U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

81–742 PDF 2013

THE IRS: TARGETING AMERICANS FOR THEIR 

POLITICAL BELIEFS 

HEARING 

BEFORE THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

MAY 22, 2013 

Serial No. 113–33 

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 

MARK POCAN, Wisconsin 

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 

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 May 22, 2013 ............................................................................... 1 

WITNESSES 

The Hon. J. Russell George, Inspector General, Treasury Inspector General 

for Tax Administration 

Oral Statement ................................................................................................. 10 

Written Statement ............................................................................................ 12 

The Hon. Douglas Shulman, Former Commissioner, Internal Revenue Service 

Oral Statement ................................................................................................. 20 

Written Statement ............................................................................................ 21 

Ms. Lois G. Lerner, Director, Exempt Organizations, Tax Exempt and Government Entities Division, Internal Revenue Service 

Oral Statement ................................................................................................. 22 

The Hon. Neal S. Wolin, Deputy Secretary, U.S. Department of the Treasury 

Oral Statement ................................................................................................. 25 

Written Statement ............................................................................................ 28 

APPENDIX 

The Hon. Matt Cartwright, a Member of Congress from the State of Pennsylvania, Opening Statement ................................................................................... 126 

U.C. by Chairman Darrell Issa to Include Budget Data from a GAO Report .... 127 

Chairman Darrell Issa, Paz Interview Pages ........................................................ 128 

(1) 

THE IRS: TARGETING AMERICANS FOR THEIR 

POLITICAL BELIEFS 

Wednesday, May 22, 2013 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The committee met, pursuant to call, at 9:30 a.m., in Room 2154, 

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

the committee] presiding. 

Present: Representatives Issa, Mica, Turner, Duncan, McHenry, 

Jordan, Chaffetz, Walberg, Lankford, Amash, Gosar, Meehan, 

DesJarlais, Gowdy, Farenthold, Hastings, Lummis, Woodall, 

Massie, Collins, Meadows, Bentivolio, DeSantis, Cummings, 

Maloney, Norton, Tierney, Clay, Lynch, Cooper, Connolly, Speier, 

Cartwright, Pocan, Duckworth, Kelly, Davis, Welch, Cardenas, 

Horsford, Lujan Grisham. 

Staff Present: Ali Ahmad, Communications Advisor; Alexia 

Ardolina, Assistant Clerk; Kurt Bardella, Senior Policy Advisor; 

Brian Blase, Senior Professional Staff Member; Molly Boyl, Parliamentarian; Lawrence J. Brady, Staff Director; David Brewer, Senior Counsel; Caitlin Carroll, Deputy Press Secretary; Sharon Casey, 

Senior Assistant Clerk; Steve Castor, General Counsel; Drew 

Colliatie, Professional Staff Member; John Cuaderes, Deputy Staff 

Director; Brian Daner, Counsel; Adam P. Fromm, Director of Member Services and Committee Operations; Linda Good, Chief Clerk; 

Tyler Grimm, Senior Professional Staff Member; Frederick Hill, Director of Communications and Senior Policy Advisor; Christopher 

Hixon, Deputy Chief Counsel, Oversight; Michael R. Kiko, Staff Assistant; Justin LoFranco, Digital Director; Mark D. Marin, Director 

of Oversight; Tegan Millspaw, Professional Staff Member; Kristin 

L. Nelson, Senior Counsel; Ashok M. Pinto, Chief Counsel, Investigations; Laura L. Rush, Deputy Chief Clerk; Scott Schmidt, Deputy Director of Digital Strategy; Jonathan J. Skladany, Deputy 

Chief Counsel, Investigations; Matthew Tallmer, Investigator; Rebecca Watkins, Deputy Director of Communications; Jedd Bellman, 

Minority Counsel; Meghan Berroya, Minority Counsel; Claire Coleman, Minority Counsel; Kevin Corbin, Minority Professional Staff 

Member; Susanne Sachsman Grooms, Minority Chief Counsel; 

Devon Hill, Minority Research Assistant; Adam Koshkin, Minority 

Research Assistant; Elisa LaNier, Minority Deputy Clerk; Dave 

Rapallo, Minority Staff Director; and Donald Sherman, Minority 

Counsel. 

Chairman ISSA. The committee will come to order. 

2 

We exist 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 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’s our job to work tirelessly in partnership with 

citizen watchdogs and the IG community to deliver the facts to the 

American people and bring genuine reform to the Federal bureaucracy. 

I would note today that what we read at the opening of every 

committee hearing is particularly questionable today—or appropriate today, when it says ‘‘government accountable to taxpayers.’’ 

Our democracy was created by people and for the people. When 

government power is used to target Americans for exercising their 

constitutional rights, there is nothing we as Representatives should 

find more important than to take it seriously, get to the bottom of 

it, and eradicate the behavior. 

Since 2010, there appears to have been a targeting of people 

based on their beliefs. These people, particularly those who use 

‘‘Tea Party’’ in their name, were mocked by the liberal media, 

mocked by late-night television, and referred to by this administration regularly with disdain. Even here in the hallows of Congress, 

people would talk about who the Tea Partyers were, who was TeaParty supported, when, in fact, there is no Tea Party. As the evidence has shown, there are hundreds and hundreds of organizations as independent as any single American who simply wanted 

to live up to the Constitution, to have their freedom, and have it 

protected by our country. 

So last year when we received troubling complaints by groups 

across the country who were receiving what appeared to be inappropriate and unnecessary questions, in many cases after more 

than a year, sometimes 2 years, of inaction by the IRS, we went 

to the inspector general, who is here with us today. 

In March of last year, upon the request of our staff and later in 

a formal letter from Mr. Jordan, the subcommittee chairman, and 

myself, the IG launched a formal investigation. We knew then that 

something seemed to be wrong. We knew then that there was 

smoke. We knew then that, in fact, something just didn’t seem to 

be right. But we didn’t know what was really wrong, and we could 

have never suspected an organized and pervasive denying of hundreds of applications, not by a reject stamped and sent back, but 

by deliberate inaction. 

So our suspicions were just that. Only in the last few weeks have 

we begun to realize that this was, at least within the IRS, vast, because every single person who looked at one of these applications 

could have and should have been a whistleblower; could have and 

should have realized there was something wrong. 

During this period of time of more than a year, we had an intervening election. Many people want to talk about this relative to the 

election. I will not do that here today. This is more important than 

any one election. We need to look at this relative to our democracy. 

3 

The power to tax is the power to destroy. The power to grant tax 

status is, in fact, an enhancement of the right and liberties of our 

speech. That is what was at stake here. And it wouldn’t matter one 

bit if a different group was targeted. It is wrong. 

Congress produces laws, many of them complex. We may hear in 

the weeks and months to follow that it was the complexity of these 

applications that caused this. Complexity is created all more often 

than it exists. The IRS finds complexity when it is convenient, and 

simplicity when it is convenient. That is what we have begun to 

find out. 

During the same period of time, at least two investigations were 

going on, one by the IG, and one internal. Congress was misled. 

The American people were misled. Just yesterday the committee 

interviewed Holly Paz, the Director of Exempt Organizations, Rulings and Agreements Division of the IRS. While a tremendous 

amount of attention centered about the inspector general report, or 

investigation, the committee has learned that—from Ms. Paz that 

she, in fact, participated in an IRS internal investigation that concluded in May of 2012, May 3rd of 2012, and found essentially the 

same thing that Mr. George found more than a year later. 

Think about it. For more than a year, the IRS knew that it had 

inappropriately targeted groups of Americans based on their political beliefs, and without mentioning it, and, in fact, without honestly answering questions that were the result of this internal investigation. 

Many people believe that the IRS is an independent agency. 

Nothing could be further from the truth. We define it deliberately 

as less political. It has only two political appointees. It is carefully 

scrutinized to have limited visibility to Congress, limited visibility 

because we are protecting American people’s rights. But, in fact, 

Commissioner, former Commissioner, who is with us today will tell 

us he reports to the deputy of Treasury. In fact, he is a subordinate 

of a subordinate of a Cabinet officer. It is not an agency that gets 

to do what it wants to do or that cannot be challenged by Treasury. 

As a result, when we discover that not only did Ms. Paz know 

about this, learn about this, and participate in the IRS’s internal 

investigation, but she also played an integral role in the IG’s report, or investigation. 

We were shocked to find that Ms. Paz participated in virtually 

every one of the interrogations or interviews with her own subordinates. In those, of course, one of the questions the IG had to ask 

was, did anyone tell you to do this? If that question was asked, 

their own superior was in the room. Although it appears as though 

this was signed off by the IG, this committee finds it inappropriate, 

inappropriate for any inspector inspecting wrongdoing within an 

agency to include individuals in the agency who, in fact, could be 

and we now believe participated willingly in this activity. 

It is also unclear why the inspector general did not inform the 

committee of his substantive findings when he first became aware 

of the targeting no later than July of 2012. And here is where I 

take a liberty of this committee, a liberty of the Congress. Despite 

numerous requests from the committee for information and updates, including an August 3rd letter, a request for the IG to inform Congress about serious or flagrant problems quickly, the IG 

4 

failed to do that. Ladies and gentlemen, that is existing law. That 

is under the IG Act. That has been a responsibility of IGs across 

the board since the ’70s. And we, in fact, on this committee both 

support, defend, and promote the IGs, but we must also insist, particularly after situations like the GSA scandal that this committee 

dealt with, that we not wait 10 months to find out that there is 

a ‘‘there’’ there. That, in fact, is perhaps the greatest failing of an 

otherwise well-regarded inspector. 

Today we will be looking at how things went so wrong, how multiple wrongdoings occurred, how no one in position of authority 

seems to know anything about it. And within the administration, 

there seemed to be a culture of insulation that puts higher priority 

on deniability than addressing blatant wrongdoing. 

The American people don’t expect perfection. Men and women, 

many of them working very hard and trying to do the best within 

government, make mistakes. A few make wrongdoings and do so 

deliberately. But the buck has to stop somewhere, so in this investigation the buck will stop with this committee. This committee 

will not stop this investigation until we know that the IRS is fixed. 

In a one-on-one interview with the IG shortly after his report, I 

asked the inspector general a simple question that I expected to 

have a mixed answer on. The question was: Is this the only time? 

Could this happen again? In fact, his answer to me in an unambiguous way is, the internal controls are not there for me to say that 

it isn’t happening somewhere else in the IRS, meaning the American people today should not have confidence that this is an isolated incident. But rather, like the days of Enron and WorldCom, 

you ask the question, has Congress made this organization 

auditable, and accountable the way they make us auditable and accountable? I paid a lot of taxes in my life; most people on the dais 

have. We know one thing: You cannot just say you are doing the 

right thing and expect the IRS to take your word and the check you 

send in. Documentation, the ability to verify it, is essential when 

dealing with the IRS. We can expect no less when we deal with the 

IRS. 

Chairman ISSA. And I will recognize the ranking member for his 

opening statement. 

Mr. CUMMINGS. Mr. Chairman, I thank you for calling this very 

important hearing. 

Mr. Chairman, you are absolutely right. This is more important 

than one election. The revelations that have come forward so far 

provides us with a moment pregnant with transformation; Not 

transformation for a moment, but for generations to come and generations yet unborn. That’s why this hearing must be about two essential things: truth and trust. 

The American people expect the IRS to exercise its responsibilities in a fair and nonpartisan manner. When the IRS breaches 

that trust, it damages the ability of the agency to implement the 

Nation’s tax laws effectively and efficiently. 

The inspector general has called the actions by IRS employees in 

Cincinnati, quote, ‘‘inappropriate,’’ unquote, but after reading the 

IGs report, I think it goes well beyond that. I believe that there 

was gross incompetence and mismanagement in how the IRS deterVerDate Aug 31 2005 09:13 Jul 10, 2013 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\DOCS\81742.TXT APRIL
5 

mined which organizations qualified for tax-exempt status. Again, 

this is about truth and trust. 

By now we have all heard how IRS employees used terms like 

‘‘Tea Party’’ and ‘‘Patriots’’ to single out conservative groups for enhanced scrutiny. But the IG report also discusses how some cases 

took more than 3 years to resolve. Ladies and gentlemen, we are 

better than that. We are simply better than that. IRS staff stopped 

working for more than a year, from October 2010 through November 2011, while they waited for guidance from supervisors on how 

to process these applications. This is simply unacceptable. When 

the IRS finally got to processing applications, employees with little 

or no oversight sent overly extensive requests for information to 

many of these groups, which understandably angered them. 

New processes have been put in place to prevent these abuses in 

the future, but much more needs to be done. According to the IG 

audit, at least part of the reason—of the reason for this mismanagement is inadequate guidance on how to process these cases. 

The original statute passed by Congress requires 501(c)(4) organizations engage exclusively in social welfare activities, but in 1959, 

the Treasury Department issued a regulation that requires these 

entities only to be primarily engaged in social welfare activities. As 

a result, many groups now believe they can spend up to 49 percent 

of their funds on campaign-related activities. 

Significant concerns also have been raised about groups that 

have already qualified for tax-exempt status, or whose applications 

are still pending, and are now openly engaging in campaign-related 

activities and spending millions of dollars with little or no IRS 

oversight of their activities. These concerns are not limited to just 

one political party, by the way. For example, good government 

groups like Democracy 21 and others have written to the IRS about 

Crossroads GPS, which was created by Karl Rove, as well as Patriots USA, which was created by former Obama administration officials. 

I’m encouraged that the IG has already announced that he will 

be examining this issue in more detail in the upcoming audit, but 

it is also time to revisit a 1959 regulation and consider returning 

to the original standard set forth in the statute that bans political 

activity by these groups altogether, which is what Congress originally intended. 

As we investigate the actions of IRS employees, I urge my colleagues to avoid making the investigation into a partisan attack. 

Let me pause here to say that there are many great employees 

in the IRS. I’m sure the chairman would agree with me that it is 

not our intention to take a broad brush and say negative things 

about all of the employees at IRS, because there are many hardworking people who are probably looking at this event right now 

wondering, you know, why are they talking about me? Well, we say 

to all of those employees, we appreciate what you are doing, but 

we are trying to make sure that this organization is straightened 

out. 

Mr. Shulman, who was the head of the IRS when all of these actions occurred, was appointed by President Bush. There is no evidence to suggest that he directed IRS employees to intentionally 

delay or harass Tea Party groups. Similarly, the inspector general 

6 

and all IRS officials who have appeared before Congress to date 

have agreed that no one outside the IRS participated in these activities or was aware of them when they occurred. These facts were 

confirmed again yesterday when the committee conducted a transcribed interview of Holly Paz, who served as manager of the Rulings and Agreements Office in Washington, D.C., which oversees 

the Cincinnati unit that processed these applications. 

I share the chairman’s very serious questions about why Mr. 

Shulman and Ms. Lerner failed to inform Congress about these 

problems. Again, ladies and gentlemen, we’re talking about truth 

and trust. To me, this is one of their most significant failures, and 

I do not believe their answers to date have been sufficient. Truth 

and trust. 

As the committee continues in what I hope will be a bipartisan 

and thorough investigation, I want to make a request of the chairman. Now that the President has designated Danny Werfel as the 

new Acting Director of the IRS, I believe the committee should 

hear from him about his plans to address the recommendations in 

the IG report and other steps he intends to take to restore the public trust in the IRS. That said repeatedly, to do our jobs on this 

committee, we must focus on oversight and reform. And reform. 

Holding a hearing with Mr. Werfel will allow us to do both. 

Finally, Mr. Chairman, I would like to say a brief word about 

Ms. Lerner. Her attorney has written to the committee to inform 

us that she intends to invoke her Fifth Amendment right against 

self-incrimination. Of course, I am disappointed that we will not be 

able to ask her questions today. I believe that she could share 

much light on what we are trying to find, the truth. But every 

member of this committee takes an oath to support the Constitution of the United States of America, and this is Ms. Lerner’s right 

under the Constitution. So I will honor her decision, and I respectfully urge all of my colleagues to do the same. 

I ask unanimous consent to place into the record written answers 

that Ms. Lerner provided in response to questions posed by the inspector general, as well as similar answers provided by her boss Joseph Grant. 

Chairman ISSA. They will not be accepted at this time. They have 

not been provided to us by the IG on a bipartisan basis, I have 

been informed. So at this time we will take them under advisement. They will be—I will take back my reservation if—after Mr. 

George has viewed them and agreed that, in fact, they are true, or 

someone else from the IG. And I must mention, I’m shocked that 

I’m finding things that we want delivered now. 

Mr. CUMMINGS. They were provided last night, I understand. 

Chairman ISSA. They were not provided to us. 

The committee has respectfully requested all of these transcribed 

interviews from the IG. Mr. George, am I to assume that this was 

the only one provided, or were all of them provided to the minority? 

Mr. GEORGE. Mr. Chairman, I have been informed that they were 

provided to both sides last night. 

Chairman ISSA. Well, there is a way to get them to us to where 

we know they are there. Can we—no, that’s all right. That’s all 

right. 

7 

Will we expect to receive all transcribed interviews or only this 

one? We have asked for all of them equally. 

Mr. GEORGE. We prioritized them, sir. We are still working on 

the requests. 

Chairman ISSA. Can we get an estimate of times as long as we 

are at this point, this juncture? 

By the way, I will take back my reserve. 

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

Mr. GEORGE. Sir, we are working on the request. We prioritized 

them as requested by the committee. I cannot give you at this very 

moment a definitive time for receiving—for your receipt of them. 

Chairman ISSA. I trust it will be no greater time than we give 

taxpayers to respond. 

With that, I ask—unanimous consent is accepted and will be 

placed in the record. 

Mr. CUMMINGS. Mr. Chairman, let me just make one comment 

very briefly on what just happened. 

Chairman ISSA. Sure. 

Mr. CUMMINGS. Mr. Chairman, we would not submit—we were 

under the impression that you all had the document. And I 

would—— 

Chairman ISSA. And I fully understand that. It wasn’t you blindsiding me, I assure you. 

Mr. CUMMINGS. Very well. 

And as I close, I want this committee to be very careful, and I 

have said it many times. This committee should act on the level of 

a Federal court. And I think we need to be very, very careful not 

to let partisanship undermine the integrity not only of the committee, but of our investigation and our work product. 

The American people are depending upon us, and I have full 

faith and confidence in the chairman, and all of our Members, that 

we will do as I just said. And so I certainly look forward to our witnesses’ answers to our questions today. I look forward to your opening statements. And with that, Mr. Chairman, I yield back. 

Chairman ISSA. I thank you, Mr. Cummings. 

We now go to the chairman of the subcommittee Mr. Jordan. 

Mr. JORDAN. Thank you, Mr. Chairman. 

Two rogue agents. That’s what the White House tells us were the 

people responsible for this. In fact, I got a news report from May 

15th that says, White House said two rogue IRS employees from 

Cincinnati were responsible for investigating conservative groups. 

Two employees in Cincinnati responsible for the systematic targeting of conservative groups over 2 years. 

This administration would have us believe that. This administration, this agency, the very agency charged with enforcing 

Obamacare, systematically targeted groups who came into existence because they opposed Obamacare, and they started the targeting the very month, March 2010, that Obamacare became law, 

expects us to believe it was just the work of two rogue agents. 

This administration, this agency, which, according to Mr. 

George’s report, found out about this practice certainly as early as 

June of 2011, and after that date Ms. Lerner had 14 opportunities 

in direct and distinct interactions with the Ways and Means Committee and with this committee, 14 different occasions where she 

8 

could have set the record straight, and she chose not to do it. And 

yet they expect us to believe that the systematic targeting of conservative groups was just the work of two rogue agents in Cincinnati. 

This administration, this agency, which was so calculating that 

they planted the question 12 days ago when Ms. Lerner gave the 

news that the IRS was engaged in this targeting before the IGs report came out, so calculating they all got together and said, let’s 

do this, let’s plant the question and break this story, and yet they 

expect us to believe it was just the work of a couple of employees, 

two rogue agents in Cincinnati. 

And finally, Mr. Chairman, I would say this: The subject of this 

committee knows something about. This administration, this administration, which told us and told the American people that the 

attack that killed four Americans in Benghazi was the work—was 

caused by a video, is now the same administration who expects us 

to believe that this scandal was just a result of two rogue agents 

in Cincinnati. 

Mr. Chairman, the people don’t buy it. The American people get 

it, and they just want—they just want this administration to give 

them the truth. And that’s why this hearing is so important. 

And I yield back. 

Chairman ISSA. I thank the gentleman. 

I understand Mr. Lynch will—on behalf of the ranking member, 

Mr. Lynch is recognized. 

Mr. LYNCH. Thank you very much, Mr. Chairman. I want to 

thank you and the ranking member for holding this timely hearing, 

I would also like to thank the witnesses for coming forward and 

helping the committee with its work. 

Mr. Chairman, each year the State Department releases its 

Country Report on Human Rights and Practices. It is a comprehensive assessment of human rights conditions across the world. Notably the overview of the country report released this year provides 

that sustainable democracy means more than just elections, and includes a quote from President Obama’s remarks at the United Nations in September of 2012 defining true democracy as dependent 

on the freedom of citizens to speak their minds and assemble without fear and on the rule of law and due process that guarantees 

the rights of all people. The country report goes on to conclude that 

these elements of democracy, particularly the freedom of expression 

and the freedom of speech, faced serious threats around the globe 

in 2012. 

I just want to point to a couple of these examples offered by our 

own State Department. While the law in the People’s Republic of 

China provides for freedom of speech and freedom of the press, the 

report states that authorities generally do not respect these rights 

in practice. In particular, those who made politically sensitive comments in public speeches, academic discussions and comments to 

the media remain subject to punitive measures. And the government frequently monitored gathering of intellectual scholars and 

dissidents where political or sensitive issues were discussed. 

And similarly in the Republic of Belarus, the national Constitution provides for freedom of speech and freedom of press, but the 

authoritarian regime in place also does not respect the rights in 

9 

practice. Specifically it says, individuals could not criticize the government publicly or discuss matters of general public interest without fear of reprisal. Authorities videotape political meetings, conducted frequent identity checks, and used other forms of intimidation. 

In my view, these and other blatant violations of individual freedom of expression serve to illustrate exactly what is at stake when 

a Federal agency, for whatever reason, targets U.S. citizens based 

on their political beliefs. Such a practice compromises one of the 

bedrock principles of our democracy: the commitment to ensure 

that all citizens are free to exercise their freedom of speech without 

fear of retribution from their government. And it constitutes a significant infringement on human rights in this country. 

It is why the facts set forth in the audit report issued by the 

Treasury IGs are deeply troubling and reveal an IRS practice that 

is unacceptable. According to the inspector general, the criteria 

used by the IRS Determinations Unit in Cincinnati to identify taxexempt applications for further review include specific organization 

names, such as ‘‘Tea Party’’ and ‘‘Patriots’’; as well as policy positions, such as government spending, and any case file—and this is 

what gets me—any case file statements that criticize how the country is being run. Anything that criticizes the government on how 

this country is being run. That was subject to enhanced investigation by the IRS. 

The inspector general has also reported that many of these organizations had not received an approval or denial letter from the 

IRS for more than 2 years after submitting their applications, and 

in some instances remained open as long as over 1,000 calendar 

days. 

Moreover, the audit report notes that the same Determinations 

Unit sent out burdensome request letters for additional information, 58 percent of which the inspector general has characterized as 

unnecessary. 

In light of these and other reports, it’s my hope that today’s 

hearing will serve to build upon the investigation conducted by Inspector General George by—and assist our committee in determining how we can better ensure that such practices are never repeated within the Federal Government. 

But there’s something else at play here. If we don’t get, if this 

committee is prevented by obstruction or by refusal to answer the 

questions that we need to get to the bottom of this, you will leave 

us no alternative but to ask for the appointment of a special prosecutor or appointment to special counsel to get to the bottom of 

this. This is a very serious matter. We would like to handle it in 

this committee, but if—I watched the last hearing where the witness for the IRS had no names and no direction as to who led these 

investigations, who chose the terms to be used, and basically 

stonewalled the committee. That cannot continue. We know where 

that will lead. It will lead to a special prosecutor. It will lead to 

special counsel being appointed to get to the bottom of this. So I 

hope that is not the approach of the IRS going forward, because 

there will be hell to pay if that’s the route that we chose to go 

down. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

10 

I thank the gentleman. 

All Members will have 7 days in which to place their opening 

statements in the record. 

We now recognize our panel of witnesses. Mr. Russell George is 

the Treasury IGs for the Tax Administration. Mr. Douglas 

Shulman is the former Commissioner of the Internal Revenue Service. Miss Lois Lerner is the Director of Exempt Organizations at 

the Internal Revenue Service. Mr. Neal S. Wolin is the Deputy Secretary at the Department of Treasury, as I previously noted, essentially the report 2 of the Commissioner. 

Pursuant to the rules of the committee, all witnesses will be 

sworn. Would you please rise, raise your right hand to take the 

oath. 

Do you solemnly swear that the testimony you will give will be 

the truth, the whole truth, and nothing but the truth? 

Let the record indicate all witnesses answered in the affirmative. 

Please take your seats. 

For all of the witnesses, your entire opening statements will be 

placed in the record. We understand sometimes you are obligated 

to stay with your opening statement. If so, keep it within 5 minutes. If you would like to use the time to either add to or to summarize, that can be very helpful for the Members. 

Mr. George, you are up first. Welcome. 

WITNESS STATEMENTS 

STATEMENT OF J. RUSSELL GEORGE 

Mr. GEORGE. Thank you, Mr. Chairman. 

Chairman Issa, Ranking Member Cummings, members of the 

committee, thank you for the opportunity to discuss our recent report concerning the Internal Revenue Service’s treatment of groups 

that applied for tax-exempt status. As you noted, and as you are 

aware, Mr. Chairman, our audit was initiated based on concerns 

that you expressed due to taxpayer allegations that they were subjected to unfair treatment by the IRS. 

The three allegations considered during our review were proven 

true. The IRS targeted specific groups applying for tax-exempt status. It delayed the processing of these groups’ applications, and requested unnecessary information, as well as subjected these groups 

to special scrutiny. 

It is important to note that the IRS conducted an audit that— 

rather, that we, TIGTA, conducted an audit of the IRS and not an 

investigation. Pursuant to the Inspector General Act, TIGTA is authorized to conduct both audits as well as investigations in our 

oversight of IRS programs and operations. Audits are generally reviews of IRS programs designed to identify systemic problems and 

recommend corrective actions, whereas investigations are focused 

on a person or persons and are usually undertaken in response to 

reports or complaints of misconduct. Investigations may be criminal or administrative in nature and can result in referral for prosecution or referral for management for administrative action. 

Once again, the report we are discussing today is an audit of the 

IRSs processing of tax-exempt applications. It is not uncommon for 

audits to present specific issues that lead to additional reviews or 

11 

investigations. The inappropriate criteria discussed in this audit 

were the IRSs targeting for review Tea Party and other organizations based on their names or policy positions, a practice started 

in 2012, and which was not fully corrected until May 2012. Actually the practice was started in 2010 and not fully corrected until 

May of 2012. These criteria were inappropriate in that they did not 

focus on tax-exempt laws and Treasury regulations. They remained 

in effect for approximately 18 months. 

The organizations selected for review for significant political 

campaign intervention experienced substantial delays in the processing of their applications. In addition, many of these organizations received requests for unnecessary information, including lists 

of donors. 

In closing, our overall assessment is that the IRS demonstrated 

poor judgment and gross mismanagement in the implementation of 

this program. The substantiated allegations are troubling and raise 

many questions. 

Chairman Issa, Ranking Member Cummings, members of the 

committee, thank you for the invitation to appear. 

Chairman ISSA. Thank you. 

[Prepared statement of Mr. George follows:] 

12 


Insert offset folio 1 here 81742.001

TESTIMONY 

OF 

THE HONORABLE J. RUSSELL 

GEORGE 

TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION 

before 

the 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

U.S. HOUSE OF REPRESENTATIVES 

"The IRS: Targeting Americans for Their. Political Beliefs" 

May 22, 2013 

Chairman Issa, Ranking Member Cummings, and Members of the Committee, 

thank you for the invitation to provide testimony on the subject of the Intemal Revenue 

Service's (IRS) processing of certain applications for tax-exempt status. The Treasury 

Inspector General for Tax Administration, also known as TIGTA, has provided ongoing 

oversight of the IRS's Tax Exempt and Government Entities Division, Exempt 

Organizations' (EO) customer service and compliance efforts, including those related 

to political activities. For example, several reviews have covered the IRS's political 

activities compliance initiative,' as well as the processing of political action 

committees' returns. 2 My testimony today focuses on the results of our most recently 

issued report. 3 In this report, TIGTA determined whether allegations were founded 

that the IRS: 1) targeted specific groups applying for tax-exempt status, 2) delayed 

processing targeted groups' applications for tax-exempt status, and 3) requested 

unnecessary information from targeted groups. Our report is included as an 

attachment to the testimony, and I will provide highlights of our key findings. 

Organizations, such as Internal Revenue Code (LR.C.) Section (§) 501 (C)(3)4 

charities, seeking Federal tax exemption are required to file an application with the 

IRS. Other organizations, such as I.R.C. § 501 (c) (4)5 social welfare organizations,6 

1 TIGT A, Ref. No. 2005-10-035, Review of the Exempt Organizations Function Process for Reviewing 

AI/eged Political Campaign Intervention By Tax-Exempt Organizations (Feb. 2005); 

TIGTA, Ref. No. 2008-10-117, Improvements Have Been Made to Educate Tax-Exempt Organizations and 

Enforce the Prohibition Against Political Activities, but Further Improvements Are Possible (June 2008). 

2 TIGTA, Ref. No. 2005-10-125, Additional Actions Are Needed to Ensure Section 527 Political 

Organizations Publicly Disclose Their Actions Timely and Completely (Aug, 2005); 

TIGTA, Ref. No. 2010-10-018, Improvements Have 8een Made, but Additional Actions Could Ensure That 

Section 527 Political Organizations More Fully Disclose Financial Information (Feb. 2010). 

3 TIGTA, Ref. No. 2013-10-053, Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for 

Review (May 2013). 

4I.R,C. § 501 (c)(3) (2012), 

51.R.C. § 501 (c)(4) (2012). 
13 


Insert offset folio 2 here 81742.002

may file an application but are not required to do so. The IRS's EO function's Rulings 

and Agreements office, which is based in Washington, D.C., is responsible for 

processing applications for tax exemption. Within the Rulings and Agreements office, 

the Determinations Unit in Cincinnati, Ohio, is responsible for reviewing applications 

as they are received to determine whether the organization qualifies for tax-exempt 

status. If the Determinations Unit needs technical assistance? processing 

applications, it may call upon the Technical Unit in Washington, D.C., which is within 

the Rulings and Agreements office. 

Most organizations requesting tax-exempt status must submit either a Form 

1023, Application for Recognition of Exemption Under Section 501 (c)(3) ofthe 

Internal Revenue Code, or Form 1024, Application for Recognition of Exemption 

Under Section 501 (a),8 depending on the type of tax-exempt organization. 

The I.R.C. section under which an organization is granted tax-exempt status 

affects the activities it may undertake. For example, !.R.C. § 501 (c)(3) charitable 

organizations are prohibited from directly or indirectly participating in or intervening in 

any political campaign on behalf of or in opposition to any candidate for public office 

(hereinafter referred to as political campaign intervention).9 However, IRC. § 501 (c)(4) 

social welfare organizations, I.R.C. § 501 (C)(5)10 agricultural and labor organizations, 11 

and I.R. C. § 501 (c)(6) 12 business leagues 13 may engage in limited political campaign 

intervention. 

The IRS receives thousands of applications for tax-exempt status annually. 

Between fiscal years 2009 and 2012, the IRS received approximately 60,000-65,000 

applications for I.R.C. § 501 (c)(3) status each year. In addition, receipts for 

6 Organizations that promote social welfare primarily promote the common good and general welfare of the 

people of the community as a Whole, such as a nonprofit organizations providing financial counseling, 

¥outh sports, and public safety. 

Assistance such as interpretation of the tax law or guidance on issues that are not covered by clearly 

established precedent. 

'Form 1024 is used by organizations seeking tax-exempt status under a number of other I.R.C. sections, 

including I.R.C. § 501 (c)(4) social welfare organizations, I.R.C. § 501(c)(5) agricultural and labor 

organizations, and I.R.C. § 501(c)(6) business leagues. 

9 Political campaign intervention is the term used in Treasury Regulations §§ 1.501(c)(3)-1, 1.501(c)(4)-1, 

1.501(c)(5)-1, and 1.501(c)(6)-1. I.R.C. § 501 (c)(3) defines political campaign intervention as directly or 

indirectly partiCipating in or intervening in any political campaign on behalf of or in opposition to any 

candidate for public office. 

10 I.R.C. § 501 (c)(5) (2012). 

11 Agricultural organizations promote the interests of persons engaged in raising livestock or harvesting 

crops, and labor organizations include labor unions and collective bargaining associations. 

" IR.C. § 501(c)(6) (2012). 

13 Nonprofit organizations such as chambers of commerce, real estate boards, and boards of trade that 

promote the improvement of bUSiness conditions. 

2 
14 


Insert offset folio 3 here 81742.003

I.R.C. § 501 (c)(4) applications increased between fiscal years 2009 and 2012 from 

approximately 1,700 to more than 3,300 annually. 

During the 2012 election cycle, some Members of Congress raised concerns to 

the IRS about its selective enforcement efforts and reemphasized its duty to 

treat similarly situated organizations consistently. In addition, several organizations 

applying for I.R.C. § 501(c)(4) tax-exempt status made allegations that the IRS: 

1) targeted specific groups applying for tax-exempt status, 2) delayed the processing of 

targeted groups' applications for tax-exempt status, and 3) requested unnecessary 

information from targeted organizations. Lastly, several Members of Congress 

requested that the IRS investigate whether existing social welfare organizations are 

improperly engaged in a substantial, or even predominant, amount of campaign 

activity.14 

We initiated this audit based on concerns expressed by the Committee on 

Oversight and Government Reform and reported in the media regarding the 

IRS's treatment of organizations applying for tax-exempt status. We focused our efforts 

on reviewing the processing of applications for tax-exempt status and determining 

whether allegations made against the IRS were founded. Over 600 tax-exempt 

application case files were reviewed by TIGTA. We did not review whether specific 

applications for tax-exempt status should be approved or denied. 

Results of Review 

In summary, we found that all three allegations were substantiated. The IRS used 

inappropriate criteria that identified for review Tea Party and other organizations applying 

for tax-exempt status based upon their names or policy positions instead of indications of 

potential political campaign intervention. Because of ineffective management by IRS 

officials: 1) inappropriate criteria were developed and stayed in place for a total of more 

than 18 months, 2) there were substantial delays in processing certain applications, and 

3) unnecessary information requests were issued to the organizations. 

Inappropriate Criteria Were Used to Identify Potential Political Cases 

The IRS developed and began using criteria to identify tax-exempt applications 

for review by a team of specialists that inappropriately identified specific groups applying 

for tax-exempt status based on their names or policy positions, instead of developing 

14 A second audit is planned to assess how the EO function monitors I.R.C. §§ 501 (c)(4}-(6) organizations 

to ensure that political campaign intervention does not constitute their primary activity. 

3 
15 


Insert offset folio 4 here 81742.004

criteria based on tax-exempt laws and Treasury Regulations. The criteria evolved 

during 2010. 

• In early Calendar Year 2010, according to an IRS Determinations Unit 

specialist, the IRS began searching for applications with "Tea Party," 

"Patriots," or "9/12" in the organization's name as well as other 

"political-sounding" names (hereinafter referred to as potential political cases). 

• In May 2010, a Determinations Unit specialist and group manager began 

developing a spreadsheet that would become known as the "Be On the Look 

Out" listing (hereinafter referred to as the "BOLO" listing), which included the 

emerging issue of Tea Party applications. 

• In June 2010, Determinations Unit managers and specialists began training 

Determinations Unit specialists on issues to be aware of, including Tea Party 

cases. 

• By July 201 0, Determinations Unit management stated that it had requested 

its specialists to be on the lookout for Tea Party applications. 

In August 2010, the Determinations Unit distributed the first formal BOLO listing. 

The criteria in the BOLO listing were stated as "Tea Party organizations" applying for 

!.R.e. § 501 (c)(3) or I.R.C. § 501 (c) (4) status. 

EO function officials in Washington, D.C. stated that Determinations Unit 

specialists interpreted the general criteria in the BOLO listing and developed expanded 

criteria for identifying potential political cases. By June 2011, these criteria included: 

The Director, EO, stated that the expanded criteria were a compilation of various 

Determinations Unit specialists' responses on how they were identifying Tea Party 

cases. We asked the Acting Commissioner, Tax Exempt and Government Entities 

Division; the Director, EO; and Determinations Unit personnel if the criteria were 

influenced by any individual or organization outside the IRS. All of these officials stated 

that the criteria were not influenced by any individual or organization outside the IRS. 

Instead, the Determinations Unit developed and implemented inappropriate criteria due 

to insufficient oversight provided by management and other human capital challenges. 

4 
16 


Insert offset folio 5 here 81742.005

Specifically, first-line management in Cincinnati, Ohio approved references to the Tea 

Party in the BOLO listing criteria. As a result, inappropriate criteria remained in place 

for more than 18 months. 15 Determinations Unit managers and employees also did not 

consider the public perception of using these criteria when identifying these cases. 

Moreover, the criteria developed showed that the Determinations Unit specialists lacked 

knowledge of what activities are allowed by I.R.C. § 501 (c)(3) and I.R.C. § 501 (c)(4) 

organizations. 

However, developing and using criteria that focus on organization names and 

policy pOSitions instead of the activilies permitted under the Treasury Regulations does 

not promote public confidence that tax-exempt laws are being applied impartially. The 

IRS's actions regarding the use of inappropriate criteria over such an extended period of 

time has brought into question whether the IRS has treated all taxpayers fairly, which is 

an essential part of its mission statement. 16 

After being briefed on the expanded criteria in June 2011, the Director, EO, 

immediately directed that the criteria be changed. In July 2011, the criteria were 

changed to focus on the potential "political, lobbying, or advocacy" activities of the 

organization and references to these cases were changed from "Tea Party cases" to 

"advocacy cases." These criteria were an improvement over using organization names 

and policy positions because they were more consistent with tax-exempt laws and 

Treasury Regulations. 

