not be in the business of regulating political speech. When there is no—regulating political speech when 

there is no impact on tax revenue. This process is where targeting 

happened. Other Federal agencies exist to regulate political campaigns and their elections, and this is not the IRS’ job. 

This committee found it very frustrating to have to repeatedly remind Members on the dais here that 501(c)(4)s, in fact, get no tax 

deduction, no special tax treatment, and that all contributions are 

post-tax. And yet the IRS took special interest in who their contributors were, even though they were paying for it with money after 

they had paid their taxes. And Congress should consider changing 

that law. 

Second, the current structure of the IRS as a single-director 

agencies allowed freedom to people like Lois Lerner and the Exempt Division to grow and gain power. It also allowed—also created the circumstances under which White House was informed of 

Lois Lerner’s lost emails months before Congress and the public 

knew. 

If Congress created a bipartisan, multimember commission, it 

would create assurances that the IRS truly is an independent, nonpartisan agency. 

Third, TIGTA, the special IG for—Treasury IG covering IRS, and 

the IRS knew that groups had been targeted from May of 2012, but 

did not take immediate action to help the aggrieved parties. This 

3 

was wrong, and this is the kind of inappropriate behavior that, 

again, affects the outcome of elections. 

We must examine the current structures of the Treasury Inspector General for Tax Administration and the IRS’ Oversight Board 

to ensure that they are living up to their oversight responsibilities 

not only to know, but to take action. 

Our report notes 15 problems and offers 15 solutions for Congress to discuss. I am sure there are more good reforms and more 

good reform ideas that should be part of the discussion, and I expect some Members to raise concerns with aspects that we have already suggested. 

Our investigation must also continue, because we clearly do not 

have the full knowledge of what happened. We don’t even have a 

significant portion of the emails from the most important figure in 

this investigation. 

Serious debate and discussion about reforming a failed agency 

and getting politics out of the IRS is a good and worthwhile exercise, even though there may not be any clear consensus for those 

major reforms today. Last week the committee took bipartisan 

steps on some of these measures. 

As we develop future ideas, I hope we will continue to work in 

a bipartisan spirit. Our witnesses today will help us to explore the 

other steps that Congress can take to improve the accountability of 

the IRS. With an agency like the IRS, reform will not be accomplished overnight. This is an important process that will continue 

into the future and expand to many other committees and stakeholders. 

But this is a process we must start today. And from that standpoint, I want to welcome our witnesses, and I look forward to hearing their testimony. 

Chairman ISSA. And I would now recognize the distinguished 

gentleman from Illinois Mr. Davis. 

Mr. DAVIS. Thank you very much, Mr. Chairman. Unfortunately, 

the ranking member Mr. Cummings could not be here today, and 

I am substituting or sitting in for him. 

Today is the twelfth hearing our committee has held on the IRS 

investigation over the past year. We have held six hearings on this 

topic in just the last 6 weeks. The IRS Commissioner has testified 

three times before our committee and a fourth time before the 

Ways and Means Committee in just the past month. 

The same is true for the organizations testifying here today. Representatives from all three groups, True the Vote, The Heritage 

Foundation, and the Center for Competitive Politics, testified before the committee in February of this year. I welcome our witnesses here today, or perhaps I should say welcome them back. 

Some may say our efforts are duplicative. It makes no sense, for 

example, to require IRS witnesses to submit to transcribed interviews with the Oversight Committee first and then force them to 

appear again before the Ways and Means Committee, but that is 

what these two committees on which I serve are doing. 

Unfortunately, one person who is not here today is Inspector 

General Russell George. The title of today’s hearing is ‘‘IRS Abuses: 

Ensuring that Targeting Never Happens Again.’’ So it would have 

made sense to hear from the official who issued the report in 2013 

4 

that first identified inappropriate criteria used by IRS employees 

to screen tax-exempt applications. He could have told us how the 

IRS is doing in terms of implementing the recommendations in his 

report. Last week Ranking Member Cummings requested that the 

committee invite the inspector general, but he’s not here today. 

Other people who are not here include progressive groups that 

were singled out. On April 17, 2014, Chairman Issa stated, ‘‘There 

is simply no evidence that any liberal or progressive group received 

enhanced scrutiny because its application reflected the organization’s political views.’’ But the committee has obtained substantial 

evidence that IRS employees treated progressive groups in a manner similar to conservative groups. For example, a ‘‘be on the lookout’’ list, or BOLO list, from 2010 directed IRS screeners to look 

for ‘‘ACORN successors.’’ Another directed IRS employees to screen 

for, ‘‘progressives.’’ 

A PowerPoint presentation from 2010 included images of a donkey and an elephant, and it instructed IRS screeners to look for the 

terms, ‘‘progressive’’ alongside, ‘‘Tea Party.’’ 

And a training presentation listed successors to ACORN as examples of organizations to watch for. 

Witnesses also confirmed that progressive groups were subjected 

to extended reviews and delays. He stated that I am—during a 

transcribed interview with committee staff on October 29, 2013, a 

senior technical advisor in the Exempt Organizations Division testified that progressive emerge groups were subjected to multitiered 

reviews that included consolidating cases and working with attorneys in the Office of Chief Counsel. During a hearing before the 

committee on July 18, 2013, the inspector general testified that he 

did not become aware of documents relating to progressive groups 

until after his audit was complete. He stated, ‘‘I am disturbed that 

these documents were not provided to our auditors at the outset, 

and we are currently reviewing this issue.’’ It is now more than a 

year later and we still have not heard his update, and we will not 

hear today. 

Finally, late last night, the chairman issued a Republican staff 

report with new recommendations for the IRS. This report was not 

provided to committee members in advance, so we did not have an 

opportunity to review it or offer our opinions. 

The primary recommendation is to eliminate the position of IRS 

Commissioner, one of only two political appointees in the entire 

agency, and replace it with a board full of political appointees. Personally, I was surprised by this recommendation because it seems 

to contradict the Republican narrative for this investigation. If you 

believe there is too much political activity at the IRS, I don’t see 

how increasing the number of political appointees would help. 

I also wonder, given the committee’s focus on overpoliticized and 

dysfunctional boards at the Nuclear Regulatory Commission and 

the Chemical Safety Board, why this model is best for the IRS. 

With that, Mr. Chairman, I thank the witnesses very much for 

being here and look forward to their testimony. 

Chairman ISSA. Thank you. 

Members may have 7 days in which to submit their opening 

statements. 

5 

I now ask unanimous that the aforementioned majority report, 

‘‘Making Sure Targeting Never Happens Again: Getting Politics 

Out of the IRS and Other Solutions,’’ be placed in the record. Without objection, so ordered. 

Additionally, I will add the previously published April 7, 2014, 

Committee on Oversight report, ‘‘Debunking the Myth of the IRS 

Targeting Progressives.’’ Without objection, both will be ordered in. 

I might note for the record that we asked repeatedly for the minority to submit a witness. If they wanted the IG to be their witness, they certainly could have had them. 

Today we welcome our witnesses. Mr. David Keating is president 

of the Center for Competitive Politics. Thank you. 

The Honorable Hans von Spakovsky—— 

That’s right. 

—is the manager of Election Law Reform Initiative and a senior 

legal fellow at The Heritage Foundation. 

Miss Cleta Mitchell is a partner at Foley & Lardner, LLP. 

And Mr. James Sherk is the senior policy analyst in labor economics at The Heritage Foundation. 

Thank you all for being here. 

Pursuant to our committee rules, would you please rise to take 

the oath. And, yes, please raise your right hands. 

Do you solemnly swear or affirm that the testimony you are 

about to give will be the truth, the whole truth, and nothing but 

the truth? 

Please be seated. 

Let the record reflect that all witnesses answered in the affirmative. 

In order to allow time for discussion, please try to limit your testimony to 5 minutes. Your entire written statement will be made 

part of the record. 

We’ll begin with Mr. Keating. 

WITNESS STATEMENTS 

STATEMENT OF DAVID KEATING 

Mr. KEATING. Mr. Chairman and members of the committee, 

thank you for the invitation to speak to you today, and thank you 

also for the investigative work you’ve done on this very important 

topic. 

While the investigations here and elsewhere are still ongoing, 

and we don’t know the full extent of what happened, we do know 

enough to make some recommendations already to ensure that nonprofit groups are never targeted again. 

I think the most important of these recommendations is to get 

the IRS out of the speech police business as soon as possible. Given 

the importance of First Amendment rights and the effect of tax 

compliance on revenue collections, the IRS is perhaps the last 

agency that we could envision as the speech police. As a revenuecollecting agency, the IRS has proven that it’s in incompetent at 

regulating political speech, and that in term undermines its primary function of collecting tax revenue. Its continued worked in 

this area could cost the government tens or even hundreds of bilVerDate Aug 31 2005 10:32 Oct 07, 2014 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\DOCS\89864.TXT APRIL
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lions of dollars in tax revenue if lack of trust in the IRS causes tax 

compliance to fall by even a tiny amount. 

Now, in fairness to the career staff of the IRS, this is very difficult work. As I like to tell people, campaign finance law is extremely complicated. It makes the tax law seem like a model of 

simplicity and clarity. Imagine, if you will, if we gave the Federal 

Election Commission the job of writing a tax regulation or enforcing the tax law. Well, the FEC would probably make a hash of it, 

too. 

The IRS is simply not equipped, it doesn’t have the culture, and 

it doesn’t understand First Amendment constitutional rights. And 

the most important case in this area was the landmark Buckley v. 

Vallejo discussion. In that ruling the Supreme Court said the supposedly clear-cut distinction between discussion, laudation, general 

advocacy, and solicitation puts the speaker in circumstances wholly 

at the mercy of the varied understanding of his hearers and consequently whatever inference may be drawn as to his intent and 

meaning. Such a discussion offers no security for free discussion. 

In these conditions it blankets with uncertainty whatever may be 

said. It compels the speaker to hedge and trim. 

Now, this is exactly the problem with the IRS guidance today for 

nonprofit organizations. This advocacy places nonprofit groups in, 

‘‘circumstances wholly at the mercy of the varied understanding of 

his hearers’’; in this case, IRS agents. 

Now, the Court’s solution was simple and elegant, and it essentially said that political advocacy was defined as communications 

that in express terms advocate the election or defeat of a clearly 

identified candidate. 

Shortly after this ruling, the Federal Election Commission came 

up with regulations to implement the decision. The IRS did nothing. Nothing. And as a result, it didn’t recognize the Buckley decision, and it didn’t modify its guidance in any way to reflect it. 

Congress recently, and I’m talking about in the last 15 years, has 

tried to move the IRS more into the area of political regulation, 

and this has embroiled the IRS in political fights the Service 

should avoid. 

Given the history of the agency from the 1930s through the 

1970s, where there was considerable history of Presidents of both 

parties attempting to use the IRS to attack political enemies, the 

Service has long been prickly, and justifiably so, about being 

dragged into political wars. 

Now, I’m concerned that this distrust of the IRS could lead to a 

fall of tax compliance. If tax compliance fell just 1 percentage point, 

the government could lose 170 billion in tax collections over the 

next 10 years. 