However, the team of Determinations Unit specialists subsequently changed the 

criteria in January 2012 without senior IRS official approval because they believed the 

July 2011 criteria were too broad. The January 2012 criteria again focused on the 

policy positions of organizations, instead of tax-exempt laws and Treasury Regulations. 

After three months, the Director, Rulings and Agreements, in Washington, D.C. leamed 

the criteria had been changed by the team of specialists and subsequently revised the 

criteria again in May 2012. The May 2012 criteria more clearly focus on activities 

permitted under the Treasury Regulations. We are not aware of any additional changes 

to the criteria during our audit. We are continuing to look into whether any violations of 

15 The 18 months were not consecutive. There were two different time periods when the criteria were 

inappropriate (May 2010 to July 2011 and January 2012 to May 2012). 

1S The IRS's mission is to provide America's taxpayers top-quality service by helping them understand and 

meet their tax responsibilities and enforce the law with integrity and fairness to all. 

5 
17 


Insert offset folio 6 here 81742.006

the Internal Revenue Service Restructuring and Reform Act of 199817 (RRA 98) have 

occurred and if any political influence caused the change in criteria. 18 

Potential Political Cases Experienced Significant Processing Delays 

The organizations that applied for tax-exempt status and that had their 

applications forwarded to the team of specialists for additional review experienced 

substantial delays. As of December 17,2012, many organizations had not received an 

approval or denial letter for more than two years after they submitted their applications. 

Some cases have been open during two election cycles (2010 and 2012). 

Potential political cases took significantly longer than average to process due to 

ineffective management oversight. Once cases were initially identified for processing by 

the team of specialists in February 2010, the Determinations Unit Program Manager 

requested assistance via e-mail from the Technical Unit to ensure consistency in 

processing the cases. However, the Determinations Unit waited more than 20 months 

(February 2010 to November 2011) to receive draft written guidance from the Technical 

Unit for processing potential political cases. 

The team of specialists stopped working on potential political cases from 

October 2010 through November 2011, resulting in a 13-month delay, while they waited 

for assistance from the Technical Unit. Many organizations waited much longer than 13 

months for a decision while others have yet to receive a decision from the IRS. For 

example, as of December 17, 2012, the IRS had been processing several potential 

political cases for more than 1,000 calendar days (approximately 3 years). Some of 

these organizations received requests for additional information in Calendar Year 2010 

and then did not hear from the IRS again for more than a year while the Determinations 

Unit waited for assistance from the Technical Unit. For the 296 potential political cases 

we reviewed, as of December 17, 2012, 108 applications had been approved, 28 were 

withdrawn by the applicant, none had been denied, and 160 cases were open from 

206 to 1,138 calendar days (some crossing two election cyctes). 

17 Pub. L. No. 105-206, 112 Stat. 685. 1998 (codified as amended in scattered sections of 2 U.S.C., 

5 U.S.C. app., 16 U.S.C., 19 U.S.C., 22 U.S.C., 23 U.S.C., 26 U.S.C., 31 U.S.C., 38 U.S.C., and 

49 U.S. C.). 

18 For example, it is a violation of RRA 98 § 1203(b)(3) for IRS employees to violate a taxpayer's civil 

rights, a violation of RRA 98 § 1203(b)(4) to falsify or destroy documents to conceal mistakes made by any 

employee with respect to a matter involving a taxpayer or taxpayer representative, and a violation of 

RRA 98 § 1203(b)(6) for IRS employees to violate the Internal Revenue Code, Treasury Regulations, or 

policies of the IRS for purposes of retaliating against or harassing a taxpayer. Proven violations of Section 

1203 require the termination of the offending IRS employee. 

6 
18 


Insert offset folio 7 here 81742.007

The IRS Requested Unnecessary Information for Many Potential Political Cases 

After receiving draft guidance in November 2011 from the Technical Unit on 

processing potential political cases, a different team of specialists in the Determinations 

Unit began sending requests for additional information in January 2012 to organizations 

that were applying for tax-exempt status. For some organizations, this was the second 

letter received from the IRS requesting additional information, the first of which had been 

received more than a year before this date. These letters requested that the information 

be provided in two or three weeks (as is customary in these letters) despite the fact that 

the IRS had done nothing with some of the applications for more than one year. After 

the letters were received, organizations seeking tax-exempt status, as well as Members 

of Congress, expressed concerns about the type and extent of questions being asked. 

After this media attention, the Director, EO, stopped issuance of additional 

information request letters and provided an extension of time to respond to previously 

issued letters. EO function headquarters Washington, D.C. office employees reviewed 

the additional information request letters prepared by the team of specialists and 

identified seven questions that they deemed unnecessary, including requests for donor 

information, pOSition on issues, and whether officers have run for public office. 

Subsequently, the EO function instituted the practice that all additional information 

request letters for potential political cases be reviewed by the EO function headquarters 

office before they are sent to organizations seeking tax-exempt status. In addition, EO 

function officials informed us that they decided to destroy all donor lists that had been 

sent in for potential political cases which the IRS determined it should not have 

requested. 

The Determinations Unit requested unnecessary information because of a lack of 

managerial review, at all levels, of these information requests before they were sent to 

organizations seeking tax-exempt status. Additionally, as mentioned earlier, we 

concluded that Determinations Unit specialists lacked knowledge of what activities are 

allowed by LR.C. § 501 (c)(3) and I.R.C. § 501(c)(4) tax-exempt organizations. In May 

2012, a two-day workshop was provided to the team of specialists to train them on what 

activities are allowable by I.R.C. § 501 (c)(4) organizations, including lobbying and 

political campaign intervention. 

IRS's Response to Our Recommendations 

TIGTA made nine recommendations to provide more assurance that applications 

are processed in a fair and impartial manner in the future without unreasonable delay. 

The IRS agreed to seven of our nine recommendations and proposed alternative 

7 
19 


Insert offset folio 8 here 81742.008

corrective actions for two of our recommendations. However, we do not agree that the 

alternative corrective actions will accomplish the intent of the recommendations. One of 

these recommendations was that the IRS should clearly document the reason 

applications are chosen for further review for potential political campaign intervention. 

The second was that the IRS should develop specific guidance for specialists processing 

potential political cases and publish the guidance on the Internet. Further, the IRS's 

response also states that issues discussed in the report have been resolved. We 

disagree with this assertion. Until all of our recommendations are fully implemented and 

the numerous applications that were open as of December 2012 are closed, we do not 

consider the concerns in this report to be resolved. In addition, as part of our mission, 

TIGTA will also determine whether any criminal activity or administrative misconduct 

occurred during this process. The attached TIGTA report includes additional information 

on all nine recommendations and the IRS's planned corrective actions and completion 

dates. 

We at TIGTA are committed to delivering our mission of ensuring an effective and 

efficient tax administration system and preventing, detecting, and deterring waste, fraud, 

and abuse. As such, we plan to provide continuing audit and investigative coverage of 

the IRS's efforts to administer the tax-exempt laws. 

Chairman Issa, Ranking Member Cummings, and Members of the Committee, 

thank you for the opportunity to update you on our work on this tax administration issue 

and to share my views. 

8 
20 

Chairman ISSA. Mr. Shulman. 

STATEMENT OF DOUGLAS SHULMAN 

Mr. SHULMAN. Chairman Issa, Ranking Member Cummings, 

members of the committee, thank you for the opportunity to appear 

before the Committee on Oversight and Government Reform to discuss the Treasury IGs findings. 

I was the Commissioner of the Internal Revenue Service from 

March 2008 until November 2012, and during that time the agency 

was called upon to tackle a number of challenges. The agency 

played a key role in stimulus and economic recovery efforts during 

the economic downturn, aggressively addressed offshore tax evasion, and completed a major modernization of its core technology 

database. The agency also continued to deliver on its core mission 

of collecting the revenue to fund the government. 

The IRS is a major operation with more than 90,000 employees 

who work on issues ranging from processing individual tax returns 

to building complex technology, to ensuring compliance with businesses, to educating the public about tax law changes, to administering a very complex set of rules governing tax-exempt organizations. 

I have now read the Treasury IGs report. I was dismayed and 

saddened to read the inspector general’s conclusions that actions 

had been taken creating the appearance that the Service was not 

acting as it should have; that is, as a nonpolitical, nonpartisan 

agency. Utilizing a list with keywords to select applicants for review based on organizations’ names or policy positions is, in my 

view, inappropriate and damaging. 

The IRS serves a critical function for our Nation. It collects the 

taxes necessary to run the government. Because of this important 

responsibility, the IRS must administer and must be perceived to 

administer our tax laws fairly and impartially. Given the challenges that the agency faces, it does its job in an admirable way 

the great majority of the time. And the men and women of the IRS 

are hard-working, honest public servants. 

While the inspector general’s report did not indicate that there 

was any political motivation involved, the actions outlined in the 

report have justifiably led to questions about the fairness of the approach taken here. The effect is bad for the agency and bad for the 

American taxpayer. 

I’m happy to answer questions. 

Chairman ISSA. Thank you. 

[Prepared statement of Mr. Shulman follows:] 

21 


Insert offset folio 9 here 81742.009

Doug Shulman Statement for House Oversight and Reform Committee 

May 20, 2013 

My name is Doug Shulman. Thank you for the opportunity to appear before the 

Committee on Oversight and Government Reform to discuss the findings of the May 14, 

2013 report by the Treasury Inspector General for Tax Administration entitled 

"Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review." 

I was Commissioner of the Internal Revenue Service from March 2008 until November 

2012, and during that time the agency was called upon to tackle a number of challenges. 

The agency played a key role in stimulus and recovery efforts during the economic 

downturn, aggressively addressed offshore tax evasion and completed a major 

modernization of its core technology database. The agency also continued to deliver on 

its core mission of collecting the revenue to fund the government. The IRS is a major 

operation with more than 90,000 employees who work on issues ranging from processing 

individual tax returns, to building complex technology, to ensuring compliance with 

businesses, to educating the public about tax law changes, to administering a very 

complex set of rules governing tax exempt organizations. 

I have read the recent Treasury Inspector General for Tax Administration's report 

entitled: "Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for 

Review." I was dismayed and saddened to read the Inspector General's conclusions that 

actions had been taken creating the appearance that the Service was not acting as it 

should have - that is, as a non-political, non-partisan agency. Utilizing a list with 

keywords to select applications for review based upon the organizations' names or policy 

positions is, in my view, inappropriate and damaging. 

The IRS serves a critical function for our nation: It collects the taxes necessary to run the 

government. Because of this important responsibility, the IRS must administer-and be 

perceived to adrninister--our tax laws fairly and impartially. Given the challenges that 

the agency faces, it does its job in an admirable way the great majority of the time-and 

that the men and women of the IRS are hard working, honest public servants. While the 

Inspector General's report did not indicate that there was any political motivation 

involved, the actions outlined in the report have justifiably led to questions about the 

fairness of the approach taken here. The effect has been bad for the agency and bad for 

the American taxpayer. 

I am happy to answer any questions the Committee may have. 
22 

Chairman ISSA. Ms. Lerner, I note that you have not provided a 

written testimony for the committee. Do you wish to make an opening statement? 

Ms. LERNER. Yes, sir, I do. 

Chairman ISSA. Please proceed. 

STATEMENT OF LOIS G. LERNER 

Ms. LERNER. Good morning, Mr. Chairman and members of the 

committee. My name is Lois Lerner, and I’m the Director of Exempt Organizations at the Internal Revenue Service. 

I have been a government employee for over 34 years. I initially 

practiced law at the Department of Justice and later at the Federal 

Election Commission. In 2001, I became—I moved to the IRS to 

work in the Exempt Organizations office, in 2006, I was promoted 

to be the Director of that office. 

Exempt Organizations oversees about 1.6 million tax-exempt organizations and processes over 60,000 applications for tax exemption every year. As Director I’m responsible for about 900 employees nationwide and administer a budget of almost $100 million. 

My professional career has been devoted to fulfilling responsibilities of the agencies for which I have worked, and I am very proud 

of the work that I have done in government. 

On May 14th, the Treasury IGs released a report finding that 

the Exempt Organizations field office in Cincinnati, Ohio, used inappropriate criteria to identify for further review applications from 

organizations that planned to engage in political activity which 

may mean that they did not qualify for tax exemption. On that 

same day, the Department of Justice launched an investigation 

into the matters described in the inspector general’s report. In addition, members of this committee have accused me of providing 

false information when I responded to questions about the IRS 

processing of applications for tax exemption. 

I have not done anything wrong. I have not broken any laws. I 

have not violated any IRS rules or regulations, and I have not provided false information to this or any other congressional committee. 

And while I would very much like to answer the committee’s 

questions today, I’ve been advised by my counsel to assert my constitutional right not to testify or answer questions related to the 

subject matter of this hearing. After very careful consideration, I 

have decided to follow my counsel’s advice and not testify or answer any of the questions today. 

Because I’m asserting my right not to testify, I know that some 

people will assume that I’ve done something wrong. I have not. 

One of the basic functions of the Fifth Amendment is to protect innocent individuals, and that is the protection I’m invoking today. 

Thank you. 

Chairman ISSA. Thank you for your testimony. 

Chairman ISSA. Ms. Lerner, earlier the ranking member made 

me aware of a response we have that is purported to come from 

you in regards to questions that the IG asked during his investigation. Can we have you authenticate simply the questions and answers previously given to the inspector general? 

23 

Ms. LERNER. I don’t know what that is. I would have to look at 

it. 

Chairman ISSA. Okay. 

Would you please make it available to the witness? 

Ms. LERNER. This appears to be my response. 

Chairman ISSA. So it’s your testimony that as far as your recollection, that is your response? 

Ms. LERNER. That’s correct. 

Chairman ISSA. Ms. Lerner, the topic of today’s hearing is the 

IRS improper targeting of certain groups for additional scrutiny regarding their application for tax-exempt status. As Director of Exempt Organizations of the Tax-Exempt and Government Entities 

Division of the IRS, you were uniquely positioned to provide testimony to help this committee better understand how and why the 

IRS targeted these groups. To that end, I must ask you to reconsider, particularly in light of the fact that you have given not once, 

but twice testimony before this committee under oath this morning. 

You have made an opening statement in which you made assertions of your innocence, assertions you did nothing wrong, assertions you broke no laws or rules. Additionally, you authenticated 

earlier answers to the IG. 

At this point I believe you have not asserted your rights, but, in 

fact, have effectively waived your rights. Would you please seek 

consult for further guidance on this matter while we wait? 

Ms. LERNER. I will not answer any questions or testify about the 

subject matter of this committee’s meeting. 

Chairman ISSA. We will take your refusal as a refusal to testify. 

The witness and counsel are dismissed. 

Mr. GOWDY. Mr. Chairman, a point of order. 

Chairman ISSA. The gentleman will state a point of order. Please 

wait. 

Mr. GOWDY. Mr. Issa, Mr. Cummings just said we should run 

this like a courtroom, and I agree with him. She just testified. She 

just waived her Fifth Amendment right to privilege. You don’t get 

to tell your side of the story and then not be subjected to cross examination. That’s not the way it works. She waived her right of 

Fifth Amendment privilege by issuing an opening statement. She 

ought to stay in here and answer our questions. 

Mr. CUMMINGS. Mr. Chairman. 

Chairman ISSA. Mr. Cummings. 

Mr. CUMMINGS. I—first of all, with all respect for my good friend 

Mr. Gowdy, I said I would like to see it run like a Federal court. 

Unfortunately, this is not a Federal Court, and she does have a 

right, and I think—and we have to adhere to that. 

Chairman ISSA. Thank you. 

We’ll pause for a moment. 

Ms. Lerner, I’ll ask you just a couple of additional questions. 

Is it possible that we could narrow the scope of questions, and 

that there are some areas that you would be able to answer any 

questions on here today? 

Ms. LERNER. I will not answer any questions or testify today. 

Chairman ISSA. Ms. Lerner, would you be willing to answer questions specifically related to the earlier statements made under oath 

before this committee? 

24 

Ms. LERNER. I decline to answer that question for the reasons I 

have already given. 

Chairman ISSA. For this reason I have no choice but to excuse 

the witness subject to recall after we seek specific counsel on the 

questions of whether or not the constitutional right of the Fifth 

Amendment has been properly waived. Notwithstanding that, in 

consultation with the Department of Justice as to whether or not 

limited or use of unity could be negotiated, the witness and counsel 

are dismissed. The clerk will please rearrange the seating. 

For all of the Members on both sides of the dais, I think it is important that we take a moment, though I think I speak for Mr. 

Cummings and myself. This is a committee that is investigating 

more than anything else the ultimate right of free speech and the 

First Amendment. So as we go on with the rest of this hearing, I 

would admonish all of us to remember that it is not the First 

Amendment, or the Second Amendment, or the Fifth Amendment, 

or the 10th amendment in a vacuum. We have to respect them all. 

The gentlelady who has departed was entitled to assert her Fifth 

Amendment. Although there is some questions about how it was 

done, there could be no question that we have to respect it; additionally, that her assertion is not to be viewed or used during this 

hearing to make any determination, plus or minus, as to actions 

that were taken. 

We have the inspector general with us today, we have other fact 

witnesses, and this committee has more than 10 additional witnesses that will be called either to hearings or to interviews already on the schedule. 

I believe that this committee has a long history of very few, during my tenure of 12 years, of these occasions, and we should not 

use this either for political gain or for any indication that it is anything other than somebody’s right. 

It is the committee’s work to find out what went terribly wrong. 

I will take one liberty mentioning Mr. Cummings’ earlier statement. At this point this committee is not investigating wrongdoing 

for political purposes by high-ranking individuals in or out of this 

government. We are investigating something which has now been 

entered as fact that wrongdoing occurred, and occurred over a 

group, and that group happened to be keyworded things that are 

generally called conservative. 

In my research on this, and I think Mr. Cummings would agree, 

this is not new to government. This has happened before, and it 

has not always been conservative groups. So as we go through this, 

I would ask all of us to avoid talking about who was liked by President Bush, who is liked by President Obama, who is liked by Republicans or Democrats. Let’s all be ‘‘Republicrats’’ and ‘‘Democans’’ 

today. 

Mr. Cummings. 

Mr. CUMMINGS. Mr. Chairman, first of all, I appreciate you saying what you just said. And I agree with what you just said, and 

I would associate myself with your words. 

Mr. JORDAN. Mr. Chairman. 

Chairman ISSA. Thank you. 

For what purpose does the gentleman seek recognition? 

Mr. JORDAN. If the gentleman will just yield for 1 minute. 

25 

Chairman ISSA. A fraction thereof. 

Mr. JORDAN. Okay. I just want to say the same. I appreciate 

what the chairman said, I think he is right on target, but the irony 

is inescapable. Ms. Lerner gets to exercise her constitutional rights, 

but she won’t stay here and answer questions about the constitutional rights of thousands of Americans who were denied by their 

action. 

Chairman ISSA. I thank the gentleman. It is this committee’s 

goal to get to the truth. If we have to go circuitous routes, we will 

eventually get there. The dots will be connected. 

With that, Mr. Wolin, would you move over? It will be less distracting, and we will remove the other chair. 

Actually I’ll take note of the gentlelady’s opening statement. She 

made it very obvious, with 90,000 IRS individuals, 900 working for 

her, and more or less 9 out of 900 involved in this, or maybe slightly more, we’re talking about a fraction of 1 percent of the IRS. And 

I join with the gentleman in recognizing that this is not to disparage the men and women of the IRS. 

Mr. Wolin, you’re recognized for 5 minutes. 

STATEMENT OF NEAL S. WOLIN 

Mr. WOLIN. Thank you, Mr. Chairman. 

Chairman Issa, Ranking Member Cummings, members of the 

committee, thank you for the opportunity to appear before you 

today. 

Last week the Treasury Inspector General for Tax Administration Mr. George published a report on the Internal Revenue Service’s use of inappropriate criteria to identify tax-exempt applications. Like President Obama and Secretary Lew, I believe that the 

activities described in the report are absolutely unacceptable and 

inexcusable. The IRS must operate without bias or even the perception of bias. It must act in an utterly nonpartisan manner. It must 

act with the utmost integrity. 

The IRS did not do that here. Upon learning of the IGs findings, 

President Obama and Secretary Lew took immediate action. First, 

within 24 hours of receiving the IGs report, Secretary Lew asked 

for and accepted the resignation of the Acting Commissioner. The 

next day the Acting Commissioner for Tax Exempt and Government Entities tendered his resignation. The day after that the 

President appointed Danny Werfel to be the new IRS Acting Commissioner and charged him with holding accountable anyone responsible for improper conduct. 

Second, Secretary Lew instructed Mr. Werfel to implement fully 

and promptly all nine of the recommendations in the IG report. 

Secretary Lew also directed Mr. Werfel to examine and correct any 

failures in the system that allowed this behavior to happen. 

Third, the Secretary asked Mr. Werfel to conduct a broader review to see whether the inexcusable conduct reflects larger management failures and cultural issues at the IRS that require systematic change. 

Mr. WOLIN. Secretary Lew directed Mr. Werfel to take action and 

implement the necessary changes. Within 30 days Mr. Werfel will 

report back to Secretary Lew and the President on his progress and 

on any future actions he expects to take. 

26 

Before I describe Treasury’s interactions with the IG related to 

this audit, it is important to underscore two critical points. First, 

there is no indication that Treasury was involved in the improper 

conduct at the IRS. The IG report did not find any evidence that 

Treasury or others outside the IRS had any role. Mr. George confirmed this point in his testimony before the Ways and Means 

Committee last Friday and before the Senate Finance Committee 

yesterday. 

Second, the improper conduct already had ended by the time Mr. 

George informed Treasury of the facts of his audit. Mr. George’s report states that the improper conduct ended in May, 2012. Mr. 

George has testified that he first notified Treasury of the fact that 

he was conducting an audit in June of 2012. At some point in 2012, 

though I do not recall precisely when, Mr. George notified me at 

his initiative that he had undertaken an audit of the IRS’ review 

of tax-exempt applications. He told me only of the fact that he had 

undertaken such an audit and did not provide any findings. That 

is my recollection, and that is what Mr. George testified before the 

Ways and Means Committee last Friday and before the Senate Finance Committee yesterday. 

In that conversation, I told him that he should follow the facts 

where they lead. I told him that our job is to stay out of the way 

and let him do his work. I told him to let us know if he wanted 

our help and otherwise to let us know when he had more to tell 

us. I understand that Mr. George also notified this committee in 

July 2012 that he had begun his review. And similarly in October 

2012, he provided a notice on his public Web site that he was conducting his review. 

Again, to be clear, Mr. George told me that he was conducting 

an audit. And I told him to follow the facts wherever they lead. Our 

core principle is that we do not interfere in any way with the independent review of an Inspector General. When an Inspector General tells us he is conducting a review, we step back and leave him 

to do his work. That is how the process functions, that is how the 

process should function, and that is how the process functioned 

here. 

Let me reiterate that there is no indication that Treasury was involved in the inexcusable behavior at the IRS and Treasury only 

learned of the fact that the IG was conducting a review after the 

unacceptable conduct had already ended. It is important in this 

context to make clear that Treasury’s longstanding practice, spanning Republican and Democratic administrations, is not to involve 

itself in the details of the IRS’ administration and enforcement of 

the Nation’s tax laws. It is critical that the Nation’s tax laws are 

administered and enforced in a way that neither involves political 

influence nor the perception of political influence. This is particularly true with respect to decisions affecting specific taxpayers. 

Over the past 12 days, President Obama and Secretary Lew have 

taken decisive act to address what happened at the IRS. The President named a new Acting Commissioner and we charged him with 

holding parties, responsible parties accountable and with taking 

immediate actions to prevent these inexcusable acts from happening again. 

27 

Treasury is committed to taking all measures to restore the 

public’s confidence in the IRS, and toward that end we have asked 

the IG for its continued assistance, and we are operating fully with 

this committee and with the Congress. 

Thank you again for the opportunity to appear before you today. 

[Prepared statement of Mr. Wolin follows:] 

28 


Insert offset folio 10 here 81742.010

EMBARGOED UNTIL 9:30 A.M. 5/22113 

Statement of Neal S. Wolin 

Deputy Secretary of the Treasury 

before the 

Committee on Oversight and Government Reform 

United States House of Representatives 

May 22,2013 

Chairman Issa. Ranking Member Cummings. members of the Committee. thank you for the 

opportunity to appear before you today. 

Last week the Treasury Inspector General for Tax Administration (TIGTA), J. Russell George, 

published a report on the Internal Revenue Service's (IRS) use of inappropriate criteria to 

identify tax-exempt applications. Like President Obama and Secretary Lew, I believe that the 

activities described in the report are absolutely unacceptable and inexcusable. The IRS must 

operate without bias or even the perception of bias. It must act in an utterly nonpartisan manner. 

It must act with the utmost integrity. The IRS did not do that here. 

Upon learning ofTlGT A's findings, President Obama and Secretary Lew immediately took 

action. 

First, within twenty-four hours of receiving the TIGTA's report, Secretary Lew asked for and 

accepted the resignation of the Acting Commissioner. The next day, the Acting Commissioner 

for Tax Exempt and Government Entities tendered his resignation. The day after that, the 

President appointed Daniel Werfel to be the new Acting Commissioner and charged him with 

holding accountable anyone responsible for the improper conduct. 

Second, Secretary Lew instructed Mr. Werfel to implement, fully and promptly. all nine of the 

recommendations in the TIGT A report. Secretary Lew also directed Mr. Werrel to examine and 

correct any failures in the system that allowed this behavior to happen. 

Third, the Secretary asked Mr. Werfel to conduct a broader review to see whether the 

inexcusable conduct reflects larger management failures and cultural issues at the IRS that 

require systemic change. Secretary Lew directed Mr. Werfel to take action and implement the 

necessary changes. 

Within 30 days, Mr. Werfel will report back to Secretary Lew and the President on his progress 

and any future actions he expects to take. 

Mr. Werfel is ideally suited for his charge. He is a career public servant. He has worked in both 

Democratic and Republican administrations. He is an effective leader who serves with the kind 

of professionalism, integrity, and skill that the American people deserve. He has our full 

support. Today is his first day, and we are confident that he will hit the ground running. 

Before I describe Treasury's interactions with TIGTA related to this audit, it is important to 

underscore two critical points. 
29 


Insert offset folio 11 here 81742.011

EMBARGOED UNTIL 9:30 A.M. 5/22113 

First, there is no indication that Treasury was involved in the improper conduct at the IRS. The 

TIGT A report did not find any evidence that Treasury or others outside the IRS had any role. 

Mr. George confirmed this point in his testimony before the House Ways and Means Committee 

last Friday and before the Senate Finance Committee yesterday. 

Second, the improper conduct already had ended by the time Mr. George informed Treasury of 

the fact of his audit. Mr. George's report states that the improper conduct ended in May 2012. 

Mr. George testified that he first notitled Treasury of the fact that he was conducting the audit 

but not any results in June 2012. 

At some point in 20 I 2, though I do not recall precisely when, Mr. George notified me, at his 

initiative, that he had undertaken an audit of the IRS's review of tax-exempt applications. He 

told me only of the fact that he had undertaken such an audit, and he did not provide any 

findings. That is my recollection, and that is what Mr. George testified before the House Ways 

and Means Committee last Friday and before the Senate Finance Committee yesterday. 

In that conversation, I told him that he should follow the facts wherever thcy lead. I told him 

that our job is to stay out of the way and let him do his work. I told him to let us know ifhe 

wanted our help and otherwise to let us know when he had more to tell us. 

I understand that Mr. George also notified this Committee in July 2012 that he had begun his 

review. Similarly, in October 2012, he provided a notice on his public website that he was 

conducting his review. 

Again, to be clear, Mr. George told me that he was conducting an audit, and I told him to follow 

the facts wherever they lead. Our core principle is that we do not interfere in any way - or do 

anything to create the perception of interference with the independent review of an inspector 

general. When an inspector general tells us he is conducting a review, we step back and leave 

him to do his work. That is how the process functions. That is how the process should function. 

And that is how the process functioned here. 

On March 15,2013, Mr. George had a short introductory meeting with Secretary Lew. At that 

meeting, Mr. George informed Secretary Lew of a number of matters TIGT A was reviewing. He 

also indicated that this audit report would be forthcoming. Mr. George did not describe any 

details of his audit findings. This was also in line with standard practice. 

Let me reiterate that there is no indication that Treasury was involved in the inexcusable 

behavior at the IRS. And Treasury only learned of the fact that TIGTA was conducting a review 

after the unacceptable conduct already had ended. 

It is important in this context to make clear that Treasury's longstanding practice spanning 

Republican and Democratic administrations is not to involve itselfin the details of the IRS's 

administration and enforcement of the nation's tax laws. It is critical that the nation's tax laws 

are administered and enforced in a way that neither involves political influence, nor the 

perception of political influence. This is particularly true with respect to decisions affecting 
30 


Insert offset folio 12 here 81742.012

EMBARGOED UNTIL 9:30 A.M. 5/22/13 

specific taxpayers. That is how the process functions. That is how the process should function. 

And that is how the process functioned here. 

Over the past twelve days, President Obama and Secretary Lew have taken decisive action to 

address what happened at the IRS. The President named a new Acting Commissioner, and we 

charged him with holding responsible parties accountable and with taking immediate action to 

prevent these inexcusable acts from happening again. 

Treasury is committed to taking all measures to restore the public's confidence in the IRS. 

Toward that end, we have asked TIGTA for its continued assistance, and we are cooperating 

fully with this Committee and this Congress. Thank you again for the opportunity to appear 

before you today. 
31 

Chairman ISSA. Thank you, Mr. Wolin. 

I’m going to comment that I’ve never heard a defense of not 

knowing and I’m disappointed. 

Let me go through a line of questioning primarily with Mr. 

George. 

Mr. George, before the Ways and Means Committee you told 

Representative Danny Davis the following: Our audit, sir, began 

with the request of Congressional staff in what I want to give you, 

I want to give you the exact date, sir, I do not have it here, March 

1st of 2012 is when there was an initial contact with the Government Reform and Oversight Committee and our audit began or 

roughly, and then you go on with May or March et cetera et cetera. 

So essentially this began in your mind when you were made 

aware of it in March of 2012 by members of my committee, staff 

members of my committee correct? 

Mr. GEORGE. Yes. 

Chairman ISSA. So, oddly enough, we have with us and put it up 

on the board from Holly Paz a document just released to us yesterday, I guess in preparation for yesterday’s interview, that says forward TIGTA document request, the following are issues that could 

indicate a case to be considered a potential Tea Party case and sent 

for secondary screening, one Tea Party Patriots of 9/12 project, two 

or Number 4 statements in the case file that are critical of how the 

country is being run. 

Now, that’s May 20th of 2013. To your knowledge, is that—and 

that’s from, that is essentially a result of an internal investigation 

done by the IRS not your investigation. 

I’m sorry, that’s July 23rd, I’m looking at emails which unfortunately are this year, but that’s July 23, 2012. Is your understanding that the IRS concluded that they had wrongdoing through 

their own internal investigation by July, 2012. 

Mr. GEORGE. I have no information on that, but let me consult 

with my counsel. 

I have been informed that they conducted an internal review, sir, 

that was completed before that period. 

Chairman ISSA. Okay. So it’s your testimony that, in fact, independent of your activity, Mr. Shulman’s report conducted and concluded wrongdoing and could have, in fact, reported that up the 

chain and taken appropriate action independent of your activities? 

Mr. GEORGE. That is certainly an option, sir. 

Chairman ISSA. So Mr. Shulman, before I go back to Mr. George, 

it was your watch, your people did an internal review. How is it 

you did not know that things were rotten in your shop in time to 

not only make sure it stopped and stayed stopped, but, in fact, that 

Treasury, your boss sitting next to you, was aware of it? 

Mr. SHULMAN. I’ve said that I learned about this some time in 

the spring and by this, I mean I learned the fact that there was 

a list and the fact that Tea Party was on it. 

Chairman ISSA. Okay. So you knew at that time that you had 

mistreated Americans within your organization and saw no need to 

report it up the chain, is that your testimony? 

Mr. SHULMAN. My testimony is that I at that point I had had a 

preliminary verbal report. I had been told at that same point that 

32 

the activity was being stopped, and I was told that the IG was 

looking into the matter. 

Chairman ISSA. Okay. Stop there. I don’t really care about the 

IG right now. The IG probably prompted the internal report. The 

IG, in fact, has been the reason that we didn’t hear about this until 

long after the election, until months or actually a year had gone 

by. I’m asking you a question. It was your job to make sure people 

weren’t abused. It was your job to stop abuse but also to report it. 

Americans had been injured by the activity, wrongful activity, of 

your organization. You say you got it vocal, I don’t care that the 

IRS doesn’t keep paperwork. I know when I have to pay my taxes, 

I don’t do it based on what I say I made or what I say my deductions are that I need paper, however, you knew, you did not report 

it or did you report it to anyone else within your chain? 

Mr. SHULMAN. I had some of the facts, not all of the facts. I had 

no idea of the scope and severity. I didn’t know the full list. I didn’t 

know who was on the list. And I did not report it up the chain. 

Chairman ISSA. I’m not going to belabor that because ‘‘I don’t 

know’’ has been your answer previously. 

I’m going to move back to the IG. 

Mr. George, September 24, 2012, committee staff mentioned, you 

mentioned your report would be ready in September. Now, these 

are exchanges we’re putting up here that are back and forth. They 

are not all personally with you. 

So September 24, 2012, the answer to our request about this IG 

report was, field work for this audit is still ongoing, meaning we 

don’t get an answer. December 18, 2012, any update on this? Sorry 

for the delayed response. I was studying for a final. 

Okay, that’s when it was pushed off to March. These are staff. 

Committee staff, just wanted to know, to check on the progress 

of this—this is February 12, 2013—of this, are you at a point 

where you can schedule a briefing? 

From your organization. We are leaving no stone unturned. This 

is February 22nd of 2013. We won’t be able to provide a detailed, 

substantive briefing until late April, early May. 

My time is limited, so I’ll put the rest in for the record. 

Mr. George, I could go on, as late as May 19th, I’m sorry, May 

9th, where the committee staff had said on the 8th, can we go 

ahead and schedule a briefing? May 9th, I’ll get back to you. And 

it goes on. 

Mr. George, this committee and the entire Congress has existing 

laws. Yesterday I spoke before all of your fellow IGs. Under existing law, you have a peer level report, a peer level report of substantial misconduct or problems, including waste, fraud and abuse. 

The act describes your establishment, which means in this case the 

IRS, and Congress in the same sentence. On August 3rd, this committee, I sent you a letter explaining the 7-day rule, explaining the 

statute as it has been written for decades. You have a responsibility to keep us continuously and, according to statute, equally informed. In this case, it appears as though you certainly did not. 

Would you agree with that? 

Mr. GEORGE. No actually. 

Chairman ISSA. So when you conducted day after day after day 

with Mr. Shulman’s subordinates, Ms. Paz, one after another interVerDate Aug 31 2005 09:13 Jul 10, 2013 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 C:\DOCS\81742.TXT APRIL
33 

views in which she’s in the room, she’s listening to all of these, 

you’re doing that. You know at some time, and I’m going to close 

with just a question, on what day did you know over this year period, did you know personally that, in fact, the IRS had abused 

Americans in the process of approval? What was that day? What 

was the aha moment and didn’t you have an obligation to report 

that to Congress at that time? 

Mr. GEORGE. Mr. Chairman, I have a detailed timeline which 

goes from almost month to month as to the interactions that we 

had with your staff and then the subsequently with the Commissioner as well as with officials at the Department of the Treasury, 

and I would appreciate the opportunity to give you a sampling of 

that. 

Chairman ISSA. We’re are going to accept that and I just want 

to close and then I’ll let you take as much time as you need. If your 

timeline essentially says you kept us informed so we knew that, in 

fact, there was a pattern and could speak to Ways and Means to 

find out that hundreds of people, hundreds of organizations still 

languished not being approved even after ‘‘the abusive behavior 

began,’’ they still didn’t get their answer in a timely fashion. And 

if you’re saying that you informed Mr. Wolin so that he would understand what was going on or others at Treasury and you informed us and Mr. Shulman, here’s my problem: Mr. Shulman has 

already said under oath he didn’t know. Mr. Wolin has already said 

they didn’t know, and although I’m not under oath, I have reviewed 

my committee staff documents and of course it’s a bipartisan relationship, we certainly did not have the information in any way, 

shape or form that could be understood so that Congressional action could occur until practically today. 

Mr. GEORGE. Mr. Chairman, there are established procedures for 

conducting an audit and once again this is an audit. And to ensure 

fairness and to ensure that we are completely accurate with the information that we convey to Congress, we will not report information until the IRS has had an opportunity to take a look at it to 

ensure that we’re not misstating facts. 

Chairman ISSA. Mr. George, that is not the statute. That is not 

the statute. 

Mr. GEORGE. Sir, but it would be impractical for us to give you 

impartial information which may not be accurate. It would be counterproductive, sir, if we were to do that. 

Chairman ISSA. Well, I appreciate that. I’ve taken a lot of time 

and I will give the same amount of time of course to my ranking 

member. But this committee last August made it very clear that 

the statute, as written, does not give you the ability to—or any 

IG—to use us as a whipping boy when you want to and, in fact, 

keep us in the dark until in fact an investigation is completed. 

Mr. Shulman, I will admonish you as best I can as one member 

of government to a former member of government that, in fact, 

there was a ‘‘there’’ there. People in your own internal operation 

knew, if you didn’t know you were derelict in your duty or your 

management style was such that you didn’t get informed. Either 

way, that is certainly not something you should be proud of. 

34 

To the extent that you did know or suspected Mr. Wolin is standing here, sitting here implying that Treasury didn’t know is astounding. 

Mr. George, the fact is if these individuals did not know then you 

did not allow them in a timely fashion to take corrective action 

even while you continued with what could be a criminal investigation/audit. 