And that is why we think the solution is pretty simple, and that 

is to get the IRS out of speech police business. We already have 

agencies in all 50 States, and we have the Federal Election Commission to regulate speech. And, in fact, the IRS’ own National 

Taxpayer Advocate Nina Olson wrote in her report last year, it 

may be advisable to separate political determinations from the 

function of revenue collection. Under several existing provisions 

that require nontax expertise, the IRS relies on substantive determinations from an agency with programmatic knowledge. 

7 

We already have such an agency. As I said, it is the Federal 

Election Commission. If the FEC decides a group conducts excessive political activities, it can force, and indeed has forced, such 

groups to register and report to the FEC. If they are a political 

committee, then they automatically become a 527 organization and 

are no longer a social welfare business, trade, or union. 

So I think that’s the most important change that could be made. 

The IRS could and should do it on its own, and that is getting out 

of the speech police business. And that’s the only solution I believe 

that can guarantee a similar scandal will not occur again. It will 

protect against a decline in tax compliance and help restore the 

agency’s reputation. 

Chairman ISSA. Thank you. 

[Prepared statement of Mr. Keating follows:] 

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Chairman ISSA. Mr. von Spakovsky. 

You know, and I grew up in a neighborhood with a lot of those 

names. I should be better. But if your name was Jazbinski, I’d have 

been much more skilled in saying it. 

Thank you. Please. You are recognized. 

STATEMENT OF HANS A. VON SPAKOVSKY 

Mr. VON SPAKOVSKY. Thank you. Mr. Chairman, I appreciate the 

invitation to be here today for your first hearing on how to fix the 

problems at the IRS, and that is how to prevent the IRS from abusing its tremendous power. 

In May of last year, Lois Lerner, as everyone knows, revealed 

that the IRS has been targeting Tea Party and other conservative 

organizations. This was apparently made public just before the 

public release of an inspector general report that detailed the, ‘‘inappropriate criteria,’’ used by the IRS to identify/review the applications of conservative organizations for tax-exempt status under 

501(c)(4) of the Internal Revenue Code. These reviews, again 

quoting the IG report, ‘‘resulted in substantial delays in processing’’ 

of their applications, and they were also subjected to voluminous 

requests for totally irrelevant documents and information. 

This represents one of the most dangerous actions that can be 

taken by a government agency, abusing its power to target 

disfavored individuals and disfavored organizations. What is worse 

is that the IRS seems to have learned nothing from this effort to 

regulate political speech, which is outside its statutory mandate, 

instead of sticking to its mission, which is collecting tax revenue. 

In fact, the IRS recently proposed new regulations that would, in 

essence, implement the inappropriate criteria that the IRS used in 

its unlawful targeting scheme. And, unfortunately, as we all know, 

the IRS has a history of abusive behavior, starting with Franklin 

Delano Roosevelt, who used the power of the agency against a host 

of political rivals and business opponents. 

Now, I’ve got six recommendations that I will make very quickly, 

although there are certainly others that we can discuss. 

First of all, I highly recommend the IRS be made an independent 

agency run by a multimember commission. When compared to 

other Federal agencies like the FEC or the SEC, the IRS lacks the 

safeguards needed to assure citizens that tax regulation enforcement will not be used to stifle political opposition of the party in 

power. 

Specifically, for example, the FEC is an independent agency. And 

unlike the Treasury Department and the IRS, it is not directly accountable to the party controlling the White House. 

Additionally, the FEC has a bipartisan makeup of six Commissioners, instead of just one. Since it takes four votes to carry out 

any action, it requires the consensus of both parties represented 

there to take any action. This reassures the public that the agency’s policies, regulations, and enforcement decisions are based on 

the legal and factual merits rather than on partisan and ideological 

considerations. The IRS lacks both of these important institutional 

safeguards. 

The second recommendation is to place a time limit on the IRS’ 

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tirely. The investigations revealed that at one point for 27 months 

the IRS did not approve a single tax exemption application from a 

Tea Party organization. 

This kind of years-long delay can be obviated with a time limit 

placed on the IRS for review, such as 60 days. That exemption 

could be granted then automatically if the IRS does not respond 

within 60 days, and you could even give the IRS the ability to extend that period once if it makes a written request for relevant information. 

Alternatively, organizations could be automatically granted taxexempt status as soon as they submit a basic application to the 

IRS. That would prevent the type of manipulation that occurred. If 

the IRS later obtains evidence that an organization is abusing its 

tax-exempt status, it can then conduct an investigation or an audit, 

just as it does for any other taxpayers when a problem arises. But 

there is no logical reason why the IRS should conduct a review of 

newly formed organizations just starting their activities. 

Third, the IRS should only be allowed to take into account political speech or activity that consists of express advocacy. Now, I actually agree with Mr. Keating that they ought to get out of this 

business entirely, but that is also something that should be considered. 

Also, the IRS has completely misinterpreted the definition of the 

promotion of social welfare. And this is my fourth recommendation. 

As you know, in order to be a 501(c)(4), what the law says is you 

must be operated exclusively for the promotion of social welfare. 

The IRS has wrongly interpreted that term to exclude all political 

activity. However, in a democracy, political involvement and participation are within the definitions of social welfare. 

If you want to promote social welfare, it requires advocacy in the 

election process, given the broad and extensive scope of modern 

government. In today’s America, you can’t promote social welfare 

without interacting with government officials and legislators, as 

well as promoting the election of candidates with positions on 

issues that particular organizations believe are important in 

achieving their goals for promoting social welfare. 

I also think IRS employees should be held personally liable for 

certain violations of the law, which is not currently the effort. 

And, finally, the IRS should be prohibited from using campaign 

finance reports or public disclosures of a taxpayer’s political donations at the FEC as the basis for commencing an IRS investigation. 

Thank you. 

[Prepared statement of Mr. von Spakovsky follows:] 

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Mr. MICA. [Presiding.] Thank you. 

I now recognize Ms. Mitchell, partner with Foley & Lardner. 

Welcome, and you are recognized. 

STATEMENT OF CLETA MITCHELL 

Ms. MITCHELL. Thank you, Mr. Chairman, members of the committee. I want to thank you for conducting this hearing, but I also 

want to thank the committee and the chairman—I’m sorry he’s not 

here for me to personally thank—and to thank the—this committee, because you’ve been determined and dogged and relentless 

in trying to get to the truth. And from those of us, and particularly 

my clients, who were on the receiving end of the IRS targeting, I 

can tell you that the IRS was determined and dogged and relentless in the denial of the First Amendment rights of hundreds of 

citizens groups and thousands of law-abiding, patriotic Americans. 

So my—my sympathy for the poor IRS being subjected to all of 

this investigation is not very—not very high. 

You’ve asked us for recommendations about ensuring this targeting never happens again, and I come before you today as somebody who has represented clients before the IRS many—for many 

years before the targeting started, represented clients during the 

targeting, and now represent clients in suing the IRS in three different lawsuits that are cases that have arisen from this unlawful 

targeting. 

And I want to say, first of all, that I believe that the IRS is such 

a corrupt and rotten and broken agency that it cannot be salvaged. 

And, frankly, for that reason, I would urge the Members of Congress to support Representative Jim Bridenstine’s bill, House Joint 

Resolution 104, which would repeal the 16th Amendment, abolish 

the income tax, and, by definition and extension, abolish the IRS, 

because I don’t think this agency can be saved. 

But knowing that that takes a little while, in the meanwhile I 

have 10 recommendations I’m going to go through quickly, which 

are things that Congress needs to do to reinstate the rule of law 

at the IRS, because that’s what has been lost through all of this 

is an abiding by the IRS of the—with the rule of law. 

First of all, I believe that IRS employees should be prohibited 

from being unionized. They should not be in a political organization 

that gives 94 percent of its contributions to Democrats, including 

11 members of this committee, all Democrats. No Republicans have 

received any contributions from this union. 

I think, number two, that we should eliminate the application 

process for all 501(c) organizations other than (c)(3)s. There’s absolutely no reason for organizations to go through this ‘‘Mother may 

I?’’ with the Federal Government to find out whether they can operate as a tax-exempt organization. They do not receive the tax-deductible contributions. Contrary to what I hear constantly from 

Members of Congress at these hearings—it makes me—makes my 

head spin—contributions to a 501(c)(4) organization are not tax deductible to the donor, and there’s no reason for organizations from 

any 501(c) category, all 29 of them— there’s no reason for them to 

have to get permission from the government to operate. 

Number three, define by statute that political activities are social 

welfare activities. We should be encouraging, not discouraging, the 

27 

people from participating in political activities, and citizens organizations have a—have a right and a duty to do that. 

Number four, repeal the tax that is imposed on political expenditures by 501(c) organizations. It is a hateful violation, in my view, 

of the First Amendment to tax citizens groups for the exercise of 

their First Amendment rights. 

Number five. This one needs a lot of work. Congress has got to 

take section 26 U.S.C. 6103, which was enacted by Congress to protect taxpayers from unlawful inspection, release of their tax information. The IRS has turned it on its head and now uses 6103 as 

a basis for denying the rights of citizens and taxpayers, denying 

Congress access to information about misdeeds by the IRS. We 

need to give taxpayers a private right of action and opportunity to 

recover treble damages from individual IRS employees who violate 

their 6103 rights. 

We need to repeal—number six—repeal the requirement that organizations must—must reveal to the IRS their donors. That is a 

terrible law, and it has given rise already. The first inkling we had 

of IRS targeting of conservatives was when we saw the IRS going 

after donors to a conservative group and tried to impose a gift tax 

on them. There is no public interest and no public policy imperative for citizens to have to disclose to the government who their donors are. These are not public documents, and they should not be 

subject to being disclosed to the IRS. 

Number seven, as Hans said, we must—and I think the committee should expand its investigation and ask and investigate, because I’m absolutely convinced that the IRS has used campaign finance reports and, in particular, donors to the Romney Presidential 

campaign or super PAC as the basis of conducting personal IRS tax 

audits, and I think that that should be illegal. But this committee 

needs to get to the bottom of that particular situation, because I 

have heard too many stories from too many people from all over 

the country to not think that that—that something is afoot there. 

We need to give a—number eight—a private right of action to 

citizens to be able to go—to file lawsuits and to recover damages 

for the violation of their constitutional rights by Federal employees. 

Just as they can today against State and local employees, that 

should be extended to Federal employees. 

Number nine, we have to reaffirm, Congress should reaffirm that 

the laws that Congress has enacted to protect taxpayers and citizens from an overreaching Federal Government in fact apply to the 

IRS. I have listened and watched and read the IRS say that things 

like the Administrative Procedures Act, the Regulatory Flexibility 

Act, the Paperwork Reduction Act don’t apply to them. And we’ve 

seen that the IRS has completely disregarded its statutory obligations under the Federal Records Act and the Federal Information 

Security Management Act, and they’re making a joke out of FOIA, 

because now they either don’t answer your questions, make you sue 

them, or they lie. 

And finally, that we should make a law, 18 U.S.C. Section 1001 

makes it a crime for any citizen to make a false statement to a 

Federal agency, agent, or investigator. Well, I believe that the IRS, 

and its employees and Federal employees should be held to the 

same standard when they lie to us. 

28 

The IRS Commissioner came—Doug Shulman came before this 

committee in March of 2012 and told this committee that there was 

no targeting of conservative groups, and that was a lie. And what 

has happened to him? And I—Lois Lerner has lied. Other members 

of the IRS, they have lied, and I think that they should be subject 

to the rule of law, and all the laws that Congress has enacted that 

apply to everybody else ought to apply to the IRS. Thank you. 