In the case of Congress, I will work with the ranking member to 

reiterate with clarity Congress’ absolute right to have, according to 

the statute, continuous information and that is not waiting for the 

final conclusion. The act did not say audits and investigations shall 

upon their conclusion 7 days after being given to the principal be 

delivered. That is not the portion that we referred to in August of 

last year. I give you the last word. 

Mr. GEORGE. Sir, I would welcome the opportunity to work with 

you and other Members of Congress to clarify exactly what the, 

quote/unquote, 7-day rule is under the Inspector General Act. But, 

once again, I think it would behoove all of us to ensure that accurate information is given to Congress so that we don’t act precipitously. And as you I’m sure are aware, many times when information is conveyed to the Hill it is sometimes not retained in the Hill, 

on the Hill rather, and that is not fair to the people who are investigating or—— 

Chairman ISSA. I apologize, I said I would give you a last word 

but right now we are seeing an awful lot leaking out of the administration and the IRS leaked in this particular case. This organization maliciously leaked this information. 

Mr. Wolin, the only other thing, and I apologize, Mr. Cummings, 

I’m going way past where I normally would, it is our understanding 

that today as we speak dozens if not hundreds of applicants who 

have been waiting years are still being essentially denied justice. 

If they continue to be denied justice every clock tick is a clock tick 

of your not meeting your obligation. Mr. Shulman has left office. 

He left office without making sure that those ‘‘Tea Party’’ groups 

and others had a legitimate adjudication in a timely fashion which 

means they were already overdue because of the prior abuse, to the 

extent that there is one applicant that comes forward to this committee that today has not been approved or denied for cause, you 

are now derelict in your duty. 

Mr. Cummings. 

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

Mr. Shulman, I want to pick up where the chairman left off with 

you. You were the head of the IRS from 2008 to 2012. All of this 

activity happened on your watch. The development of these terms, 

the use of the terms and the targeting of conservative groups, the 

IG called this activity inappropriate but I think it’s far worse than 

that. And it undermines the public trust in the IRS and that is 

very, very unfortunate. 

I want to ask you about two major issues. First, I’d like you to 

address the allegation that the administration was engaged in 

some kind of effort to use the IRS to target its political enemies. 

So I want to walk through this very quickly with you. Who nominated you to be the head of IRS? 

Mr. SHULMAN. President Bush. 

35 

Mr. CUMMINGS. Are you biased against conservative groups? 

Mr. SHULMAN. No. 

Mr. CUMMINGS. Do you think they deserve more scrutiny than 

liberal or progressive groups? 

Mr. SHULMAN. No. 

Mr. CUMMINGS. Did you ever order IRS employees to target conservative groups? 

Mr. SHULMAN. No. 

Mr. CUMMINGS. Did you ever encourage or prompt them to do so 

in any way? 

Mr. SHULMAN. No. 

Mr. CUMMINGS. Did you ever receive instructions from anyone at 

Treasury to target conservative groups? 

Mr. SHULMAN. No. 

Mr. CUMMINGS. Did you ever receive instructions from anyone at 

the White House to target conservative groups? 

Mr. SHULMAN. No. 

Mr. CUMMINGS. So these misguided actions, Mr. Shulman, were 

initiated by IRS employees, they were not part of any administration conspiracy, and you had no knowledge of them before 2012, is 

that right? 

Mr. SHULMAN. I personally don’t remember ever hearing about 

this until the spring of 2012. 

Mr. CUMMINGS. Now we’ve dispensed with that issue. 

I want to address the very serious question of why you failed to 

inform Congress about these activities last year when you learned 

of them. And I must tell you, Mr. Shulman, I want to remind you 

that you are under oath. And I tell you when I watched your testimony the other day, I was, it was very troubling, as a matter of 

fact, some of your testimony this morning has been troubling. So 

I want you to give us your answers and I know you will be truthful. 

Members of Congress wrote numerous letters to you expressing 

concern that conservative groups were being targeted by the IRS. 

When asked about these allegations at a hearing before the Ways 

and Means Committee in March, 2012, you answered, ‘‘there is absolutely no targeting.’’ 

Even if you did not know it was going on when you testified, you 

learned about it soon after but you never corrected the record. You 

were the head of IRS. Why didn’t you ever come back to the Congress to explain that you were mistaken? 

Mr. SHULMAN. So, what I can recall is that I learned about the 

list after that testimony. And when I learned about the list, I 

learned two other things. First, I learned that the activities were 

stopped, so by the time it got to me, the list was no longer being 

used with inappropriate criteria. And I also learned that the matter was in the hands of the IG. And my standard procedure as head 

of the IRS is when I knew something that sounded of concern, as 

the chairman called smoke, that, and I didn’t have all the facts, I 

didn’t know what was on the list, exactly how it was used, were 

there liberal groups as well as conservative groups, I didn’t have 

the facts that—and it was in the hands of the IG, that the IG 

would do a thorough review of the matter, and when he had all of 

the facts, would report that to the IRS, to the Treasury and to Congress. And so, at that point, I didn’t have anything concrete. I 

36 

didn’t have a full set of facts to come back to Congress or the committee with. 

Mr. CUMMINGS. That answer would be more acceptable if you 

had not given the answer that you did in March, 2012. 

When Congress asked you a question, and then you say these 

words, there’s absolutely no targeting, it seems to me that even 

given what you just said you knew that Congress was concerned 

about this issue, you knew then that the information, you just said 

it had been corrected, but it seems to me that if you say to the Congress, absolutely not, absolutely no targeting, it seems to me that 

you would come back even if it was a phone call, a letter, or something, I mean common sense. People, I mean a reasonable person 

would expect you as the head of the IRS communicating with Congress to come back and do that. You didn’t feel that way though? 

Mr. SHULMAN. I mean I guess I would repeat—— 

Mr. CUMMINGS. I don’t want you to repeat. I don’t want you to 

repeat. I just, I take it that you disagree with what I just said. 

Mr. SHULMAN. At the time I learned about this list I felt I was 

taking the appropriate actions and that my course was the proper 

one, and I still feel that way today. 

Mr. CUMMINGS. Well, I’m sorry. That’s simply not good enough. 

It’s simply not good enough, Mr. Shulman. The IRS conducted an 

internal investigation of his own, not the IG investigation, but your 

own investigation. You personally knew there was a target list. You 

knew it said Tea Party on it. You put new processes in place and 

you took personnel actions. You reassigned at least one individual 

back in 2012. 

Come on, Mr. Shulman. I mean help us. Help us help the taxpayers. Am I missing something? Did you have an investigation? 

Was there an internal investigation? 

Mr. SHULMAN. I never understood that word of internal investigation. 

Mr. CUMMINGS. Did you ever assign, reassign at least one person 

back in 2012? 

Mr. SHULMAN. Not that I was aware of. 

Mr. CUMMINGS. You don’t know that? 

Mr. SHULMAN. To best of my knowledge I was not involved in the 

reassignment of people in the Determinations Unit. I have no recollection of that. 

Mr. CUMMINGS. So when you heard, when you learned about the 

targeting, apparently you made some kind of inquiry because you 

said you found out that it had been resolved. 

Who did you go to and who told you that it had been resolved 

and what did they say the resolution was? You were the head of 

the IRS. 

Mr. SHULMAN. I was the head of the IRS. 

Mr. CUMMINGS. And you’ve got Congress people that were upset 

about targeting. They had been asking questions. You had come 

and said there was absolutely no targeting. And so help me with 

this. 

Mr. SHULMAN. First of all, let me express this is a very serious 

matter and I fully recognize that. This was a 90,000-person agency, 

and this was a unit that was working on applications by definition 

for organizations that had political activity. My general operating 

37 

style as the only one of two Presidential appointees in the building 

was to have the responsible career officials be the hands-on people 

in sensitive case matters that involve political activity. So my deputy informed me of this. 

Mr. CUMMINGS. And who was your deputy? 

Mr. SHULMAN. Steve Miller. 

Mr. CUMMINGS. Okay. 

Mr. SHULMAN. And at or about the same time he informed me 

that we found this list that had Tea Party on it. I have no memory 

of having knowledge of what was on the list, what else was on the 

list, to the best of my understanding, didn’t know how it was being 

used, didn’t know if it also had the target word ‘‘progressive’’ on it. 

He said, look, it’s not being used any more. It’s being stopped. The 

IG is looking into it. And I was aware that some of these cases 

were languishing because we had gotten letters from Congress and 

he said and we put extra people on there and we’re moving cases. 

That’s my memory of this. 

And as I said, once the IG has this, my practice was to support 

IG reviews and investigations but not interfere with the full confidence that he would get the information. 

Mr. CUMMINGS. But this has nothing to do with interfering with 

an IG investigation. This is merely coming back to Congress. You 

have to understand why I’m getting to this. Remember in my opening statement I said two words just two—two—two: truth and 

trust. And we need, we want to be able to trust the IRS. But for 

this moment on this day, we need to be able to trust your word. 

And what I’m saying to you, you keeping telling me, you almost, 

you act as if something that was of paramount concern to the Congress, paramount concern to the chairman of the top investigative 

committee in the Congress, and you find out information and you 

know it’s a concern, did you get upset when you heard this from 

Miller? 

Mr. SHULMAN. Yeah, I had concern. I didn’t know the scope and 

severity of it. As head of the IRS, I felt comfort that the IG was 

going to look into it, find the scope and severity and report it back 

to Congress at the appropriate time. 

Mr. CUMMINGS. Mr. Shulman, as I close, you know, you headed 

up an organization, you were responsible for that organization, you 

don’t even know that an employee was reassigned back there, and 

you did not come back to Congress and let Congress know what 

you knew. You didn’t have to give us a lot of details, it’s just that, 

if I had said something to Congress and it was just the opposite 

of what it was, it seems like just logic would tell me to go back and 

say, look, I thought that, I acted on certain information that I 

didn’t have, now I have it, this is what it is, I have limitations, 

there’s an IG investigation going on but at least I want to set the 

record straight. 

I take it that you disagree with what I just said. 

Mr. SHULMAN. I told you before I think I took the proper course. 

Mr. CUMMINGS. Very well. Thank you, Mr. Chairman. 

Chairman ISSA. Thank you, Mr. Cummings. I now recognize the 

gentleman from Florida, Mr. Mica. 

Mr. MICA. Thank you, Mr. Chairman, and as I look around I end 

up being the most senior member of this panel and having seen a 

38 

number of scandals and also participated in various investigations, 

I don’t think I’ve ever seen any investigation or review by this committee or subject that has so riveted and shocked the American 

people. Going home last weekend, almost to a person everyone 

asked me about this. Maybe it’s because, what Mr. Cummings said, 

you know, people expect truth and trust in government. Everyone, 

just about everyone that I deal with or talk to pays taxes or has 

to deal with the IRS. So this has really come home to them in a 

very personal way. They want us to get to the bottom of this. 

And Mr. George, you know, so far IRS would have us believe that 

this is a bunch of lower level IRS employees who got around the 

water cooler one day in Cincinnati and said who do we target this 

week and they sort of got out of hand and that’s the end of the 

story. Do you think that’s the end of the story? 

Mr. GEORGE. I do not, Congressman. 

Mr. MICA. And neither do the American people. 

What’s disturbing, too, is—I made this little chart that morning. 

Sort of a pattern, this isn’t very fancy, the staff not highly paid 

graphics here, but this all started back in 2010. Here’s long lists, 

Mr. Shulman, of Members of Congress who contacted you, and I 

see Sarah Hall Ingram, I see Lerner, on and on, not just people like 

Mr. Issa and myself of this committee but Senators and everyone 

else asking questions here, here, here, here, all the way through, 

and for 27 months you said you did all you could to expedite those 

requests for 27 months from here to here, nothing got done, none 

of those were approved were they? Not one. Not one. 

Mr. SHULMAN. I defer to Mr. George who has looked into the details—— 

Mr. MICA. I’m just telling you, we checked, not in 27 months, 

none. So what you’re saying doesn’t hold true. 

Now, the thing, too, and you may disagree with the Tea Party 

or conservative groups or whether you’re liberal or conservative, 

Americans under the right of this little document, the Constitution, 

you know, maybe not in the framework of the Constitution but 

right at the beginning you have 10 amendments, the Founding Fathers to pass it put it in there, the first is the freedom of speech. 

You closed down or gagged for 27 months people, folks who work 

for IRS, closed them down for 27 months between 2010 and we’re 

discussing policies of expanding government of health care important to the American people, of a whole host of issues, plus the 

election coming up, for 27 months you gagged or closed down the 

legitimate rights of those folks to participate in the process under 

the Constitution. 

Do you disagree with that? 

Mr. SHULMAN. Let me premise that I was, because, on purpose, 

I was not heavily involved in—let me finish—in tax exempt organizations but my best understanding is people were not closed down 

during this time. 

Mr. MICA. You said you knew this was going on—— 

Mr. SHULMAN. No. No. My best understanding though is that 

people were operating at that time, and there’s also my best understanding is——there is a whole other option— 

Mr. MICA. Did you know Mr. Miller—— 

39 

Mr. SHULMAN. There’s a whole other option for someone to be 

a—— 

Mr. MICA. Did you know Mr. Miller—— 

Mr. SHULMAN. A 501(c)(4). They don’t need to apply—— 

Mr. MICA. Did you know Mr. Miller had sent or had you sent approved of sending Ms. Lerner down to look at this? 

Mr. SHULMAN. Mr. Miller informed me that some time in the 

spring that he was going to look into the matter further and find 

out what was going on—— 

Mr. MICA. You do. 

Mr. SHULMAN. Down in the determination unit. 

Mr. MICA. But did you know Ms. Lerner was doing it? 

Mr. SHULMAN. My interactions on this were directly with my 

deputy. 

Mr. MICA. Well, did you know, for example, Ms. Lerner, who’s 

the head of it, got a total of $740,000 between 2009 and 2012, over 

$42,000 in bonuses, would you check off on bonuses? And she—and 

this is the one that used to sit there and was going to testify but 

didn’t. 

Do you check off on bonuses? 

Mr. SHULMAN. That number does not sound familiar. I did not 

individually make decisions but I probably signed off on overall 

agency compensation. 

Mr. MICA. And have you participated in the political process? 

Could you tell the committee of your political participations, donations? 

Mr. SHULMAN. My whole life. 

Mr. MICA. Well, yes. I don’t know your background, I heard you 

were an appointee of one of the administrations but what is your 

history of participation? 

Mr. SHULMAN. My full life history of participation in politics, I 

don’t want to mislead—— 

Chairman ISSA. The gentleman’s time is soon to expire. We could 

take a short version, please. 

Mr. MICA. Have you donated for example, to parties and groups? 

Mr. SHULMAN. Have I in the past? To the best of my recollection 

I have. 

Mr. MICA. You have. 

Mr. SHULMAN. Yeah, I mean, sorry. To the best of my recollection 

I have. I haven’t in a long time, didn’t make any contributions 

while I was IRS Commissioner. 

Mr. MICA. Thank you. Thank you, Mr. Chairman. 

Chairman ISSA. The chair now recognizes the gentlelady from 

New York, Mrs. Maloney. 

Mrs. MALONEY. Thank you, Mr. Chairman. I believe we are 

united in this committee in being outraged at the alleged targeting 

of Americans for their political beliefs by the IRS. 

Mr. George, is it illegal to target Americans in the IRS for their 

political beliefs? Is it illegal activity? 

Mr. GEORGE. The way in which the Internal Revenue Service exercised their authority in this matter at this stage, Congresswoman, we do not deem it illegal. We do not believe that it was 

illegal what they did. 

40 

Mrs. MALONEY. Do you believe it should be illegal to target 

Americans in the IRS for their political beliefs? 

Mr. GEORGE. Well, the IRS currently has policies which state 

that if there are willful actions taken that would violate civil rights 

of the taxpayer which would in other ways falsify documents, destroy documents, there are illegal activities that the Internal Revenue Service employee can engage in. But I have to note, Congresswoman, that the Secretary has delegated tax policy questions to 

the Assistant Secretary for Tax Policy and I have to defer to him. 

Mrs. MALONEY. I personally believe it should be illegal. And I 

find it very troubling the allegation that the IRS not only targeted 

Americans for their political beliefs but also withheld information 

from this committee. 

And specifically, Mr. George, in roughly March of 2012, Chairman Issa and Representative Jordan sent you, or rather Ms. 

Lerner asking for information about the potential targeting of Tea 

Party organizations by the Exempt Organization office, is that 

true? 

And that in response to that letter and media reports and requests from this committee that you started an investigation of and 

reviewing the applications for tax-exempt status, is that correct? 

Mr. GEORGE. Actually it is correct but we have had conversations 

with staff of this committee prior to the receipt of that letter 

and—— 

Mrs. MALONEY. But you did begin an investigation? 

Mr. GEORGE. Yes, we did. 

Mrs. MALONEY. And your staff informed us, Chairman Issa and 

this committee, about that investigation, correct? 

Mr. GEORGE. That is correct. 

Mrs. MALONEY. Mr. Shulman, in March of 2012, the IRS began 

conducting its own internal review of the Tax Exempt Organization 

Division. Is that true? Did that happen? And is that a common occurrence? Why did the IRS start their own internal review when 

you have an IG whose job it is to do the internal review and he 

had notified Congress that he was doing the review? 

Mr. SHULMAN. Look, I don’t have a direct recollection of the timeframe, but I read the report and saw that in the report in late 

March at least in the report it said that my deputy asked someone 

to go take a look, and I think that’s what you’re talking about—— 

Mrs. MALONEY. Absolutely—— 

Mr. Shulman. My understanding at the time—I’m sorry. 

Mrs. MALONEY. What I’m talking about is you did not inform the 

committee that you were doing an internal review, which is the 

process, the IG—— 

Mr. SHULMAN. I don’t remember it ever being called an internal 

review. I remember somebody coming to me and saying hey people 

from headquarters are going to go down and talk to the folks in 

Cincinnati and find out what’s going on. And so I don’t, I don’t remember it being—— 

Mrs. MALONEY. Specifically the IRS not only chose not to alert 

Congress and this committee about the internal review or looking 

into it, whatever you want to call it, but on April 26th of 2012, Ms. 

Lerner responded to a letter from this committee with her own letter stating that information was gathered from these organizations, 

41 

‘‘in the ordinary course of the application process to obtain the information as the IRS deems necessary to make a determination 

whether the organization meets the legal requirements for tax-exempt status.’’ 

And at no point in the letter did Ms. Lerner mention that IRS 

officials were conducting their own internal review. Mr. Shulman, 

why did she admit that fact? 

Mr. SHULMAN. I’m not familiar with that letter. I’m sorry. 

Mrs. MALONEY. And in fact Ms. Lerner never informed the committee of what was happening in the IRS tax-exempt status in any 

way. And I would just like to ask you do you think it’s appropriate 

for the IRS to send such a misleading response back to this committee? 

Mr. SHULMAN. I’d have to look at the whole response and, if it 

came from Ms. Lerner it’s very unlikely that I knew about it or reviewed it. 

Mrs. MALONEY. Well, I would say that we’re all outraged but it’s 

not too early to start talking about what we can do to fix it. And 

in your report, Mr. George, you mentioned that it needs to be clarified what is tax exempt, what is not, what is political activity, what 

is not. What is the status of changing it so that this doesn’t happen 

in the future? 

Mr. GEORGE. Once again, Congresswoman, that is a tax policy 

question. I don’t know the answer to that and that would fall into 

the ambit of the Assistant Secretary for Tax Policy. 

But if I may, may please just elaborate on my earlier response 

to your question. We are still in the process of looking at this matter. It is possible that criminal activity may have occurred. But it 

is too early at this stage to make that determination, Ma’am. 

Mrs. MALONEY. My time is expired. 

Chairman ISSA. Thank you. Mr. George, just to clarify in the 

gentlelady’s question, you did talk about the complexity about the 

system but in no way did you say that this misconduct was the result of a lack of clarity, in other words, targeting these individuals 

is not because of complexity but rather something that was inappropriate whether it was complex or simple. 

Mr. GEORGE. It’s a combination, Mr. Chairman. The Determinations Unit did have some technical questions which they submitted 

along the chain to the appropriate people in Washington. It took 

over 13 months before they received a response. That was a cause 

of some of the delay in addressing some of the exempt issues. But 

I would attribute it mostly to a lack of training, sir, that there was 

very inadequate training of the people who were handling these applications, and I do fault the IRS for that. 

Chairman ISSA. I thank the gentleman. We now go to the gentleman from Ohio, Mr. Turner. 

Mr. TURNER. Thank you, Mr. Chairman. I appreciate your holding this hearing. There are a number of investigations, congressional, internal IRS, Department of Justice, the IG, all targeting 

the issue of who knew what when, who was involved, who directed 

these targeting actions, and who is complicit? And the answer to 

all these questions we will find out. Through all these investigations we will find out who at the IRS, who, if any, at the White 

42 

House, and who for political reasons, targeted conservative groups, 

Tea Party groups and constitutional groups. 

There are those who would have us believe that this was just 

spontaneous, that this just erupted in the organization, but I don’t 

think anybody believes that. 

Someone did this. Someone directed this, someone orchestrated 

this, and someone was complicit in this. 

But that’s not my focus today. My focus today is wanting to make 

certain that this never happens again. I was absolutely shocked 

when Ms. Lerner from the IRS made her statement of, we made 

mistakes, for that we apologize. I was shocked. And I think the 

American people were shocked because they were thinking that’s 

it? An apology? That the actions of the Federal Government using 

its investigative arm to prosecute American citizens based upon 

their political beliefs and their affiliations, their membership, their 

activities and they get an apology? 

Now, Ms. Lerner has invoked her constitutional right not to answer our questions about her involvement or the IRSs involvement 

ironically about denying others their constitutional rights. I believe 

that that should be a crime. 

Mr. Shulman, it’s reported in my community that you and I hail 

from the same hometown community. So I have a question of you, 

and it’s not about what you knew when, it’s about what you know 

now. 

Do you believe that the actions of the IRS in targeting individuals based upon their political beliefs represents the values of our 

hometown community or our country or even our democracy? 

Mr. Shulman. 

Mr. SHULMAN. I’ve read this report and its use of the criteria 

used by the IRS was inappropriate. It’s something that I’m incredibly sad about, I’m sad for, that it happened, I’m sad that it’s cast 

a shadow over the rest of the good work of the agency, and—— 

Mr. TURNER. You would agree it doesn’t represent our democratic 

values, correct, Mr. Shulman? 

Mr. SHULMAN. So far, look, I didn’t—— 

Mr. TURNER. Mr. Shulman, do you agree that it doesn’t represent 

our democratic values to have the government persecute people 

based upon their political beliefs? Surely you can give me that one. 

Mr. SHULMAN. I did not see those words in the report, Mr. Turner, and so—— 

Mr. TURNER. That’s fine. Mr. George, you’ve been subject to criticism for the timing of the report but I want to thank you because 

but for your answers and your work we still would not know. If we 

waited for the IRS to tell us, we still would not have any understanding of what has occurred. Now you answered Carolyn 

Maloney from New York that you do not have any evidence of a 

crime and you have not concluded that a crime has occurred, is 

that correct, Mr. George? 

Mr. GEORGE. As of this time, yes, sir. 

Mr. TURNER. Mr. Shulman, if you had directed this, according to 

the United States Code, this would have been a crime. You would 

have been subject to 5 years of incarceration and $5,000 in a penalty. I personally believe that whether this happens from someone 

under you or by you, it should be the same. 

43 

I’ve introduced H.R. 1950 that would make this a crime for anyone in the IRS to target someone based upon their political beliefs 

or their religious beliefs. We have over 80 cosponsors, Marco Rubio 

has entered it into the Senate. I think this is an important step to 

say this will never happen again because no one should have a supervisor walk in their office and tell them to target Americans 

based on their political beliefs and have that employee do it without an understanding that not only are they violating somebody’s 

Constitutional rights but they’re violating the United States Code 

and they will go to jail. 

Now, I happen to believe that even without this that there are 

people who are going to go to jail and that there were constitutional rights violated and I think there were laws violated and I 

think it’s why we have to continue these investigations. 

Mr. Wolin, you’ve continued to answer the question as to when 

you knew things based upon the assumption that the question that 

you’re being asked is when did you know about the IG report? 

I don’t want to know when you knew about the IG report. I want 

to know when you knew that the IRS was targeting people based 

on their political beliefs and their statements such as Tea Party or 

constitutionally directed organizations. When did you know what 

was happening in the IRS, not when did you know what Mr. 

George was doing? 

Mr. WOLIN. Congressman, I learned that when Lois Lerner made 

her public statement and then consequently a few days later when 

the Inspector general released his report. I did not know any of the 

findings or the details or the substance of what Mr. George looked 

into in his audit until then. 

Mr. TURNER. Mr. Shulman, one more thing. You said that you 

are a political appointee and that if the employees beneath you had 

gotten political that you were not taking actions, I think it’s is a 

travesty that you would have had a constitutional oath to execute 

your duties, and as a political appointee you decided that if the organization decided to take political actions against people, it was 

not within your responsibility because it absolutely was. And we’re 

going to get to the bottom of this, and I certainly hope that in the 

future this is criminal and no one at the IRS is just subject to 

merely termination. 

Thank you. 

Mr. SHULMAN. Mr. Turner, you have misstated what I said. 

Mr. JORDAN. [presiding.] Before yielding to Mr. Lynch, Mr. 

Wolin, just to follow up Mr. Turner’s question, when did you learn 

of the internal investigation the IRS was conducting? 

Mr. WOLIN. I learned through whatever testimony over the last 

few days, I hadn’t heard of it before then. 

Mr. JORDAN. You didn’t know about it earlier? 

Mr. WOLIN. No. 

Mr. JORDAN. Thank you. Mr. Lynch, you’re now recognized for 5 

minutes. 

Mr. LYNCH. Thank you, Mr. Chairman. 

Mr. Shulman, I want to go back over your testimony before Congress. On March 27, 2012, you testified before the Committee on 

Ways and Means. Did you have a chance to talk to Mr. Miller prior 

to your testimony? 

44 

Mr. SHULMAN. On March 22? 

Mr. LYNCH. March 22, 2012, any time prior to that did you have 

a chance to talk with—now you’re testifying before Congress. Obviously you prepare for that. Did you speak to Mr. Miller before your 

testimony? 

Mr. SHULMAN. To the best of my knowledge I did. 

Mr. LYNCH. You did. Okay. How about Ms. Lerner, did you speak 

with Ms. Lerner prior to your testimony? 

Mr. SHULMAN. I don’t remember speaking with Ms. Lerner before 

my testimony. 

Mr. LYNCH. I want to just describe what Chairman Boustany 

said to you in a dialogue. 

You said, we have seen some recent press allegations that the 

IRS is targeting certain Tea Party groups across the country requesting what had been described as onerous document requests, 

delaying approval for tax-exempt status and that kind of thing. 

Can you elaborate—this is his question to you—can you elaborate 

on what is going on with that? Can you give us assurances that the 

IRS is not targeting particular groups based on political leanings? 

In response to that question you answered: ‘‘there is absolutely 

no targeting.’’ 

Now, what was the basis of your answer? 

Mr. SHULMAN. So I had received letters from Members of Congress I believe—— 

Mr. LYNCH. I know that. You received a lot of them. 

Mr. SHULMAN. Excuse me? 

Mr. LYNCH. You received quite a few. 

Mr. SHULMAN. On this issue I believe I had received two but I’m 

not sure of the exact number before that testimony. 

And I said no targeting in the sense, and if you read the full testimony, that there’s two ways for a social welfare group or a 

501(c)(4) to start operating—— 

Mr. LYNCH. Well, I’m not going to let you use up my time on 

that. Your answer was, the operative language was there is absolutely no targeting. 

What was the basis for that statement? 

Mr. SHULMAN. So—— 

Mr. LYNCH. Obviously you’re the—— 

Mr. SHULMAN. I can give you my explanation and to the best of 

my recollection what is in my mind if you would like me to. 

Mr. LYNCH. Yes. 

Mr. SHULMAN. So I said there was no targeting in the sense that 

there’s two ways—— 

Mr. LYNCH. No. You said there was absolutely no targeting. It 

was more affirmative than that. What I’m getting at is you definitely gave Congress the impression there was absolutely no targeting. Absolutely no targeting. That’s what you said. 

Mr. SHULMAN. If you give me a minute I can actually explain 

this. 

Mr. LYNCH. Well, I only have a short amount of time. If you can 

explain it quickly. 

Mr. SHULMAN. Well, first, let me just say I answered truthfully 

based on the information I had at the time. 

45 

Mr. LYNCH. That’s what I’m getting at. That’s what I’m getting 

at. What was the basis of the information you had at the time? 

How could you sit there under oath, testify before Congress and 

say there’s no, absolutely no targeting going on and put Congress 

in that position to believe that you’re telling the truth? What was 

the basis of your understanding when you, when you led Congress 

to believe that there was absolutely no targeting going on? 

Mr. SHULMAN. That’s what I’m actually trying to say, Congressman. 

Mr. LYNCH. Okay. 

Mr. SHULMAN. So I said there was no targeting in the sense that 

a 501(c)(4) had two options to operate. They could apply or they 

could start operating, there’s no need to go through this application 

process. You can be a 501(c)(4), do your business and file a tax return at the end of the year. I said there was no targeting in the 

sense that in, from conversations that I had had that these people 

had voluntarily come in. And so the question that had been posed 

to me was why are they getting all these questions? And I had said 

that it’s normal to have this kind of back and forth. So that was 

one piece of my understanding. 

The second is my understanding at the time was that conservative groups, and this is to the best of my recollection—— 

Mr. LYNCH. I want to take back my time. I understand. 

Mr. SHULMAN. My understanding was that conservative groups 

were not the only ones getting these questions. That was my memory. 

Mr. LYNCH. So progressive groups were also being targeted? 

Mr. SHULMAN. And finally I certainly don’t—— 

Mr. LYNCH. Wait a minute. I want to back you up on that. Now 

you’re saying they weren’t being targeted because other groups 

were also being targeted for their political views. Is that what 

you’re saying? 

Mr. SHULMAN. No. That’s not what—— 

Mr. LYNCH. Well, that’s interesting because that’s just what I 

heard. 

Mr. SHULMAN. Well, I would love to explain it to you, Congressman. 

Mr. LYNCH. Please. 

Mr. SHULMAN. My understanding at the time was complaints had 

come in about letters, I had conversations about are these questions normal? Are these questions legitimate? Are these things we 

should be asking? At no time, to the best of my memory, did I, was 

I ever given the impression that these were only being asked of 

conservative groups. 

Mr. LYNCH. All right. You’ve gobbled up most of my time. I just 

want to close with this. So after leading Congress to believe there’s 

no absolutely no targeting going on, you learn later on that there’s 

a list, there’s a list of people being targeted. After telling Congress 

that no one, absolutely no one is being targeted, you learn that 

there’s a list, a list of people being targeted. Tea Party, patriots, 

people who are critical of how the government is being run. 

And what did you do after that point? You did nothing. You did 

nothing to straighten out the impression that you had left by your 

testimony before Congress. 

46 

Sir, you misled Congress. You misled Congress. Make no question about it. You told us one thing, when you learned, when you 

learned that our suspicions were true, when you learned that there 

was a list, you did nothing. You did nothing. You abdicated your 

responsibility, and you allowed Congress to proceed under your 

prior information that was false, that was untrue, and you never 

came back. You never notified Congress to say, sir, I gave you the 

wrong information. I misled you. You never came back to Congress 

to straighten out that impression. That’s inexcusable. It really is. 

I yield back the balance of my time. 

Mr. JORDAN. I thank the gentleman for his questions. 

The gentleman from Tennessee, Mr. Duncan, is recognized. 

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

It was primarily conservative groups that were targeted but people of all political persuasions are very upset about this. President 

Obama said on May 15th, he said it’s inexcusable and Americans 

are right to be angry about it, and I am angry about it, I will not 

tolerate this kind of behavior in any agency but especially in the 

IRS given the power that it has and the reach that it has into all 

of our lives, and as I said earlier it should not matter what political 

stripe you’re from. The highest official of the ACLU here in this 

city said that even the appearance, ‘‘even the appearance of playing 

partisan politics with the Tax Code is about as constitutionally 

troubling as it gets.’’ With the recent push to grant Federal agencies broad new powers, to mandate donor disclosure for advocacy 

groups on both the left and right, there must be clear checks in 

place to prevent this from ever happening again? 

Mr. George, will you promise us or commit to us at this time that 

you will make it a high priority and make sure that something like 

this never happens again? 

Mr. GEORGE. Sir, we will, I make a commitment to you to do our 

level best to work with the Internal Revenue Service and others involved to help establish procedures to help identify and avoid this 

from occurring. I cannot, obviously, sir, control what happens within the approximately 100 offices of the IRS. 

Mr. DUNCAN. Mr. Shulman, on March 22, 2012, you testified that 

there was absolutely no targeting when asked this by Congressman 

Boustany at the Ways and Means hearing and that’s been covered 

several times already this morning. But there was an internal IRS 

review that was completed in early May, just a little over a month 

later. And you said that when you met with Mr. Miller, you were 

assured that this activity had stopped. Was that—and so you took 

no further action. Did you ever discuss this with anybody at the 

Department of the Treasury, any Treasury official at all? 

Mr. SHULMAN. I had—definitely had no substantive conversations with anyone at Treasury and did not report that that there 

was a list and that kind of thing. 

Mr. DUNCAN. Mr. Wolin, when you learned that this had gone on, 

who did you discuss this with at the Department? 

Mr. WOLIN. Well, I learned the details, Congressman, when the 

report was made public a week or 10 days ago and obviously at the 

Department at that point we discussed it with the Secretary and 

General Counsel and others to make sure that we began to put in 

place both the accountability with respect to people who were reVerDate Aug 31 2005 09:13 Jul 10, 2013 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 C:\DOCS\81742.TXT APRIL
47 

sponsible for this misconduct but also to make sure that we put in 

policies and procedures that would make sure this wouldn’t happen 

again, not just the implementation and the recommendations that 

the IG included within his audit report, but also to charge, as the 

Secretary of the Treasury has done, the new Acting Commissioner 

of IRS with a broader agenda to make sure this was looked at carefully and to make sure he had a broader review to make sure that 

this didn’t happen again. 

Mr. DUNCAN. Let me ask you this. Apparently, one of these 

groups called Coalition for Life was asked in their, was asked by 

IRS officials about prayer meetings that they had held and how 

much of their time was spent on prayer meetings and what went 

on at those prayer meetings. 

Mr. DUNCAN. Do you think that questioning like that is proper? 

Mr. WOLIN. No, Congressman. I think that the conduct that is 

outlined in the—in the IGs report obviously is inexcusable, deplorable. I can’t be more clear than that. It’s absolutely outrageous. 

Mr. DUNCAN. Mr. Shulman, do you think that those types of 

questions should be asked in this situation about—— 

Mr. SHULMAN. It certainly sounds inappropriate to me. 

Mr. DUNCAN. —about religious beliefs? 

Mr. SHULMAN. No, I don’t. It sounds inappropriate to me. 

Mr. DUNCAN. Now, a few moments ago, you said that there was 

another method, that there’s the 501(c)(3) and then there’s the 

501(c)(4). And you said that there are situations where people don’t 

have to apply. What were you talking about there? 

Mr. SHULMAN. My best understanding is that none of these 

groups, of the 300 that are talked about, or the 298 in the report, 

actually have to apply for 501(c)(4) status; that a 501(c)(4) can start 

operating, can hold itself out, can do all of its business, and then 

can file what’s called a Form 990, which is the equivalent of a tax 

return for a tax-exempt organization. So I think that’s an option 

that organizations have. 

Mr. DUNCAN. That’s what I thought you meant, but I wanted to 

be clear on that. Thank you very much. 

I yield back. 

Mr. JORDAN. I thank the gentleman for his questions. 

I now recognize the gentlelady from the District of Columbia, Ms. 

Holmes Norton. 

Ms. NORTON. Thank you very much, Mr. Chairman. 

Even granted that the seed was planted for something bad to 

happen when somehow the interpretation of a law was changed 

from ‘‘exclusively’’ to ‘‘primarily,’’ that’s a terrible thing to put on 

civil servants, that they somehow have to take the unclear words 

of the statute that’s now been changed in a way that I’m not sure 

how you’re going to enforce that. 

But one thing is clear, that we see here something—at least terrible incompetence and the absence of the normal kind of managerial oversight you’d expect in any Federal agency and certainly in 

the IRS. And I’m particularly troubled that the problems persisted 

for, it looks like, a year and a half because of what seems to have 

been very little oversight from management at the headquarters. 

So, you know, these civil servants are doing their incompetent best, 

I suppose. 

48 

But I want to make sure that’s what it was. I’d like to ask Mr. 

George, because I saw something of your testimony in the Senate 

where you testified that your audit did not uncover any evidence 

that the Treasury suggested the use of screening criteria or approved of the screening criteria that was used. 

Is that your—is that the case? Would you indicate whether you 

asked that question? 

Mr. GEORGE. We did pose that question, Congresswoman. And, 

again, the response was that there was no direction from the Department itself to those in the determinations unit in Cincinnati, 

nor their affiliate office in Washington. 

Ms. NORTON. Well, I ask these questions because the incompetence and the terrible handling of this, which has shaken confidence in the IRS, is bad enough, but it would be far worse if there 

were any evidence that there was outside influence outside the 

IRS. 

And did you find any evidence that anyone in the White House, 

in particular, suggested that the IRS target conservative organizations or that they played any role whatsoever in selecting the criteria? 

Mr. GEORGE. No, Congresswoman. But, in all honesty, we didn’t 

look at the White House, we didn’t question anyone as to whether 

or not they’d received any direction from the White House, and—— 

Ms. NORTON. So that specific question was not asked? 

Mr. GEORGE. That’s correct. 

Ms. NORTON. Now, in the investigation, which continues, do you 

intend to ask that question? 

Mr. GEORGE. And, again, if I may—and, again, this may seem 

like semantics. I want to be clear. At this stage, it is an audit still. 