Mr. MICA. Thank you for your testimony. 

[Prepared statement of Ms. Mitchell follows:] 

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Mr. MICA. We will now turn to our final witness, Mr. James 

Sherk. He is the senior policy analyst in labor economics at The 

Heritage Foundation. Welcome. And you are recognized, sir. 

STATEMENT OF JAMES SHERK 

Mr. SHERK. Representative Mica, Representative Davis, and committee members, thank you for the invitation to testify. 

My name is James Sherk, and I—though I work at The Heritage 

Foundation, my testimony this morning should not be construed as 

an official position of The Heritage Foundation. 

This morning I want to explain to you that the law makes it very 

difficult to fire Federal employees, and that this shelters workers 

who engage in misconduct. Congress should streamline the firing 

procedures to discourage employees at the IRS and at other agencies from abusing their positions. 

There are three facts about the current civil service system that 

Congress should understand. The first fact is that trying to fire a 

Federal employee takes years of effort. Agencies can remove workers; however, even after severe misconduct, doing so takes incredible time and effort. An agency must show that a reasonable person 

would more likely than not conclude that the evidence justifies a 

firing. Gathering the evidence to show this can take months. Then 

the agency must give the employee 30 days’ advance notice before 

removing them. During this time they cannot hire a replacement 

and must pay the employee. If the employee during this time alleges that their supervisor is firing them for exposing misconduct, 

they can ask for a whistleblower investigation, during which time 

they also cannot be fired, even if it’s a completely baseless investigation. 

After all this, the agency can remove the employee; however, the 

employee can appeal their firing to the Merit Systems Protection 

Board, or MSPB. In 2013, this initial appeal took an additional 3 

months. If the employee loses this appeal, they can then file a second appeal to the MSPB headquarters in Washington. In 2013, this 

second appeal took an average of over 9 months. If the MSPB rules 

against the employee again, they can appeal then to the EEOC or 

to the Federal courts. 

In total, it can take several years to fire employees for even flagrant misconduct. For example, it took the Treasury Department 

5 years to fire Lester Erickson for lying to investigators during an 

internal misconduct investigation. 

For many managers, successfully removing a problem employee 

becomes a full-time job in its own right, and doing nothing is, unfortunately, often the path of least resistance. An Office of Personnel Management study found that managers feel it takes ‘‘heroic’’ efforts to remove problematic employees. 

The second fact is that this causes Federal employees to rarely 

lose their job, sheltering those who abuse their position. Most Federal agencies are not run by heroes; they are run by managers trying to operate the government. An OPM survey found that only 8 

percent of managers with poorly performing employees attempted 

to remove them, less than 1 in 10. And of those who attempted to 

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38 

fect whatsoever. So, unsurprisingly, the statistics show that Federal employees rarely get fired. 

OPM data also shows that last year the Federal Government 

fired less than 10,000 workers out of its 2.1 million-man workforce 

for discipline or performance reasons. Almost half of those firings 

occurred among new hires in the probationary period. Last year the 

government fired just one-quarter of 1 percent of tenured employees with 2 or more years of experience. 

Now, employees who engage in misconduct know how hard it is 

to remove them. The Office of Personnel Management reports that 

many managers stated in their agencies, ‘‘The unwritten policy was 

to avoid any situation that could lead to an appeal or lawsuit.’’ 

In other words, managers frequently let misconduct slide. For example, at Housing and Urban—at the Department of Housing and 

Urban Development, an employee spent over one-third of his time 

over the course of 5 years conducting private business deals using 

his official email account. One of those business deals involved providing a lap dancer to a private party. HUD officials did not even 

try to fire him. 

And this system also shelters the IRS employees who target 

Americans for their political views. IRS employees have the same 

notice and appeals process as other government workers. Consequently, IRS managers had and still have strong incentives to ignore employees targeting Americans for their political beliefs. It 

would take heroic efforts to remove employees engaging in such 

conduct. 

Now, the third fact is that Congress can fix these problems by 

reforming America’s civil service laws. Ideally Congress should return to the spirit of the original Pendleton Act, which regulated the 

hiring of Federal employees to prevent a political spoils system 

while allowing managers to remove employees at will. Congress 

should return to this policy and make Federal employees at will 

while still preventing patronage and nepotism appointments in the 

hiring process. 

Barring such reform, Congress should at least streamline the firing process so it takes less time and effort. Congress can take several steps to do so, such as allowing Federal managers to immediately suspend employees without pay when they’ve engaged in 

misconduct, and then providing the due process after their suspension. 

Congress should also eliminate the ability of Federal employees 

to appeal their dismissal through multiple forums. They should 

have to pick one. 

Congress should also extend the probationary period from 1 to 3 

years to give managers more time to vet employees and remove 

those likely to cause problems later. 

And to encourage good behavior, Congress should transform the 

current seniority-based step increases into performance-based 

raises. 

Thank you. I appreciate the opportunity to explain that the law 

makes it very difficult to fire Federal employees, and that this shelters workers who engage in misconduct. 

[Prepared statement of Mr. Sherk follows:] 

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Mr. MICA. Thank you, Mr. Sherk and the other witnesses, for 

their testimony. 

Ms. Mitchell, unfortunately you seem to be very wavering in 

whether you think we should do something about the IRS. But all 

humor aside, it sounds like you represented some people who also 

were targeted, and maybe could you tell us a little bit more about 

again about what you’ve seen and people—the other thing, too, is 

these people, if you’re defending them, you’re the attorney. Who’s 

absorbing the cost? What’s this doing to their lives? 

Now, we’re here to look at a remedy, but I think it’s also important to look at the impact. And you are by far one of the most forward-speaking people about the damage that has been done by IRS 

that we’ve had before our committee. So would you mind commenting? 

Ms. MITCHELL. I’m happy to do that, Mr. Chairman. 

I testified in February before Mr. Jordan’s subcommittee. I told 

the story, but this wasn’t the full committee. 

I first—I represent people who apply for tax-exempt status. And 

I’ve been doing this for many years. I’ve been dealing with IRS Exempt Organizations Unit for many, many years, representing 

groups seeking tax-exempt status of various kinds, (c)(3), (c)(4), 

(c)(6)s. And it used to take—prior to the onset of this scandal, to 

get a 501(c)(4) application reviewed and processed would take 3 to 

4 weeks. 

I had an application for—I first began to realize something was 

going on at the IRS in early 2010, because I had a client—we applied for tax-exempt status for 501(c)(4) group in the fall of—October of 2009, and IRS cashed the check, because you do have to pay 

for this privilege, and then we didn’t hear from them again until 

June of 2010. And this was very unusual. This had never happened 

before. 

And in early 2010—and then, you know, I have another application that we file—— 

Mr. MICA. How long before—you said 2010. How long before were 

you handling these kinds of cases? 

Ms. MITCHELL. Oh, decades. 

Mr. MICA. So—— 

Ms. MITCHELL. Yeah, I mean, this wasn’t—— 

Mr. MICA. This was quite a departure from—— 

Ms. MITCHELL. It was a total departure. 

Mr. MICA. Total departure. 

Ms. MITCHELL. It was a total departure. 

And, by the way, that organization that filed for tax-exempt status in October 2009 did not get its 501(c)(4) tax status granted 

until July of last year, and only after this committee—the scandal 

broke and this committee began this work. 

So, I mean, I’ve represented a number of organizations that applied for tax-exempt status during that period and were associated 

with—they were conservative or Tea Party groups. They were 

groups that were opposing Obamacare. And I really do believe, 

frankly, that that one is one of the triggers. We don’t know all the 

information that you know and that your investigators know, but 

I think one of the criteria that the IRS was looking at was whether 

51 

these organizations were opposing Obamacare as a matter of policy. 

And now you have a situation, I think it goes to the—my colleagues’ testimony, which is that when you have an agency that 

now not only is collecting taxes, but is the agency that is enforcing 

Obamacare, and now it’s regulating political activities, you’re mixing things that should not be mixed in an agency that is set up to 

collect revenue. 

Mr. MICA. Did you have any progressive groups also come to you 

with—— 

Ms. MITCHELL. Well, you know, it doesn’t really work that way. 

The fact is—you gotta choose. You’re gonna for play for USC or 

Notre Dame; you can’t play for both. And people have lawyers 

who—or, in our case, the University of Oklahoma or Oklahoma 

State. I see my Congressman from Oklahoma City, which is where 

I’m from. 

Mr. MICA. Your future Senator. 

Ms. MITCHELL. My future Senator. Yes. 

But, you know, Republicans have lawyers, and Democrats have 

lawyers. You know, they represent them because—and same 

with—— 

Mr. MICA. Were you aware of—I mean, the accusation is that—— 

Ms. MITCHELL. I’m well aware of that. 

Mr. MICA. —that this was also a targeting towards progressive 

groups? 

Now, I just asked the staff, there was one of the principal promotions—what was the name of it? Organizing for Action. I think 

it was approved in 73 days, and 27 months there was a freeze on 

conservative groups. It doesn’t appear to us that the other side was 

targeted. 

Ms. MITCHELL. They were not—— 

Mr. MICA. Let me say this, too. If you were targeting progressives, if this was all about progressives or liberals, the ceiling 

would be coming down—— 

Ms. MITCHELL. Yes, it would. 

Mr. MICA. —and there would be riots in the street. 

Ms. MITCHELL. Mr. Chairman, if you look at the documents, I 

mean, I know that this is something that the minority members of 

this committee and the House keep saying, but it simply isn’t borne 

out by the facts. 

If you look at the documents, frankly, that have been posted by 

Congressman Levin on the Democratic—the Democrats—the minority pages of the Ways and Means Committee, he has posted a 

lot of documents from the IRS, and he posted it to stand for the 

proposition that progressives were referenced just the same as Tea 

Party groups in these monthly reports. 

And I’ve read the training materials to which Mr. Davis refers, 

but if you read what they said in the training, and you look at 

what the instructions were, here’s what the instructions were for 

progressive groups: You look at those. Yes, they were on a BOLO 

list, but if you found them, what the instructions said was there 

are some progressive groups who have applied for 501(c)(3) status; 

it is more appropriate to tell them to be (c)(4)s. 

52 

If you look at what it said for the Tea Party groups, it said, send 

them all—basically quarantine them in a—in a special unit in Cincinnati. And that’s the difference. Yes, they looked at them, but 

they looked and got different treatment depending on whether they 

were progressive or Tea Party. If they were Tea Party, they literally were quarantined for a period of years. The progressive 

groups were looked at to make sure they’d applied for the right status, and then they got their tax status. That’s the difference. 

And in the case of many of these conservative groups and Tea 

Party groups, there’s one—the Tea Party of Albuquerque still 

hasn’t gotten its tax-exempt status. And there are many of these 

small groups, when they got these letters from the IRS saying, tell 

us everyone who has spoken at your meetings, tell us everybody 

who is on your board, every—who are your volunteers; how many 

volunteers do you have; what are their names; who attended your 

meetings; do you have transcripts of who spoke, of everything they 

said when they spoke to you; tell us everywhere where your president spoke in the last year and where she plans to speak in the 

next 2 years. These are impossible questions, and a lot of these 

groups when they got these very burdensome letters from the IRS 

saying things like, did you have candidate debates? Did you do 

voter registration? And I had people saying, were we not supposed 

to do candidate debates? Are we not supposed to conduct voter registration? Because they think if the government’s asking them 

those questions, that maybe they were doing something wrong. 

And so what did they do? They started backing away. Many 

times groups just went away because they couldn’t get contributions because they didn’t have their tax status. And it—it had the 

desired chilling effect, and that viewpoint discrimination caused injury to hundreds and hundreds of organizations nationwide. 

Mr. MICA. And gagged a particular viewpoint prior to a national 

election. 

Mr. Davis. 

Mr. DAVIS. Thank you very much, Mr. Chairman. 

Seems to me that the logical place to start this discussion is with 

the report issued by the inspector general in May of last year. And 

it is my understanding that Mr. Cummings did ask that the inspector general be a part of this hearing. 

That the inspector general found that IRS employees in Cincinnati developed what he called inappropriate criteria for screening applications for attempt status. He also identified serious deficiencies by IRS managers. He found that Lois Lerner was not 

aware that these employees were using these criteria for a full 

year. He also found that even though she ordered an immediate 

stop to them, the employees used different, inappropriate criteria 

anyway. 

Since then the committee has obtained evidence that progressive 

groups were also singled out in similar ways, being listed expressly 

in so-called ‘‘be on the lookout,’’ or BOLO, lists, receiving lengthy 

questionnaires, facing long delays, and sometimes being denied. I 

agree that no groups, conservative or progressive, should be singled 

out based on inappropriate criteria. 

In his report, the inspector general made nine recommendations 

for reform at the agency. Ms. Mitchell, let me ask you, in your 

53 

opinion, how do you think the IRS is doing in implementing these 

recommended reforms? 

Ms. MITCHELL. Congressman, I have to tell you in all honesty I 

think the application process is completely broken. It is HumptyDumpty. It is off the wall, and it cannot be put back together 

again. 

What the IRS has done subsequent to the TIGTA report is to 

make matters worse. 

Mr. DAVIS. Well, then, let me ask our witness—— 

Ms. MITCHELL. Can I give you an example what they’ve done? 

Mr. DAVIS. Yes. 

Ms. MITCHELL. Because this—they issued those regulations the 

day after Thanksgiving, which had clearly been in process for many 

months, if not years. I think this committee released an email from 

Ruth Madrigal from the Treasury Department to Lois Lerner that 

was dated, I want to say, maybe even 2011. 

And they—so they’d been working on regulations off plan, not in 

public view, which they sprung on the American people over the 

Thanksgiving holiday and gave us until February 28 to issue comments. And there were over 160,000 comments. I want to tell you 

that some of us worked pretty darn hard to get those comments 

filed. And what those regulations would have done would have 

codified the egregious, horrible principles that were in all of those, 

‘‘development letters’’ that were sent to the conservative groups. 

But since that—— 

Mr. DAVIS. My time is running so just—— 

Ms. MITCHELL. One other thing. 

Mr. DAVIS. Let me just ask the other witnesses what their opinions are. 

Mr. KEATING. Well, I think one of the recommendations was for 

the IRS to come up with clearer rules. And I think the IRS, as 

Cleta indicated, their proposed rulemaking was horrible. 

We did a study of all the comments filed, and the opposition was 

almost unanimous. And you had groups, left and right, business 

and labor unions, were unanimous in their criticism of the agency’s 

rules. 

So I don’t think the IRS gets it, I don’t think they understand 

the First Amendment, and that’s why I think the key recommendation is the IRS should get out of the speech police business. 

And this is something that the National Taxpayer Advocate and 

independent voice inside the IRS, Nina Olson, she actually has a 

background in low-income taxpayer compliance and advocacy, and 

she came to the same conclusion, and I think it is something the 

IRS should do. 

Mr. VON SPAKOVSKY. Congressman Davis, I’ll just make one comment on that. And to show you just how confused the IRS was, 

these new regulations they proposed, they were all, in essence, to 

have what their definition would be of campaign-related activity. 

Well, their definition of campaign-related activity would completely 

conflict with the Federal Election Commission’s definition of campaign-related activity. So things that the FEC thinks are just fine 

and are not campaign related, the IRS would say, no, no, those are 

campaign related, which would put all kinds of organizations in 

this untenable position. 

54 

And these regulations were so bad that I and seven other former 

FEC Commissioners wrote an extensive public comment pointing 

out all of the basic errors and mistakes that the IRS had made 

with these proposed new regulations. 

Mr. DAVIS. Let me just hear from Mr. Sherk. 

Mr. SHERK. Representative, would it take an act of Congress for 

the IRS to be able to streamline their firing procedures. I mean, 

there’s some internal agency regulations, but the core of it is mandated by Congress. And Chapter 43 and Chapter 75 of Title V of 

the U.S. Code, and unless Congress acts, they can’t do much to 

make it easier to remove people quickly for misconduct. 

Mr. DAVIS. Thank you very much, Mr. Chairman. And I assume 

we are going to come back. And I have got some other questions 

I’d like to raise on that. 

Chairman ISSA. [presiding.] So we’ve had 12 hearings, and you 

still have questions. I appreciate that, Mr. Davis. 

Mr. Jordan. 

Mr. JORDAN. I thank the chairman. 

And I want to thank our witnesses for being here today, but, 

more importantly, for all the work they have done in helping let 

the American people know what the Internal Revenue Service was 

up to, what they did, how they harassed people and targeted people 

for exercising their most fundamental right, their right to speak 

out in a political fashion against—against their government. 

Let me just dispel one thing; 104 to 7. Those are the numbers. 

One hundred four conservative groups we know were targeted, harassed, delayed, delayed, delayed. Seven progressive groups were 

put on a different list, as Ms. Mitchell pointed out, put on a different list, got their (c)(4) status, and never received anything close 

to the same kind of treatment. So this idea that it’s wrong, it’s 

false, it is just simply not borne out by the facts. 

The idea that the IRS is involved in way too many things. Of 

course. Mr. von Spakovsky, they’re not the FEC, for goodness sake. 

They can’t enforce election law. They shouldn’t be involved in 

healthcare law. Of course. 

And the rule that Mr. Keating just brought up. We had a hearing 

several months ago where we had the ACLU, Tea Party Patriots, 

Motorcycle Association of America, and Home School Legal Defense 

Association, all opposed to the rule. Now, when you have the 

ACLU, and the Tea Party, and home schoolers and Harley riders 

all against the same thing, you know that they—this is unbelievable. 

The thing I want to get to the question, just get your responses. 

I know we have people with a background—there’s another hearing 

going on. That’s why you see a lot of Members over at the other 

hearing dealing with the special prosecutor resolution that passed 

Congress with 26 Democrats, I might point out. Every single Republican, 26 Democrats supported a resolution saying what the 

Justice Department is doing in their investigation here warrants 

an outside special counsel. So I want to get your thoughts on that. 

And let me just—let me just prompt you with one thing. Two 

weeks ago we had James Cole, Deputy Attorney General, the number two guy at the Justice Department, James Cole, sitting right 

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55 

tion: When did you learn, when did the Justice Department learn 

that the Internal Revenue Service had lost Lois Lerner’s emails? 

And his response shocked us all. He said, we learned when it was 

reported in the press that they had been lost, even though, sitting 

at that same table a week ago, Mr. Koskinen told us he knew in 

April, and his chief counsel knew in February. And the Justice Department learns June 13th, when the rest of America learned, that 

they had lost Lois Lerner’s emails. 

So I want your thoughts on do we need a special—I’ll just go 

right down the list, but particularly Mr. von Spakovsky and Ms. 

Mitchell, who I know have had a background in dealing with this. 

But let’s start with Mr. Keating. 

Mr. KEATING. I think that would be advisable. I think I first suggested that—I wasn’t the first to suggest, but I first suggested that 

last year shortly after the scandal broke. 

Mr. JORDAN. Thank you. 

Mr. von Spakovsky, if I’m correct, you worked in the Justice Department. 

Mr. VON SPAKOVSKY. I did. And I, frankly, was astonished at 

Cole’s answer for this reason. In May of last year is when Attorney 

General Eric Holder announced that he was opening up a criminal 

investigation of this. Well, I was involved in investigations with the 

Justice Department. The first thing you would do if you have the 

FBI as your investigator situation like this is go and seize all of 

the documents and information the way the FBI does when they’re 

investigating a private organization. A year and a half later, they 

clearly had not done that and didn’t even know that all of the evidence they were supposedly supposed to be looking at, all those 

emails, didn’t exist. 

Mr. JORDAN. And when we asked that specific question, did you 

get a court order, did you get a warrant, did you go in—did you 

go to Lois Lerner’s office, did you grab all the documents, did you 

get her computer, of course they hid behind, well, there’s an ongoing investigation. We can’t comment. 

But based on witnesses we have had in depositions and transcribed interviews, it sure seems like they haven’t. And based on 

what—the response, it sure looks like they haven’t. 

Mr. VON SPAKOVSKY. No, I don’t think they’ve taken the most 

basic steps you would take in a real investigation. 

Mr. JORDAN. Yes. Ms. Mitchell. 

Ms. MITCHELL. I don’t think there’s any question that there 

should be a special prosecutor. You know, the problem is that the 

longer they wait, the harder it is to conduct an authentic investigation because of the spoliation of evidence, et cetera. 

We filed a motion in our civil suit. True the Vote sued the IRS 

and a number of individual IRS employees for the denial of its 

First Amendment rights in the consideration of its application. And 

so we filed 3 weeks ago a motion for a preliminary injunction asking the court to conduct an evidentiary hearing into what has happened. And that motion is pending. We had a hearing, and we are 

waiting. And the judge ordered the IRS to file three declarations 

that are supposed to be first-person, authentic evidence. And, you 

know, and the Justice Department told the court that this is in the 

civil case. 

56 

Mr. JORDAN. Yeah. Mr. Sherk, yeah. 

Ms. MITCHELL. But they didn’t know until they read it in the 

paper. 

Mr. SHERK. It certainly seems that such an investigation would 

be warranted. But even if you had a special prosecutor who 

brought charges against the IRS, individual IRS employees, it 

would still take the agency months to remove them, and in many 

cases be collecting pay. 

Mr. JORDAN. Mr. Chairman, if I—are we giving a little extra 

time here, Mr. Chairman? 

Chairman ISSA. If no one objects. 

Mr. JORDAN. Okay. Well, I’ll wait for the second round. I don’t 

want to do that. I know we have got—— 

Chairman ISSA. The gentlelady from Illinois Ms. Kelly. 

Ms. KELLY. Thank you, Mr. Chair. 

Mr. Sherk, in April our chairman made this statement: ‘‘There 

is simply no evidence that any liberal or progressive group received 

enhanced scrutiny.’’ Do you agree with that statement? 

Mr. SHERK. I’m an expert on the firing procedures, and Federal 

workforce. I would defer to the others on the panel who have more 

expertise on the specifics of the targeting. 

Ms. KELLY. So you have no opinion? 

Mr. SHERK. I would certainly give the other chairman always the 

benefit of the doubt, and I would assume it would be accurate. But 

if you’d like to talk to me about ways we can fix the—how—the 

civil service laws, I’d be happy to answer those questions. 