And so—— 

Ms. NORTON. Well, it was an audit then, but you asked questions 

that—— 

Mr. GEORGE. Yes, yes. But, again—and even there, it was—— 

Ms. NORTON. Well, I’m asking you, in the continuing audit, do 

you intend to ask that question? 

Mr. GEORGE. At this stage, I am not in a position to say whether 

or not, because as it’s going to be continued, we will go wherever 

the facts lead us, Mrs. Norton, or Congresswoman. But I have to 

say that I’ll just have to leave it at that. We’ll go wherever the 

facts take us. 

Ms. NORTON. Well, let me suggest, Mr. George, that it would be 

appropriate to ask whether anyone outside of the IRS, without fingering any particular agency or any particular individual, anyone 

outside of the IRS. The record needs to be clear on that. 

Mr. GEORGE. May I clarify my answer then? We did ask if anyone outside of the IRS—— 

Ms. NORTON. And so you take that to imply the White House and 

anybody else we can think of? 

Mr. GEORGE. At this stage, yes, we do. 

Ms. NORTON. I want to—I guess it is Mr. Wolin I ought to ask, 

the Deputy Secretary. 

Did you, yourself, ever suggest or did you, yourself, ever propose 

that IRS personnel use screening criteria of any kind to target conservative organizations? 

49 

Mr. WOLIN. Absolutely not, Congresswoman. 

Ms. NORTON. Or other organizations? 

Mr. WOLIN. Absolutely not, Congresswoman. 

Ms. NORTON. Did you order or did you approve the inappropriate 

screening criteria used by the IRS personnel in Cincinnati, Ohio? 

Mr. WOLIN. I did not, Congresswoman. 

Ms. NORTON. Well, Mr. Chairman, I very much think the committee is pursuing the appropriate investigation and believe that, 

before it is all over, we get direct answers from all those involved. 

We will know what needs to be done next. 

And I do want to say, Mr. Chairman, that, whatever we do, the 

difference between ‘‘exclusively’’ and ‘‘primarily’’ has to be clarified 

so that I think there is proper direction from the Congress so that 

the IRS can, in turn, give the proper direction. 

Thank you very much. 

Mr. JORDAN. Thank you. 

Mr. Shulman, you’ve testified yesterday and today, and you said 

last spring you had a partial set of facts, you didn’t have the full 

story, didn’t fully understand what took place until you read the 

Inspector General’s report. Is that accurate? 

Mr. SHULMAN. That sounds accurate. 

Mr. JORDAN. All right. In the 2 years that this targeting was taking place, did any Member of Congress contact you, write to you 

about this particular subject? Did you get any letters from Congress? 

Mr. SHULMAN. Yes. 

Mr. JORDAN. All right. Do you know how many? 

Mr. SHULMAN. I do not. 

Mr. JORDAN. We got some information from you all yesterday, a 

list of correspondence regarding 501(c)(4)s. And we counted them 

up: 132 different Members of Congress contacted you over the approximate time period. 

Did you read any of those letters? 

Mr. SHULMAN. The letters that I remember about this set of facts 

around the Attorney General—— 

Mr. JORDAN. No, did you read any of them? 

Mr. SHULMAN. —started coming in in February of 2012. 

Mr. JORDAN. Well, this is from the IRS. We got 132 Members of 

Congress contacted you about 501(c)(4) status. 

Did you ever read newspaper articles about this issue in the time 

period in question, Mr. Shulman? 

Mr. SHULMAN. To the best of my knowledge, yes. 

Mr. JORDAN. Do you know how many news stories, could you 

hazard a guess, took place in the time period that we’re focused on? 

Mr. SHULMAN. I wouldn’t guess. 

Mr. JORDAN. Your staff—in our office, we have, like, a Google 

alert, and if my name comes up, they find out what the press is 

saying about me, and they let me know. Do you have that when 

you were at the IRS? Do you have, like, a Google alert? When stories about the IRS or Doug Shulman come up, did they let you 

know about those stories? 

Mr. SHULMAN. IRS has press clippings that I saw on a regular 

basis when I was there. 

50 

Mr. JORDAN. Would you hazard a guess about how many major 

news stories took place in this time period that is in question when 

the targeting was going on, before you said you knew? 

Mr. SHULMAN. No, I wouldn’t. 

Mr. JORDAN. Forty-two. We just did a quick search—42 major 

news stories. 

So here’s what everyone wants to know. You’ve got 132 Members 

of the United States Congress contacting you about this issue, 42 

major news stories about this issue in the time period in question, 

and you never checked it out. You never researched it. 

I mean, are you sure you’re being square with us today, Mr. 

Shulman? 

Mr. SHULMAN. I’m absolutely telling you the truth today. 

Mr. JORDAN. Absolutely. Well, that’s interesting because Mr. 

Lynch just cited your testimony from a year ago, and you used 

similar language when in front of the Ways and Means Committee. 

‘‘Can you give us assurances that the IRS is not targeting particular groups?’’ 

‘‘Thanks for bringing this up because I think there has been a 

lot of press about this’’—there was, we found out—‘‘and a lot of 

moving information, so I appreciate the opportunity to clarify. 

First, let me start by saying, yes, I can give you assurances.’’ I 

don’t think you can say it any stronger. ‘‘We pride ourselves on 

being a nonpolitical, nonpartisan organization.’’ 

And that’s why people are wondering if you’re being square with 

us today, because you said you could assure everyone, the American people and the Congress, then that nothing was going on. And 

the gentleman sitting besides you just issued a report last week 

that says what you told the Congress, what you told the American 

people a year ago is absolutely wrong. 

And you’re sure you’re being square with us? 

Mr. SHULMAN. Excuse me? 

Mr. JORDAN. Did you ever talk to anyone at the White House 

about this issue? 

Mr. SHULMAN. About this issue? Not that I remember. 

Mr. JORDAN. Did you ever go to the White House? As IRS Commissioner, did you ever go to the White House for meetings? 

Mr. SHULMAN. Yeah, I had a number of occasions to go to the 

White House. 

Mr. JORDAN. How many times did you go to the White House? 

Mr. SHULMAN. Many times around budget and policy matters of 

tax and other things like that. 

Mr. JORDAN. Got a number? Any idea? 

Mr. SHULMAN. I don’t have a number. 

Mr. JORDAN. We just looked at—we just look at the White House 

log. Now, we couldn’t get 2012, but in 2010 and 2011, 118 times 

you were at the White House. I mean, that’s a lot. I bet these Democrat Members of Congress in this administration haven’t been 

there close to that many times. 

A hundred and eighteen times you were at the White House; 132 

Members of Congress contact you about this information; 42 major 

news stories about this very subject. And you told Congress a year 

ago, I can give you assurances, nothing is going on, everything’s 

wonderful, we’re not targeting conservative groups. 

51 

I mean, that’s why the American people are—they’re like, this is 

unbelievable. 

Are you sure you didn’t talk to anyone at the White House about 

this, Mr. Shulman? 

Mr. SHULMAN. About singling out conservative groups for special 

scrutiny? 

Mr. JORDAN. Well, that’s what we are talking about, isn’t it? 

Mr. SHULMAN. I’m absolutely sure I did not talk to anyone at 

the—— 

Mr. JORDAN. In 118 visits, it didn’t come up in a casual conversation after 132 Members of Congress contacted you about it? Are 

you sure you didn’t bring it up with anybody at the White House? 

Mr. SHULMAN. Not to my memory. And it wouldn’t be appropriate. And so I certainly believe I did not have any conversations. 

Mr. JORDAN. I recognize the—Mr. Lynch I think is—or, excuse 

me, Mr. Connolly is next up for questioning. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

Mr. Shulman, you were appointed by President Bush when? 

Mr. SHULMAN. I was nominated in 2007, confirmed in 2008. 

Mr. CONNOLLY. And you served until? 

Mr. SHULMAN. November 2012. 

Mr. CONNOLLY. So you served both in the last year of the Bush 

administration and through the first term of the Obama administration. Is that correct? 

Mr. SHULMAN. Correct. 

Mr. CONNOLLY. There might be many reasons you would be at 

the White House. What would be some of the reasons you might 

be at the White House? 

Mr. SHULMAN. The Easter Egg Roll with my kids—— 

Mr. CONNOLLY. Well—— 

Mr. SHULMAN. —questions about the administerability of tax policy they were thinking of, our budget. I was helping the Department of Education streamline application processes for financial 

aid. 

Mr. CONNOLLY. I just want to be clear. You’re very aware of the 

fact that you’re under oath today? 

Mr. SHULMAN. Yeah, very aware of that. 

Mr. CONNOLLY. And your testimony, to be very clear, in response 

to Mr. Jordan’s question is that you have never had any conversation with respect to this subject, the subject of this hearing, with 

anybody at the White House though you were at the White House 

118 times. Is that—— 

Mr. SHULMAN. Yeah, I mean, just so I’m—just so I’m clear, I 

have no memory. It wouldn’t have been appropriate—would not 

have been appropriate to have a conversation with the White 

House, with anyone at the White House, about the subject of discriminating against conservative groups in any part of our operation. 

Mr. CONNOLLY. And let me be real clear about that. Because you 

answered a series of interrogatories from the ranking member, Mr. 

Cummings, a little earlier. And, again, in listening to your answers, I want to be clear, neither—no one from the Bush White 

House and no one from the Obama administration White House 

ever called you and said, there’s a little list of groups or there’s an 

52 

umbrella of titles I want you to be particularly sensitive about it 

if they apply for a nonprofit status. 

Mr. SHULMAN. No. Nobody ever talked to me about—— 

Mr. CONNOLLY. That never happened. Is that correct? 

Mr. SHULMAN. Right. 

Mr. CONNOLLY. Thank you. 

Mr. George, I’m looking at your report, and I want to make sure 

I understand it. I mean, we’re talking about this like it happened 

in a vacuum. You know, some sinister plot was hatched by normally kind of, you know, colorless bureaucrats in Cincinnati to get 

somebody for their political beliefs. 

Now, was there a triggering event that flooded the IRS with new 

applications between 2010 and 2012? 

Mr. GEORGE. We have had some difficulty, Congressman, getting 

a definitive answer as to exactly how this began, the genesis of this 

program. 

Mr. CONNOLLY. Well, can I just help you a little bit? I’m looking 

at your own report—— 

Mr. GEORGE. Uh-huh. 

Mr. CONNOLLY. —and what seems to be the triggering event is 

the Supreme Court ruling, Citizens United. The number of applications between 2009 and 2012 for a 501(c)(4), even though Mr. 

Shulman points out, actually, it’s sort of redundant, but doubled 

from 1,751 to 3,357. That’s in your report. 

Mr. GEORGE. There is no question that that event, the ruling of 

the Supreme Court, came down—— 

Mr. CONNOLLY. Yeah. Did IRS resources expand? Did Congress 

rush to IRSs aid here, saying, well, since you’re flooded with new 

responsibilities, here’s some more resources to help you hire up or 

to train—because you cited bad training—so you can handle this 

volume of applications? Did that happen? 

Mr. GEORGE. I would have to defer to Mr. Shulman. 

Mr. CONNOLLY. Mr. Shulman? 

Mr. SHULMAN. Could you repeat the question? 

Mr. CONNOLLY. Yes. Were you flooded with resources after Citizens United to deal with the volume that the inspections—— 

Mr. SHULMAN. Were we given resources? 

Mr. CONNOLLY. Yes. 

Mr. SHULMAN. No. 

Mr. CONNOLLY. No. 

All right. Mr. George, again, I’m looking at your report, and 

there’s a pie chart I want to make sure I understand. Here’s the 

pie chart. And we’re focused particularly on conservative groups. 

And, of course, I think all of us feel, as Americans, irrespective of 

your political beliefs, nobody should be targeted, you know, in the 

proper exercise of their right to express themselves politically. 

Now, you’ve got a pie chart with 298. Is that 298 cases you 

looked at? 

Mr. GEORGE. That is correct. 

Mr. CONNOLLY. Now, if I’m reading this right, 72 of those were 

Tea Party, had the name ‘‘Tea Party’’ in them. Is that right? 

Mr. GEORGE. That is correct. 

Mr. CONNOLLY. And 11 had ‘‘9/12.’’ Is that right? 

Mr. GEORGE. That is correct. 

53 

Mr. CONNOLLY. Thirteen had ‘‘patriots,’’ correct? 

Mr. GEORGE. Correct, sir. 

Mr. CONNOLLY. But 202 are listed as ‘‘other.’’ Were those all conservative groups, or could some of them have been progressive 

groups? 

Mr. GEORGE. We were unable to make that determination, sir, 

because in many instances the names were neutral and that you 

couldn’t necessarily attribute it to one particular affiliation or another. 

Mr. CONNOLLY. And I know I have very limited time left, but I 

know the chair has been indulgent with my colleagues because this 

is so important, and all of us, as Americans, don’t want the chilling 

effect of any government agency suppressing the expression of 

thought or the right of every American to express themselves politically irrespective of those beliefs. 

To what do you attribute this, what seems to be kind of a rogue 

element in Cincinnati? It was told once to stop and ignored it, or 

returned to this activity. Is it just a natural perversion in Cincinnati? Or, I mean, what were they doing that they thought was 

proper, apparently? 

Mr. GEORGE. It was—the conclusion that I can give you today, 

Congressman, is that it was a lack of oversight from management, 

both in—in Washington, primarily, and the fact that they did not 

go back to ensure that the directions, the instructions that were 

given to the determinations unit within Cincinnati were being complied with. 

Once they found out that the initial inappropriate action had occurred, attempted to make corrective action and did direct a corrective action, they failed to go back to ensure, to follow up to make 

sure that those actions were being complied with. 

So it was mismanagement. It was a lack of fulfilling the responsibility that they have, sir. 

Mr. CONNOLLY. Uh-huh. Thank you very much, Mr. George, for 

your testimony, and Mr. Shulman. 

And thank you, Mr. Chairman. 

Mr. JORDAN. Thank you. 

Mr. Shulman, a real quick follow-up. The 118 times you were in 

the White House in 2010 and 2011, who were you meeting with? 

Mr. SHULMAN. First of all, I’m not familiar with that—— 

Mr. JORDAN. Straight from the White House log. 

Mr. SHULMAN. —number, and I’m assuming that it counts when 

I go to OMB, which is, you know, the budget office, for resources, 

et cetera. 

Mr. JORDAN. No, it counts when you go to the White House. 

That’s what it was, the times you’ve been at the White House. 

That’s when it counts. 

So who did you meet with? 

Mr. SHULMAN. I met with a variety of people—— 

Mr. JORDAN. Is there somebody—or what was the main subject 

you talked about? Did you talk about 118 different things, or were 

there just kind of some themes and focus? 

Mr. SHULMAN. The themes of things I would’ve talked to people 

at the White House about would’ve been our budget; would’ve been 

about tax policy, fiscal cliff; would’ve been about streamlining the 

54 

FAFSA, the financial aid application; would’ve been when the tax 

for airport—— 

Mr. JORDAN. Did you talk about the implementation—— 

Mr. SHULMAN. —and—— 

Mr. JORDAN. Did you talk about the implementation of the Affordable Care Act? 

Mr. SHULMAN. Implementation of the Affordable Care Act 

would’ve been one of the themes. And there could’ve been more. I’m 

not prepared to give you an exhaustive—— 

Mr. JORDAN. Which one—which one consumed the most of your 

time, of those subjects you just listed? 

Mr. SHULMAN. Probably budget, general tax policy, and the Affordable Care Act. 

Mr. JORDAN. So the Affordable Care Act was pretty important. 

You talked about it a lot. 

Mr. SHULMAN. The IRS has a major role in the money flows of 

the Affordable Care Act. 

Mr. JORDAN. Exactly. Exactly. And you started targeting the very 

groups who came into existence because they opposed what you 

were talking about in the White House 118 different visits there. 

You started targeting them the very month that the Affordable 

Care Act became law. And yet you didn’t have any conversations 

about the subject matter at hand today on those 118 visits, when 

many of those visits were about implementation of the Affordable 

Care Act and the groups you were targeting were opposed to the 

Affordable Care Act. 

That’s a question. 

Mr. SHULMAN. I’m sorry, but what is the question? 

Mr. JORDAN. You went to the White House 118 times. One of the 

key subjects you talked about was the implementation, the enforcement of the Affordable Care Act. Going on in your administration 

at the time you acted as Commissioner, targeting of groups who 

came into existence because they opposed the Affordable Care Act. 

And you never brought it up in any of those conversations and 

all those visits to the White House, when this is a major topic of 

conversation? 

Mr. SHULMAN. No, I did not. 

Mr. JORDAN. Okay. All right. 

Mr. SHULMAN. I operated as—— 

Mr. JORDAN. That’s all I wanted to know. 

Mr. SHULMAN. —a nonpartisan, nonpolitical person trying to implement the laws that were on the books. It would have been inappropriate, and nobody ever asked me—— 

Mr. JORDAN. Well, that would—— 

Mr. SHULMAN. —nor did I ever—— 

Mr. JORDAN. —that would all be well and good, Mr. Shulman, 

but Mr. George issued a report that said just the opposite. That’s 

the whole point. That’s why we’re here. And you said you’d give assurances that it wasn’t happening. Mr. George issued a report that 

said it was. And you were at the White House 118 times talking 

about the Affordable Care Act. And you never had any conversations about the targeting that was going on of groups who opposed 

the Affordable Care Act. And the American people are supposed to 

believe that. 

55 

The gentleman from Utah? 

Mr. CHAFFETZ. Thank you, Chairman. 

Mr. Shulman, in your confirmation hearing on January 29th, 

2008, you were asked by Senator Wyden, he said, ‘‘What do you intend to do to make sure that the IRS on your watch is not used 

as a political tool?’’ And your response, Mr. Shulman, was, ‘‘That’s 

a great question. I believe that it is incredibly important that the 

IRS is seen as fair, is seen as a nonpolitical, nonpartisan, that really is a public service organization. I would be a public servant serving all American taxpayers and really the government.’’ 

How would you—based on that standard, based on the answer 

you gave, what letter grade would you give yourself in your tenure 

and what you did there? 

Mr. SHULMAN. Look, I tried every day to be a good leader and 

public servant. 

Mr. CHAFFETZ. I’m asking you for a letter grade on your assessment of how you did there. 

Mr. SHULMAN. There was clearly a breakdown in our—— 

Mr. CHAFFETZ. I know that you know—— 

Mr. SHULMAN. —determinations process. 

Mr. CHAFFETZ. I know that you know what letter grades are. You 

don’t—— 

Mr. SHULMAN. I’m not going to grade myself. 

Mr. CHAFFETZ. These 118 visits to the White House, did you ever 

have a discussion about 501(c)(4)s? 

Mr. SHULMAN. First of all, you know, this is the first I’ve had an 

accounting of this 118—— 

Mr. CHAFFETZ. Did you ever go to the White House—— 

Mr. SHULMAN. So I just don’t accept the, you know, the premise 

of there were 118 visits to the White House. It may or may not be 

true. So let me just stipulate that for the record broadly, if there’s 

more questions about that. 

Mr. CHAFFETZ. Did you ever talk about 501(c)(4)s at the White 

House? 

Mr. SHULMAN. About our—— 

Mr. CHAFFETZ. Yes or no? 

Mr. SHULMAN. —either determinations process or—— 

Mr. CHAFFETZ. Anything about 501(c)(4)s. Did you ever talk 

about the Citizens United case? 

Mr. SHULMAN. Not that I remember. 

Mr. CHAFFETZ. You never had a discussion? 

Mr. SHULMAN. Not that I remember. 

Mr. CHAFFETZ. No discussion around 501(c)(4)s? 

Mr. SHULMAN. Not that I remember. 

Mr. CHAFFETZ. It was a major thing. It was a big deal. And you 

never had one conversation. 

Mr. SHULMAN. Not that I remember. 

Mr. CHAFFETZ. You said you first heard about this problem in 

spring of 2012, correct? 

Mr. SHULMAN. I heard that—I first heard about the BOLO list 

in spring of 2012. 

Mr. CHAFFETZ. When did you first hear that there was a concern 

about the targeting of—based on political beliefs and political 

speech? When did you first hear that? 

56 

Mr. SHULMAN. To the best of my recollection, it was in the February-March time frame of 2012. And then—— 

Mr. CHAFFETZ. Okay, but—— 

Mr. SHULMAN. —there were also—can I—— 

Mr. CHAFFETZ. No. No. You can’t. 

On June 3rd, 2011, the chairman of the Ways and Means Committee, Dave Camp, sent you a letter, June of 2011. Second paragraph, ‘‘Now, with no warning, the IRS appears to have selectively 

targeted certain taxpayers who are engaged in political speech.’’ 

And he goes on. 

How is it that he, the chairman of Ways and Means, sends you, 

the head of the IRS, a letter like this and you say you know nothing about it? 

Mr. SHULMAN. So that’s where I was going to go. This is a very 

separate matter—— 

Mr. CHAFFETZ. No, you weren’t. 

Mr. SHULMAN. —about—this is a very—— 

Mr. CHAFFETZ. No, you weren’t. 

Mr. SHULMAN. —separate matter. That’s a gift tax matter that 

I’m—that I’m aware of. 

Mr. CHAFFETZ. This is exactly about political speech, and it continues to go on. 

Then you hear from Charles Boustany, who sends a letter on October 6th requesting information about the tax-exempt sector. How 

is it that it takes you so long and you say you don’t know this? 

And, Mr. Wolin, you said you took immediate action. What happens with all of these letters? 

Mr. Shulman, when you get a letter from a Member of Congress, 

who else is copied on that? Who else do you give it to? 

Mr. SHULMAN. Who do I—— 

Mr. CHAFFETZ. You’re not the only one that sees this letter. 

Mr. SHULMAN. Who do I give it to? Letters, usually, as far as I 

know the process, go into our Congressional Affairs Office. They get 

farmed out to the appropriate staff who are subject-matter experts 

to try to get the best answer. And that’s—— 

Mr. CHAFFETZ. Does Mr. Wolin get copied on these? 

Mr. SHULMAN. Not that I’m aware of. 

Mr. CHAFFETZ. Does anybody at the Treasury Department get 

these, outside of the IRS? 

Mr. SHULMAN. I really don’t know. 

Mr. CHAFFETZ. Does anybody get—does anybody get these letters 

at the White House? 

Mr. SHULMAN. At the White House? 

Mr. CHAFFETZ. At the White House. 

Mr. SHULMAN. Not that I’m aware of. 

Mr. CHAFFETZ. So when you get a letter from the chairman of the 

Ways and Means Committee or the chairman of this committee, 

chairman of any, you’re telling me that you don’t—you have no 

idea where it goes and what happens to it. 

Mr. SHULMAN. To the best of my knowledge, it goes into our Congressional Affairs shop; someone in the organization answers it. 

Mr. CHAFFETZ. And who do they—— 

Mr. SHULMAN. If it comes up—if it’s for my signature, the return, 

that would come up to me for review most of the time. 

57 

Let me also just note, of all the letters people are talking about, 

there’s a lot of individual constituent mail that comes into the IRS, 

much of which I don’t—— 

Mr. CHAFFETZ. So you get a lot of mail. 

Mr. SHULMAN. —much of which I don’t see. 

Mr. CHAFFETZ. But do you see all the letters from Members of 

Congress? 

Mr. SHULMAN. To the best of my knowledge, I do, the ones to me. 

Mr. CHAFFETZ. So you got 132 Members of Congress—— 

Mr. SHULMAN. Let me actually repeat. If it’s something that 

someone else is going to take care of, I might not have seen it. But 

the ones you are referring to, Mr. Boustany’s, Mr. Camp’s—— 

Mr. CHAFFETZ. Mr. Hatch, the 12 Senators, did you see that letter? 

Mr. SHULMAN. Yes. 

Mr. CHAFFETZ. When he says this is a lie by omission, how do 

you respond to that? 

Mr. SHULMAN. You know, my belief is that—well, first of all, the 

letter in question was not under my signature. And, second of 

all—— 

Mr. CHAFFETZ. He’s made a very serious charge. 

Mr. SHULMAN. —second of all, I—— 

Mr. CHAFFETZ. I want to know what you think of this idea of lie 

by omission. 

Mr. SHULMAN. I disagree with it. 

Chairman ISSA. [Presiding.] And—— 

Mr. CHAFFETZ. I yield back. 

Chairman ISSA. —that will have to conclude. 

We now go to the gentlelady from California, Ms. Speier. 

Ms. SPEIER. Mr. Chairman, thank you. 

Mr. Shulman, you have been the head of the IRS for over 5 

years. You’re in charge of the Internal Revenue Service, correct? 

Mr. SHULMAN. I was head of the IRS for 4 years and about 8 

months. 

Ms. SPEIER. All right, 4 years and 8 months. You get 132 letters 

from Members of Congress concerned about targeting, and you 

send them to Leg Affairs to deal with. 

Did you feel any responsibility to go to the Cincinnati office and 

find out for yourself what was going on? Did you ever make a visit 

to the Cincinnati office? 

Mr. SHULMAN. I guess I don’t accept the premise that I got 132 

letters about targeting. I certainly wasn’t aware of that number 

until now. I knew about two questions—— 

Ms. SPEIER. Well, regardless, when Congress contacts you, 

whether it’s 12 Senators or members of this committee, I mean, 

doesn’t it alert you to the fact that, you know, if there’s smoke, 

maybe there’s fire? 

So did you ever visit the Cincinnati office? 

Mr. SHULMAN. I visited early in my tenure the Cincinnati office, 

which has, you know, many different operations. But I don’t believe 

I went to Cincinnati, you know, during this 2012 time frame. 

Ms. SPEIER. Do you take responsibility for what happened in the 

Cincinnati office? 

Mr. SHULMAN. Do I take responsibility for the list—— 

58 

Ms. SPEIER. Yes. 

Mr. SHULMAN. —being done? You know, I don’t take personal responsibility for there being a list with criteria put on it, but I do 

accept the fact that this did happen on my watch. 

Ms. SPEIER. So you don’t take responsibility, but you recognize 

the fact that it happened under your watch. 

Mr. SHULMAN. I recognize that this happened on my watch. And 

I’m very sorry that this happened while I was at the Internal Revenue Service. 

Ms. SPEIER. You know, one of the problems we have here is people are unwilling to take responsibility for actions that happened 

under their command. 

And you had a duty, as far as I’m concerned, to find out what 

was going on in the Cincinnati office when Members of Congress, 

132 of them or 50 of them or 10 of them, inform you that they 

think that there’s some kind of targeting going on. And if that 

doesn’t elevate your concern and interest, then something is fundamentally wrong between the way Congress interacts with the administration and the bureaucracy. 

Now, Mr. George, the law is that a 501(c)(4) must operate exclusively for the social welfare. That’s what the law says, correct? 

Mr. GEORGE. That is my—yes, that’s correct, ma’am. 

Ms. SPEIER. Exclusively for social welfare purposes. 

Mr. GEORGE. Yes. 

Ms. SPEIER. And somewhere along the line, the IRS came out 

with a regulation that reduced it to ‘‘primarily.’’ Is that correct? 

Mr. GEORGE. That’s my understanding. 

Ms. SPEIER. So does the regulation trump the statute? 

Mr. GEORGE. Well, I’m not here to give legal advice, but—— 

Ms. SPEIER. But in your—— 

Mr. GEORGE. —as an attorney, that is my understanding, that a 

regulation does not trump a statute. But a regulation can be used 

to elaborate on the intent of the statute and to help—— 

Ms. SPEIER. So if we just look at those two words, ‘‘exclusively’’ 

and ‘‘primarily,’’ there is a dramatic difference, correct? 

Mr. GEORGE. Yes, in my view. 

Ms. SPEIER. And if regulation can’t trump statute, then everything that’s been going on here relative to authorizing 501(c)(4)s if 

they’re not exclusively being used for social service purposes is violative of the law, correct? 

Mr. GEORGE. I would say yes, but we have to keep in mind there 

may have been court interpretations between the passage of the 

legislation and the implementation of the—the passage of the statute and the implementation of the regulation. And I don’t have the 

history of that, Congresswoman. 

Ms. SPEIER. All right. In your review of this situation, have you 

identified in Cincinnati the individuals who have developed this 

BOLO list? 

Mr. GEORGE. We have not yet, ma’am. 

Ms. SPEIER. And why not? 

Mr. GEORGE. We have had some difficulty in terms of getting 

clarity from some of the IRS employees we’ve interviewed. 

Keep in mind, this is an audit. The people we have been interacting with were not under oath. And so, if this matter develops 

59 

further and changes its character, that might change the willingness of people to be more forthcoming with the information. 

Ms. SPEIER. Now, the committee yesterday interviewed Holly 

Paz, who is the manager of the Rulings and Agreements Office in 

Washington, D.C. And for at least part of the time period in question, she oversaw approximately 300 employees in the Cincinnati 

unit that determines whether organizations qualify for tax-exempt 

status. 

She said that she was the first person in the Washington office 

to learn about the use of inappropriate criteria in June of 2011. Do 

you agree with that? Is that consistent with your report? 

Mr. GEORGE. I have no information on that, but if you’ll—I beg 

your indulgence for 1 minute. 

Chairman ISSA. The gentlelady’s time has expired, but you can 

continue to answer. 

Mr. GEORGE. We do not have any information on that, Congresswoman. 

Ms. SPEIER. I yield back. 

Chairman ISSA. I thank the gentlelady. 

We now go to the gentleman from Michigan, Mr. Walberg. 

Would you give me just 2 seconds of yielding? 

Mr. WALBERG. Two seconds, I certainly will. 

Chairman ISSA. For the gentlelady, my colleague from California, 

the Center for American Progress and Organize for American Action and others are 501(c)(4)s. This is not new. President Obama 

uses a 501(c)(4). 

Ms. SPEIER. Will the gentleman yield? 

Chairman ISSA. It’s the gentleman’s time. 

Mr. WALBERG. I will yield briefly. 

Ms. SPEIER. Thank you. 

Mr. Chairman, regardless of whether it’s a Democratic, a progressive, a conservative, or Republican organization, laws we have 

should be enforced. And a statute was trumped by a regulation, 

and we should all be concerned about that. 

I yield back. 

Chairman ISSA. And if I can clarify for all of us, this changed in 

1959, there’s a whole lot of water over the dam since 1959. And I 

think that it’s important today to realize that, without congressional action, trumping a 1959 by the IRS would be legislating, 

without a doubt. And I think the IG, in including it in his audit, 

told all of us essentially that the Ways and Means Committee has, 

in fact, a challenge to deal with, which is, do we really want it the 

way it is, as it has evolved in use? But, ultimately, the decision 

since 1959 has caused organizations that perhaps all of us have 

grown to like—the 501(c)(3)s, like the American Lung Association, 

endorses legislative initiatives, as you know, in California. They 

promote initiatives and so on. They do it as a minority of what they 

do. 

So I think one of the challenges for this committee—and I would 

only ask us all to think about it in these terms—is, Ways and 

Means has authority to change the law or to essentially trump a 

regulation. In our case, we have primary responsibility to ask questions like: Should the IG have known sooner and we have been reported? Should Mr. Shulman have been a better manager than he 

60 

was? And if so, how do we ensure in the future that Mr. Wolin, for 

example, would, in fact, have known and known with specificity 

sooner? 

I think that’s our lane, and I only would say that as chair, because our lane is not unlimited. The jurisdiction of the Ways and 

Means as to laws governing the IRS does not belong in this committee. And I know all of us on this committee are very proud that 

we do a lot of work. The one thing we don’t do is we don’t pass 

tax law. Although we all have opinions on it, let me assure you. 

The gentleman is recognized. 

Mr. WALBERG. I thank the chairman. And I’d ask unanimous 

consent to have my full 5 minutes restored. 

I mean, it’s been interesting listening to the counts here of 118 

visits to the White House by Mr. Shulman; no talk about this specific issue, no talk about related issues during those 118 visits; 132 

letters coming from Members of Congress; 42 articles in newspapers. And, frankly, we just had the opportunity now of having 

the press really get engaged with it, but 42 over that course of 

time. 

I also looked at a train of events: September 2010, Senate Finance Committee Chairman Baucus wrote a letter to the IRS asking the IRS to survey tax-exempt organizations to ensure that political campaign activity is not the organization’s primary activity. 

October 2010, Senator Durbin wrote to the IRS to review the 

purposes and activities of several tax-exempt organizations. 

February 2012, Senators Bennett, Franken, Merkley, Schumer, 

Shaheen, Udall, and Whitehouse wrote to the IRS about the issue. 

Thirty-two Democrats in March of 2012, House Democrats, wrote 

to the IRS and the White House to ask that political activity of taxexempt organizations be investigated. 

July and August of 2012, Senator Levin sent letters to the IRS 

and said that the IRS appears to be passively standing by while 

organizations clearly ignore the Tax Code with no apparent consequences. 

Now, this, to me, seems like a significant amount of requests for 

information and concerns that private citizens, organizations seeking tax-exempt status who happened to be of the conservative side 

would be checked on and questioned. 

Now, I find it difficult, Mr. Wolin, to understand how that didn’t 

come across your train of reference and responsibility earlier on. 

Did you ever discuss congressional interest in the way the IRS 

was handling political nonprofits with the President? 

Mr. WOLIN. I did not, Congressman. Never. 

Mr. WALBERG. Did you ever discuss it with anyone at the White 

House or any agency outside the IRS? 

Mr. WOLIN. I did not, Congressman. 

Mr. WALBERG. Why didn’t you discuss this, when you knew it 

was of such interest to Congress and you knew Congress was apparently not satisfied with whatever actions the agency had taken 

thus far on either side of the issue? 

Mr. WOLIN. Frankly, Congressman, the correspondence to which 

you refer did not come to me. I think it was, in general, as you suggested, addressed to the IRS. And I, frankly, was unaware of this— 

of the concern until—— 

61 

Mr. WALBERG. But Treasury has intense responsibility and ought 

to have intense scrutiny over the IRS, correct? 

Mr. WOLIN. Well, Congressman, I think it’s important for me to 

reiterate that, with respect to the details of tax administration and 

tax enforcement, it’s been the longstanding practice of Treasury 

Departments, spanning administrations of Republican and Democratic Presidents, not to get involved in those details, specifically 

because we don’t want—we don’t want to have political influence 

over those kinds of detailed activities with respect to tax administration. I think this is a hearing and a subject matter that makes 

clear why that’s not a good idea. 

Mr. WALSH. Not a good idea. 

Mr. Shulman, when did you learn about the second BOLO again 

and the failure of employees to follow explicit directions from their 

superiors? 

Mr. SHULMAN. About the fact that there was a BOLO and then 

a second BOLO and that employees hadn’t followed directions? 

Mr. WALBERG. Yes. 

Mr. SHULMAN. That I didn’t learn about until, you know, this last 

week when the report came out. 

Mr. WALBERG. Wow. Were you involved in any discussions about 

disciplining people who were being insubordinate in the Cincinnati 

office? 

Mr. SHULMAN. Not that I remember. 

Mr. WALBERG. In Politico today, I see this headline here: ‘‘Heads 

Won’t Roll at the IRS.’’ ‘‘Heads Won’t Roll at the IRS.’’ ‘‘Labor rules 

give workers protection.’’ 

The amount of ineptitude—and it’s assuming that a Fifth 

Amendment was requested by Ms. Lerner, who is not here. We 

have to assume that there’s some concern about criminality, as 

well. 

What does it take for someone to get disciplined at the IRS? 

Mr. SHULMAN. There’s—you know, at the IRS, there’s, you know, 

procedures that people follow that, you know, workers have—— 

Mr. WALBERG. And people don’t follow, I would guess. 

Mr. SHULMAN. And there’s a union, so it depends if it’s somebody 

in the union or not. The best of my knowledge, it’s the kind of procedures you would think about in any organization, which is 

that—— 

Mr. WALBERG. Well, specifically, while you were Commissioner—— 

Mr. SHULMAN. —people go over it—— 

Mr. WALBERG. I only have 4 seconds. While you were Commissioner, for what reasons did you discipline some individuals at the 

IRS while you were Commissioner? 

Mr. SHULMAN. Inappropriate conduct, not doing their job, those 

kinds of things. 

Mr. WALBERG. Wow. And we missed all of this. 

I yield back. 

Chairman ISSA. I thank the gentleman. 

We now go to the gentleman from Pennsylvania, Mr. Cartwright. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. 

Gentlemen, I want to say I am deeply troubled, and I know I 

speak for the entire panel, we are all deeply troubled by what has 

62 

happened at the IRS. And perhaps the most troubling part is that 

the IRS has been revealed to have targeted groups for their political beliefs, their political leanings. It’s an outrage if this is true. 

And I want to drill down a little bit with you, Mr. George. You’re 

the Inspector General. Last week, you testified in front of the 

House Ways and Means Committee to the effect that, from your 

looking into this matter, whether you call it an audit or an investigation, from your looking into this matter, you saw no evidence 

that IRS employees were politically motivated in their creation or 

use of the inappropriate screening criteria. 

Was that essentially your testimony? 

Mr. GEORGE. That we received no evidence during the course of 

our audit to that effect, yes, sir. 

Mr. CARTWRIGHT. All right. So that doesn’t really square with the 

headline that the groups were targeted by the IRS for their political beliefs and political leanings. 

And I want to ask you, I mean, isn’t it true, people do things for 

a reason? If people at the IRS came up with improper ways of 

going about their business, improperly triaged groups with political-sounding names to the top of the list for extra scrutiny, if they 

did those things and it wasn’t for political reasons, why did they 

do it? 

Mr. GEORGE. Congressman, there are reasons for the IRS to 

issue ‘‘be on the lookout’’ types of directives and without violating 

any, I don’t want to say secrets, but without giving the bad guys 

a way of avoiding detection. 

I will point out that, in the case of terrorists, terroristic activities, both domestic and international, there may be a reason for the 

IRS to be on the lookout for a particular type of application or 

something of the like. 

Mr. CARTWRIGHT. Well, one thing that Mr. Connolly mentioned 

earlier this morning was the doubling of the applications that we 

saw after the Supreme Court’s decision in January of 2010 in Citizens United. And that’s true; is that correct? 

Mr. GEORGE. It is correct, but I want to make sure that I’m clear 

about that. I did—our audit did not say this was as a direct result 

of that. 

Mr. CARTWRIGHT. Right. 

Mr. GEORGE. It was coincidental. 

Mr. CARTWRIGHT. And you’re anticipating my next question. 

Whether or not we know there was a direct relation, we don’t want 

to engage in, post hoc propter hoc reasoning, but whether or not 

we know what the cause was, we know that the applications doubled starting in 2010, right? 

Mr. GEORGE. That’s my understanding. 

Mr. CARTWRIGHT. So we’ve got the workload doubling. We’ve also 

established that there were no additional resources given to the 

IRS to do this work. 

Is one of the possible explanations that the staffers who were not 

acting for political reasons were actually acting to streamline their 

own work and try to get through a twice-as-high pile of work in a 

streamlined fashion so that they could actually get the work done? 

Mr. GEORGE. Congressman, there are certainly valid reasons for 

the Internal Revenue Service to try to become more efficient in the 

63 

way they identify these types of cases. However, it is entirely inappropriate for them to use certain categories in which to accomplish 

that. 

Mr. CARTWRIGHT. Exactly. 

Now, one thing I want to ask you is, I think you’ve testified that 

you haven’t really zeroed in on individuals because you’ve done an 

audit, not an investigation. Is that right? 

Mr. GEORGE. That is correct, sir. 

Mr. CARTWRIGHT. Why, Mr. George? In your testimony, you said 

that you were asked by several Members of Congress to do an investigation. Why have you not done one so far? 

Mr. GEORGE. Many of our activities, sir, are covered by Privacy 

Act rules. And, again, in some instances, during the course of an 

audit, if an investigation were initiated, the audit would have to 

cease because of conflicts and a variety of other reasons. 

Mr. CARTWRIGHT. So you do an audit first, finish that, and then 

move to an investigation. And I hope you will do that. 

And I want to finish with this question: Did the IRSs improper 

prioritizing of certain groups for extra scrutiny, did that lead to 

any actual incorrect determinations of the tax-exempt eligibility of 

any groups? 

And I’ll open that up to all three of you gentlemen. Do any of 

you know, did this improper conduct lead to improper decisions? 

Mr. GEORGE. I will say that this action led to the fact that not 

a single application for this status, this tax-exempt status, was denied. They were delayed, they were delayed for years at times, but 

not a single one of the ones that we examined were denied. So it 

does raise questions in that regard. 

Mr. CARTWRIGHT. Mr. Shulman? 

Mr. SHULMAN. Not that I’m aware of. But I defer to the Inspector 

General, who has done the—done the review. 

Mr. CARTWRIGHT. Mr. Wolin? 

Mr. WOLIN. I have no knowledge of this, Congressman. I, too, 

defer to the Inspector General, who has looked at this. 

Mr. CARTWRIGHT. Thank you. 

And I yield back. 

Chairman ISSA. Thank you. 

Just to clarify what the gentleman was asking, none were denied, but, by definition, not granting them is, in fact, not allowing 

them to happen. So you can actually deny better by not denying. 

Because if you deny, they have a right of appeal. If you just let 

them sit in limbo, they’re screwed. And some are still screwed 

today; isn’t that correct? 

Mr. GEORGE. That’s—— 

Chairman ISSA. A term of art. 

Mr. GEORGE. Well, I was going to say I wouldn’t use, necessarily, 

that word. 

Chairman ISSA. But if you were a Tea Party organization, you’d 

use that term. 

Mr. GEORGE. I would be very frustrated, sir, yes. 

Chairman ISSA. Two quick things to clarify, because the gentleman made a very good point. This doubling—isn’t it true that 

they began targeting Tea Party before there was any doubling, that 

your own testimony shows between 2009 and 2010 there was not 

64 

a marked increase and they began targeting with just one Tea 

Party application and then expanded it? 

Mr. GEORGE. They did, yes, sir. 

Chairman ISSA. Thank you. I think that makes it clear. 

Oh, one more thing. There were 479 or so of these Tea Party 

groups that were targeted in total. Were there any BOLOs issued 

for progressive groups, liberal groups? 

Because I’m assuming that your investigation—we can’t see 

them—but your investigation showed liberal groups that flew right 

through during the same time and got their 501(c)(4)s. They were 

not stopped; isn’t that correct? 

Mr. GEORGE. Sir, this is a very important question. Please, I beg 

your indulgence. 

Chairman ISSA. Of course. 

Mr. GEORGE. The only ‘‘be on the lookout,’’ that is, BOLO, used 

to refer cases for political review were the ones that we described 

within our report. 

There were other BOLOs used for other purposes. For example, 

there were lookouts for indicators of known fraud schemes so that 

they could be referred to the group that handles those issues. For 

nationwide organizations, there were notes to refer State and local 

chapters to the same reviewers. 

As we continue our review of this matter, we have recently identified some other BOLOs that raised concerns about political factors. I can’t get into more detail at this time as to the information 

that is there because it’s still incomplete—that we’ve uncovered, 

rather, because it’s still incomplete. 

And there are 6103 issues—— 

Chairman ISSA. Of course. 

Mr. GEORGE. —involved here, too. I hope that provides context—— 

Chairman ISSA. So, clearly, it’s fair to say, though, that there 

was a BOLO for Tea Party but not a BOLO for MoveOn or Progressive? 

Mr. GEORGE. I’m not in a position to give you a definitive response on that question at this time, Mr. Issa—Mr. Chairman. 

Chairman ISSA. So are you saying today that there were other 

501(c)(4)s, not specific, so much as one other 501(c)(4) not previously identified during your IG audit that were, in fact, targeted 

and held in a similar way? 

Mr. GEORGE. I cannot give you a definitive answer, sir, at this 

time. But I certainly will when—— 

Chairman ISSA. I only asked you if there’s at least one. Are you 

aware of at least one that was targeted using a BOLO that was a 

501(c)(4) in which they were targeted politically but did not fall 

into this current report we have before us? 

I’m not asking for privileged information. I’m asking—— 

Mr. GEORGE. No, no, no. 

Chairman ISSA. —for one. 

Mr. GEORGE. Under the report, the review—the purposes of the 

audit that we conducted, which was to determine whether they 

were looked for in the context of political campaign intervention, 

there were no others. 

Chairman ISSA. Thank you. 

65 

As I recognize the gentleman from Oklahoma, I want to express 

my deep condolences for the losses. I realize you flew through the 

night to come back and that you’ll be leaving as soon as votes conclude. But, again, I think all of us on the dais would offer our 

heartfelt condolences. 

Mr. LANKFORD. Thank you, Mr. Chairman. Tough day for the 

folks in Oklahoma, a tough—very tough time for a long time. 

Mr. George, I want to clarify several things. One of them, you 

made the comment that, so far, none of them have been turned 

down. They just had this inordinately large amount of paperwork, 

and additional questions applied to them, and it’s a long delay with 

no response, and it’s basically, ‘‘We’ll get back to you at some 

point.’’ Is that correct. 

Mr. GEORGE. That is correct, sir. 

Mr. LANKFORD. Man, that sounds like the Keystone pipeline to 

me. But that’s a whole different issue. 

You had mentioned under your audit, people under investigation 

are not under oath. They’re not under investigation, or audit—are 

not under oath and that the IRS staff has not been forthcoming on 

some of the things. Is that the statement that you used? 

Mr. GEORGE. That’s the inference that—— 

Mr. LANKFORD. Is that both staff and management that you’ve 

had conversations with? Or has staff and management been in that 

conversation where you feel like they’ve not been completely forthcoming on all the questions you’ve asked? 

Mr. GEORGE. I’m sorry, is your question, is it because management has—— 

Mr. LANKFORD. No, staff and management both. When you say 

IRS personnel have not been completely forthcoming on some of the 

issues you’ve asked about. 

Mr. GEORGE. That is an inference that can be made from the fact 

that we have not gotten clear answers. 

Mr. LANKFORD. So that’s what I’m trying to ask you, is staff, 

management, so two different levels of individuals. You’re not getting completely full answers that you expect when you ask—— 

Mr. GEORGE. While I am not in those interviews personally, sir, 

that is my understanding. 

Mr. LANKFORD. Okay. 

Mr. Wolin, did you ever ask anyone at the IRS—because you had 

to—you had to hear about all these reports, as well, that possibly 

political activity was happening within the IRS. It’s been mentioned before, already 42 different major news stories were out 

there that there was potential targeting. 

Did you have a conversation with anyone anywhere in the IRS 

where you asked the question, ‘‘Is this true,’’ or ‘‘Is this happening,’’ 

sometime after May the 3rd, 2012? 

Mr. WOLIN. I did not, Congressman. Again, with respect to the 

details of how the IRS administers the Tax Code, especially—— 

Mr. LANKFORD. No, I understand. I’m just asking, did you have 

that conversation where you asked someone, is this true, is this 

happening? Because there were a lot of media reports before this 

came out. 

Mr. WOLIN. I didn’t—the first I was aware of this, Congressman, 

is when the Inspector General came to me at some point in 2012 

66 

and said on the basis of some congressional inquiries he was going 

to begin an audit. And that was the first I’d learned it. 

Mr. LANKFORD. Okay, so you didn’t see any of the media reports 

over the group that you oversee? 

Mr. WOLIN. I did not. 

Mr. LANKFORD. Okay. 

Mr. WOLIN. Not that I recall. 

Mr. LANKFORD. Wow. 

Mr. Shulman, in my office, before a letter goes out, there are four 

different people, including myself, that go through that letter as it 

goes through the process of edits and review and fact-checks and 

all those things. I assume it’s very similar in your office, as well, 

that you’re not actually penning every letter. There are multiple 

people that are involved in the process on it. 

I am one of many that wrote a letter in 2012 to your office and 

received a response back from Steve Miller. In that response that 

I got back from Steve Miller about this exact issue, he said, ‘‘In 

those cases where the application raises issues for which there is 

no established published precedent’’—I assume that’s the Tea Party 

groups and everything else—‘‘or no uniformity, EO Determinations 

may refer the application to EO Technical. At EO Technical, the 

applications are very reviewed by tax law specialists, whose job it 

is to interpret and provide guidance on the law and to work closely 

with IRS chief counsel attorneys on the issues.’’ That’s a lot of folks 

when there’s new ground to be broken. 

Now, from my district, this is one of those letters that came in 

from someone in my district that specifically contacted me and had 

a whole series of questions that came back to them with what is, 

in my area, the Oklahoma City Patriots in Action group. They were 

asked questions such as, ‘‘Have any candidates running for public 

office’’—‘‘Have any candidates running for public office spoken or 

will they speak at your function or organization? If so, include a 

transcript of any speeches given by candidates.’’ Which is remarkable to be able to ask. 

‘‘Do you directly or indirectly communicate with members of legislative bodies?’’ And there is no definition for what indirect communication is given on that. It’s just, have you had—I don’t even 

know what that would mean. 

My favorite question: ‘‘Who developed the Web site and has control over the data generated by the Web site?’’ Not only is that an 

insane question to ask, it’s not even grammatically correct. 

19A: ‘‘Provide all copies of your corporate minutes from inception 

to the present.’’ This was asked—and at the beginning of the first 

page, it says, ‘‘Under penalty of perjury, I declare that I have examined this information,’’ and goes through this long statement. 

My issue is, this is new ground. And based on the letter that we 

received when I wrote the letter to you, it lists a long list of people 

that have to be involved in the formation of this. How do we get 

the list of individuals that were involved or at least the process of 

how these questions were done? 

Because this assumption that this is a couple rogue agents does 

not match up with the letter and how we were told this was actually created. This includes technical folks, attorneys, chief counsel, 

EO. This is a pretty large list of people that are involved in creVerDate Aug 31 2005 09:13 Jul 10, 2013 Jkt 000000 PO 00000 Frm 00070 Fmt 6633 Sfmt 6633 C:\DOCS\81742.TXT APRIL
67 

ating this. Someone knew—in fact, a lot of someones knew about 

this, because you can’t form this without this. 

How do we get that information? Ms. Lerner is obviously the best 

person to ask. She’s chosen not to answer questions. How do we get 

that? 

Mr. SHULMAN. Look, as you said, there’s probably other people 

who work on the details of that who you could ask. I would presume you ask it directly. I’d presume that the IG, who now has a 

better understanding of this, would be able to be helpful. And I 

would presume that the committee investigative staff will take letters like that and your questions and ask, you know, who was involved. 

Mr. LANKFORD. If I can have the luxury here, Mr. George, is 

there any way to know about how many people? Has that been a 

part of your audit, to try to determine how many people went into 

creating this and how many different offices? Because this lists at 

least three different offices and multiple groups of people that were 

referenced just in their response to me in creating one of these surveys. 

Mr. GEORGE. My understanding is we have not made that determination, sir. 

Mr. LANKFORD. Well, that might be something we need to know. 

Mr. GEORGE. We will take that under advisement, Congressman. 

Mr. LANKFORD. I yield back. 

Chairman ISSA. I thank you. 

The gentleman from Wisconsin, Mr. Pocan. 

Mr. POCAN. Thank you, Mr. Chair. 

And, you know, in Wisconsin, we try to find silver linings. And 

in this one, Mr. Chairman—— 

Chairman ISSA. If you find one, then you can find a sunny day 

in a snowstorm. 

Mr. POCAN. Well, I found a small one. You know, the inept, inexcusable actions of the IRS have done more to unify Democrats and 

Republicans than I’ve seen in my 5 months here so far. So that’s 

what I’m going with. I’m going to try to work off of that. 

Chairman ISSA. I’d use it until we lose it, and hopefully we won’t. 

Mr. POCAN. Exactly. 

Let me drill down a little bit in a different area because I think 

a lot has been talked about, really, the ineptitude of what had happened. 

But specifically, Mr. George, one of your recommendations, I 

think, that stands out the most is the better guidance to determine 

whether organizations are properly qualifying for the tax-exempt 

status, 501(c)(4). 

Not related to the groups that have, but to the future, the fact 

that since the 2 years previous to Citizens United there’s a pretty 

even number of applications and now in the last year that has 

more than doubled, so we’re clearly seeing more activity in this 

area, if we really want to make sure, not through this sad way that 

was done through the IRS to try to find this out, but some other 

way, you in your report say that we need the Acting Commissioner 

for the Tax-Exempt/Government Entities Division to work with the 

IRS chief counsel and Department of Treasury to improve guidance 

68 

to help determine the primary activity of social welfare organizations. Is that correct? 

Mr. GEORGE. That is correct, sir. 

Mr. POCAN. Okay. And, to be clear, if a group’s primary activity 

is political, they do not qualify for the 501(c)(4), correct? 

Mr. GEORGE. Again, as long as they pass that test of, you know, 

not being their primary activity. 

Mr. POCAN. All right. And the IRS, in your opinion, from the report, does not have adequate guidance so its employees can figure 

out this question. Was that your point? 

Mr. GEORGE. That is definitely my point, sir, yes. 

Mr. POCAN. Okay. 

Mr. Shulman, you’re no longer there, so I’m not going to ask you 

this question, but I am going to put it to Mr. Wolin. 

You know, the Treasury oversees implementing regulations for 

the Tax Code passed by Congress. In this specific area, do you expect Treasury to come out with some guidelines measuring the primary activity of 501(c)(4) organizations so we can actually have 

some clear and concrete guidance for IRS employees? 

Mr. WOLIN. Congressman, the existing guidance, as you know, is 

very old. This is a very complicated area. But as the IG report recommends and as this matter makes clear, we need to have some 

new guidance in this area. That’s what the IG has recommended, 

and we have adopted all of his recommendations. 

So we will work with the new Acting Commissioner, Mr. Werfel, 

to see what additional guidance we can provide so that we can 

bring better clarity to this area and help avoid the kinds of things 

that we’ve just learned were happening. 

Mr. POCAN. And do you have a timeline on that? 

Mr. WOLIN. Well, I think we’re going to get to our work as soon 

as possible, but I don’t have a specific timeline for you, Congressman, other than to say that the Secretary has charged the new 

Acting Commissioner with a report in 30 days that includes, among 

other things, how we’re progressing with respect to the implementation of the various recommendations that Mr. George has put forward and that we have accepted. 

Mr. POCAN. Okay. I just think this is probably one of the areas, 

you know, we can look at the problems that occurred, and they 

were significant. And, as you can see, there’s complete unanimity 

in the room here, looking at this thing, this was inept and inexcusable. 

Mr. POCAN. But I think the next step is how do we make sure 

that because of Citizens United the growth of these applications 

that we have are fair and level process to work off of. So as soon 

as you can do that, that would be much respected. And then finally, Mr. Chairman, I would just close in saying, I think this has 

been really great to have this in the open so everyone can see this 

and it’s been a very good hearing. I would hope you would still consider tomorrow perhaps opening the Thomas Pickering hearing so 

that we could try to indeed have as I think he has requested a 

chance to do that. 

Mr. JORDAN. Would the gentleman from Wisconsin yield? 

Mr. CONNOLLY. Would my colleague yield? 

69 

Chairman ISSA. You’ve got so much yielding to do, I may have 

to give you more time. 

Mr. JORDAN. Would the gentleman yield? 

Mr. CONNOLLY. I thank my colleague. 

Mr. George, in response to Mr. Cartwright, you said something 

that I don’t think you’re competent to say, and that is when looking 

at your own report that shows the doubling of applications of 

501(c)(4)s you said, well, that’s just coincidental to Citizens United. 

You don’t know that. We don’t know if it’s causal or coincidental 

based on your analysis, and I want to give you an opportunity to 

acknowledge that. 

Mr. GEORGE. I agree with your statement, but my point was that 

we did not indicate in our report that because of Citizens United, 

there was a doubling. 

Mr. CONNOLLY. I understand. And is it not also true that a 

501(c)(4), one benefit of that versus a 501(c)(3) is the donors don’t 

have to be revealed, is that correct? 

Mr. GEORGE. That is my understanding sir. 

Mr. CONNOLLY. Thank you, Mr. George, and I thank my colleague. 

Mr. JORDAN. Will the gentleman yield the last 15 seconds? 

Mr. POCAN. He can have the last 10 seconds. 

Mr. JORDAN. Mr. Wolin, yesterday Mr. Lew said senior aides at 

the White House, the Treasury Department and the IRS debated 

the best way to break this news when Ms. Lerner gave the speech 

and you had the planted question, how you were going to spin this, 

how you were going to bring this forward. Were you involved in 

those discussions on how this story was going to break to the 

American people? 

Mr. WOLIN. No, I was not involved—— 

Mr. JORDAN. You weren’t one of the people at Treasury involved, 

even though it’s your responsibility to oversee the IRS? 

Mr. WOLIN. Congressman, there were, and I think there’s been 

press reporting on these conversations among folks in the chiefs of 

staff’s office and among lawyers about these questions. And I was 

not directly involved in those conversations, no. 

Mr. JORDAN. Who at Treasury was? 

Mr. WOLIN. Again, we will work with you to get the names, Congressman, but there were people in the Chief of Staff’s office—— 

Mr. JORDAN. Do you know the name Celia Roady? She was the 

person who planted the question. Do you know how she was chosen 

and why she was chosen? 

Mr. WOLIN. Congressman, I had no involvement, no knowledge 

of that until we learned about it probably together when there was 

testimony from Mr. Miller on that question. I have no knowledge 

about. 

Chairman ISSA. Thank you. 

I just, Mr. George, following up on Mr. Pocan, just one quick 

thing. I had our staff check, and Citizens United was decided and 

announced on 21 January, 2010, and the IRS began targeting Tea 

Party groups in March of 2010. Isn’t that correct? 

Mr. GEORGE. I’m not sure of the date of the—— 

Chairman ISSA. Well, the first file pulled, according to Ms. Paz, 

would have been that less than 2 months later. 

70 

Mr. GEORGE. I’m not sure of the date of the issuance of the Supreme Court ruling. 

Chairman ISSA. We can all get that at Google. That’s a fact online. But essentially, if there’s a coincidence, the coincidence the 

IRS began targeting less than 60 days Tea Party groups after Citizens United was started, I would assume that it’s awful hard to 

have this supposed exponential increase in applications in less 

than 60 days, especially since they targeted, they had gathered 

starting with application one, isn’t that essentially, without exceeding what Mr. Connolly would agree to, if there’s a coincidence, isn’t 

that the coincidence that it happened so close to the deciding of a 

Supreme Court not to the increase in applications? 

Mr. GEORGE. It does seem coincidental, sir. 

Chairman ISSA. Thank you. With that we go to the gentleman 

from Arizona, Mr. Gosar. 

Mr. GOSAR. Thank you, Mr. Chairman. 

Mr. Shulman, are you familiar with any examples in which confidential information relating to the application for tax-exempt status of groups was leaked to any entity outside of the IRS? 

Mr. SHULMAN. I’m familiar with some press reports and vague 

recollection of things happening. 

Mr. GOSAR. We’re going to pick up one in particular. Media reports asserts that Austan Goolsbee, then the President’s Chairman 

of the Council of Economic Advisors, disclosed confidential tax information about Koch Industries to reporters on August 27, 2010. 

Do you have any idea how Mr. Goolsbee obtained that information? 

Mr. SHULMAN. Two things, one is, if I remember from the time, 

it wasn’t confirmed that he had confidential information. And to 

the extent he did, if that’s your premise, I have no idea—— 

Mr. GOSAR. It should have alerted you because that’s something 

very, very important. It kind of hit the screen it’s a pretty big deal. 

So did you ask your staff at the IRS how this happened? And did 

you find out if anyone at the IRS provided Mr. Goolsbee with that 

information, because it caused you, I just saw you with your caution, it caused you to think about it and somebody in your nature 

should have gone back and asked. Did you ask anybody, yes or no, 

in the IRS looked into how he got that information? 

Mr. SHULMAN. It was several years ago, but my best memory is, 

and I have a recollection that the Inspector General was, actually 

did an investigation to see if something had happened. But that’s 

my best memory. 

Mr. GOSAR. At that time? 

Mr. SHULMAN. It’s very vague. 

Mr. GOSAR. Is that true, Mr. George? I didn’t think you were at 

that time investigating. 

Mr. GEORGE. Congressman this is one of the most frustrating aspects of implementing or overseeing the Internal Revenue Service, 

and those are some of the restrictions that the Tax Code places on 

me and my ability to communicate information to people outside of 

the Ways and Means Committee. The IRS has strict confidentiality 

rules which we actually enforce, and which I’m not allowed to provide you, sir. 

Mr. GOSAR. I appreciate that. I want to keep going here. 

71 

So, Mr. Shulman, how would that information be obtained? From 

your understanding of the IRS, you’re the head, you’re the guy. 

How would that be obtained? It had to come from a leak, right? 

Mr. SHULMAN. It shouldn’t be obtained. Section 6103 prohibits 

IRS employees from disclosing specific taxpayer answers. 

Mr. GOSAR. Thank you. You gave me my answer. 

So, Mr. Shulman, 6 months after Mr. Goolsbee made that public 

information, you went to the White House and met with him according to the White House records on February 3rd 2011. Did you 

ask Mr. Goolsbee then or at any other time how he obtained that 

information? 

Mr. SHULMAN. Not to my recollection. 

Mr. GOSAR. Why not? 

Mr. SHULMAN. Because there’s lots of things that happen in the 

press that involve the IRS. I don’t remember that meeting, but I 

do remember—— 

Mr. GOSAR. But my understanding is this is a very important 

piece, particularly as a Director, that you should have looked at because—by the way, sir, did you take an oath of office? 

Mr. SHULMAN. I did take an oath of office. 

Mr. GOSAR. Let’s keep going. Are you familiar with the news organizations a propolitica publication of pending tax exempt applications from conservative leaning organizations? 

Mr. SHULMAN. I’m sorry, could you repeat the question? 

Mr. GOSAR. Are you familiar with those publications? The 

news—— 

Mr. SHULMAN. ProPublica? 

Mr. GOSAR. Yes. 

Mr. SHULMAN. I’m familiar with the organization, ProPublica. 

Mr. GOSAR. And it is my understanding based on reports from 

that publication that your office provided that publication with the 

applications that were still pending which were confidential. Is that 

your understanding? 

Mr. SHULMAN. That my office? 

Mr. GOSAR. Mmh hmm. 

Mr. SHULMAN. I saw news reports of issues around ProPublica 

that I remember, and I don’t remember the time stamp, and again, 

my best recollection is when those news reports broke, that it was 

referred to the IG to look at, is my best memory. 

Mr. GOSAR. So what contributed to the confidential pending applications making it through the internal review process and being 

provided to the publication? 

Mr. SHULMAN. I don’t have any knowledge of the premise that 

it happened. I saw news reports. 

Mr. GOSAR. Well, but it should have alerted you because I mean, 

as the head person with these big things happening, you should 

have followed up. Give us the detail. I’ve watch you all day. You’re 

really good at certain parts of detail, and then you obscure the rest. 

There’s a disease going on in America. I see it in trials all over the 

country. We feign because somebody gets in our face that we don’t 

acknowledge something. 

I want to go further. Are you aware that in July 2012 Senator 

Harry Reid claimed Mitt Romney hadn’t paid taxes for the last 10 

72 

years and claimed to have the information supporting that? Are 

you aware of that? I’m sure you are. 

Mr. SHULMAN. I have a recollection of reading that in the paper. 

Mr. GOSAR. Do you know how Mr. Reid obtained that information? Did you look into this? 

Mr. SHULMAN. I have no idea. 

Mr. GOSAR. Doesn’t that alarm you that all of a sudden, this pertinent information comes up, you’re the head of this agency and 

you’re not asking questions? Shame on you. Absolutely shame on 

you. 

Did you ask for any other leaks of any other information, confidential information, on anybody else? I mean, I’ve just now illustrated you three different incidences where for private information, 

and yet you did nothing. So did you—let me ask you again. 

Chairman ISSA. If the gentleman would conclude his questioning? 

Mr. GOSAR. Yes. Did you faithfully take this oath, and I want to 

highlight it, that I will bear true faith and allegiance to the same 

and that I will well and faithfully discharge the duties of the office 

of which I am about to enter. Did you take that oath? 

Mr. SHULMAN. Yes, I took the oath of office, yes. 

Chairman ISSA. Thank you. The gentleman has concluded. Mr. 

Wolin, do you want to answer the same set of questions? I think 

they were directed to Mr. Shulman as a former agency head, but 

you were his superior and still would be the superior to each of 

those questions. 

Were you involved? Did you investigate? Did you have concerns, 

particularly for sensitive IRS information? 

Mr. WOLIN. I would say a couple things, Mr. Chairman, one I 

was not involved in any of those things. I remember reading news 

accounts of the—is it ProPublica—when it happened. I want to be 

sensitive as to the Inspector General has sort of instructed us to 

6103 issues. But the only thing I learned about one of those issues 

was from the Inspector General who said he was looking into it 

and, of course, I did as I always do, I said follow the facts where 

they may lead, and otherwise stay out of the matter. 

Chairman ISSA. Mr. George. 

Mr. GEORGE. Mr. Chairman, we at TIGTA do have exclusive jurisdiction to review these types of allegations and again, I—— 

Chairman ISSA. But you have no authority to go to the White 

House, go to here on the Hill or go anywhere else for that investigation, you’re extremely limited, you can’t, as I understand, you 

can’t leave Treasury for your investigation. 

Mr. GEORGE. No. That is not true. We do have the authority to 

go beyond Treasury, including the White House. 

Chairman ISSA. Thank you. 

Mr. CUMMINGS. Mr. Chairman, for further clarification, is it, 

some agencies, if they read something in the newspaper, as a matter of fact, Members of Congress, we can be subjected to an ethics 

investigation just by somebody reading something in the paper or 

hearing about it. How does that work there with the IRS? Some 

mention was made of Senator Reid and others. How does that work 

there? Maybe you can answer that so that we can all be clear, 

briefly. 

73 

Mr. GEORGE. I can assure you, TIGTA has exclusive jurisdiction 

to investigate unauthorized disclosures of return information, tax 

return information. Now these, again, these provisions prevent me 

from discussing in any detail other than what the chairman of the 

Ways and Means Committee and the chairman of the Senate Finance Committee, I can’t even discuss these matters with the ranking member of the Ways and Means Committee nor the ranking 

member of the Senate Finance Committee. But also the member, 

the chairman of the Joint Committee on Tax. 

So if a matter is in the newspaper and if it’s publicized, and if 

they name names, if I were to repeat the names publicly, I’m in 

violation of 26, section 61 of the—notwithstanding the fact that 

is—— 

Mr. CUMMINGS. Could you do an investigation? That is the question I’m asking. 

Mr. GEORGE. Yes certainly, certainly we could. 

Mr. CUMMINGS. Thank you. 

Chairman ISSA. The gentlelady from Illinois, Ms. Duckworth. 

Ms. DUCKWORTH. Thank you, Mr. Chairman. Americans have a 

good reason to be outraged by the actions of the IRS and I share 

their outrage. I’m just frustrated today listening to you, beyond the 

mismanagement and the miscommunication that is well documented at this point, what troubles me most is the violation of public trust. It’s clear that at several levels, from the misguided actions of the IRS staff in Washington, the IRS employees in Cincinnati, to yourself, Mr. Shulman, in your failure to disclose information to Congress, I just feel that you’ve really violated the public 

trust, and it’s troubling because the IRS has such an awesome responsibility, and such an incredibly important job to do, one that 

is central who to how well our government operates. 

And as our Tax Code gets more and more complicated and IRS 

employees face furloughs and pay freezes which, by the way, Presidential appointees are exempt from, it is an increasingly difficult 

job to do. 

So I want to get at your comments in yesterday’s Senate finance 

hearing, and again today in response to my colleague, the gentlewoman from California, Ms. Speiers, you denied personal blame for 

inappropriate criteria used by the IRS. 

So what will you accept personal responsibility for? How about 

the lack of training of the staff as identified by the IG? Will you 

accept personal responsibility for the failure to properly train the 

staff? 

Mr. SHULMAN. Look, I wouldn’t go down a long list. I was the 

leader of the IRS at the time that this happened. I accept the fact 

that this happened on my watch, and I’m very sorry that this happened while I was at the IRS. I feel horrible about this for the 

agency, for the people there, for the great public servants. I’m not 

sure what else I can say. 

Ms. DUCKWORTH. Were you responsible for the training of the 

IRS personnel on your leadership? 

Mr. SHULMAN. I did not hands-on decide the training of 90,000 

people. 

Ms. DUCKWORTH. So you will not accept responsibility for the 

training of the personnel under the IRS at your time there? 

74 

Mr. SHULMAN. I accept that this happened on my watch. 

Ms. DUCKWORTH. So, yesterday, you said, talking about when 

someone found out about this problem, and you said when someone 

spotted it, they should have run it up through the chain, why they 

didn’t, I don’t know. 

Do you accept responsibility for the forward reporting process up 

the chain all the way to you as you yourself have identified happened? 

Mr. SHULMAN. As I said yesterday, it should have been brought 

up the chain earlier so that it could have been addressed. There 

was clearly a breakdown in this one unit of the IRS and of the 

chain that moved up, and I accept that this happened on my watch. 

Ms. DUCKWORTH. So you won’t accept responsibility that some 

sort of a process needed to be in place or a check and balance to 

make sure that if there was a breakdown that that would be corrected and if it were properly trained on how to report up the 

chain. No need to answer. 

Now, do you accept responsibility for your failure to correct the 

public record once you found out your testimony was not accurate? 

Mr. SHULMAN. I answered truthfully with the information I had, 

and I said before, when I found out that a list existed I did not 

have all the facts at that time. The Inspector General was going 

to investigate, and I feel very comfortable that the actions I took 

were appropriate. 

Ms. DUCKWORTH. Mr. George, your report indicated that after 

Ms. Lerner discovered the IRS employees in Cincinnati were using 

inappropriate criteria, she stopped them immediately, is that correct? 

Mr. GEORGE. Well, I don’t know how you define immediately. She 

did halt that behavior, yes. 

Ms. DUCKWORTH. Thank you. But then the employees started 

using slightly different but still inappropriate practices a few 

months later? 

Mr. GEORGE. Correct. 

Ms. DUCKWORTH. How were these employees allowed to resume 

these activities after management stopped them the first time? 

Mr. GEORGE. That is the heart of the question, Congresswoman, 

which we still do not have a definitive answer to. My response is, 

at this stage would be a lack of oversight, a lack of follow-up on 

the part of Ms. Lerner and people within her immediate chain of 

command. No one went back to make sure that what was being 

told by them to do in Cincinnati was being done, and that is inexcusable. 

Ms. DUCKWORTH. Mr. Shulman, do you accept responsibility for 

Ms. Lerner’s failures as your employee to follow up and provide the 

oversight necessary? 

Mr. SHULMAN. I have the same answer. This happened on my 

watch. I do not accept responsibilities for all the actions taken by 

all of the people outlined in the report. 

Ms. DUCKWORTH. Well, I am deeply disappointed in your answer 

because right now, in forward operating bases in Afghanistan all 

over the world, we have 25-year-old buck sergeants and second 

lieutenants who know you can delegate authority, you can never 

delegate responsibility and that you’re always responsible for the 

75 

performance, the training and the actions of the men and women 

under you. And I hope that you remember that in the next position 

you go to. Thank you, Mr. Chairman. 

Chairman ISSA. If the gentlelady would yield, I’m going to work 

with the ranking member, and we are going to either formally or 

informally ask the designate to be the next Commissioner who has 

been the director of the Office of Management and Budget to come 

before us so that we can perhaps see in advance whether the management skills are there, and the plan is there for what has clearly 

been a dysfunctional period of time. 

Mr. CUMMINGS. Mr. Chairman, I just want to thank you. I made 

that request in my opening statement and I thank you because I 

think that’s a major move. 

Chairman ISSA. Absolutely. And with that, we go to the gentleman from Pennsylvania who has been patiently waiting, Mr. 

Meehan. 

Mr. MEEHAN. Thank you Mr. Chairman. Mr. Chairman I would 

like to begin to follow up a little bit on some of the information that 

was generated by my colleague from Oklahoma, because I’m standing and holding in my hand as well a questionnaire for one of the 

organizations that made an application. Their application was 

made in 2009. It’s now 2013, and they still have not gotten a response, and yet here we are 39 questions that are being asked. 

This is the second level of questioning. 

Now, we hear some of this is all being done for efficiency purposes and other kinds of things and yet we have people that have 

39 questions that they’re asking on subsequent organizations. So 

the issue I have for you is, is there an ability to have these questions resolved as was stated by your successor, by a few people 

down in Cincinnati, or is there another level of questioning that 

these matters are vetted? Mr. Shulman. 

Mr. SHULMAN. I guess I’m not sure I understand your question 

but—— 

Mr. MEEHAN. The testimony—the testimony of Mr. Miller the 

other day, your successor, was that this matter was contained, it 

was his specific language, this was the result contained by a couple 

of low-level employees in Cincinnati. I’m having trouble really understanding where this is all coming from. And it was his testimony that it was a couple of low level people in Cincinnati. 

And now I’m seeing 39 questions that are sophisticated and complicated. And the question becomes, is there somebody else beyond 

Cincinnati that is participating in the vetting of these questionnaires? 

Mr. SHULMAN. So, the best of my understanding, I really don’t 

know who approves all of the questions. It’s pretty well outlined. 

I have made myself familiar with the IG report about requests for 

guidance and those kinds of things. 

Mr. MEEHAN. Mr. George, what do you know about this? 

Mr. GEORGE. Actually, Congressman, one of our recommendations which the administration has agreed would be—— 

Mr. MEEHAN. Mr. George, I’m not asking about a recommendation about what would be. I’m asking about what has happened because the testimony of Mr. Miller was this was contained to a couple of people back in Cincinnati. 

76 

Mr. GEORGE. Yeah, I’m not able to give—— 

Mr. MEEHAN. Let me give you a little bit of information because 

I have from the application. Now this is the attorney who has actually made the application and this is the words of the attorney, ‘‘Indeed more than one agent in Cincinnati has advised me that the 

instructions regarding the processing of the Tea Party related organization clients were coming from the Washington, D.C. office.’’ 

Were there other levels beyond Pittsburgh, I mean Cincinnati, as 

was testified by Mr. Shulman’s successor? 

Mr. GEORGE. That is still to be determined sir. 

Mr. MEEHAN. What ambiguity is there? What have you looked 

at? What questions have you asked to determine that? 

Mr. GEORGE. I have not been personally involved in the interviews but I do know that there have been conflicting information 

provided to, again, auditors not my investigators, sir, but my auditors as to how this came about. 

Mr. MEEHAN. Did you ask the question specifically whether there 

was anybody asking or involved in these evaluations beyond the 

Cincinnati office back in Washington? 

Mr. GEORGE. Yes. Yes. 

Mr. MEEHAN. And what was the answer? 

Mr. GEORGE. I beg your indulgence. 

Sir, can I get—— 

Mr. MEEHAN. No, you can’t get back to me. Your counsel just 

whispered something in your ear. What did he say? 

Mr. GEORGE. I didn’t hear. 

Apparently, again, the determinations unit on a number of occasions not, obviously I don’t know the instant matter you’re discussing, had made requests to the technical unit in Washington for 

guidance on how to handle certain matters. The technical unit in 

Washington took 14 months—— 

Mr. MEEHAN. So you’re saying that this was a request that was 

made from the floor that went up and asked the technical unit, 

there was no involvement from anybody in Washington in the form 

of participating or directing in which things came up? 

Mr. GEORGE. The answer is yes, but in this matter—— 

Mr. MEEHAN. There was involvement in Washington in which 

these came up? 

Mr. GEORGE. Yes, because the technical units—— 

Mr. MEEHAN. That contradicts the testimony of Mr. Miller, but 

please explain. 

Mr. GEORGE. Well, the technical unit is located in Washington, 

and as I discussed much earlier at this hearing, the technical unit 

took an enormous amount of time to respond to many of the requests from the—— 

Mr. MEEHAN. Five years, 4–1/2 for this applicant. 

Mr. GEORGE. Sir, but it’s very important for me to point out the 

administration has agreed to our recommendations, our recommendations that they curb all, excuse me, all the backlogs such 

as the ones that you’re referring to. And so, if they follow through 

on those recommendations, hopefully this matter that you’re referring to now will be addressed. 