Ms. KELLY. Well, I’d like to go through some of the evidence our 

committee has obtained during our investigation. These should be 

simple yes-or-no answers. First, we received a copy of a so-called 

BOLO list from November 2010 that directs IRS employees to 

screen for progressives. It states, ‘‘Common threat is the word progressive. Activities appear to lean toward a new political party. Activities are partisan and appear anti-Republican.’’ 

Were you aware of that document? 

Mr. SHERK. I’m aware to the extent I’ve heard it discussed at this 

hearing, that there was differential treatment between the two 

groups. But again, my focus and expertise is on labor policy and 

on the Federal civil service laws. 

Ms. KELLY. Well, let me go on. Another BOLO list from August 

2010 directs IRS screeners to look specifically for ACORN successors. Were you aware of that document? 

Mr. SHERK. I was not aware of that, although, as Representative 

Jordan pointed out, it was something like 104 to 7 was the differential treatment between groups on the right and groups on the 

left. 

Ms. KELLY. So there were probably more Tea Party groups that 

applied, so you probably would have some differences. 

A BOLO list from February 8, 2012, includes an entry for Occupy 

organizations. Were you aware of that document? 

Mr. SHERK. No, I was not, but I wasn’t looking for it. Again, I 

was looking into Federal firearm procedures. 

Ms. KELLY. Yes or no is fine. 

A PowerPoint presentation from 2010 includes images of a donkey and an elephant and instructs IRS screeners to look for the 

57 

terms ‘‘progressive’’ alongside ‘‘Tea Party’’ when reviewing tax-exempt applications. Were you aware of that document? 

Mr. SHERK. That’s not something I looked into because, again, 

my expertise is on the Federal civil service laws. 

Ms. KELLY. Thank you. 

Notes from an IRS screening workshop in 2010 list emerged, 

‘‘groups’’ alongside ‘‘patriot,’’ and 9/12 organizations. Were you 

aware of that document? 

Mr. SHERK. Again, as with all your questions—— 

Ms. KELLY. You can just say yes or no. 

Mr. SHERK. No, I was not, Representative. 

Ms. KELLY. Progressive groups were sent lengthy questionnaires 

almost identical to the ones sent to Tea Party groups, and they also 

had to wait years to receive tax-exempt status. For example, a Palestinian rights group in Minnesota received inquiries that were almost identical to those sent to conservative groups and waited 

more than 2 years for final IRS tax-exempt status approval. 

Were you aware of those questionnaires? Just yes or no. 

Mr. SHERK. No, I was not, Representative. 

Ms. KELLY. Thank you. 

How about witness testimony? Our committee interviewed witnesses who testified that progressive groups went through a 

multiyear, multitiered IRS review process similar to that used for 

conservative groups. For example, during a transcribed interview 

with committee staff on October 29, 2013, a senior technical adviser in that Tax-Exempt Government Entities Division explained 

that, like Tea Party organizations, emerge cases were grouped together and subjected to a lengthy multitiered review. 

Were you aware of that testimony? 

Mr. SHERK. No, I was not, Representative. 

Ms. KELLY. Many people point to the number of Tea Party cases 

that were screened as evidence of bias, but the simple fact is that 

there were many, many, many more tax-exempt applications during this timeframe from Tea Party groups. And it’s really time for 

us to stop politicizing this issue. People on both sides of the aisle 

in this room, we don’t want bias and discrimination and wrongful 

treatment against any group. We just want to get to what the fact 

of the matter is and make sure that each group is treated fairly. 

And I might add that the IG said that he was not aware of the 

BOLOs for screening progressive groups before his audit was released. That’s why the report was skewed. And I wish the IG was 

here to actually answer questions about this. 

I yield back. 

Chairman ISSA. I thank the gentlelady. You have only your ranking member to complain to for not asking for the IG. 

Is there anyone else who would like to answer that question or 

comment, since Mr. Sherk, quite frankly, was probably the worst 

person as far as, A, looking at those questions? 

Ms. Mitchell. 

Ms. MITCHELL. Mr. Chairman, I’ve seen most of those. I’ve reviewed most of those reports to which the Congresswoman was referring. And those training materials from July of 2010 specifically 

state progressive does not equal Tea Party. That’s in the outline. 

That’s in the minutes of that training session. And what they— 

58 

and, yes, they were looking for that term. They were looking for the 

term and given different instructions as to what to do if they saw 

it. 

And I’ll give you an example. There’s an organization called 

Progress Texas—— 

Chairman ISSA. The gentlelady might want to remain. This is 

still your time and answers to your questions. 

Ms. KELLY. Right. But I’ve stayed long, and I have another committee that I have to go to. 

Chairman ISSA. I understand. 

Continue, please. 

Ms. MITCHELL. There is an organization called Progress Texas, 

and in a report that was leaked to USA Today in September of last 

year, this was a November 2010, maybe 2011, report of the IRS, 

and it was a sensitive case report. And it had, I think, 162 cases 

on it. And it did have some progressive groups, but what happened 

was Progress Texas, when it had the comments about Progress 

Texas, it said, seems to have anti-Rick Perry propaganda. And 

within 6 months, they had their tax-exempt status, their (c)(4) status, compared to my client, King Street Patriots from Houston, 

where it said, likely approval. You know when they got their 

501(c)(4) status? November. I’m sorry, December of 2013. They just 

got it. And we got another round of questions last August after the 

scandal broke. 

So, yes, progressive groups—the word ‘‘progressive’’ was on some 

of those reports, but what the IRS employees were instructed to do 

when they saw that term was totally different from what they were 

instructed to do when they saw a Tea Party, 9/11 or other conservative group. 

Chairman ISSA. I thank the gentlelady for making the answers 

complete, and I hope MSNBC will broadcast both. 

We now go to the gentleman from Oklahoma Mr. Lankford. 

Mr. LANKFORD. You are an optimist on that, Mr. Chairman. 

I do have a couple follow-up questions. The specific goal of this 

hearing is to be able to determine how do we keep this from happening again. Now, there’s several comments that have been made, 

and I appreciate all of your written statements and your oral statements as well to be able to walk through this. 

Probation changes. Mr. Sherk, you mentioned this, as well, 

change in the probation, extending that. You made a brief comment 

on that. I’d like for you to expand on that. From 1 to 3 years for 

new employees so we can deal—if there’s a problem early, we can 

discover it early. What’s the difference on trying to be able to deal 

with discipline for an employee in their probation status versus 

once they’ve been there? 

Mr. SHERK. Thank you, Representative. 

For the first year in most agencies, in some agencies it extends 

to 2 years, employees are called basically probationary, and they 

can be fired almost at will. There’s only two reasons you can’t fire 

them during the probationary period. One is for political discriminations; you can’t say you’re a Republican, you’re a Democrat, get 

out of the Federal service. And the second is on the basis of marital 

status. For any other reason beyond those two, they can be fired, 

and fairly large numbers of them are. Again, if you look at the figVerDate Aug 31 2005 10:32 Oct 07, 2014 Jkt 000000 PO 00000 Frm 00062 Fmt 6633 Sfmt 6633 C:\DOCS\89864.TXT APRIL
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ures for terminations, for layoff in performance in the Federal Government for last year, almost half of them came from employees 

with less than 2 years of experience. 

Mr. LANKFORD. Okay. So is that something you’d recommend 

governmentwide, or are you recommending that simply for the 

IRS? 

Mr. SHERK. I’d recommend it governmentwide. Give the managers more time to review the employees and get rid of people they 

think might cause problems later. 

Mr. LANKFORD. Okay. Thank you very much. 

Ms. Mitchell, thanks for being here, as well. We can speak Okie 

to each other back and forth off the dais as well. 

But the second recommendation, ‘‘Eliminate the application process for exempt organizations other than 501(c)(3) entities. Stop the 

Mother, may I.’’ 

Ms. MITCHELL. Yes. 

Mr. LANKFORD. Can you go into greater detail why that would 

matter? There are lots of folks coming in that say, if they’re going 

to be tax exempt, they’re, ‘‘getting Federal funds, and so they 

should be limited.’’ 

Ms. MITCHELL. Well, that is simply not true, and it demonstrates 

a lack of understanding of how the process works and the end result when you get a letter of determination from the IRS. And I 

recall that when this committee had then-IRS Commissioner 

Shulman appear before it in March of 2012, and when he lied to 

the committee and said there was no targeting when there was, the 

other thing that he said at that hearing was, well, you know, 

501(c)(4) organizations don’t even have to have a letter of determination from the IRS in order to operate as a 501(c)(4). So but 

if they submit themselves to our jurisdiction, we can ask them 

whatever we want, which I thought was a pretty arrogant comment, frankly. 

But anything else you do, and if you want to open any kind of 

entity, if I want to open a flower shop, if I, you know, am going 

to be my mother’s estate executor, I have to open a bank account, 

I file a form with the IRS, I tell the IRS what it is that the entity 

is going to be, and then I just start operating. And I file the correct 

tax return, and the IRS deals with it after the fact. 

And one of the problems here with the 501(c)(4) screening process that they employed was that they started trying to conduct program audits during the review process, the application review process. They completely abandoned their published rules and application and all. 

501(c)(3) is the only organization, the only type of entity, that offers a benefit to the donor that you give money to it, and you get 

a tax deduction. Every other 501(c) group is—as the chairman 

pointed out, receives contributions after tax. So there’s no reason 

to have all of this process in the first place. Just get rid of it. 

Mr. LANKFORD. Right. What about the publication of donors and 

submitting the list of donors to the IRS? 

Ms. MITCHELL. Every tax-exempt organization has to file a 

Schedule B with its Form 990 tax return in which it must disclose 

to the IRS all donors of $5,000 or more. Now, that is not a public 

60 

schedule. The public is not entitled to it. It is, by law, confidential. 

So the only people you’re telling the information to is the IRS. 

And since, as I said, for all organizations other than (c)(3)s—I 

mean, I would probably get rid of it for (c)(3)s, because I don’t really see the point—but if they can make an argument that they’re 

in a different category because contributions are deductible, but 

there’s no public policy reason to tell the government who has 

given of their after-tax dollars to an exempt organization. 

Mr. LANKFORD. Are they cross-referencing that to the individual’s 

tax returns? 

Ms. MITCHELL. Well, there’s no reason to because they don’t get 

any tax benefit. 

Mr. LANKFORD. Okay. So that is the question, then, of why you 

gather that. That limits the authority, that IRS typically functions 

in the gray areas of the law, and that’s where they have the greatest amount of power. 

You had also started a comment earlier telling a story about the 

new rulemaking, and you were giving an example that we had run 

out of time on. Can you finish that story briefly? 

Ms. MITCHELL. The day that—thank you, Congressman. The day 

that the comments closed was February 28 of 2014, and at last 

count I think it’s over 160,000 comments. The following Tuesday— 

that was on a Thursday. The following Tuesday, March 4, the IRS 

issued new guidance for reviewing applications for exempt status 

for 501(c)(4)s. Guess what’s in that guidance? It is all of the questions—many of the questions that they were trying to include in 

their new definition of candidate-related political activities are now 

in their guidance as to the kinds of development letters and questions that every 501(c)(4) organization can anticipate receiving 

from the IRS if you file an application for (c)(4) status going forward. 