Mr. MEEHAN. Well, I will have a series of other questions, but 

this is just so frustrating to me. The whole question here is we’ve 

77 

heard this from time to time just about accountability, and all the 

scandals we hear the same thing from time after time by the government officials that are involved—Benghazi, IRS, AP reporters, 

Fast and Furious, time after time we’re hearing people, it wasn’t 

my job. I don’t know. It was the other office. I recused. I didn’t find 

out about it until you found out about it. 

Where does the accountability begin? People’s lives are on the 

line, and these things overseas, people’s constitutional rights are at 

stake here. 

Where does the accountability begin? 

I’ll close with one comment. This was the President of the United 

States himself. These were his words on June 21, 2009, in the 

memorandum, ‘‘Governments should be transparent. Transparency 

promotes accountability and provides information for citizens about 

what their government is doing.’’ Then he spoke to the heads of the 

organizations, and these were his words, Let me say it as simply 

as I can, transparency and the rule of law will be the touchstones 

of this Presidency. Don’t let this President and this Nation down. 

Mr. GEORGE. Thank you. 

Mr. JORDAN. Mr. Chairman, point of order. 

Chairman ISSA. The gentleman from Ohio seeks recognition. 

Mr. JORDAN. I hope what Mr. Meehan says, I hope the chairman 

will look at calling in groups of the victims, 4–1/2 years, I would 

love to have them in front of us explaining what took place and 

what they had to go through. I hope we do at a subsequent date. 

Chairman ISSA. I will direct staff to attempt to vet groups that 

can come before as witnesses. As the gentleman knows, and I think 

has been said here, there is tremendous sensitivity as to personal 

information, but we certainly would welcome those groups asking 

us and then vet an appropriate panel. 

Mr. George, in my opening statement, I did talk about something 

we talked about personally which was that you could not rule out 

that there were other problems because of questions about internal 

controls, that discussion we had. 

I assume, in response to Mr. Meehan, the same is true, today you 

may not be able to speak to intervention that came from above or 

any other place, but you can’t rule out that there was some at some 

time? 

Mr. GEORGE. That is correct, sir. 

Chairman ISSA. Thank you. 

We now go to the gentlelady from Illinois, Ms. Kelly. 

Ms. KELLY. Thank you, Mr. Chairman. 

Mr. George, I want to ask about you a report that the IRS disclosed taxpayer information that it should not have. Section 6104 

A of the Tax Code allows public disclosure of an application for taxexempt status only after an organization has been recognized by 

the IRS as exempt. 

Last November, ProPublica reported that they requested from 

the IRS applications for 67 different nonprofits. In response, the 

Cincinnati IRS office sent ProPublica applications or 

documentations for 31 groups. Nine of those applications were still 

pending and had not yet been approved, meaning they were not 

supposed to be made public. 

78 

Mr. George, during the committees’s transcribed interview with 

Ms. Paz, committee staff asked her how this happened, and she explained that an administrative employee in Cincinnati who is supposed to check each application to ensure that it had been approved before disclosing it had made a mistake. Ms. Paz also told 

us that when the IRS discovered this disclosure, they referred the 

matter to your office. Is that correct? 

Mr. GEORGE. I cannot even acknowledge the existence of an investigation, Congresswoman, pursuant to title 26 section 6103 of 

the United States Code. 

Ms. KELLY. Well, can I read to you what she told us. 

Ms. Paz told our investigators that your office determined that 

this disclosure was inadvertent. And I will read about the IGs review, and I quote, they found that there was no evidence that the 

employee had done it for any political reason, that there was no 

reason to believe that it was anything other than a mistake. 

Can you tell us, Mr. George, did you, in fact, find any evidence 

that this release was intentional or that it was motivated by any 

political considerations? 

Mr. GEORGE. Notwithstanding the fact that the victim is in a position to disclose his or her or its status, Congresswoman, I’m not 

able to comment on it, pursuant to law, and I don’t want to go to 

jail. 

Ms. KELLY. I don’t want you to go to jail either. Can you recommend taking any actions even if it’s generic? And you’re not 

talking about a specific case. 

Mr. GEORGE. If there is a matter that was sent to us for investigation I can assure you that we did investigate it ma’am. We 

have initiated over 143 unauthorized disclosure cases last year and 

counting. 

Ms. KELLY. Okay. Also we do have a new acting Commissioner, 

and he’s tasked with addressing problems and restoring faith in 

the IRS. What would be your best advice for the acting commissioner? And what are things you think he should undertake quickly 

in the next 30 days? 

Mr. GEORGE. Thank you for asking that question. Mr. Werfel has 

reached out to me already and has requested a meeting as soon as 

this week to discuss some of the problems confronting the Internal 

Revenue Service. And I’ve made a commitment to work with him 

to help him become familiar with the problems within the IRS that 

we’ve identified and ways to hope in the future to avoid them, obviously to address the problems that currently exist and to avoid future problems. 

Ms. KELLY. And do you foresee this meeting taking place within 

the next 30 days? 

Mr. GEORGE. It’s happening next week, ma’am. 

Ms. KELLY. Thank you. I yield back. 

Mr. CUMMINGS. Would the gentlelady yield? Let me just add just 

following up on what the gentlelady just asked you about. When 

Mr. Werfel comes in to meet with you, how much latitude do you 

have with regard to disclosure? You just cited, and rightfully so, 

things that you can’t disclose and whatever, how much information 

can you provide him? 

79 

Mr. GEORGE. I have the ability to provide him, the Deputy Secretary and the Secretary of the Treasury, again, along with the 

chairman of the Ways and Means Committee, the chairman of the 

Senate Finance Committee and the chairman of the Joint Committee on Tax any and all information, sir. 

Mr. CUMMINGS. So you’ll be able to tell him about ongoing investigations and what you have found to date, is that correct? 

Mr. GEORGE. That is correct, sir. 

Mr. CUMMINGS. So he would be in a position therefore to—I’m 

not saying he will, but I hope he will—to be able to make corrections and try to create a better situation and correct some of the 

things that we’ve been hearing and reading about, is that right? 

Mr. GEORGE. That is correct. But he is also confined by title 26 

section 6103, so he’ll be limited in terms of what he can publicly 

disclose but—— 

Mr. CUMMINGS. But the most important thing he will be supplied 

with adequate information so that he can begin to deal with this 

immediately because I think all of us want that trust restored with 

regard to the American people as soon as possible, so I’m hoping 

that you will disclose everything. 

Mr. GEORGE. I certainly will sir. 

Mr. CUMMINGS. Thank you. 

Chairman ISSA. Thank you. Now we now go to the gentleman 

from North Carolina who has been in and out of here but who has 

been active on this issue. The gentleman is recognized. 

Mr. MCHENRY. Thanks so much. Thank you, Mr. Chairman. 

So, Mr. Wolin, so, do you have meetings with Mr. Shulman and 

his then-deputy Commissioner Miller? Did you do that on a fairly 

regular basis? 

Mr. WOLIN. I had, Congressman, quarterly management review 

meetings where we looked at broad issues with respect to the budget and to how their IT refresh was going and so forth, again, taking 

full cognizance of this relationship with the IRS where we didn’t 

engage in discussions, didn’t work in the details of tax administration or tax enforcement. 

Mr. MCHENRY. Right. Right, but, so, okay, roughly four times a 

year you sit down, go over the budget, talk things through, that’s 

good. And in terms of report stream you are the appropriate person 

for that to happen in Treasury. I understand that. 

So you are regularly have this meeting and you discuss budget 

issues. But this issue about IRS employees’ targeting conservative 

groups, did that ever come up in any of these meetings? 

Mr. WOLIN. It did not. I have no recollection of that at all, Congressman. 

Mr. MCHENRY. So knowing what you now know, do you think 

there might have been a concerted effort to kind of prevent the report stream, I mean prevent this from coming to you? 

Mr. WOLIN. I don’t know, Congressman, exactly what was going 

on within the IRS on this. What I know is that, in general, and 

this is Treasury-IRS relationships with many administrations now 

of both political parties—— 

Mr. MCHENRY. No, no. I understand. I’m not saying that the IRS 

is a venerable organization but certainly not as bad as what we 

have come to find out in this problem. So, in May of 2012, the IRS 

80 

had completed an internal review and investigation. Were you informed of that internal review and investigation? 

Mr. WOLIN. No, Congressman as I testified earlier this morning, 

I learned of that just in the last few days. 

Mr. MCHENRY. But were you informed—you were informed in 

June 2012 that the IG was undertaking their audit or review right? 

Mr. WOLIN. I’m not sure precisely, Congressman, when it was 

but at some point Mr. George came to me and said he was undertaking an audit. 

Mr. MCHENRY. May, June, July, summer of 2012? 

Mr. WOLIN. Some point in 2012. 

Mr. MCHENRY. Some point in 2012? Was it perhaps before the 

first Tuesday after the first Monday in November? Just establish 

as a fact here. 

Mr. WOLIN. It may have been, Congressman. Again, I don’t precisely recall when it was. 

Mr. MCHENRY. Mr. George, do you have some further vague 

recollection, was it perhaps hot outside or were you wearing an 

overcoat, some time frame for me? Not to be glib about it. 

Mr. GEORGE. No, no, no, sir. It was in the summer of 2012. 

Mr. MCHENRY. Thank you. So in summer 2012, you are informed 

the IG is undertaking its review. Does this raise any sort of concern with you? 

Mr. WOLIN. Well, what it raises for me is what I said earlier 

which is once the IG is looking at an issue, we—— 

Mr. MCHENRY. I understand. I understand. I’m separate from 

that. I’m not saying you go to Mr. George and try to manhandle 

him and say don’t do this. I’m not making that accusation okay. 

Just to be clear. What I’m saying is he brings this very serious 

matter to you, you’ve received letters from the left and the right 

in Congress to the Department of Treasury, among various other 

administration officials, right, they send letters to the Treasury 

and to the IG, there are press reports in the spring of that year, 

there is some concern your IG comes forward and says, look, we’re 

going to take this review, don’t you go, this is kind of a good thing, 

bad thing? Come on, give me some sort of sense of your emotions. 

You’re a human person too. 

Mr. WOLIN. Congressman, I did not have an awareness of this 

issue before. I don’t believe—— 

Mr. MCHENRY. No, no, no, I’m not talking about your learning. 

I’m talking about your feelings. Let’s talk about your feelings then 

when you heard the IG is going to do this. You’re serving a President, the President appointed you, you’re Senate confirmed, a very 

important position. You’re there from the beginning of the administration. The IG comes to you and says we’re looking into this very 

damning thing. It’s a Presidential election year. You don’t say for 

a minute this is kind of frightening? 

Mr. WOLIN. He didn’t come to me with conclusions, Congressman, he came to me with the fact of the audit. So what I said to 

him was, this is important and you should follow the facts where 

they lead. 

Mr. MCHENRY. So then take me from there. Do you tell anybody? 

Mr. WOLIN. No, not until much, much later. 

Mr. MCHENRY. When? Like when? 

81 

Mr. WOLIN. I can’t remember, but at some point later, I came to 

learn that the IG had also told the facts of his audit to some other 

folks. 

Mr. MCHENRY. No, no, no, we’re talking about summer of 2012. 

The election is coming up, it’s unclear who’s going to win, your guy 

that nominated you and I assume you still support him, but in 

2012, you’re looking at this election year and you don’t pick up the 

phone and say to your contacts at the White House, which, you 

know, say, just as a heads up, this could actually hit the fan in a 

Presidential year. 

Mr. WOLIN. I did not, Congressman. 

Mr. MCHENRY. Okay. And you don’t tell anybody in the Office of 

Counsel at the White House? 

Mr. WOLIN. I did not. 

Mr. MCHENRY. So the first time you’d learned about conservative 

groups being targeted by the IRS was when this report came out? 

Mr. WOLIN. The first time I learned that there was, before the 

report came out, a draft of the report was shared with IRS and IRS 

staff, as I think is now public, I had conversations with some people at the Treasury Department. I didn’t have any understanding 

of the details. But I understood from Mr. George I think at some 

point in the last 7 weeks that this was going to be a report that 

was going to reach a very damning conclusion, but I didn’t have 

any understanding at that point—— 

Mr. MCHENRY. So did you give a heads up to the White House 

chief of staff? 

Mr. WOLIN. I did not. 

Mr. MCHENRY. Okay. Thank you, Mr. Chairman. Thanks for 

your indulgence. The absurdity of this is that when a huge accusation is being undertaken by an Inspector General in a Presidential 

year, I just, it is beyond me to think that an administration official 

wouldn’t have made—let me ask another question. Did you contact 

Chicago about it? 

Chairman ISSA. The gentleman’s time is expired. Make it very 

quick. 

Mr. MCHENRY. Did you contact the campaign about it? 

Mr. WOLIN. I never had any contact with the campaign. 

Chairman ISSA. Mr. George, just for the record, the date that the 

draft was shared to your recollection? I think it’s on your timeline. 

Mr. GEORGE. A draft was shared with whom, sir. 

Chairman ISSA. With the Treasury. 

Mr. GEORGE. Well, it would have been shared with the—we don’t 

share drafts with the Treasury. We share them with the IRS. 

Chairman ISSA. I’m sorry you share them with the IRS. And I 

thought there was a date you shared with the consult for Treasury. 

I don’t have that draft in front of me. You shared an unofficial 

draft. I just want to know if you have an official date on that one 

event. I just want it in the record. 

Mr. GEORGE. March 28, 2013, a discussion draft report was 

shared with the Internal Revenue Service. 

Chairman ISSA. So that’s the date with the IRS. And the 27th 

was the Acting Commissioner? 

Mr. GEORGE. Yeah, I have monthly meetings with the Acting 

Commissioner, just principal deputy as we indicated—— 

82 

Chairman ISSA. So outside of the Office of the Inspector General, 

before or after March 27, 28, were any other drafts or portions of 

drafts circulated outside of your direct reports? 

Mr. GEORGE. If the question is whether TIGTA, my office, shared 

drafts, we would have shared drafts with the IRS, I believe. 

Chairman ISSA. But in this discussion draft, or this set of 

timelines you gave us, we only had the IG function head briefing, 

including the Acting Commissioner and discussion draft issued to 

the IRS the next day. 

Are there any other days in which discussion drafts or preliminary or portions were shared with anyone outside of your direct reports as the IG? 

Mr. GEORGE. Sir, during the course of an audit, there is a back 

and forth sharing of information between the subject of the audit 

and our—— 

Chairman ISSA. The reason I ask is Mr. Shulman knows nothing. 

Mr. Wolin knows nothing in almost any of these areas, either he 

doesn’t remember or he didn’t know, so can you make available to 

us, to the greatest extent possible, those back and forth discussions 

that occurred with anyone including Ms. Paz and others so that we 

have a complete record of sort of who knew what when? 

Mr. GEORGE. We will provide that. 

Chairman ISSA. Because as you know, we didn’t know any of this 

until long after the 28th of March. 

Mr. GEORGE. Very good. We will provide that. 

Chairman ISSA. Thank you. We now go to gentleman from Illinois. We are on a roll with the Illinois folks, Mr. Davis. 

Mr. DAVIS. Mr. Chairman, thank you very much for holding 

these hearings. Mr. George, let me commend you for your stamina 

and composure. It seems to me that you’ve been testifying around 

the clock all week. This is my second encounter with you from another committee. 

Let me ask you, according to your report, about one-third of the 

organizations selected for further review were groups with the 

words Tea Party, Patriots, and 9/12 in their names. Is that correct? 

Mr. GEORGE. Yes. Yes, it is sir. 

Mr. DAVIS. Your report also found that as of December 2012, 

none of the applications submitted by these targeted groups had 

been denied, is that correct? 

Mr. GEORGE. That is correct, sir. 

Mr. DAVIS. Several progressive groups have now come forward to 

say that they were also included in this enhanced review process. 

According to these groups, they also received requests for additional information similar to those sent to conservative groups. The 

IRS asked them for detailed information about the meeting minutes, officers and board members and specific activities they conducted. These groups also experienced substantial delays in the 

processing of their applications, and in some cases, were denied 

tax-exempt status. 

Mr. George, how is it that these progressive groups were included in the enhanced review if their names did not have the 

words Tea Party or other designated words. 

Mr. GEORGE. Mr. Davis, first of all, in the course of this review, 

we were looking at political intervention and that was the exclusive 

83 

charge that we had. I have subsequently received information that 

what you’re indicating may have occurred. And as a result, we will 

be conducting a follow-up review to determine whether or not that 

is the case and if so, the extent of it. 

Mr. DAVIS. Thank you. You testified yesterday that in conducting 

the audit, your office did not give further review to any of the more 

than 200 501(c)(4) applications in your statistical sample, and did 

not have Tea Party, 9/12, or Patriots in their title. Is that correct? 

Mr. GEORGE. We looked, sir, I beg your indulgence—— 

Two hundred and two non-Tea Party cases and so, the various 

groups that you just enumerated, were reviewed for indications of 

significant political campaign intervention which was our key criteria, again, in this exercise, in this review, Congressman, we did 

not evaluate whether or not they were conservative groups or progressive groups or liberal groups or whatever term you want to use, 

because those groups did not again have the be-on-the-look-out 

terms, Tea Party, Patriot or 9/12 in their names. 

Mr. DAVIS. But then it is true that conservative sounding groups, 

or with the names that some people would associate with being 

conservative were not the only groups who went through this process and were treated essentially the same way? 

Mr. GEORGE. We were unable—we did not make that determination, sir, for fear of not being able to determine what groups did 

for what position. But it is a possibility. 

Mr. DAVIS. Thank you very much. And I have one question, Mr. 

Wolin. What is your title? 

Mr. WOLIN. I’m the Deputy Secretary of the Treasury, Congressman. 

Mr. DAVIS. And the Internal Revenue Service reports up through 

you? 

Mr. WOLIN. It does. 

Mr. DAVIS. And did—when they encountered these applications, 

did anyone come to you for advice or come to you and say we’re 

getting all of these applications, we’re not sure what to do with 

them, what do you suggest or recommend? 

Mr. WOLIN. No, they did not, Congressman. 

Mr. DAVIS. Thank you very much. Mr. Chairman, I yield back. 

Chairman ISSA. I thank the gentleman. And I would like to let 

everyone know that the intent of the chair is not to stop during the 

upcoming votes. So as we get close to the votes, if some folks that 

are not in the queue want to go, there will be two votes, they can 

go to either one of them or both of them and then return. My expectation is that I will continue until concluded. If you are not here 

and we pass you by, and we get to the end, we will dismiss our 

witnesses. So do your best to get back quickly. 

Immediately following the hearing, we will go into a markup. 

This is a bipartisan markup but we still want a quorum, so please 

make sure you’re here. With that, we go to the gentleman from 

Tennessee, Mr. DesJarlais. 

Mr. DESJARLAIS. Thank you, Mr. Chairman, and I thank the witnesses for appearing here today. We start a lot of these hearings 

saying we don’t want this to turn political, but we’re almost in kind 

of a strange parallel universe today where Democrats and RepubVerDate Aug 31 2005 09:13 Jul 10, 2013 Jkt 000000 PO 00000 Frm 00087 Fmt 6633 Sfmt 6633 C:\DOCS\81742.TXT APRIL
84 

licans alike are in agreement that what has happened here just 

shakes the very foundation of what this country was built on. 

People are here today to get answers about what the outcome of 

this is going to be, and who’s going to be held responsible. We all 

trotted off to our high school government classes and history classes, and we were told what a great country we are because of the 

freedom we have, the freedom of the First Amendment, freedom of 

speech, the right to hold elections without fear of tyranny or being 

oppressed. But now we have a Federal agency that has admittedly 

targeted, in this case, conservative groups, and I think both sides 

are equally concerned because this could go either way. 

And I think what people want to know is who is going to be held 

accountable and how they’re going to be held accountable, how high 

up this went or didn’t go. And so we’re here today to find those answers. 

Now, Mr. Shulman, do you consider yourself a good leader? 

Mr. SHULMAN. Excuse me? 

Mr. DESJARLAIS. Do you consider yourself a good leader? 

Mr. SHULMAN. I do. 

Mr. DESJARLAIS. So you’re, as an American, outraged like the 

President over what’s happened within your agency; is that correct? 

Mr. SHULMAN. I’m deeply saddened and dismayed that this happened at the agency. 

Mr. DESJARLAIS. What would be justice to you? What would restore the faith in the American people in the IRS in your opinion? 

What should be done? 

Mr. SHULMAN. I don’t have all the facts, and I’m not in a position 

to, I’m outside of the government at this point, so it’s not my decision what should be done. 

Mr. DESJARLAIS. But you admit that people were targeted and 

you found out about that over a year ago. You knew that conservative groups were targeted? 

Mr. SHULMAN. No, I, over a year ago, was informed that there 

was a list. I did not know the details I didn’t know the severity—— 

Mr. DESJARLAIS. A list of people who were targeted? This is really hard for you to say. Everyone else is saying it, but you can’t say 

that there were groups targeted. 

Mr. SHULMAN. As of May 2013, so sitting here today, you can call 

it what you want—— 

Mr. DESJARLAIS. A year ago you didn’t know people were targeted. Did Mr. Miller, your predecessor, did he know groups were 

being targeted? 

Mr. SHULMAN. I can’t tell you what he knew, I can tell you what 

he told me. 

Mr. DESJARLAIS. What did he tell you? 

Mr. SHULMAN. What I said that he told me there was a list, that 

the word Tea Party was on it, we didn’t know what else—— 

Mr. DESJARLAIS. And when did you know this? You knew this before the election? 

Mr. SHULMAN. What’s that? 

Mr. DESJARLAIS. You knew this before the election? 

Mr. SHULMAN. Some time in the spring of 2012. 

85 

Mr. DESJARLAIS. Okay, that would be before the election I believe. You did know there was an election going on that year? 

Mr. SHULMAN. I’m aware that there was an election last year. 

Mr. DESJARLAIS. Do you think that that type of information 

could potentially harm the President in an election year? Did that 

cross your mind? 

Mr. SHULMAN. No. That did not cross my mind. I was the Commissioner of the Internal Revenue Service, and when I got a piece 

of information of concern, I viewed my obligation not to think about 

elections, but to think about was—once information came to me, 

was it being handled properly, and as I’ve said before, I’ve been 

told that it had been stopped or was in the process of being stopped 

and that the—— 

Mr. DESJARLAIS. As a good leader, that was good enough for you? 

Mr. SHULMAN. Excuse me? 

Mr. DESJARLAIS. As a good leader that was good enough for you? 

Mr. SHULMAN. I feel very comfortable with my actions. 

Mr. DESJARLAIS. What about the credibility of the IRS moving 

forward with implementing the health care law? A year or so ago 

you and I had a conversation in this room about the IRS’ readiness 

to implement the health care law. You felt that even though it took 

55 minutes for a person calling about a tax question to talk to a 

human being to get an answer, that you felt comfortable that we 

would ready to implement this health care law, how do you feel 

about that today? I know this won’t be your responsibility, do you 

still think the IRS is ready and has the confidence of the American 

people to share their most personal information with them? To go 

ahead and implement the new health care law? 

Mr. SHULMAN. I think a couple of things. I think one, the last 

couple of years, Congress has not been funding the IRS sufficiently, 

and I would defer to the Inspector General who’s done some look, 

at least when I left, had been looking at is the IRS ready to implement its portion—— 

Mr. DESJARLAIS. Are they competent to do it? Are they trustworthy enough? This is personal information people are going to 

have to share. We have to restore the confidence, and we don’t even 

know what we’re going to do in this case where our most basic freedom of speech has been violated, and you don’t know whether anyone should go to jail, you don’t know who should be held accountable. 

Mr. SHULMAN. Look, I feel very confident in the men and women 

of the IRS to do the task they gave them. There was clearly a serious breakdown in this unit, and in the topic here, and it’s very serious and the committee should be looking at it, et cetera. But I feel 

very confident in the capability of the IRS broadly and generally. 

Mr. DESJARLAIS. We’ll see if America shares your views. And I 

yield back. 

Chairman ISSA. I thank the gentleman. 

The gentleman from Vermont is recognized. 

Mr. WELCH. I thank the gentleman for this hearing and support 

the aggressive investigation. 

Mr. Chairman, you’re known to be aggressive, you’re known to 

be persistent and those are qualities that are going to serve us well 

in this effort. 

86 

There’s really two issues. The first is vitally important, is has the 

principle of equal protection and equal enforcement of the law been 

violated? And the second question is whether First Amendment 

rights have been infringed? Those are the focus of this hearing. 

And I support the aggressive efforts of this committee led by our 

chairman and ranking member to, A, determine the facts and, B, 

follow the facts wherever they lead. 

America deserves an answer, and the fundamental question here 

is whether or not at the end of this investigation the conclusion is, 

this was poor judgment and mismanagement or what really is actions politically directed and politically motivated by politically 

powerful people? 

That’s our oversight function. And you’re pursuing that as you’ve 

said aggressively and we support that, both of you. 

But there is an oversight function, as Mr. Cummings said, and 

the oversight question asks us the question as to what is going on 

in the campaign finance world that we all live in? 

It also raises the question as to whether or not America’s institutions are failing the American people that they serve. This was a 

failure by the IRS, whichever conclusion the facts lead us to. Just 

the conduct that raises legitimate questions as to whether or not 

there’s been selective enforcement and politically motivated action 

compromises the ability of that institution, the Internal Revenue 

Service, to have credibility to do the job that the law requires it 

to do. 

But this mess goes back to a decision by the United States Supreme Court in Citizens United. In that case, in my view, the court 

made what I think is an absurd decision. They said a corporation 

is a person. Corporations have rights and they should be protected. 

Corporations serve a very important function in our economy, and 

those should be promoted. But a person like you or like me? That’s 

just nutty. 

You know, when it comes to this question of personhood, Mr. 

Chairman, and I’m talking about this because of our oversight 

function where I hope we do find some common ground, the Supreme Court gets it wrong. 

In 1857, in the Dred Scott decision, the Supreme Court said an 

African American was not a person. That is a stain on the court, 

it’s a stain on our history. That was corrected by this Congress in 

1868 with the 14th Amendment. 

And one of the challenges we face as a Congress is whether or 

not we’re going to acknowledge what has happened in campaign finance since Citizens United. And let me just give a few facts because this is really, I think, my view, a threat to the access to democracy by everyday people. Last Presidential election, our candidate spent 1.1 billion between what he raised and what outside 

groups—— 

Chairman ISSA. Put a B on that one, if you would. Billion. 

Mr. WELCH. Thank you. And the Republican candidate spent 

about the same. And in the quaint old days when President Clinton 

ran for his first race, he spent about $42 million, that’s an M, and 

Mr. Dole spent about $44 million. And the Congressional races that 

we’ve all been engaged in, the House races were $1.1 billion, and 

87 

the Massachusetts Senate race $82 million. The House race in Florida, $23 million. 

And what has happened with all of this money coming into the 

political process—and I think we’ve all experienced this because 

I’ve talked to my colleagues, there’s more 30-second attack ads they 

do nothing to elevate the debate or explain the sharp divisions we 

have on a legitimate issue of taxing and spending. There’s less control that each of us as a candidate have over what it is we’re promoting to the people we’re trying to represent because outside 

groups are starting to spend more than the individual candidate 

does. 

There’s more despair by citizens that we all represent that this 

political system has anything to do with anything they care about. 

And this is something I’ve noticed as a Member of Congress, there’s 

less ability for us to try to find common ground and make compromises that are in the public interest because some loopy billionaire on your side or ours, can flood the airwaves with an avalanche 

of cash criticizing us because we actually dare to make some compromises. 

So this campaign finance system, in my view, Mr. Chairman, is 

in dire need of reform. 

So, yes, let’s get to the bottom of this situation. But let’s also acknowledge that this money that is coming into the political system 

is the very threat to our ability of this institution to do the job that 

the people expect it to do and the Constitution requires us to do. 

I yield back. 

Chairman ISSA. I thank the gentleman. We now go to a gentleman who got here based on his ability as an attorney, not on 

based on being a billionaire, Mr. Gowdy. 

Mr. GOWDY. Thank you, Mr. Chairman. 

Mr. Shulman, when you learned that conservative groups were 

being targeted by the IRS for discriminatory treatment, what did 

you do? 

Mr. SHULMAN. When I learned of the existence of a BOLO list, 

in that same conversation, or right around that time, I also learned 

a couple of things. One, that it was being stopped so that—— 

Mr. GOWDY. All right, and who told you it was being stopped? 

Mr. SHULMAN. That was Steve Miller, my deputy. 

Mr. GOWDY. All right, and did you investigate further; can you 

give me the name of a single person who was involved in the original decision to target conservative groups for disparate treatment? 

Mr. SHULMAN. I’m not aware of those names. 

Mr. GOWDY. Why can’t you give me a name? 

Mr. SHULMAN. The same time that I learned and that it was 

being stopped, I was also told that the Inspector General was 

aware of it. 

Mr. GOWDY. Mr. Shulman, is the Inspector General the only person who can investigate wrongdoing within the IRS? 

Mr. SHULMAN. My general practice—— 

Mr. GOWDY. Can you answer my question and then you can explain? Is the Inspector General the only entity who can investigate 

wrongdoing? 

Mr. SHULMAN. Congress can investigate. 

Mr. GOWDY. How about you? Can you do it? 

88 

Mr. SHULMAN. The practice at the Internal Revenue Service that 

I inherited, and the one that I operated—— 

Mr. GOWDY. So if there is inappropriate conduct being done in 

your watch at the IRS, then that inappropriate conduct can last as 

long as the Inspector General’s investigation lasts, is that what you 

are telling me? That you are not going to step in and stop it? 

Mr. SHULMAN. No, I’m—what I’m telling you—— 

Mr. GOWDY. If there is someone wielding a knife in the parking 

lot, are you going to call the Inspector General? Are you going to 

wait until his or her investigation is over before you stop it? 

Mr. SHULMAN. When I was told about this, these allegations, I 

was also told that they were being stopped, and so that the inappropriate criteria were not being used anymore. 

Mr. GOWDY. Despite the seriousness and potential criminality of 

that conduct, you didn’t investigate it yourself at all? 

Mr. SHULMAN. So the procedure is that I inherited and that my 

general practice was—— 

Mr. GOWDY. Mr. Shulman, this is going to go much quicker if you 

will answer yes or no, and then you can explain. 

Did you do anything to verify that the practice as insidious as 

it was, was stopped? 

Mr. SHULMAN. The Inspector General was going to be looking 

into it. And that’s where the investigation—— 

Mr. GOWDY. If you can, say yes or no, or are you just choosing 

not to say yes or no? Can you answer the question? Did you do anything, personally, to make sure that this insidious discriminatory 

practice was stopped? Yes or no? 

Mr. SHULMAN. At the time that I learned about it, I also learned 

two things. The first was that it was being stopped, and the second 

was that the Inspector General—— 

Mr. GOWDY. And what did you do to verify that it was being 

stopped? 

Mr. SHULMAN. The responsible deputy of the Internal Revenue 

Service told me it was being stopped. I had no reason to believe 

otherwise. I think it is borne—— 

Mr. GOWDY. Did you investigate why conservative groups were 

being targeted? 

Mr. SHULMAN. Excuse me? 

Mr. GOWDY. Did you investigate? So you can’t give me a single 

name. You can’t answer the who. Can you tell me the why? Why 

were conservative groups, why was the culture such that under 

your watch that an employee felt comfortable targeting conservative groups? Did you investigate that? 

Mr. SHULMAN. You know, from my reading of the report, I can’t 

tell if it was political motivation, or if it was tone deaf, somebody 

trying to expedite a way to get—— 

Mr. GOWDY. You still don’t know that this was political? 

Mr. SHULMAN. Excuse me? 

Mr. GOWDY. You still don’t know that this was political? 

Mr. SHULMAN. I defer to the Inspector General. 

Mr. GOWDY. Well, I will tell you this, Mr. Shulman, your predecessor said that he wasn’t sure if it was partisan, and that requires 

the listener to be as stupid as the speaker, to utter a comment like 

89 

that. He just testified that policy positions dictated this. What does 

that mean to you if it is not partisan? What does that mean? 

Mr. SHULMAN. I’m not sure I heard that testimony. 

Mr. GOWDY. Well, we will be sure and get you a copy of the transcript and you can supplement your testimony. How is that? 

Mr. SHULMAN. I would be happy to answer the committee’s questions. 

Mr. GOWDY. Do you agree with Dan Pfeiffer that the law is irrelevant, or do you think it is relevant? 

Mr. SHULMAN. I think the law is always relevant. 

Mr. GOWDY. Do you think 26 USC 7214 which provides for criminal penalties for this conduct would be relevant, and did you refer 

the matter to someone with law enforcement investigative jurisdiction? 

Mr. SHULMAN. I’m—A, I’m not going to speculate what is appropriate legally in this matter, and Mr. George, I knew his operation 

was looking at it, I believe. 

Mr. GOWDY. I thought it was an audit. I thought he just testified 

it was an audit, not an investigation. Did you refer it for criminal 

investigation? 

Mr. SHULMAN. I didn’t refer it. It was already being looked into 

at the time that it was brought to my attention. 

Mr. GOWDY. So I want to be real clear because my time is up. 

The only recourse you have when there is an allegation of wrongful 

conduct on your watch, the only thing you feel comfortable doing 

is waiting on an Inspector General to finish his or her report? 

Mr. SHULMAN. The general practice is to make sure the Inspector 

General will look into it. 

Mr. GOWDY. No matter how insidious the conduct. If it were an 

allegation of racial discrimination, you would have waited until Mr. 

George finished his investigation? Is that your testimony? 

Mr. SHULMAN. I’m really not going to answer hypotheticals. 

Mr. GOWDY. I tell you what, instead of answering my hypothetical, why don’t you answer the case at bar today? If there is 

an allegation that groups are being discriminated against based on 

political ideology, are you really going to wait until an Inspector 

General finishes his or her report before you take corrective remedial action? 

Mr. SHULMAN. When I have a fact, but I don’t have all of the 

facts, and I don’t know the scope and—— 

Mr. GOWDY. Did you investigate the facts, Mr. Shulman? Did you 

lift a finger to identify the facts? 

Mr. SHULMAN. I felt very comfortable with the facts, the Inspector General was going to run down the facts and once he had it, 

it would be reported out. 

Mr. GOWDY. Let the record reflect that’s a no. I yield back. 

Mr. JORDAN. [Presiding.] I thank the gentlemen. I know you guys 

have been here a long time. We appreciate your patience. We are— 

we have to give you time to use the men’s room, so we are going 

to take a short recess, 5 minutes. The chairman is headed over to 

votes—have the votes been called? Votes just got called, so in 5 

minutes we are going to bring you back and when the chairman 

gets back from voting, and I’m going to try to run—we are not 

going to recess. We are just going to give you a restroom break. 

90 

[Recess.] 

Mr. JORDAN. Take your seats, members who are still here. I want 

to thank our witnesses, and appreciate the time commitment and 

their patience. The gentleman from Nevada, Mr. Horsford, is recognized for 5 minutes. 

Mr. HORSFORD. Thank you, Mr. Chairman. I agree with a number of my colleagues here today that the behavior of the IRS has 

been inexcusable in regard to this situation. You know, no group 

or person should be inappropriately scrutinized because of their political affiliation, and the bottom line, unfortunately, is that this is 

not the first time that this has happened. Focusing on groups because of their political beliefs was wrong when the IRS did it to 

Greenpeace. It is wrong when the IRS did it to the NAACP, and 

it is wrong now when they have done it to the 501(c)(4) applicants. 

Regardless of which party holds power, this behavior has to stop. 

What I would like to focus on is how we can reform this process 

so that it never happens again. 

Following up on the ranking member, and Representative 

Speier’s line of questioning, the Inspector General’s report found 

that the IRS employees in Cincinnati: ‘‘Lacked knowledge of what 

activities are allowed by tax-exempt organizations.’’ It explained in 

the report that we believe this could be due to a lack of specific 

guidance on how to determine the primary activity of an IRC 

501(c)(4) organization. 

Treasury regulations state that IRC 501(c)(4) organizations 

should have social welfare as their: ‘‘primary activity.’’ However, 

the regulations do not define how to measure whether social welfare is in an organization’s primary activity. 

So Mr. Shulman, as the past agency head, in judging whether a 

501(c)(4) has conducted an impermissible level of political activity, 

the IRS applies a wide-ranging, multi-factor facts and circumstances test, is that correct? 

Mr. SHULMAN. Yeah. First of all, I’m not an expert in 501(c)(4) 

law and the details of how individual applications are reviewed, 

but, yes, I mean, the—broadly, they look, the IRS looks for—to see 

if political activity is the primary activity, which would disqualify 

an organization from being a 501(c)(4), and the inquiry’s done, or 

at least should be done, is broadly done on a facts and circumstances basis. 

Mr. HORSFORD. Okay. Well, someone who is an expert, Professor 

Ellen April, has explained that the IRS’s facts and circumstances 

test: ‘‘reach broadly, gives discretion to the administrators, and 

leaves many organizations and their advisers with little certainty 

on how to conduct their activity day to day.’’ 

So, Mr. George, do you believe a clear, bright line test for what 

is permissible level of political activity would be helpful to the IRS 

specialist? 

Mr. GEORGE. Well, again, I’m going to have to preface my response by saying that the Secretary has delegated tax policy to the 

Assistant Secretary for Tax Policy. There is no question that clarity 

in how—in the law and how to implement it would certainly help 

anyone who’s trying to apply the law, in this instance—— 

Mr. HORSFORD. Has you—has your office made that recommendation? 

91 

Mr. GEORGE. We have. And one of the recommendations in this 

report is that the Internal Revenue Service work with the Department of the Treasury for clarity in this area, sir. 

Mr. HORSFORD. Well, I think it’s imperative, particularly since 

primary activity isn’t even the standard. It is, according to the Federal law, exclusively. ‘‘Exclusively’’ is stated twice. In 501(c)(4)(a) of 

the Federal Tax Code, it is stated nowhere primary activity, and 

yet that is what the standard is that’s being used by IRS, and that 

standard is not even clearly defined. So this is a major loophole 

that must be addressed. 

Mr. Wolin, are you intending to revisit these regulations so that 

taxpayers are on notice of what legal requirements are and how 

auditors can enforce the rules fairly? 

Mr. WOLIN. Congressman, the IGs report makes clear that additional guidance in this area is necessary, and we will work with the 

new Acting Commissioner to do just that. This is very old guidance, 

it’s in a very complicated area, but we will endeavor to make sure 

that we can provide as much clarity as possible. 

Mr. HORSFORD. Well, again, I would just hope, based on what the 

chair and the ranking member indicated, with the new Commissioner coming in, you’re right, for years we have had this ambiguity. Tax and campaign finance experts have urged the IRS and 

the Treasury Department to better define electoral advocacy beyond the ambiguous facts and circumstances test and to set clear 

limits for how much political advocacy is too much, but the agencies have failed to respond. So I hope that based on the leadership 

of this committee within our oversight and reform role—this is a 

reform policy that cannot wait, because it did not just happen to 

this group or set of groups, it’s happened before, and it must stop. 

Thank you, Mr. Chairman. 

Chairman ISSA. I thank the gentleman. We now recognize the 

gentleman from Texas, Mr. Farenthold. 

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

Mr. George, earlier on you testified that some of the questions 

that were asked to some of these groups included a request for 

their list of donors. Do we know what happened to those lists of 

donors? Do we have any insurance that—or assurances that those 

lists weren’t made public or somebody snapped a picture with their 

cell phone and sent it to an opposing group or a political candidate 

or somebody? 

Mr. GEORGE. Very good question, Congressman. We were told by 

the IRS, the office that collected this information, that they did destroy the information. However, again, they were not under oath, 

we weren’t there when it happened, but we have to take them at 

their word. 

Mr. FARENTHOLD. Yes. But we have no conclusive evidence that 

somebody wasn’t trying to create an enemies list or something like 

that. 

Mr. GEORGE. That’s correct, sir. 

Mr. FARENTHOLD. All right. Let’s talk a little bit about the IRS 

procedure. There was a Fox News report today that the President’s 

brother, I think, got his 501(c)(4) approved in a matter of days, and 

we’ve got conservative groups and possibly other groups that are 

waiting multiple years. 

92 

Is there a standard of time within the IRS that these are expected to be handled? Are there some processes and procedures in 

place? 

Mr. GEORGE. Addressed to me? 

Mr. FARENTHOLD. I’ll start with you, Mr. George. 

Mr. GEORGE. Well, first of all, I cannot under—pursuant to Title 

26.6103 make any comment that would in any way make—— 

Mr. FARENTHOLD. No. I’m asking about the procedures of the 

IRS. 

Mr. GEORGE. Yes. Go ahead. 

Mr. FARENTHOLD. There is a procedure in place to—— 

Mr. GEORGE. Yes. 

Mr. FARENTHOLD. So after a certain amount of time, the computer says, what happened to this? 

Mr. GEORGE. I don’t know if—exactly how it works, but they do 

have target deadlines or dates for processing these. However—— 

Mr. FARENTHOLD. Mr. Shulman, are you aware? 

Mr. SHULMAN. I don’t know the specifics. Generally there’s goals 

for processing of any sort of cases. Those goals generally in the last 

couple of years have been very difficult to meet, you know, with the 

budget—— 

Mr. FARENTHOLD. All right. You know, I practiced law for a 

while. We had a tickler system that when something came in, it 

got entered into the computer, and if after a certain number of 

days, it flagged it, and after a few more days, it would flag the 

boss. 

Mr. George, you’re indicating you—— 

Mr. GEORGE. Congressman, thank you. I was just informed by 

staff that the standard is 121 days for the processing of these, but 

unfortunately they average over 574 days. 

Mr. FARENTHOLD. So when they get behind, does the—do the supervisors get notice? Are you aware of an escalation procedure? 

Again, you know, I’ve never managed an organization the size of 

the IRS. I think the most people I’ve ever supervised is around 50, 

but I had procedures and technology in place to where when somebody was screwing up, it moved up the chain of command. 

Mr. George, Mr. Shulman, are either of you all familiar with any 

procedures like that? 

Mr. GEORGE. I’m going to defer to Mr. Shumer—Shulman, rather, on this one. 

Mr. SHULMAN. I’m—I don’t have detailed knowledge of this specific unit handling these 300 cases. 

Mr. FARENTHOLD. Well, a news station in Cincinnati obtained an 

employee directory for the IRS indicating who reports to whom. 

And of the six identified employees, they report to different managers, and then above them even to different territory managers. 

This sounds like a reasonable and, you know, rational organization. 

You know, I mean, the government, we love our chain of command 

here. 

I guess my question is how in any sort of rigid chain of command 

do these extraordinary delays not move out of one department and 

get up to a supervisory level within that department and then on 

up within the chain of command to Washington, D.C.? It just seems 

93 

unfathomable to me that that wouldn’t happen. Do either of you 

gentleman like to comment? 

Mr. GEORGE. Unfortunately, Congressman, and it’s not just in 

this context, but if you look at the processing of FOIA requests, 

Freedom of Information Act requests, many times, because agencies are overwhelmed by the number of those requests and the limited number of resources that they have to address those requests, 

they fall behind. 

Mr. FARENTHOLD. Okay. And if I don’t file my tax return or extension by April 15th, is there any chance it will fall through the 

cracks and get ignored for 3 years? 

Mr. GEORGE. I’m going to yield to Mr. Shulman on that one. 

Mr. SHULMAN. And I’ll yield back to Mr. George. 

Chairman ISSA. Why don’t we go to Mr. Wolin, who is still involved. 

Mr. FARENTHOLD. Yeah. I will address those questions to you. Is 

there not—the command structure is the one I want to get at. Isn’t 

there—isn’t there or shouldn’t there be a command structure when 

this gets escalated to a level that this should have been caught 

long before it was? 

Mr. WOLIN. I would say this, Congressman: I think the IGs report includes an important series of recommendations that speak 

to some of these management issues and training and making sure 

that these cases are handled in an appropriate way and in a way 

that’s within the time frames that are meant to be. What we have 

done is we’ve asked the new Acting Commissioner, who started this 

morning, to be on top of that to make sure that these things get 

implemented quickly and to report back. 

Mr. FARENTHOLD. And let’s get some automation in there. Trust 

but verify is a good move. 

Chairman ISSA. I thank the gentleman from Texas and admonish 

him to go vote. I now recognize the gentleman from Georgia for 5 

minutes. 

Mr. WOODALL. Thank you, Mr. Chairman. I appreciate the witnesses being with us for so long today. I appreciate the chairman’s 

generosity in allowing that last restroom break to make—give you 

the ability to focus on my questions. They’re fairly simple, and I 

wish Ms. Learner was here, because I think she explained part of 

it in her opening testimony. 

Mr. George, about how many applications are we talking about 

in a year on 501(c)(3), (c)(4) categories? 

Mr. GEORGE. It’s approximately 60 to 65,000. 

Mr. WOODALL. 60 to 65,000. And this problem, isolated in a Cincinnati office, but about how many of those 60 or 65,000 applications flow through the Cincinnati office? 

Mr. GEORGE. It’s my understanding that all of them do. 

Mr. WOODALL. 100 percent of these ap-—so it—— 

Mr. GEORGE. Yes. 

Mr. WOODALL. When we’re talking about what our—what our 

challenge is, it’s not that it’s some—a couple of rogue employees in 

one small branch somewhere. We’re talking about a problem that 

exists in the center that processes 100 percent of all of these 

501(c)(3), (c)(4) applications. Is that correct? 

94 

Mr. GEORGE. It’s my understanding there may be one or two, you 

know, offices out in the field that might have a smaller role to play, 

but the vast majority are—— 

Mr. WOODALL. Vast majority are here. 

Mr. GEORGE. Yes. 

Mr. WOODALL. Mr. Shulman, I don’t envy the job you had at all. 

In full disclosure, I have a bill that moves us away from an income 

tax to a consumption tax. I don’t know how an agency can have the 

kind of responsibility and authority that the IRS have—has and 

not have really bad mistakes happen. It’s just an—it’s an awesome 

responsibility and it’s one that I would argue that no agency ought 

to be entrusted with, but you took on that—that challenge. Mr. 

George has told me that virtually 100 percent of all of these tax 

exempt applications are handled in this one facility in Cincinnati. 

I go back to your testimony in March of 2012 where Chairman 

Boustany said, can you give us assurances that the IRS is not targeting particular groups based on political leanings? 

And your response is, thanks for bringing this up. There has 

been a lot of press on this and a lot of moving information. I appreciate the opportunity to clarify. First let me start by saying, yes, 

I can give you assurances. 

We have 100 percent of these applications being processed in this 

one office in Cincinnati, where this problem was discovered and 

widespread. Who did you contact in order to give yourself the confidence to give the chairman of the subcommittee your assurances 

that this was not happening? 

Mr. SHULMAN. Well, first of all, I’d note that that hearing, the 

focus was on the budget and our appropriations. This was a question that came. The chairman had written to me—or members to 

Congress had written to me in the month before—— 

Mr. WOODALL. Well, with due respect, I just—I just have limited 

time. Again, serious question—— 

Mr. SHULMAN. Serious question. 

—off topic, granted, for the hearing, but you gave your assurances. Mr. George has several times said today, I can’t give you an 

answer to that. I have to go back and reference more information. 

We’re not prepared to give you a definitive answer on that today. 

But you said, in response to, can you give me assurances, yes, I can 

give you assurances. I’m just wondering from whom—from what research did you arrive at that conclusion? 

So I said targeting in the sense that 501(c)(4) applicants did not 

need to apply. The ones that had applied had come in voluntarily, 

and my understanding was that there were questions being asked, 

that those questions were within the realm of authority of the IRS, 

and that those questions were not only being asked—— 

Mr. WOODALL. Understanding that that was your understanding—— 

Mr. SHULMAN. That was my understanding—— 

Mr. WOODALL. And, again, going on—— 

Mr. SHULMAN. —of the testimony—— 

Mr. WOODALL. And you, in fact, made that testimony. You said 

further in your testimony, there is absolutely no targeting. This 

kind of back and forth happens when people apply for 501(c)(4) status. 

95 

Knowing now what you know about that back and forth, would 

that still be your testimony? There is no targeting? This is the kind 

of back and forth that happens? 

Mr. SHULMAN. In May 2013 sitting here before you today, I 

would have answered differently. 

Mr. WOODALL. And that’s my concern for folks. We saw a press 

conference with Jay Carney on this very issue. He—the reporter 

asked, can you categorically deny the White House had any involvement in this? 

He said, yes, I can categorically deny it. 

He said, well, how do you know? Have you done any investigation? 

And Jay Carney said, no, I’ve done no investigation whatsoever. 

I just feel like it’s probably true. 

Here you are giving congressional testimony, your assurance. 

You could have said, I don’t know, you could have said, it’s outside 

the purview of this hearing. I haven’t prepared, but you said, Mr. 

Chairman, there is absolutely no targeting. 

As you sit here today, you would say there absolutely was targeting. But this line of questioning was absolutely inappropriate at 

that time, and yet with 100 percent of these applications being approved in one office, the office that has these problems, you contacted no one there before making these assurances, not just to this 

Congress, not just to the chairman of the subcommittee, but to the 

American people. That’s my concern. 

Whatever the truth is, we’ll bring the truth out, but we can’t 

bring it out if folks treat the truth in that cavalier fashion. Again, 

I don’t envy you in your awesome responsibility, I would just encourage folks if the answer’s no, say, I don’t know. Being on the 

record about something as serious as this and being wrong does a 

great deal to undermine the trust in our government. And I thank 

the table. 

Mr. SHULMAN. No. I appreciate your concern. If I could just say, 

I answered that question truthfully based on the information I had 

at the time. 

Mr. WOODALL. But to be clear, you asked no one. The information you had was no information. 

Mr. SHULMAN. I had had—— 

Mr. WOODALL. All of this office work goes on in one office in one 

city, in Cincinnati, but the chain of command of which runs directly to your office. You called no one in that chain of command. 

You asked no one in that chain of command. I’m not saying you 

were lying. I’m saying you were derelict in inquiring about what 

the truth was. It was a straight question about 501(c)(4) applications, all of which are processed in Cincinnati, and you made not 

one inquiry before testifying before Congress about what the truth 

of that is, a truth that now Mr. George says is not the truth whatsoever. That’s troubling. 

Thank you, Mr. Chairman. 

Chairman ISSA. I thank the gentleman. 

Mr. George, on May 3rd—May 10th of 2013 committee staff sent 

the following. This is paraphrased—or not paraphrased. It’s a portion in quotes. The fact that this information is now public and we 

have not been briefed, despite my repeated requests over the many 

96 

months, is completely unacceptable. And that was from my committee staff based on the release by the IRS of your audit information in an appropriate fashion. 

Your ticked response was, and I believe it’s one of your staff 

again, staff to staff on May 10th also, the IRS issued a press statement without our knowledge, consent or even advance notice. 

Are you familiar with this exchange? 

Mr. GEORGE. I am not familiar with that exchange, sir. 

Chairman ISSA. Is it correct, though, that the IRS issued a press 

statement without our knowledge, consent or even advance notice? 

Mr. GEORGE. And I want to make sure that we have the dates 

correct. If this is the event in which Ms. Lerner gave a speech and 

responded to a question—— 

Chairman ISSA. A planted question, we now know. 

Mr. GEORGE. Yes. 

Chairman ISSA. So she created a press release by planting a 

question which she was prepared to answer, and there appears to 

be an audit trail of that plan. 

Mr. GEORGE. I had absolutely no inkling that that was going to 

occur, sir. 

Chairman ISSA. I don’t want you to overly go past the hypothetical, but release of this kind of information, advance information, is in fact not legal, right, roughly? It may be criminal. 

Mr. GEORGE. You know, I cannot give you a definitive answer 

there, sir, but I can say it has never happened before. 

Chairman ISSA. Okay. Will you agree to research this under your 

authority so that we may all know all of the details without us 

having to go and ask for those many, many papers that often take 

a long time to come? 

Mr. GEORGE. Yes, but in all—let’s see. Yes, because she’s within 

IRS, so we do have the authority to do so. Yes, we will. 

Chairman ISSA. Okay. I appreciate that. Yesterday I made—well, 

Ms. Lummis has arrived, so I’m going to cut short. I only have one 

quick question for Mr. Shulman. 

The 5-year term that you received is, in fact, statutory. Isn’t that 

correct? 

Mr. SHULMAN. Yeah. The term is statutory. 

Chairman ISSA. So you’re appointed by a President to be a nonpartisan effectively, because you’re a term appointee, so by definition, you and the President and the Senate come to an agreement 

on somebody who will normally transcend their—at least their one 

term—or always transcend at least one of their terms. Correct? 

You’re—the requirement for your position is management skills, 

isn’t it? In other words—and this is not a—this is not just any political hack kind of a deal. This is one in which you’re supposed to 

possess management, administrative skills. That’s how you’re chosen in an agency that only gets two political appointees, one who’s 

the Commissioner and the other who is the Counsel to the Commissioner, as I understand it. So you have one lawyer and one 

manager. Is—am I just setting the tone correctly for the record? 

Mr. SHULMAN. Generally the goal is to have a Commissioner who 

has a 5-year term to run the agency. 

Chairman ISSA. Were you selected, in your opinion, because of 

your management skills? 

97 

Mr. SHULMAN. Yeah, I—yes, in my opinion. 

Chairman ISSA. Okay. That was all I—that was what I was trying to get to for the record. 

We now recognize the gentlelady from Wyoming for 5 minutes. 

Mrs. LUMMIS. Thank you, Mr. Chairman. 

Mr. Wolin, I want to go back to something Mr. Shulman said. He 

testified earlier that he inherited the practice of deferring to the IG 

for audits and investigations when problematic issues arise at the 

IRS. Mr. Wolin, did Mr. Shulman have the authority to change the 

management practices he inherited at the IRS? Yes or no. 

Mr. WOLIN. Sure. 

Mrs. LUMMIS. In this circumstance, do you think he should have 

changed the practice of deferring to the IG and looked into the targeting on his own? 

Mr. WOLIN. Oh, if the question is—well, Congresswoman, I think 

that once an IG begins work, it’s very important to stay clear of 

it. If a political appointee, for example, involves themself in the 

work of an IG or in topics that the IG is looking at, I think they 

run the very big risk, that’s understandable, that that will be seen 

as interference, and that is why for many administrations for the 

longest time that I can recall, it has been a core principle of ours 

that when an IG begins their work, we stay clear. 

Mrs. LUMMIS. What kind of activity do you think it would take 

to change the practice of deferring to the IG for audits and investigations? 

Mr. WOLIN. Well, I’m not sure I understand your hypothetical, 

Congresswoman. I would say this, that here, of course, the—by the 

time, for example, I learned of the fact that the IG was conducting 

an audit, the offending conduct, we now learn, was no longer taking place. 

I would expect that if the IG were looking at something and he 

determined that there was something that was ongoing that needed quick action, that he would raise that and that we would have 

a conversation so as specifically not to be either interfering with an 

IGs work or being seen to be interfering with an IGs work. 

Chairman ISSA. Would the gentlelady yield for just 1 minute? 

Mrs. LUMMIS. Yes, Mr. Chairman. 

Chairman ISSA. I think it’s important, Mr. Wolin, you keep saying, and Mr. Shulman kept saying that by the time you learned 

about it, the offending activity had finished. The offending activity 

is two parts. It’s the abusive behavior of questions, inappropriate 

questions, questions that are probative that, in fact, make us doubt 

whether or not that information leaked. Let’s leave that aside. I 

think the IG has determined a cutoff date. But are you here today 

to tell us that no entity has been denied approval or denial in a 

timely fashion, because I believe Mr. George will testify that as far 

as he knows people are still in limbo today. 

Mr. WOLIN. No, sir. 

Chairman ISSA. On your watch. 

Mr. WOLIN. Not at all, Mr. Chairman. I think you’re exactly 

right. The IG has made that clear. Now that we know that, we 

learned that last week, this needs to be fixed quickly, absolutely, 

and that’s part of the charge that Mr. Werfel has, absolutely. 

98 

Chairman ISSA. But he’s not—but he is the acting director at this 

time. 

Mr. WOLIN. He’s the Acting Commissioner as of this morning. 

Chairman ISSA. Commissioner as of this morning. So we would 

expect that in spite of these Draconian budget cuts, that these hundred or more potential entities will, in fact, get a prompt and accurate adjudication, meaning days now that it’s been years? 

Mr. WOLIN. Well, I can’t—I don’t want to speak for Mr. Werfel 

in setting a precise timeline, Mr. Chairman, but—— 

Chairman ISSA. Well, you’re his boss. You speak from the President, to the Secretary, to yourself, to him. What the heck appropriate timeline should we expect when you’ve been drowning these 

people for 3 years or more in some cases? What is the timeline 

today? If you’re not accountable today, then you’re not ever accountable. Could you give us a timeline? In your opinion, what 

would be the maximum time somebody should have to wait when 

they’ve waited for years? 

Mr. WOLIN. Well, as we’ve—as I said, Mr. Chairman, what we’ve 

charged Mr. Werfel with is coming back within 30 days and to fully 

and promptly implement the various recommendations in the IGs 

report, of which this is one. 

Chairman ISSA. Mr. George, and I’m taking a lot of gentlelady’s 

time, but 3 years you wait. If you’re sitting in that pile after 3 

years, is 30 days to find out what the plan is to have you come out 

of that pile, when in fact other entities that were submitted 2 years 

after you also involved in this, quote, category have been approved? 

Is 30 days, in your estimation, before a plan is submitted, is a new 

Acting Commissioner the reason—first of all, none of these commissioners knew anything, apparently, or asked anything, so why is a 

new one important? If you could answer. 

And I apologize to the gentlelady, give her back her time. 

Mr. GEORGE. Yeah. If you will allow, Mr. Chairman, I believe— 

I’ve made a commitment to work with Mr. Werfel, and he realizes 

the high priority the President and that I and my organization 

have placed on the Secretary of the Treasury on this issue. I can’t 

give you a definitive timeline, a date, but I will commit to you that 

we will work to expedite these—and help him, rather, expedite 

these applications, sir. 

Chairman ISSA. I thank you. 

And the gentlelady will be given 2 additional minutes. Thank 

you. 

Mrs. LUMMIS. Thank you very much, Mr. Chairman. 

And reclaiming my time, I want to take issue with one thing that 

our esteemed ranking member of our committee said earlier. He 

said that the trust in the IRS has been undermined. And the issue 

I would take with that is that trust has not been eroded or undermined, but it’s been destroyed. That trust is gone. My constituents, 

the people I represent believe the Federal Government is out to get 

them. And when things like Watergate were going on, you had a 

battle of Titans. You had the politically powerful going after the politically powerful. But in this matter, you have the politically empowered going after the people who hired them, and people who 

don’t have the weapons of the imprimatur of the Federal GovernVerDate Aug 31 2005 09:13 Jul 10, 2013 Jkt 000000 PO 00000 Frm 00102 Fmt 6633 Sfmt 6633 C:\DOCS\81742.TXT APRIL
99 

ment to turn to. You have people who are relying on trust, and that 

trust is absolutely gone. 

I have no idea how we can restore the trust that has been destroyed as a result of this. The IRS has let down the very people 

that they were employed to serve. In fact, the people think the IRS 

has turned against them, and it is on a stack of other concerns 

where they believe the Federal Government has turned against 

them. This is Goliath against David. These are the people who 

hired Goliath and empowered Goliath, and Goliath has turned 

against those very people. It’s moms and dads at kitchen tables 

who are taking kids to soccer games who want to have a political 

organization like a tea party. It’s people who believe they’re patriots, and their own government is telling them, we will not allow 

you to exercise your patriotism in this way because we don’t like 

your brands of patriotism. 

This is far worse than anything we’ve seen in Watergate or that 

the government has done to the government, because this is the 

government turned against the very people who hired them, who 

trusted them, and who have destroyed that trust. 

Mr. Chairman, I yield back. 

Chairman ISSA. The gentlelady yields back. We now go to the 

gentleman from Washington, Mr. Hastings. 

Mr. HASTINGS. Thank you very much, Mr. Chairman. I think the 

tone of this hearing is the reputation of the IRS being at stake, but 

I recognize that may be an oxymoron, to be very honest with you. 

Mr. Wolin, in response to a question by Mr. Lankford, you stated 

that you were not aware of the complaints of conservative and Tea 

Party groups that received extra scrutiny from the IRS until you 

were informed by Mr. George of the Inspector General’s audit. Is 

that correct? 

Mr. WOLIN. That’s correct. 

Mr. HASTINGS. And once again, when were you informed of that 

audit? 

Mr. WOLIN. Well, I don’t recall precisely, but I’m prepared to accept the IG—— 

Mr. HASTINGS. Well, give me a ballpark. Give me a ballpark. 

Mr. WOLIN. The IG, I think—— 

Mr. HASTINGS. I thought it was the summer of last year, right? 

Mr. WOLIN. That’s right. 2012. 

Mr. HASTINGS. Summer of two—2012. So do you not see any of 

the letters from Members of Congress about this matter? 

Mr. WOLIN. I don’t think there were many letters, if any. 

Mr. HASTINGS. I didn’t ask you that. I asked you if you were 

aware of them, not how many. 

Mr. WOLIN. No. No, we’re not aware. 

Mr. HASTINGS. Did you—so you didn’t see any news articles 

about this before that date. Is that correct? 

Mr. WOLIN. I was not aware of this. 

Mr. HASTINGS. Did you—I asked you if you did not see. 

Mr. WOLIN. I don’t recall seeing any news articles. 

Mr. HASTINGS. Okay. And you had no conversations with anybody about the extra scrutiny of the Tea Party groups before that 

date? 

Mr. WOLIN. I had no conversations about that. 

100 

Mr. HASTINGS. Okay. Good. 

Mr. Shulman, just to clarify, when you get a letter from a Member of Congress, that goes to your personal attention or at least 

your signature when you respond. Is that—did I hear you correctly 

when Mr. Chaffetz asked you that questions? 

Mr. SHULMAN. We get a lot of letters. Some—— 

Mr. HASTINGS. I didn’t ask you that. I asked you questions from 

Members of Congress, if you personally sign those letters if they’re 

addressed to you. 

Mr. SHULMAN. Some come to me—— 

Mr. HASTINGS. Okay. Did Mr.—— 

Mr. SHULMAN. —I respond to and some come to me that other 

people respond to and sign. 

Mr. HASTINGS. Would Mr.—would a letter from Mr. Camp, 

Chairman of the Ways and Means Committee, get your personal 

attention? 

Mr. SHULMAN. If Mr. Camp wrote to me? Generally, yes. 

Mr. HASTINGS. Generally yes. Well, he wrote you—he wrote to 

you in June 2011 about the Tea Party issue. So if you—now, does 

somebody sign your letters other than you? 

Mr. SHULMAN. I don’t, but to the best of my knowledge, that— 

in my memory is that was not about the same issue. 

Mr. HASTINGS. Okay. Well, according to the records we have, he 

sent you a letter in June 2011 regarding this particular issue. 

Mr. SHULMAN. That’s not my memory. In June 2011? 

Mr. HASTINGS. Well, that—that’s our records. Let me ask this: 

When you testify in front of Congress, do you have a preparation 

prior to testifying before Congress? 

Mr. SHULMAN. Yes. 

Mr. HASTINGS. You do? Who participates in that preparation. 

Mr. SHULMAN. It can depend on subject matter, but it was generally people in my direct office. 

Mr. HASTINGS. Generally your Chief of Staff, probably your top 

aides? 

Mr. SHULMAN. Yes. 

Mr. HASTINGS. Does it change from subject to subject? 

Mr. SHULMAN. It can change—— 

Mr. HASTINGS. It can. 

Mr. SHULMAN. —from subject to subject. 

Mr. HASTINGS. Okay. When you testified in front of the Ways 

and Means Committee, and this has already been brought up, 

where Mr. Boustany asked you the question and you—and then 

you had an exchange with Mr. Lynch. Let me see. Where is that? 

That is on—well, at any rate, the question was can you assure us, 

and you told Mr. Boustany that you could assure him that nothing 

was going on. Then you had an exchange with Mr. Lynch. Do you 

recall that brief conversation with Mr. Lynch earlier today? 

Mr. SHULMAN. Yeah. I don’t recall the exact words, but I recall 

the conversation. 

Mr. HASTINGS. Well, let me—this is what you—this is what you 

said. And the issue was you can give—the phrase that you used in 

response was you can give assurances that there was no targeting. 

That’s what you said in testimony. 

101 

Now, you said then in response, because he interrupted you, and 

you said, let me answer the question, and so you then said—in responding to Mr. Lynch, you said that—that those assurances of no 

targeting came from conversations. Who were those conversations 

with? 

Mr. SHULMAN. I had—my understanding at the time in March of 

2012—— 

Mr. HASTINGS. No. Who—no. The question was, the question Mr. 

Lynch said that is there no targeting, and you said I—you know, 

in conversations, that’s what—you know, that’s what I believe. 

Okay. Who—I’m asking you who those conversations were with. 

Mr. SHULMAN. So I can’t tell you these are the exhaustive conversations, but when the letters came in, I know I had—— 

Mr. HASTINGS. I’m talking about—yeah. I’m talking about the 

testimony from the question—— 

Mr. SHULMAN. Sure. 

Mr. HASTINGS. —of Mr. Boustany. 

Mr. SHULMAN. And in my mind was the letters that I had received about extensive questioning, and those conversations were 

most likely, my memory is not clear on this, but my deputy, with 

his deputy, with my Chief of Staff—— 

Mr. HASTINGS. Who are those by name? 

Mr. SHULMAN. I would have most likely had conversations with 

Steve Miller. 

Mr. HASTINGS. Steve Miller. Who else? 

Mr. SHULMAN. Nicole Flack. 

Mr. HASTINGS. Who? 

Mr. SHULMAN. Nicole Flack. 

Mr. HASTINGS. Nicole Flack. 

Mr. SHULMAN. Who was deputy at the time? 

Mr. HASTINGS. All right. Who else? 

Mr. SHULMAN. Those are the two with the most knowledge of tax 

exempt organizations that I relied on the most. 

Mr. HASTINGS. Okay. Now—— 

Mr. SHULMAN. Including other people on my staff as well. I just 

don’t have a clear recollection. 

Mr. HASTINGS. Which other people on your staff? 

Mr. SHULMAN. My Chief of Staff was an obvious person that I 

have conversations, but didn’t have knowledge of tax exempt organizations. 

Mr. HASTINGS. Now, with your indulgence, Mr. Chairman, you 

said, in conversations, this is how you drew that conclusion. Now, 

you prepare for these hearings. Did you anticipate that question 

prior to this Ways and Means hearing? 

Mr. SHULMAN. I didn’t anticipate the precise question, but I generally familiarized myself with the letters and the questions about 

donors were the main things that were on my mind at that time. 

Mr. HASTINGS. Okay. So that means that, then, you—prior to 

that question, when you gave assurances there was no targeting, 

because when you give assurance, that’s—you know, that’s pretty 

hard stuff, no targeting. So in preparation, you had discussions 

about this, and yet you answered to Mr. Boustany that gave assurances there was no targeting. 

102 

Now, the issue, of course, that we are concerned about is that 

you haven’t apologized for not stating that correctly. You just now 

said that in preparation, you anticipated at least the subject of this 

question. 

I have to say, Mr. Chairman, that I find once again, you know, 

the—I won’t say non-answers or vague answers here, trying to find 

out who in fact did all of this is pretty hard to come by when we 

get, frankly, Mr. Shulman, answers like this. You prepare for these 

meetings, you—at least the subject of this question, and then you 

respond to questions here today that in conversations with people, 

you know, I feel very comfortable. There’s something missing here, 

I have to say, in my mind, Mr. Shulman. I—and I suppose I’m sure 

that this committee will try to find those answers, but leave me in 

the dark on that. 

Thank you, Mr. Chairman. I yield my time. 

Chairman ISSA. Thank you, Mr. Hastings. I will note that this 

is a committee that was told that Justice didn’t let guns walk at 

the ATF. So sometimes it’s their definitions versus the commonsense real definitions. 

At this time I’m asking unanimous consent that the page 16 from 

the GAO report from—which is entitled, Budget Data Fiscal Year 

2008 to 2012, be placed in the record for the purpose of authenticating that Mr. Shulman, in addition to being detached from the 

running of his business, also is unaware that the fiscal 2008 budget 

of the IRS, $11.6 billion, rising to $11.9 billion, rising to $12.6 billion and roughly stable at $12.6 billion in fiscal year 2011. 

Mr. Shulman, there are no budget cuts during the period of time 

in which you’re claiming you don’t have enough money to do your 

job. 

Without objection, so ordered. 

We now go to the gentlemen from Missouri, Mr. Clay. 

Mr. CLAY. Thank you, Mr. Chairman. And let me thank Mr. 

George for being here and thanks also to your staff. They have 

given our committee staff several briefings now, and we appreciate 

their work. 

I understand that you’re—from your staff, that your office was 

not particularly happy about the way Lois Lerner at the IRS essentially tried to get out ahead of your audit. She basically orchestrated a question and answer at an ABA meeting on Friday, May 

the 10th. In your experience, have you ever seen an IRS official do 

something like that or was that a first? 

Mr. GEORGE. It was a first during my tenure, Mr. Clay. 

Mr. CLAY. And your audit was not finalized yet at that point. Is 

that right? 

Mr. GEORGE. That is correct, sir. Well, let me double—that is correct. There’s a clearance process, sir, that has to occur to ensure 

that any Title 26, Section 6103 information is not premature—is 

not released, period, and that clearance process had not been completed by then. 

Mr. CLAY. So you hadn’t completed your—your job yet, but—just 

to play devil’s advocate, you had already briefed them on your findings, so what was the problem with them going public before the 

report was final? 

103 

Mr. GEORGE. They’re privy to all of the information that we find, 

because they have, again, access to information under the Tax 

Code, Title 26 for the most part, but there is a provision within the 

Tax Code, again, Section 6103, which provides for potentially criminal results if you release information, sensitive return information 

is what they call it, but the bottom line is that it’s taxpayer information, without the approval of the taxpayer. And a lot of the reports that we issue, this report included, contained information 

that would have been violative of the law had it been prematurely 

released. 

Mr. CLAY. And the White House was informed about your audit 

on April the 24th, according to Jay Carney, the White House Press 

Secretary, but the White House took what I view as the more responsible approach. They were waiting until your report was final. 

To me that seems much more in keeping with how draft inspector 

general reports should be treated. 

In fact, let me read a quote from our chairman, Mr. Issa, who 

said this, ‘‘this is one of those things where it’s been in a sense an 

open secret, but you don’t accuse the IRS until you’ve had a nonpartisan deep look. That’s what the IG has done. That’s why the 

IGs in fact exist within government, to find this kind of waste and 

fraud and abuse of power.’’ 

And on this rare occasion, I do agree with Chairman Issa’s statement. Do you, Mr. George? 

Chairman ISSA. You know. 

Mr. CLAY. I’m asking the witness. Do you agree with the chairman’s statement? 

Mr. GEORGE. And I’m sorry, sir. I didn’t—I missed the chair— 

what—the quote you were attributing to the chairman. 

Mr. CLAY. Okay. I can read it again for you. 

Mr. GEORGE. Thank you, sir. 

Mr. CLAY. ‘‘This is one of those things where it’s been in a sense 

an open secret, but you don’t accuse the IRS until you’ve had a 

nonpartisan deep look, and that’s what the IG has done. That’s 

why the IGs in fact exist within government, to find this kind of 

waste and fraud and abuse of power.’’ 

And I agree with the chairman’s statement in this instance. 

Mr. GEORGE. I do also, sir. 

Mr. CLAY. Okay. There has been a lot of discussion recently 

about why the White House did not come out publicly as soon as 

they knew about the IG report in late April instead of waiting for 

the final IG report to be issued. And I think the terrible way the 

IRS handled this proves the point. And thanks to the IGs hard 

work, we now have precisely the type of nonpartisan deep look 

Chairman Issa was talking about, so I want to thank you, Mr. 

George, for your hard work in this area. 

And, Mr. Chairman, I will yield back. 

Chairman ISSA. I ask the gentleman to yield briefly. 

Mr. CLAY. I yield. 

Chairman ISSA. Mr. George, exactly in that line of questioning, 

based on the timeline you gave us, on May 29th, 2012, the audit 

briefed the IG in advance of the IRS Commissioner’s meeting. May 

30th, IG and function heads briefed the IRS Commissioner, Doug 

Shulman, and the Deputy Commissioner, Steve Miller, and Beth 

104 

Tucker on the audit, comma, specifically that criteria targeting Tea 

Party Patriots or 9/12, another tea word, and other policy issues 

were being used to—used, too, in reviewing applications for tax exempt status. 

You briefed, and that’s your notes. 

Mr. GEORGE. Yes. That’s correct, sir. 

Chairman ISSA. And so what you say on May 30th is, yeah, 

they’re targeting these groups. That’s a confirmation you reached 

a conclusion they’re targeting using these key words. 

Mr. GEORGE. Yes. Now, just to be clear, I didn’t take these notes 

up, but these are accurate, sir. 

Chairman ISSA. Right. And, I mean, I’m just using these because 

they were delivered to us from your staff. So on May 30th, there 

was a there there and you briefed Mr. Shulman and two others. 

On June 4th, you went on to brief the IG—or you, the IG, briefed 

Treasury General Counsel Chris Mead on the same thing, correct? 

Mr. GEORGE. That is correct, sir. 

Chairman ISSA. So, in fact, the General Counsel at Treasury was 

aware that, in fact, these groups were being targeted in a conclusion that you made on May 30th and then again briefed them on 

June 4th, correct? 

Mr. GEORGE. That is correct, sir. 

Chairman ISSA. Mr. Wolin, were you also aware that, in fact, this 

conclusion has been reached by June 4th? 

Mr. WOLIN. No. No, I was not, Mr. Chairman. I think that 

the—— 

Chairman ISSA. So this bypassed you and went to your General 

Counsel? 

Mr. WOLIN. Well, I was not briefed on any findings when the Inspector General came to me. I think his testimony under oath in 

the Finance Committee and in the Ways and Means Committee 

was he briefed merely on the fact of the commencement of an 

audit. 

Chairman ISSA. No. That is not what the IG just testified to here, 

Mr. Wolin. I walked him through his own notes—or these briefing 

notes that were given to us. The briefing was on the conclusion 

that specifically that criteria targeting Tea Party Patriots or 9/12 

and other policy issues were being used in a reviewing—in review—too, in reviewing applications for tax exempt status. 

That’s a conclusion that they were being used. Mr. George. 

Mr. GEORGE. Mr. Chairman, I may have to clarify my earlier response to you. On the 4th of June, I have a—I had a meeting, and 

I regularly meet with the General Counsel, Chris Mead, or whomever the General Counsel is at the Department of the Treasury. At 

that meeting, I certainly made him aware of the audit. I do not 

keep notes of those discussions. I don’t recall verbatim what it is 

that I discussed with him. I may have characterized the overall object—audit, rather, but I certainly—to the best—I did not have 

findings then, because the audit obviously wasn’t concluded. 

Chairman ISSA. No. You had findings that you gave. And I’m 

calling them findings. Now, I’m—I have to remember I’m not an 

IG, that the term ‘‘finding’’ may be more technical, but you had 

reached a conclusion that criteria targeting Tea Party Patriots, 9/ 

12 and other policy issues were being used in reviewing applicaVerDate Aug 31 2005 09:13 Jul 10, 2013 Jkt 000000 PO 00000 Frm 00108 Fmt 6633 Sfmt 6633 C:\DOCS\81742.TXT APRIL
105 

tions. That’s a conclusion that these criteria, these key words were 

being used and that ultimately we now understand how horrific 

this is on the face of it, correct? 