I just will tell you from a practitioner’s point of view, I think it 

is malpractice if I ever submit another one of those applications to 

the IRS until we get rid of it. So I just think the whole process is 

completely broken, and it just needs to be eliminated. 

Mr. LANKFORD. Okay. I yield back. 

Chairman ISSA. Thank the gentleman. 

We’ll go to the gentleman from Nevada Mr. Horsford. 

Mr. HORSFORD. Thank you, Mr. Chairman, and to the ranking 

member. 

Thank you to the witnesses who are here today. 

Let me begin by saying, as I have said before, I think, this is 

probably over our fifteenth hearing or something like that on this 

issue. I am not a—— 

Chairman ISSA. The gentleman wasn’t here, but it was noted by 

the ranking member it’s the twelfth. 

Mr. HORSFORD. Okay. Twelve, fifteen, they all kind of run together when it’s the same regurgitated issues with no resolution. 

I’m not a defender of the IRS; I’m a defender of my constituents 

who want there to be accountability. I believe that there was 

wrongdoing by individuals, staff-level individuals, and part of this 

committee’s oversight and government reform function should be to 

get those facts and to address those concerns. I am not here nor 

do I care about how this hearing plays with MSNBC or FOX News, 

61 

because it’s the constituents back home and their opinion that matters to me most. 

So I have one question for each of you, and I would ask you to 

be brief so I can tackle another issue that I’d like to put on the 

record, and that is this title is ‘‘IRS Abuses: Ensuring that Targeting Never Happens Again.’’ 

So what is one concrete suggestion that this committee should 

act on in order for the targeting that did occur, the IRS wrongdoing 

that did occur can be addressed? Each of you, if you could limit 

your comments, one suggestion. 

Mr. KEATING. Well, my one suggestion would be to do what Nina 

Olson, the National Taxpayer Advocate, the independent ombudsmen inside the IRS, recommended, and that is to get the IRS out 

of the business of making political determinations about speech. 

And this is something I think the committee should encourage the 

IRS to do, it already has the authority to do, and it has other agencies to make these determinations, and the IRS wouldn’t have to 

do anything further. 

Mr. HORSFORD. Thank you. 

Mr. VON SPAKOVSKY. Congressman, I have to agree with that, 

and that is something that all organizations—I don’t care whether 

they’re conservative, liberal or moderate, all of them should want 

that the IRS not be looking at and analyzing the speech and activity they engaged in to determine whether they think it’s political 

or not. 

Mr. HORSFORD. So is your point that some other entity should 

perform that function and that determination? 

Mr. VON SPAKOVSKY. No. It’s just that the IRS has the wrong definition that it uses when it looks at 501(c)(4)s. I detailed this in my 

testimony, but basically they’ve misinterpreted the law in a way 

they shouldn’t be doing to use that against organizations, and they 

simply should not be doing that. 

Mr. HORSFORD. Thank you. 

Ms. MITCHELL. Well, when you have 10 children, I’ve just recommended 10 things, I’ve got to pick my favorite. So if you want 

to be sure that there’s no targeting of citizens groups, you eliminate the process of having to ask the IRS for permission to operate 

as a citizens group. Just eliminate that application process altogether, and then you won’t get into a fight about whether it was 

progressives or Tea Party because you take away the power of the 

IRS to make that determination in the first place. 

Mr. SHERK. I would reform our civil service laws to return to the 

spirit of the original Pendleton Act in which you regulate the hiring 

to prevent a political spoils system, while leaving the government 

fairly free to fire people for misconduct and firing without this extensive appeals process afterwards. 

Mr. HORSFORD. Thank you. 

You know, I respect people’s suggestions, and, again, I want to 

hear and listen to what those suggestions should be. And we have 

now had some 45 transcribed interviews, some 250 employees from 

the IRS, some 700,000 pages of documents, and the IRS, at taxpayer expense, has spent over $18 million responding to congressional inquiries, but yet we have not, as a committee, taken action 

on anything, but we continue to have these hearings where allegaVerDate Aug 31 2005 10:32 Oct 07, 2014 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 C:\DOCS\89864.TXT APRIL
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tions about White House involvement is alleged, you know, from 

the very beginning when the chairman first started this process, 

when the inspector general first issued his report. 

It was Chairman Issa who went on national television and said, 

‘‘This was the targeting of the President’s political enemies, effectively, and lies about it during an election year.’’ 

Hal Rogers, the chairman of the Committee on Appropriations, 

stated. 

Chairman ISSA. The gentleman’s time is expired, but please continue— 

Mr. HORSFORD. Thank you. 

‘‘Of course, the enemies list out of the White House that IRS was 

engaged in shutting down or trying to shut down the conservative 

political viewpoint across the country, an enemies list that rivals 

that of another President some time ago.’’ 

But after this exhaustive investigation, the committee has obtained no evidence to support these accusations. And so, again, I 

have asked the chairman respectfully, and to my Members on the 

other side who I have talked with, you know, let’s get to the place 

where we can fix what is broken so that there is no longer targeting and this never happens again, because there are some of us 

who have that concern and want to get to that point. But we don’t 

think that it should involve conspiracies and accusations that are 

unfounded, not after $18 million of taxpayer investment has been 

wasted. 

I yield back my time. 

Chairman ISSA. I thank the gentleman. 

I might note for the record that long before I made those statements, I suggested that the White House would be well served to 

hire accountants rather than attorneys, but they didn’t take my advice on that either. 

Mr. Meadows, would you like to be next up? The gentleman is 

recognized. 

Mr. MEADOWS. Thank you, Mr. Chairman. 

I will be very brief, but, Ms. Mitchell, I want to come back to you 

on a couple of areas, because one thing that was troubling to me 

as we went through 12 hearings was that the IRS early on said 

that if you were applying for a 501(c)(4) status, that there was a 

waiver, kind of an exemption, that you really didn’t have to apply. 

And out of the people that you’ve represented or the ones that you 

know that have been represented that were caught up in this targeting, how many of them were notified by the IRS that there was 

this exemption; that if it went over I think it’s 270 days, that, you 

know, one—how many of them were notified by the IRS? 

Ms. MITCHELL. Well, for—actually for a 501(c)(4) application, this 

is what I’m saying, that you don’t have to have a letter of determination—— 

Mr. MEADOWS. Right. 

Ms. MITCHELL. —from the IRS in order to function as a 501(c)(4) 

organization. However, if you want to raise money from the public—— 

Mr. MEADOWS. Right. 

Ms. MITCHELL. —and you—you have to file charitable registrations in 38 States, and those States all require a letter from the 

63 

IRS or a copy of your application that you’re trying to get one, 

which is why they’ve got to eliminate the process. So—but the 270- 

day threshold only applies to 501(c)(3)s. Once you apply as a (c)(4) 

or (5) or (6) or (7) or (8) or (9), you are at the mercy of the IRS 

to decide when it’s going to issue your letter. And you don’t have 

any statutory right to pursue a civil remedy in court. 

In the case of True the Vote, the IRS and the Department of Justice filed on the day their answer was due in our lawsuit. They 

said, oh, we decided to give you your (c)(3) status. 

Mr. MEADOWS. So are you telling me when Mr. Shulman came 

here to this particular body and said that there was these waivers 

and they really didn’t have to do that, that that was, at best, disingenuous, what—— 

Ms. MITCHELL. Well, what he was saying, as I understood his 

testimony at the time—and as I said, I thought it was very arrogant where he said that, well, these groups don’t have to come to 

us for a letter, which is technically true; but if they do, then we 

can ask them whatever we want to. That was the position that he 

took before this committee. And I thought at the time that that 

was actually—that ignored the rule of law—— 

Mr. MEADOWS. Right. 

Ms. MITCHELL. —because there are standards, and there are application and instructions, and they shouldn’t be able to go beyond 

the four corners of that. 

But there’s one other exemption waiver thing that I think that 

you might also be recalling. You will remember that when Interim 

Commissioner Werfel went before Ways and Means in June of last 

year, he told the Ways and Means Committee—and they sent letters to all of those whose applications were still pending, that had 

not—all the Tea Party groups who had not gotten their exempt status waiting for all this period of time, hundreds of them, and several of my clients. And they received letters from the IRS saying, 

if you will promise that you will never engage in more than 40 percent political activity, and if you will also promise—and they threw 

in there a ringer that said, counting not only your program expenditures, which is what the law says, but they threw in—as I say, 

they have abandoned the rule of law—they threw in this other category of counting volunteer activity. Well, how are you supposed to 

do that? There’s no standard. There’s no—you know, and I told several clients who have said, what should I do, I said, well, I don’t 

know how to tell you to answer that, because you’re going to have 

to sign under penalty of perjury from now on that you’re complying 

with something that has no legal definition. 

Mr. MEADOWS. Well, what it sounds like, we talked about banks 

that are too big to fail. It sounds like the IRS has gotten too big 

not to fail. Would you agree with that? 

Ms. MITCHELL. Well, that’s why my number one recommendation 

is that everybody ought to sign on to Congressman Jim 

Bridenstine’s House joint resolution, what is it, 104, to abolish—to 

repeal the 16th Amendment, abolish the income tax and get rid of 

the IRS, because I think it’s become the tail wagging the dog of our 

country, and I think it’s a detriment to our Nation. 

Mr. MEADOWS. All right. Mr. Sherk, let me go to you from a labor 

standpoint. One of the frustrations, as a business guy, I sometimes 

64 

call the government ‘‘the big easy,’’ that once you get here, there’s 

no way that you get fired. Would you say that after someone has 

been with the government for 2 years that the chances of them getting fired are slim to none? 

Mr. SHERK. They are incredibly minuscule. Like I said in my testimony, once you pass that probationary period, your odds of getting fired are one-quarter of 1 percent. So, you know—— 

Mr. MEADOWS. How does that compare to the private sector? 

Mr. SHERK. So the private sector, monthly, the best we know 

from the Bureau of Labor Statistics is they have a figure for both 

layoffs and discharges. So both we fired you for showing up drunk, 

and we fired you because we’re losing business. It’s not strictly 

comparable to the Federal Government, because, of course, the 

Federal Government doesn’t go out of business in the same way 

private-sector companies do. But that monthly layoff and discharge 

rate is about 1.3 percent versus an annual termination rate for performance and misconduct rate of, you know, basically one-quarter 

of 1 percent. So it’s—the monthly private-sector rate is five times 

greater than the annual Federal rate. 

Mr. MEADOWS. So a fraction of the private sector? 

Mr. SHERK. Exactly. 

Mr. MEADOWS. I appreciate the patience of the chair. I’ll yield 

back. 

Chairman ISSA. I thank the gentleman. 

I’ll go to the gentleman from Michigan Mr. Bentivolio. 

Mr. BENTIVOLIO. Thank you very much, Mr. Chairman. 

Ms. Mitchell, thank you very much for all the work you’re doing. 

God bless you. As a Tea Party Republican, I’m a big fan. And since 

this story broke, thanks to you, about the IRS targeting Tea Party 

groups and conservative groups, a number of people have come to 

me back in my district saying they believe that they’ve been targeted because of their political beliefs working as a schoolteacher 

that’s run by the Michigan Educational Association. 

Auto dealers that lost their dealership at GM and Chrysler during the bailouts lost their dealerships not because of their past performance, but because the dealer owners donated to Republican 

groups. 

And now there are churches. I’m hearing some people that are— 

have to go before the IRS and explain what they’re doing in their 

church regarding their political activities. 

Have you heard of any other groups being targeted because of 

their political position? 

Ms. MITCHELL. Well, as I said in my testimony, I think that this 

is something the committee really should investigate, and that is, 

I have heard repeatedly from Romney donors across the country 

that they were subject to personal income tax audits by the IRS, 

or their businesses were subjects to audits. And I just have a sense 

that it’s too common to be—it’s not scientific. I’ve spoken with 

TIGTA about it. 

I think that it’s really important that the IRS answer the one 

question, did you use, have you ever used campaign finance reports 

and donor information to target individuals for IRS audits? And I 

think they should be forced to answer that question. And then you 

have to then ask, did you do it equally to donors to the Obama 

65 

super PAC as you did to the Romney super PAC? Because I think 

that this committee needs to get to the bottom of that, because I 

really firmly believe that that’s been going on, and I think that 

that should be made statutorily illegal. 

Mr. BENTIVOLIO. Thank you very much. Once again, thank you 

for all that you do. 

Mr. Chairman, I yield back. 

Chairman ISSA. Would the gentleman yield to me? 

Mr. BENTIVOLIO. Yes. 

Chairman ISSA. Briefly, I just want to get one thing on the record 

that we haven’t talked about. And I know Mr. Horsford was interested in the reforms, but he didn’t stay to hear them nor apparently read what we put out on the suggested reforms. 

But, Mr. Keating, we already previously made clear 501(c)(4)s 

get no tax exempt, no—you pay with after-tax dollars if you want 

to belong to that affiliated group. 

What’s the best way for people to understand the history of anonymous giving to groups that represent them in some cause? Call it 

political, call it ideological, but isn’t there a long history of the 

Court looking at people’s ability to have anonymous free speech 

through association so that they not be ultimately persecuted for 

their attempt to bring some form of justice? Can you give us, either 

of you give us some of the history? 

Mr. KEATING. Well, probably the most famous case that people 

are aware of is NAACP v. Alabama. And obviously, back in the 

1950s, the State of Alabama was not that keen on the types of recommendations being made by the NAACP, and they sought to get 

their membership list and presumably their donor records as well. 

And this case went up to the Supreme Court, and the Supreme 

Court said the State had no right to get that information under the 

circumstances designed in the law. 

But this is not the only case. There’s another case that I would 

like to cite. I believe it’s Tally, but I may be getting the name 

wrong. There was an ordinance passed to require labor organizers 

to register or display names while they were trying to organize, 

and the Court, again, said there’s no right for the government to 

force that kind of disclosure. 

What we like—— 

Chairman ISSA. I suspect that the tag should say ‘‘hit me’’ in the 

anti union movement potentially so—I mean, that clearly you 

would have been sectioned out; that was a way to go after the 

union movement, if they would have been allowed. 

Mr. KEATING. Absolutely. And, you know, what we point out is 

the purpose of disclosure is to allow citizens to monitor their government and to monitor government officials. The purpose of disclosure shouldn’t be for government to monitor the citizens or for people to use that in coordination with the people in power to monitor 

citizens or harass citizens for their political activity. 

Chairman ISSA. So the history of anonymous free speech, of the 

right of people to associate, and to associate in a way in which 

their ideas can be put forward without retribution is, in fact, not 

a conservative history; in many ways it’s a progressive history of 

the Court finding on behalf of the American people that right, isn’t 

it? 

66 

Mr. KEATING. Absolutely. 

Chairman ISSA. Thank you. 

With that, we go to Mr. Woodall. 

Mr. WOODALL. Thank you, Mr. Chairman. 

I was just watching it on TV back in the office, and I was so enjoying everybody’s answers and solutions, and I thought I want to 

come see it in person before folks leave. 

I don’t want to slow you down any further. You represent—well, 

I came up in that big freshman class in 2010, and you represent 

the pulling on the rope that so many of those Members from both 

sides of the aisle—that inspiration that brought them here. The 

Heritage Foundation has been the touchstone to which folks have 

looked not for blame, but for opportunity to make a change for decade upon decade. There’s no one else who has played that role better. 

Ms. Mitchell, your name has come up—I won’t tell you for how 

many years your name has come up in my readings and dealings. 

I didn’t have to get any further than the first page of your testimony where you said the secret is just to repeal the 16th Amendment, and then we can solve these issues. You had me right there. 

We were committed. 

And, of course, Mr. Keating has been in this business a while, 

trying to pull on the rope and make a difference. Candidly, I’d 

never thought about why it was post-Watergate we decided that 

the executive branch manipulation of the IRS was a bad thing, but 

if Congress wanted to manipulate the IRS, maybe that would be 

okay. That makes no sense whatsoever. While Ms. Mitchell’s recommendation to repeal the 16th Amendment would solve it better, 

prohibiting Congress from manipulating it would certainly make a 

difference. 

I, too, heard Mr. Horsford ask about what the solutions are, 

which is the question I would hope 435 people wanted to ask, but 

if you guys are not doing what you do, we never get around to the 

asking of the question. I can’t tell you how many conversations I 

had where folks said, oh, the IRS would just never do that. That 

could never happen. This is America. This would never happen in 

America. 

And until somebody cares enough, Ms. Mitchell, to make sure 

that grievances get heard, you think it could never happen in 

America, but it does. Without the think tank, without the watchdog 

groups, we are lost. 

I looked at your testimony, and I thought, golly, where are the 

liberal witnesses on this panel? And I thought, you know what? 

This is not really a conservative or a liberal issue. Free speech, 

without it neither of us could persist. 

So I won’t delay you any longer. Just know how much I appreciate what it is that you do. I can’t tell you how many conversations we’ve had in this freshman class of 2010 that say we want 

to make a difference, but it’s so hard to figure out how sometimes. 

You all don’t have a voting card, but you have a long list of resources and an endless amount of passion that folks who do have 

voting cards look to to try to make a difference for families back 

home, and I’m grateful to each one of you for that. 

Mr. Chairman, I yield back. 

67 

Chairman ISSA. I thank the gentleman. 

This may come as a surprise, but I never asked my first round 

of questions, so I’m going to sort of finish by asking. 

We made a number of suggestions in the document we put in. 

It was provided to all of you. But there’s more than one way to skin 

a cat is an old expression. Are they equal, acceptable; would they 

all be improvements is the general set of questions. 

Mr. Sherk, you looked at what we did in the way of civil service 

reform last week. Was that a good start? 

Mr. SHERK. I think it’s certainly a good start. It’s moving in the 

right direction. I think, though, that you need to move beyond the 

SES; that a lot of the employees engaging misconduct are not the 

managers, but the rank and file. And if Congress isn’t going to 

wholesale overhaul the civil service protections, things like allowing people to be immediately removed without pay instead of waiting for 30 days, things like extending the probationary period, and 

really just making it—reducing the number of appeals employees 

can have. That’s what really gets the agencies upset is that it’s, 

you know, the in-house review, okay, that’s one thing, but then 

when it goes to the Merit Systems Protection Board, then it goes 

to headquarters, then it goes to the EEOC, then it goes to the 

courts. Just pick one forum and only one set of appeals. Don’t, you 

know, get to relitigate it time and time again so it drags out over 

a course of years, I think, would make the Federal managers more 

willing to use those procedures. 

Chairman ISSA. Well, one of the suggestions that’s been made, 

and I want your opinion on it, is that people have to choose to either be members of a union and come under that union contract 

protection or civil service, but not both. 

Mr. SHERK. Well, it sort of works that way now. So you can either use your union grievance procedures, or you can use the Merit 

Systems Protection Board. So to that limited extent you’ve got one 

forum, but then at the end of the either the union grievance, the 

arbitration or the MSPB, then you can appeal to Federal courts. 

Then you can—if you’re alleging discrimination, you can appeal to 

the EEOC. And I think you should have to pick one. If you’re saying you’re fired for discriminatory reasons, appeal to the EEOC 

right at the beginning. Don’t go through the grievance, then go to 

the EEOC, then go to the courts. Just pick one forum. 

Chairman ISSA. Now, on another subject, the question of should 

there be one Commissioner or a board. We put that out, I think I’d 

get a general agreement that you think that the normal commission process where you have a bipartisan commission of some sort, 

whether it’s five with the Chairman being the party of the President, such as the SEC and so on, or six, such as the FEC where 

it’s truly an equal board, you all think that would be an improvement over the current Commissioner who is strictly a political appointee of the current President; is that right? 

Mr. VON SPAKOVSKY. I certainly agree with that, and I speak 

from experience as a Commissioner at the FEC. I mean, the whole 

advantage of having a multimember commission is that the board 

has to work to try to reach consensus on issues. And therefore, if 

something comes up on an enforcement question, a regulatory 

question, a policy question, you’ve got people with different points 

68 

of view raising issues about it. It’s particularly important, quite 

frankly, to have members of both political parties there. 

Chairman ISSA. So your point would be that by having a multimember commission, when they all agree, American confidence is 

much greater than when the political appointee of one party makes 

a decision? 

Mr. VON SPAKOVSKY. No, that’s exactly right. And frankly, look, 

when they disagree—for example, look, there are rare occasions, 

it’s actually a very small percentage despite what people may believe, when the FEC, which has six Commissioners, will disagree 

3 to 3. Well, if they’re disagreeing on the interpretation of a regulation, then it’s probably a good thing that regulation is not going in 

place, because if the six Commissioners who are tasked with enforcing the law disagree on what the law means, then you shouldn’t 

be forcing that on the public to try to comply with a confusing regulation or confusing law. 

Chairman ISSA. Now, there’s a suggestion that we remove the political question entirely from the IRS, which means that, for example, with a 501(c)(3), the question of the deductibility would remain 

at the IRS; however, whether the American Heart Association, 

American Lung Association, the Red Cross, whether they crossed 

lines of political speech and, if so, what the reporting requirement 

would shift to the FEC. Is that your understanding? 

And I said 501(c)(3) for a moment because we’ve only talked 

about the (c)(4)s and other corporations. Would it be the same for 

501(c)(3)s in your interest, or would there be a legacy there? 

Mr. KEATING. I think there has to be a difference. The statute 

specifically says a 501(c)(3) can engage in no political activity at 

all. 

Chairman ISSA. I agree with you, except that the precedent is, 

yes, they can, and they do. It’s been limited to, ‘‘de minimis.’’ The 

American Lung Association actively supports laws that reduce 

smoking, and they campaign on television supporting the establishment of, let’s just say, a vote to ban smoking in public places. They 

do that. The question is to the extent that there is any activity, 

who should regulate it? 

And I ask that for a reason. Inevitably, free speech becomes political by somebody’s interpretation. Now, there’s not an R or a D 

after, you know, clean air. There’s not an R or a D after smoking 

and nonsmoking. I’ve noticed people of both parties will choose one 

side or the other, so it’s not partisan, per se. 

But the question is should we transfer entirely to the FEC any 

and all responsibility for compliance with any and all laws related 

to political activities? 

Mr. KEATING. Well, generally I think for any other 501(c) organizations other than (c)(3), where there’s a prohibition on political activity, and by that I believe really means express advocacy for or 

against a candidate, not for or against an issue, I don’t think 

there’s any—— 

Chairman ISSA. So as long as that definition is maintained, 

you’re comfortable with the 501(c)(3)s as they are because their ban 

would be absolute, and thus it’s not a judgment call? 

Mr. KEATING. Right, although I do think the rules there need to 

be clearer as well. 

69 

Chairman ISSA. All right. I appreciate that. 

Let me ask one more question, and it goes sort of like this: If we 

were to move political oversight to the Federal Election Commission, consolidate in one place with one expertise, and, Ms. Mitchell, 

as you said, with a consistent definition, which would certainly be 

helpful, then would one of the reforms of the IRS be, as we said 

earlier, a multimember commission, or, in the alternative, if Congress in the process felt that a Commissioner that did not serve at 

the pleasure of the President, but rather, like the FBI Director or 

the Fed Chairman, served a tenure that was longer than a particular President and thus had a level of freedom, would either of 

those, in your opinions, be an improvement? Not saying you’re 

picking favorites, but just would either be an improvement over the 

present situation in which you have an overt appointee of the 

President who is beholden to the President every day for his or her 

appointment? 

Ms. Mitchell. 

Ms. MITCHELL. Well, I think either of those would be an improvement, but I would certainly caution that that reform, absent some 

of these other statutory changes, will not be sufficient to reinstate 

the rule of law at an agency which has essentially gone rogue. 

Lois Lerner talked about rogue agents in Cincinnati. The agency 

itself has gone rogue, and there is a real need for—and that’s one 

of the reasons that I’m so grateful that this committee is conducting oversight of this agency, intensive scrutiny of this agency. 

Yes, it may be uncomfortable, it may be expensive, it may be timeconsuming, but this agency is out of control, and I’m sure every 

member of this committee, Democrat and Republican, has heard 

horror stories from constituents about the IRS. And Congress has 

got to reassert its authority over this agency because it feels as 

though it is capable of completely thumbing its nose at the people’s 

representatives, and I don’t care what party affiliation, I would be 

very offended by that if I were a Member of Congress. I certainly 

am as a taxpayer. 

Chairman ISSA. Thank you. 

Mr. Davis. 

Mr. DAVIS. Thank you, Mr. Chairman. 

If I might, just I want to make sure that the record is clear regarding the publicly released notes regarding the July 2010 screening workshop for IRS employees. Contrary a bit to what Ms. Mitchell has said, although it says that, ‘‘progressive and Tea Parties are 

not the same and should not be sent to the Tea Party coordinator,’’ 

the notes direct IRS screeners to treat Tea Party and progressive 

groups the same. 

It says, ‘‘Current political activities discussion focused on the political activities of Tea Parties and the like. Regardless of the type 

of application, if in doubt, err on the side of caution and transfer 

to 7822. Indicated the following names or titles were of interest 

and should be flagged for review: 9/12 Project, Emerge, Progressive, We the People, Rally Patriots, and Pink Slip Program.’’ 

I ask that these notes be included in the record. 

Mr. COLLINS. [Presiding.] Without objection, so ordered. 

Mr. DAVIS. And I might also note that, you know, it’s interesting 

to have political ideologies and philosophies, but I also note that 

70 

the IRS Commissioner as well as the inspector general, who were 

in place as these allegations surfaced, were both President Bush 

appointees, which sort of would indicate to some people that they 

may have had some Republican leaning, although not necessarily 

so. But that would appear to be some type of implication. 

I also might note that the inspector general, while he or she cannot change law, they can make recommendations. And this inspector general made nine recommendations, all of which the Internal 

Revenue Service has complied with and gone beyond. And so I 

think it’s an indication that the Internal Revenue Service is moving 

progressively to try and make sure that it improves its operation, 

and that whatever happened in the past is not necessarily what is 

going to happen in the future and is not what’s happening now. 

And I know there are people who would not like to pay taxes, 

and so they’d like there not be a mechanism for which to collect, 

but I doubt very seriously—we have difficulty agreeing on very 

minor things around here, so I doubt very seriously if we would 

reach that point. 

Mr. COLLINS. Well, thank you, Mr. Davis. I would love to see the 

fair tax, and then we can go on from that. 

And I know, Mr. Woodall, would that be an amen from the front 

row up there? 

Mr. WOODALL. Support the chair. Amen. 

Mr. DAVIS. Well, I think we’ll be working on taxation for a long, 

long time. And I want to thank the witnesses for being here, I want 

to thank the chairman for holding this hearing, and I yield back. 

Mr. COLLINS. I thank the gentleman. 

At this time the chair recognizes himself for questions, and just 

a few questions here. And I just have to say on the point of, first, 

Mr. Spakovsky, your book, ‘‘Obama’s Enforcer,’’ you actually detailed one of my inquiries with the non-enforcer-in-chief, I think 

the obstacle-in-chief a lot of times for this administration. And I 

think it sort of shows—frankly, it’s very disturbing. I think it’s sort 

of been developed over time in many of these agencies there’s just 

a disdain for coming up here and having Congress do its normal 

oversight role. We may disagree, but there is a role for both to 

play, and I do appreciate that. 

And between—and, Ms. Mitchell, I have a question. Tea Party 

tax-exempt application experienced significant delays when they 

were in the determination process, with some waiting years to hear 

back from agencies regarding their status. These delays cause the 

groups to lose support and funding and can even cause them to disband. Therefore, you know, to me it’s worth considering proposals 

to streamline the IRS tax-exempt application process by implementing a time limit to evaluate applications. 

What are the consequences of an IRS delaying applications of 

these potential tax-exempt groups, and then, also, what your 

thoughts on a timeline would be? 

Ms. MITCHELL. Well, it’s very detrimental to these organizations, 

and particularly most of these organizations are not the Karl Rovetype groups. I mean, these are mom-and-pop organizations. They’re 

small citizens groups that operate on very small budgets, and the 

cost to them of the delay meant people thought, well, maybe they 

weren’t legitimate, so they couldn’t raise money. For some of the 

71 

larger groups who were trying to build a network that they could 

help then smaller groups, then they would run into trouble with 

the State regulators because they didn’t have letters of exempt status. 

But my basic belief is that we should just eliminate that application process altogether, and then you just get rid of it. Then there’s 

no temptation. You just let a citizens group file, say I’m a 501(c)(4), 

I’m a 501(c)5, I’m a 501(c)6, whatever, just the same way you do 

for any other entity in America. To open a bank account, you get 

an employer ID number. And then they file their 990s, and then 

the IRS can, you know, on a random statistical basis—not on a 

basis of selection based on political philosophy, but on a random 

basis—be able to look at organizations, and look at their operations 

through their Form 990s, and look at their programs after the fact, 

after they’ve been operating for a few years. 

But what the IRS did here through this application process, and 

which they’ve said they’re going to continue to do—this is the part 

that I want everybody to understand. The IRS said on March the 

4th of this year they’re going to continue to do this. And it’s in 

their guidance. It’s not in any regulations, and they buried it at the 

bottom of a newsletter that about four of us received, and that I 

read at 3 o’clock in the morning because I was waking up and 

couldn’t sleep. And it says they’re—— 

Mr. COLLINS. Not the most open and transparent process there. 

Ms. MITCHELL. No. And they’re going to continue. And they’re 

going to try to look—the questions that they’re going to ask applicants presuppose that these are organizations that have been operating for 2 or 3 years before they can answer the question. 

So we just need to—we need to make—here’s clarity: Abolish the 

process. Here’s clarity: Define political activity for all purposes for 

any—who—whatever agency is doing it, whether it’s the FEC or 

the IRS, as expressly advocating the election or defeat of a clearly 

identified candidate, using words such as ‘‘support,’’ ‘‘oppose,’’ 

‘‘elect,’’ ‘‘defeat,’’ ‘‘vote for,’’ ‘‘vote against.’’ If we did that, we would 

clarify. That is clarity, and that’s the kind of thing that we need 

to have Congress do. 

Mr. VON SPAKOVSKY. Yeah. No, I totally agree with that. I think 

you should eliminate the IRS having to approve an application. If 

Congress doesn’t want to go that far, I mean, this fall-back position 

is to put in a time limit. Give the IRS 60 days to approve it, and 

if they don’t approve it in that time, then it automatically becomes 

approved. 

There’s certainly precedent for that. A 60-day time limit, for example, was the time limit imposed by statute and regulation on the 

Department of Justice under section 5 of the Voting Rights Act. So 

there’s precedent for this, and that’s the way to do it. 

Mr. COLLINS. Well, and I think that, again, is fairness for all. 

Let’s just make it simple. Let’s make it a process. If you’re doing 

wrong, you’re doing wrong, and you get it fixed, and that’s the 

catch process, not the front end that seems to be such a problem. 

One issue I think that is just stuck in the craw of most Americans that they just don’t figure out—and Mr. Woodall and I are 

from Georgia, we get this question all the time— you know, it’s 

why somebody either, one, can’t be fired. This has been an amazing 

72 

discussion we’ve had in this office before, in this hearing room before. But when Ms. Lerner left between May 2013 and September 

2013, she collected full pay and benefits, and roughly 60- to 

100,000, that was her annual. 

At what point does there also need to be personnel changes or 

personnel issue development in the IRS and possibly a bigger—Mr. 

Keating, anybody, want to tackle that in my last little—as we finish up here? 

Mr. SHERK. Well, I’d just like to say that we’ve got a horrible system that makes it very difficult to remove government employees 

for any reason. I think Congress quite sensibly didn’t want to have 

a lot of these jobs handed out on the basis of political connections 

and help with the campaign, but we’ve gone way overboard where 

you not only regulate the hiring on a merit basis, which I think is 

quite reasonable, but make it very difficult to remove employees. 

I mean, I outlined if you just stay within the Merit Systems Protection Board process, it takes an advantage of about a year and 

a half from start to finish, from when a supervisor says, I want to 

remove a problem employee, to when, you know, that level of appeals are done, outside of any appeals to the EEOC or to the Federal courts. I mean, when the Office of Personnel Management says 

that managers describe the efforts needed to remove an employee 

as, ‘‘heroic,’’ then I think we know we’ve gone too far. 

Mr. COLLINS. Right. I think protection needs to be there, but at 

the same point, it shouldn’t take an—almost literally an act of Congress to do something. 

Well, I think what we’re seeing here is interesting. I think the 

hearing has been, I think, something to discuss, the fact that there 

are many problems here. But I think the one thing we can all come 

to a conclusion, as I told the Commissioner of IRS when he was sitting here just a little over a week ago, I said, you’ve lost the trust 

of the American people. It was never the highest in the world, but 

just by basically what they did, but we’ve now lost the trust in everything. 

It doesn’t matter how much work we’ve been, because, as my 

friend Congressman Davis said, there is a tax system, there is a 

collection system right now. We may not like it, we work to change 

it, but this is a system, and when you’ve lost trust in the very ones 

who are supposed to be actually enforcing that and taking that in, 

that’s a problem, and the people aren’t satisfied with that. 

With that, I’d like to thank our witnesses for taking their time 

out of their busy schedule to appear before us today. And with that, 

the committee stands adjourned. 

[Whereupon, at 11:27 a.m., the committee was adjourned.] 

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