Mr. GEORGE. I would say, sir, that I would have characterized 

part of the audit looking at those issues. And so we obviously had 

not concluded the audit, so we did not have final determinations 

at that time, so I don’t—and again, sir, I’m operating from memory 

here and it was a while ago, I had no idea this issue would come 

up in this manner, but the bottom line is I cannot say that—with 

certainty that I said to him this was definitively happening. I said 

we are—this is the allegation, this is what we’re looking at, 

and—— 

Chairman ISSA. Right, but essentially you told Mr. Shulman sitting next to you that shots were fired, to use an analogy, that there 

was a there there. Now, a question of who fired them, what caliber 

it was, whether somebody was hit, you do a lot of detail in an IG 

report. As a matter of fact, it took a year. 

So a year ago Mr. Shulman was told that in fact there had been 

targeting. Mr. Shulman has already testified that essentially the 

reason there wasn’t further action was that it was over as far as 

he was concerned, in that although you were briefing him that they 

had targeted, I believe Mr. Shulman testified effectively, and I’m 

paraphrasing you, sir, so correct me if I’m wrong, that basically 

your reason for not doing anything further was although you now 

knew that they had inappropriately targeted people, that in fact it 

was now no longer happening. Is that correct? 

Mr. SHULMAN. I said that—you know, to the best of my knowledge, earlier today, to be clear, I mean, when I learned, I learned 

that the IG was going to be looking into it and that the practice 

was being stopped. 

Chairman ISSA. Okay. And the May 30th—what I read to you 

about that targeting, the May 30th briefing in 2012, the IGs briefing of you, Mr. Miller and Miss Tucker all occurred and you were 

in that meeting? 

Mr. SHULMAN. Yeah, but the language you used there that there 

was a conclusion of targeting is not my recollection of the meeting. 

My recollection—— 

Chairman ISSA. Well, this is not my language. This is the IGs. 

Mr. SHULMAN. No. I hadn’t seen that language. 

Chairman ISSA. Okay. 

Mr. SHULMAN. But my recollection is, you know, that Mr. George 

said they were looking into the allegations. 

Chairman ISSA. Thank you. 

Mr. Massie 

Mr. MASSIE. Mr. Chair—Mr. Chairman. Today we are here to repair the trust of the governed in their government, but to repair 

the public trust we have to fix the problem, and before we can fix 

the problem we have to define the scope and the type of problem 

that we have. 

Mr. Shulman, how many employees work for the IRS? 

Mr. SHULMAN. About—over 90,000. 

Mr. MASSIE. So over 90,000 employees work for the IRS. And 

how many work for Ms. Lerner? 

106 

Mr. SHULMAN. She stated 900 today. I don’t know the exact number, but that sounds about right. 

Mr. MASSIE. Now, the behavior of some of those 900 employees 

has been described by Mr. Wolin today as inexcusable and deplorable. Do you accept responsibility for that behavior of those employees? 

Mr. SHULMAN. I’ve said before that I am incredibly saddened by 

this event, that it occurred on my watch—— 

Mr. MASSIE. I heard that answer before. So I’m asking do you accept responsibility for their behavior? 

Mr. SHULMAN. I don’t accept responsibility for—— 

Mr. MASSIE. Okay. 

Mr. SHULMAN. —putting a—— 

Mr. MASSIE. Thank you. 

Mr. SHULMAN. —a name on a list with an appropriate—— 

Mr. MASSIE. Mr. George, did I hear you refer to some of the behavior as gross mismanagement earlier in your testimony? 

Mr. GEORGE. That is correct, Congressman. 

Mr. MASSIE. And that was at the Cincinnati office? 

Mr. GEORGE. That’s correct, sir. 

Mr. MASSIE. Would you have been referring to either or both Ms. 

Paz and Ms. Lerner? 

Mr. GEORGE. I wasn’t referring to any individual in particular, 

but I—and I just want to actually revise what I just said. The gross 

mismanagement was not limited solely to Cincinnati. It extended 

to Washington and—— 

Mr. MASSIE. Okay. Mr. Shulman, realizing that you do not accept 

the responsibility for the behavior of all the employees at the IRS, 

do you accept the responsibility for the mismanagement that occurred at the IRS? 

Mr. SHULMAN. Look, I’m very sorry that this happened while I 

was at the agency. 

Mr. MASSIE. I understand you’re sorry. You said that before. Can 

you answer that question? 

Mr. SHULMAN. I don’t know generally what you’re talking about. 

I don’t accept the responsibility for every single action of every single employee of the IRS, but—— 

Mr. MASSIE. Understood. Thank you. 

Mr. SHULMAN. —this did happen on my watch and I accept that. 

Mr. MASSIE. Mr. George, you mentioned before that there were 

lists that were used as triggers, they were called be-on-the-look-out 

lists, but some of these were used as triggers to refer cases to the 

Fraud Division or to State and local governments. Is that correct? 

Mr. GEORGE. That is correct, sir. 

Mr. MASSIE. Okay. So my constituents, whose trust has been 

damaged in their government, are now asking me were they audited because of lists. 

And, Mr. Shulman, can you guarantee to us here today that 

there were practices in place in management such that none of 

these audits would have been triggered by a list such as we’ve seen 

the lists today? 

Mr. SHULMAN. For your constituents? 

Mr. MASSIE. Yes. 

107 

Mr. SHULMAN. Look, I don’t believe that audits were triggered 

because of it. I have—— 

Mr. MASSIE. Can you guarantee that they were not? 

Mr. SHULMAN. No, I can’t. 

Mr. MASSIE. Okay. That concerns me. We’ve got to fix that before 

we can fix the trust in the government. 

Mr. George, you stated there were 143 unauthorized disclosure 

cases that were started in the last year? 

Mr. GEORGE. That we looked at last year, yes. 

Mr. MASSIE. And I know you can’t comment on the particular 

cases, but would you expect some of those to be confirmed leaks 

from the IRS of confidential information? In the past have you 

ever—— 

Mr. GEORGE. Unfortunately, I’m being instructed by counsel that 

I cannot acknowledge the results of those investigations, Congressman. 

Mr. MASSIE. Okay. Can you acknowledge prior results of investigations? Can you acknowledge that a leak has ever been confirmed, that anybody’s private information has ever been released? 

Mr. GEORGE. I don’t—we don’t have an answer to that, sir. 

Mr. MASSIE. Okay. Mr. Chairman, we need more hearings, we 

need more investigations. We need to get to the bottom of this. I 

think people working for the government right now need to be fired 

for abusing the public trust. But let’s not delude ourselves. We’re 

just treating a symptom of the disease, and the disease is a bloated, abusive government that has become self-serving. 

We’ve seen that Mr. Shulman has stated he can’t be held responsible for 90,000 employees. I doubt any man or woman could be 

held responsible for a bureaucracy that’s 100 years old that has 

that many employees. We sit here comfortably on the dais questioning three men here today, but I think Congress created this 

monster. We need to look inward. We have 70,000 pages of Tax 

Code, 90,000 employees that work for this bureaucracy. And a lot 

of these—this Tax Code is open to interpretation. I think it’s ripe 

for corruption and abuse. And I think in order to restore trust, the 

public trust, we’re going to have to address this issue and I think 

Congress needs to take it upon itself after today to shrink the size 

of the IRS, to simplify the Tax Code, and to restore the public 

trust. 

Thank you, and I yield back. 

Chairman ISSA. We now go to the gentlelady from New Mexico, 

Ms. Lujan Grisham. 

Ms. LUJAN GRISHAM. Thank you, Mr. Chairman. Certainly the 

tone of this hearing in a bipartisan fashion has been that any government agency targeting in any way any inappropriate investigations or information is deeply disturbing, and the fact that it’s the 

IRS just makes that even more troubling. And I don’t think there’s 

a member on this committee who doesn’t also agree that we want 

a thorough and complete investigation, and we want all those held 

accountable, and then we want steps implemented there and everywhere in government to make sure that this never happens again. 

And I certainly want to be on the record echoing those statements, 

and am deeply troubled as well. But I do want to talk about 

501(c)(4)’s. 

108 

Now, Mr. George, your report explains the lack of clear guidance 

on how groups are determined to be eligible for tax exempt status, 

but were one factor that contributed to the terrible decisions made 

by IRS personnel. But one key reason, in my mind, that this problem even exists is because of the difference between the original 

statute Congress passed and the regulation the Treasury Department subsequently issued. 

The original statute passed by Congress provides that any—that 

organizations may qualify under a 501(c)(4) only if they engage exclusively in social welfare activities. That seems fairly clear that 

political activities are not allowed at all. But in 1959 a regulation 

was issued provided that entities could qualify under 501(c)(4) as 

long as they engaged primarily in social welfare activities. These 

groups now believe they can spend up to 49 percent of their funds 

on campaign-related activities. 

Now, this goes to Mr. Wolin. Requiring organizations to be primarily engaged in social welfare activities is significantly different 

than requiring them to be exclusively engaged in social welfare activities. Wouldn’t you agree? 

Mr. WOLIN. It is, Congresswoman. 

Ms. LUJAN GRISHAM. All right. Mr. Shulman, would you agree? 

Mr. SHULMAN. Yes. 

Ms. LUJAN GRISHAM. And, Mr. George, would you also agree? 

Mr. GEORGE. About whether or not clarification is necessary, 

most definitely. 

Ms. LUJAN GRISHAM. And would the three of you support that 

maybe Congress should make this even clearer? It seems to me 

that this issue, this regulation was issued fairly arbitrarily. 

Mr. WOLIN. Well, Congresswoman, as I said earlier, I think that 

this is an area that requires additional clarity. The IGs report recommends that we at Treasury, working with the IRS, provide that 

clarity, and we will get to that right away working with the new 

Acting Commissioner. 

Ms. LUJAN GRISHAM. Mr. Wolin, while you do that, it is now my 

understanding that in addition, that the Treasury Department 

plans to start investigating further 501(c)(4)’s to determine if they 

have spent more than the 49 percent on political activity. 

Now, if a 501(c)(4) in this review violated the law and used more 

than 49 percent for political activity, will the names of those donors 

who donated to those 501(c)(4)’s be released? 

Mr. WOLIN. Well, Congresswoman, the Treasury will not be investigating 501(c)(4)’s. That’s not within our purview. And, again, 

it’s important, I think, just to reiterate that the Treasury not involve itself in matters that relate to the administration of the Tax 

Code, and in particular, ones that have these kinds of political 

overtones. 

Ms. LUJAN GRISHAM. Well, and then maybe it’s my understanding that this—or Mr. George? 

Mr. GEORGE. Actually, yes, it will be my office. We have committed to doing just that type of an examination. 

Ms. LUJAN GRISHAM. And will those donors’ names be released? 

Mr. GEORGE. It’s highly unlikely because of, again, privacy and 

confidentiality restrictions that are placed upon us. 

109 

Ms. LUJAN GRISHAM. But the issue would be that those donors 

would then be required, if there’s a violation, to pay taxes on those 

donations, would they not? 

Mr. GEORGE. I cannot give that analysis. 

Chairman ISSA. Will the gentlelady yield? If you go to Organizing 

for Action, President Obama’s 501(c)(4), you will note that it says 

contributions are not tax deductible. This is about the entity not 

paying taxes, as I understand it. If you’re declined a 501(c)(4) status, some of these organizations 3 years, under certain circumstances you then have to pay corporate taxes on this as though 

it was income, you then could even have your officers and directors 

personally responsible. But it’s not a (c)(3). These are (c)(4)’s. And 

I’m sure that we have people here that could define the difference, 

but it’s real important to understand this is about—if you, for example, were determined to be a 527, nothing would change except, 

as you said, the potential names. 501(c)(4)’s, 527’s, the difference 

is not really a taxable event. 

Ms. LUJAN GRISHAM. Mr. Chairman, I appreciate that clarification; however, if—if, though—I’m not clear that some of these organizations provide the right disclosures, I’m not clear that folks who 

are providing donations to those organizations are clear about 

those rules, I’m not clear, based on the scope of this investigation 

to date, that we’ve got clarity about whether folks really are qualified as a 501(c)(3) or a 501(c)(4). And as we uncover more information about those donors, those differences, those investments and 

the engagement of activity of these organizations, it seems to me 

if there are violations made, the disclosure of donors in a violation 

and taxes be recovered if they so apply should be done by the IRS. 

Chairman ISSA. I appreciate the gentlelady’s comments. 

Would somebody clarify for the record the taxation policy so that 

that can be clear, because I think there’s a—Mr. Shulman, you certainly know the difference. There’s obviously a huge misunderstanding as to the taxability and the ramifications, what you really 

get on a 501(c)(4) versus 527. 

Mr. SHULMAN. There’s a chart actually in the Inspector General’s 

report, I think, that has the different taxable entities and the difference—— 

Chairman ISSA. Right. I mean, 501(c)(3) is a big deal; 501(c)(4) 

less. 

Mr. George? To the extent that you can answer to clarify for the 

lady. 

Mr. GEORGE. Yes. Oh, certainly. A 501(c)(3) may do the following. 

They may receive tax deductible charitable contributions. They 

may engage—they may not engage in political campaign intervention. They must publicly disclose the identity of their donors. I’m 

sorry. They may not disclose the identity of their donors. They may 

engage in lobbying, limited, but must not be substantial. They may 

engage in general advocacy not related to legislation or the election 

of candidates, but it has to be as an educational activity. And they 

must apply with the Internal Revenue Service for their 501(c)(3) 

status. 

Now, as to 501(c)(4), (5) and (6)’s, no, none of their contributions 

are tax deductible. They may engage in limited political campaign 

intervention, but again, it may not be their primary activity. They 

110 

do not have to disclose the identity of their donors. They may engage in lobbying, but it has to be in—actually, they have an unlimited amount of ability to do that if it’s in furtherance of the taxes— 

purpose for which they were established. And as it relates to general advocacy, they may also do so in an unlimited way as long, 

again, as it is in furtherance of their tax exempt status. And they 

do not need to apply to the Internal Revenue Service for this status. 

Chairman ISSA. Thank you. 

The gentlelady, I presume, is satisfied? 

Ms. LUJAN GRISHAM. I am not, Mr. Chairman. 

Chairman ISSA. Well, we’ll make additional information available, but I think it is—— 

Ms. LUJAN GRISHAM. Can I make one statement, Mr. Chairman? 

Chairman ISSA. Of course. 

Ms. LUJAN GRISHAM. Thank you so much. 

To the issue that in a 501(c)(3), which I’m clear about the differences between—and I appreciate doing that for the record, sir— 

501(c)(3)s and 501(c)(4)s, donors are not required—the 501(c)(4) 

doesn’t have to disclose the donors. 

Chairman ISSA. Correct. 

Ms. LUJAN GRISHAM. If they have violated that political activity 

premise, just like a 501(c)(3), I’m making the argument here that 

they should have to then disclose those donors. And now that 

they’re disclosed, I want to make sure that appropriate taxes have 

applied to that person’s personal income as a result of knowing 

that they’ve made contributions that were not disclosed in any form 

so that there is a double-check, in the same way that the IRS receives independent information about my income, what I receive 

and what I don’t receive. 

That’s my point here, Mr. Chairman. 

Chairman ISSA. Well, the gentlelady may turn the Tax Code upside down if she would like. I suggest you find cosponsors. 

But the fact is that these individuals give money post-tax. They 

pay their taxes, and then they give the money out. And they do not 

control the organization. So the idea that they would take on personal responsibility for their contributions and somehow be doubletaxed, perhaps the gentlelady would reconsider the chilling effect, 

whether it’s a 501(c)(3) or a 501(c)(4). 

And, with that, we go to the gentleman from Georgia, Mr. Collins. 

Oh, I’m terribly sorry. We’re going to Mr. Meadows. I’m reading 

a list. I should look at the gentleman first. 

Mr. MEADOWS. That’s all right. Thank you, Mr. Chairman. And 

I want to follow up on some of your line of questioning there. 

And it relates to—and I want to make sure that I understand 

you, Mr. George. On May 29th of 2012, almost a year before the 

official report came out, you were briefed. And it is my understanding you specifically knew at that particular point that there 

was a criteria that was being used to target the Tea Party, Patriots, 9/12 group. Is that correct? 

Mr. GEORGE. Actually, sir, I—that was my final briefing on this 

matter. During the course of the audit—— 

111 

Mr. MEADOWS. Okay, but this is—this is May 29th, 2012. Is that 

correct? 

Mr. GEORGE. That’s correct. 

Mr. MEADOWS. All right. And so, on May 30th, the day after that, 

you actually briefed Mr. Shulman, Deputy Commissioner Steve 

Miller, and Beth Tucker on this new audit, using that same criteria, that it was being used against Tea Parties. Is that correct? 

Mr. GEORGE. Sir, I—— 

Mr. MEADOWS. That’s what your notes say. 

Mr. GEORGE. Yes, but, you know, my colleagues behind me, who 

were in attendance at the meeting—— 

Mr. MEADOWS. Right. It said ‘‘function heads,’’ so I assume that 

they were your function heads. 

Mr. GEORGE. And they indicated—we had some indication at the 

time that the allegations had merit, but we did not characterize— 

we cannot—I’m not in a position now to characterize the level of 

detail that we had at that point. 

Mr. MEADOWS. I’m not asking about detail. Was there a separate 

criteria used for those groups, a separate criteria used for Tea 

Party groups that you just admitted to just a few seconds ago? 

Mr. GEORGE. You know, again, sir, I’m not certain as to exactly—— 

Mr. MEADOWS. Well, as your function heads, are y’all familiar 

with it? We have notes that would indicate that, that there was a 

separate criteria used. 

Mr. GEORGE. Yes, sir. I was just informed that we knew there 

was a criteria; we didn’t know the nature of the extensiveness of 

it, sir. 

Mr. MEADOWS. So we know that it was separate, though. 

Mr. GEORGE. Yes. 

Mr. MEADOWS. And you, the gentleman to your left, you did notify him of that on May 30th of 2012? 

Mr. GEORGE. That is my recollection, sir. 

Mr. MEADOWS. Okay. 

Then on June the 4th, this note says that you briefed the general 

counsel, Mr. Chris Meade. So you briefed him of a separate criteria 

in the Treasury Department on June the 4th, 2012. 

Because all of a sudden, you know, all of this is supposedly, it’s 

just happened, but this is well over a year ago. So you briefed the 

general counsel, the chief general counsel of the Treasury Department well over a year ago. 

Mr. GEORGE. I did. But I have to acknowledge that in the briefings that we hold with the Commissioner of the Internal Revenue 

Service I have my subject-matter experts in the room. 

Mr. MEADOWS. So you went by yourself to the general counsel—— 

Mr. GEORGE. That’s correct. 

Mr. MEADOWS. —and so you may not have given him the complete story. 

Mr. GEORGE. I’m certain that I did not give him the level of—— 

Mr. MEADOWS. Why would you have not given him the complete 

story if you had just done it a few days before? 

Mr. GEORGE. Well, because the Commissioner is the person who 

we directly oversee. I actually have—— 

112 

Mr. MEADOWS. So this was a courtesy call. 

Mr. GEORGE. It is a courtesy call, sir. 

Mr. MEADOWS. So a courtesy call to the general counsel. 

Mr. GEORGE. Yes, it is. 

Mr. MEADOWS. All right. 

Let me go a little bit further, because I’m troubled by some of 

the things that have been said. We’ve got Lois Lerner. Why would 

she have been privy to all the interviews and know exactly what 

the interviews were going on during this process? Why would she 

have known that? 

Mr. GEORGE. I’m glad you raise that, sir, because it was raised 

much earlier. My understanding—and, again, I was not privy to 

those meetings. I was not in attendance at those—— 

Mr. MEADOWS. Okay. But let me ask you another question, because my time is running out. 

Mr. GEORGE. Sure. 

Mr. MEADOWS. Holly Paz, why was she in all—almost all the 

interviews that you conducted? 

You talked about original and proper protocol from an audit 

standpoint. She was in these meetings with her subordinates and 

other people. Why would you have somebody from the IRS in all 

of those meetings? 

Mr. GEORGE. You know, well, first of all, in some instances, 

they—— 

Mr. MEADOWS. Is that proper protocol? 

Mr. GEORGE. In some instances, it may—— 

Mr. MEADOWS. Well, I know when you get audited you keep people separate. Why would you do this and put them together? 

Mr. GEORGE. Well, because in some instances—they have collective bargaining units. 

Mr. MEADOWS. So this was all because of collective bargaining? 

Mr. GEORGE. Well, no. I was just told that Holly was requested 

to leave when we were querying of the IRS staff about—— 

Mr. MEADOWS. Yeah, but she was in 36 of 41 interviews, Mr. 

George. Requested to leave? She was in 36 of 41 interviews. 

Mr. GEORGE. I’m unaware of it. This is the first time I’m hearing 

this. 

Mr. MEADOWS. So are you gentlemen aware of it? I mean, just 

talk to him. You’ve been going back and forth. So this is the first 

you’re aware of it? 

Mr. GEORGE. Well, none of the gentlemen here would have conducted those interviews directly, sir, and so—— 

Mr. MEADOWS. Well, this—I just was passed this. It was in the 

document that you’ve given us. It was in the document that you’ve 

given us. So are you just giving us stuff that you’re not aware of, 

Mr. George? 

Mr. GEORGE. I don’t know which document you’re referring to, 

sir. 

Mr. MEADOWS. Well, I’ll be glad to give it to you. 

Mr. GEORGE. Okay. Thank you. 

Mr. MEADOWS. I just find it highly inappropriate. 

Mr. GEORGE. Sir, this was put together by auditors, as you can 

see, of—some of whom are in—many of whom are in Washington, 

but some of whom are not. These are, you know, level—— 

113 

Mr. MEADOWS. Well, that’s my point. This is not isolated to two 

people in Cincinnati. This has a whole lot of people in Washington, 

D.C. 

And why would she have been part of it? Would you normally 

conduct an audit in that manner? 

Mr. GEORGE. You know—— 

Chairman ISSA. The gentleman’s time has expired. You may answer, though. 

Mr. GEORGE. Congressman, I would respectfully request the opportunity to look further into this and to report back to the committee, because this is the first time that I was made aware of this, 

and I really don’t have information about it. 

Mr. MEADOWS. I thank the chairman. 

Chairman ISSA. Thank you. And we will allow the gentleman 

time to do the research and get back with us. 

Mr. GEORGE. Thank you. 

Chairman ISSA. We now go to the gentleman from California, Mr. 

Cardenas. 

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

TIGTA made nine recommendations detailing how the IRS can 

improve its process for reviewing applications for 501(c)(4) organizations. 

Mr. Wolin, who at the Treasury is working with the IRS to ensure that these recommendations are fully implemented? 

Mr. WOLIN. Well, most of them, Congressman, are focused on actions for the IRS to take, and so the new Acting Commissioner, Mr. 

Werfel, will be quick at work on those. 

There’s one that we’ve discussed here in this hearing that relates 

to better guidance with respect to this question of whether entities 

are meant to be 501(c)(4)s or not, and that has a role for Treasury 

as well as the IRS on that guidance. 

But, in any event, the Secretary of the Treasury, Mr. Lew, has 

charged Danny Werfel with getting back to him within 30 days to 

report on his progress in implementing the recommendations from 

the IG report, plus whatever other steps he feels are necessary to 

make sure that this misconduct does not happen again. 

Mr. CARDENAS. Okay. 

And, Mr. George, what can you say about that? 

Mr. GEORGE. Mr. Werfel reached out to me last week, Congressman, and requested my assistance in helping address many of the 

issues that we identified—actually, all of the issues that we identified in our audit report. And I have committed to doing just that 

to assist him. So we are going to do our level best to help guide 

him as he is attempting to address our recommendations. 

Mr. CARDENAS. And what has the Tax-Exempt Division, regarding this implementation, what have they shared with you? 

Mr. GEORGE. I have had no discussions with the Tax-Exempt Organizations Division thus far. I don’t know whether my colleagues 

have. And if you’ll—I beg your indulgence. 

Mr. CARDENAS. Sure, please. 

Mr. GEORGE. Apparently not yet, sir. 

Mr. CARDENAS. Okay. 

Mr. GEORGE. But we will, starting—— 

114 

Mr. CARDENAS. That was my next question. When you say you 

will, is there an intended timeline? Is there a goal? 

Mr. GEORGE. Mr. Werfel and I committed to meeting next Monday—or, I’m sorry, Tuesday. Monday is a holiday. 

Mr. CARDENAS. So as early as next week? 

Mr. GEORGE. Yes. 

Mr. CARDENAS. Okay. 

Eight of TIGTAs nine recommendations were directed towards 

the Exempt Organizations office and the Tax-Exempt and Government Entities Divisions of the IRS. In a few cases, the Exempt Organizations office and TIGTA did not see eye-to-eye on the specifics 

of some given recommendations. 

Can you share with us what the disagreement was and why? 

Mr. GEORGE. They—in a couple—well, first of all, it’s overtaken 

by events, actually, Congressman, since—because when they initially provided us with their response to our recommendations, it 

was before the President directed them, and then through—and 

then the Secretary subsequently, to adopt all of our recommendations. 

But to answer your question directly, in some instances, they indicated that they had already addressed the problems that we identified, on one or two, like posting information on the Internet for 

the public. I do have the detailed response, but it’s not before me. 

Again, with the chairman’s permission, I would like to submit that 

for the record. 

Mr. GEORGE. But the bottom line is, they have subsequently now 

agreed to adopt all of our recommendations. And that’s, I think, the 

ultimate goal. 

Mr. CARDENAS. Including posting the process online so that people could understand what’s going on behind that IRS curtain with 

their applications? 

Mr. GEORGE. Now, if they come back with an extraordinarily 

plausible reason, again, citing confidentiality or security or what 

have you, we would obviously take that into consideration. That 

was not their initial objection, but, you know, so we’re—but they 

have committed to adopting all of our recommendations, sir. 

Mr. CARDENAS. So I anticipate this is not the last hearing we’re 

going to have on this. So as you progress and have that dialogue 

and you have that back-and-forth, is there any reason that you anticipate that you could not share with this committee what their 

responses are and what their intended cooperation with these implementations are? 

Mr. GEORGE. I will commit to doing so, but we’ve also committed 

to conducting a follow-up audit to ensure that they have accomplished the goal of reaching, of achieving these recommendations 

that we established. 

Mr. CARDENAS. Okay. 

And you mentioned that the President directed the Treasury to 

implement all of your recommendations. And so, as far as you can 

tell, there hasn’t been any resistance to—since then? 

Mr. GEORGE. I haven’t, but I yet have had my meeting with Mr. 

Werfel. But I assume they’re going to follow the President’s instructions. 

Mr. CARDENAS. Yes? Please. 

115 

Mr. WOLIN. Congressman, there will be no resistance. We accept 

the nine recommendations from the IG as they were written. I 

think the President and the Secretary and I have all made that 

clear to Mr. Werfel, and I think he is 100 percent on board. 

Mr. CARDENAS. Well, I’m sure that with an organization like the 

IRS there’s probably never going to be 100 percent contentment 

with every American with this particular department. Yet, at the 

same time, I think that the timeliness of you being able to—all of 

you being able to do your part and to restore confidence, at least 

around this issue, that we can do that as expeditiously as possible. 

I yield back the balance of my time. Thank you. 

Chairman ISSA. I thank you. 

And I’ll note to gentlemen, we have two additional Members to 

ask questions. Then we’re going to go to 5 minutes a side as the 

limited second round. And then we’ll dismiss our witnesses for 

today. 

At this time, we go to the gentleman from Michigan. 

Mr. BENTIVOLIO. Thank you, Mr. Chairman. 

Mr. Shulman, I’ve got to hand it to you, 5 hours under all this 

questioning, and you’ve been able to maintain some coolness, calm. 

But, at any time, did you ever feel uncomfortable, intimidated by 

questioning going on? 

Mr. SHULMAN. Congressman, my goal today is to try to answer 

your questions. 

Mr. BENTIVOLIO. Okay, so you didn’t feel the same thing my constituents feel when they get a letter from the IRS or that I felt 

when I was reading a memo that said how the IRS deemed educating on the Constitution and Bill of Rights to be a political act? 

Does the IRS still believe that educating about the Constitution 

and Bill of Rights is a partisan political act? 

Mr. SHULMAN. I don’t know what the IRS believes, but if you’re 

referring to the criteria in the report, I would agree it’s inappropriate. 

Mr. BENTIVOLIO. It’s inappropriate. You know, can you imagine 

how I felt as a former schoolteacher teaching the Constitution and 

the Bill of Rights and thinking about, wow, I could be subject to 

an IRS audit simply because I’m doing my job? 

Do IRS agents take a class on learning about the Constitution 

and Bill of Rights before joining one of the most powerful agencies 

in the Federal Government? 

Mr. SHULMAN. I don’t know the answer to that question. 

Mr. BENTIVOLIO. Okay. You do teach ethics, correct? 

Mr. SHULMAN. I do—— 

Mr. BENTIVOLIO. Or the IRS requires ethics training? 

Mr. SHULMAN. Yes, there’s a—— 

Mr. BENTIVOLIO. But not—but not the Constitution? 

Mr. SHULMAN. I don’t know the answer to that question. 

Mr. BENTIVOLIO. Yeah, the answer is no. I understand that they 

take training classes in ethics, but specifically about the Constitution and Bill of Rights, you don’t know that. 

Given their power to destroy businesses and audit individuals, do 

you think it would be useful for the IRS to require all of its employees to take a class studying the Constitution and Bill of Rights in 

116 

order to make positively sure that they understand the concept of 

government restraint created at our founding? 

Mr. SHULMAN. I think it’s very important that IRS personnel be 

well-trained. 

Mr. BENTIVOLIO. Did you study the Constitution? You’re a lawyer, are you not, or an attorney? 

Mr. SHULMAN. I went to law school. 

Mr. BENTIVOLIO. You went to law school. Did you study the Constitution? 

Mr. SHULMAN. I believe I took constitutional law, but I’m not prepared to take an exam at this time. Meaning I’ll answer any of 

your questions, but I can’t promise, you know, I’m an expert. 

Mr. BENTIVOLIO. An expert. Well, you know the First, Second 

Amendment, and one of my favorites, the 19th, right? You know 

those? 

Mr. SHULMAN. Excuse me? 

Mr. BENTIVOLIO. You know those—— 

Mr. SHULMAN. I told you, I’m not a—— 

Mr. BENTIVOLIO. Excuse me. The constitutional amendments, you 

know the First, you know the Second, and you know the 19th. 

Mr. SHULMAN. I don’t necessarily have the Constitution memorized, sir. 

Mr. BENTIVOLIO. Okay. Well, they’re pretty general, I mean, you 

know, in what each one is. Like, the First Amendment is freedom 

of the press, freedom of religion, and freedom to petition the government for redress of grievances. The First Amendment, right? 

Mr. SHULMAN. I really can’t recite the Constitution, sir. 

Mr. BENTIVOLIO. Okay. Do you understand what—do you know 

what the word ‘‘tea’’ in ‘‘Tea Party’’ stands for? 

Mr. SHULMAN. I do not. 

Mr. BENTIVOLIO. It stands for ‘‘taxed enough already.’’ That’s 

contrary to what the IRS wants, I think. Because they want to tax 

as much as possible, don’t they? 

Mr. SHULMAN. The IRSs job is to administer the tax laws that 

are on the books. 

Mr. BENTIVOLIO. Mr. Chairman, I yield back my time. 

Chairman ISSA. Would the gentleman yield? 

Mr. BENTIVOLIO. Yes. 

Chairman ISSA. Just briefly, I want to make sure this gets properly in the record. Yesterday we had a transcribed interview, and 

I’m going to ask unanimous consent to place, at this time, pages 

189 and 190 in the record. 

Without objection, so ordered. 

Chairman ISSA. And I would just read very briefly from it. 

This was to Ms. Paz. When we asked her about, did you ever accompany any other employees to their interviews with TIGTA? And 

she said, ‘‘Yes. I sat in on all the interviews, but they—the arrangement were—we had worked out with TIGTA was that I would 

leave the—at the end of the interview so they could ask anyone 

interviewed any questions they wanted to ask without anyone else 

present. So that was done.’’ 

That’s correct, her testimony that she was in at least what she 

thought was all the interviews and that she left for a short time 

at the end? 

117 

Mr. GEORGE. I have been informed by staff that that is accurate, 

sir. 

Chairman ISSA. Thank you. 

And we went on with Mr. Hixon, one of my staff attorneys, 

asked—and he is an attorney; he didn’t just go to law school—‘‘How 

did that arrangement come about when TIGTA approached you 

about conducting their audit? Did you request that you be present 

at all of the interviews?’’ 

Ms. Paz answered, ‘‘Yes, I believe—I can’t remember if I made 

the request or Lois Lerner made the request. But we discussed that 

in order for the IRS to be able to respond to the report, we had to 

understand what information TIGTA had and what they were 

being told.’’ 

Mr. George, you’re a seasoned investigator. Those individuals 

who did that on your behalf, is that routine, to basically let the target of an investigation/audit sit in so they know the questions and 

answers, when they later may be a target of misconduct? 

Mr. GEORGE. You—the operative word, Mr. Chairman, is ‘‘audit.’’ 

Chairman ISSA. Okay, so I’m going to stop you there. Because 

this was an audit, it was conducted much more, if you will, like 

people coming in and just going through the books to find out, you 

know, how much more taxes you owe. Right? It wasn’t conducted 

as an investigation. 

Mr. GEORGE. That’s correct. It was not conducted as an investigation. 

Chairman ISSA. Okay. I’m going to conclude later during the last 

5 minutes. 

Mr. CUMMINGS. Can I ask one question? 

Chairman ISSA. Sure. Go ahead, Mr. Cummings. 

Mr. CUMMINGS. Let me make sure—this is for clarification and 

truth. Usually, when you are conducting an investigation—and I 

know this was an audit, I got that—you want to keep your witnesses separate because you’re in search of the truth and you’re 

trying to make sure that there is no advantage of a person hearing 

what somebody else says. As a matter of fact—I mean, that’s just 

pretty standard procedure. 

And can you tell us what the difference is and why there is—if 

there is a difference with the way you all proceed with regard to 

audit—that is, allowing somebody to listen to testimony? I think 

that would be clarifying for all of us. 

Because, you know, maybe an audit is conducted differently, but 

it would seem to me that even in an audit you’re in search of truth 

and accuracy. And then where there is a—if there is a conflict, 

then you figure out who’s inaccurate or maybe who’s lying, but 

then you figure out how to get to the truth. But when—do you follow me? 

Mr. GEORGE. I do, Congressman. And, again, each case is different. I am not privy yet to the details of these interviews, and 

I just learned about this. But I have to say that, again, the operative word that you used is the ‘‘truth.’’ And we want to make sure 

that the information that we receive and act upon is accurate. 

And sometimes it is beneficial to have more than one person in 

the room who may have worked on the same matter so that, in 

case some person doesn’t recall a particular decision, action, activVerDate Aug 31 2005 09:13 Jul 10, 2013 Jkt 000000 PO 00000 Frm 00121 Fmt 6633 Sfmt 6633 C:\DOCS\81742.TXT APRIL
118 

ity, the other person might, and that might click the memory of the 

person who we were originally questioning. So it really depends on 

the circumstances. 

Now, in hindsight, given this matter, obviously, this seems somewhat unusual. I need to do a little more research—— 

Mr. CUMMINGS. This is just 30 seconds. Based on what the chairman just read, it sounded like Ms. Paz was—she felt like she needed to be in the room because she wanted to be able to defend herself, or the agency, I don’t know, based on what may have been 

said or information gathered in that interview. And that seems like 

it goes against what you just said. 

Mr. GEORGE. Well, again, hindsight is 20/20, sir. 

Mr. CUMMINGS. Okay. All right. 

Chairman ISSA. Thank you. I thank you for your comments. 

We now go to the gentleman from Florida. 

Mr. DESANTIS. Thank you, Mr. Chairman. 

Thanks to the witnesses for toughing this out. 

I’m just a little still stunned by the beginning of this hearing. We 

are investigating the IRS targeting groups who, among other 

things, educate about the Constitution and the Bill of Rights, and 

yet we have one of the officials potentially responsible for that invoking one of those constitutional rights. So it was—it was a startling thing. 

Let me ask Mr. Wolin, just so I get this right, IRS reports essentially to the leadership of the Treasury Department and then the 

President? Is that the proper chain of command, so to speak? 

Mr. WOLIN. It is, Congressman. 

Mr. DESANTIS. Okay. 

And, Mr. Shulman, I notice that you’ve made, obviously, a lot of 

trips to the White House. That was discussed. You also have met 

with the President in 2010, one occasion, and then twice in 2011; 

is that correct? 

Mr. SHULMAN. Sorry,I don’t—I don’t know the exact dates of 

meetings, so—— 

Mr. DESANTIS. Well, I didn’t ask you dates, but is that—about 

three times during that period, is that—I mean, that’s—we just 

have the log. That’s what it says. June 29th, 2010; February 3rd— 

or, excuse me, June 6th, 2011; and December 2nd, 2011. 

Mr. SHULMAN. I have memory of two of the meetings. I’m not 

sure I have a memory of the—— 

Mr. DESANTIS. Now, we don’t yet have the log for 2012, but did 

you ever meet with the President in the White House during 2012? 

Mr. SHULMAN. Was the last date—could you give me the last 

date? 

Mr. DESANTIS. The last date that we have is December 2nd, 

2011. 

Mr. SHULMAN. I’m sorry. I was referring to a December 2012, 

where I had a photo taken with my family. 

Mr. DESANTIS. Is that the only date you remember from 2012? 

Mr. SHULMAN. So, my memory, that’s the only date I have any 

memory of with the President in 2012, except for perhaps a holiday 

party or some such. 

119 

Mr. DESANTIS. Okay. So when you were going there, were those 

discussions—or what were those discussions about? The Affordable 

Care Act? 501(c)(4)s? 

Mr. SHULMAN. The discussions with—— 

Mr. DESANTIS. With the President. 

Mr. SHULMAN. I don’t remember having extensive conversations 

with the President. The first conversation that you referenced was 

about the tax gap and tax collection in general and how the IRS 

works and how to collect the proper amount of revenue for the government. That’s my best recollection. 

Mr. DESANTIS. So that is the extent of the substantive conversations you had, or were there other topics discussed? I mean, you 

know, I understand you’re busy, I understand you meet a lot of 

people, but most people probably remember when they meet with 

the big guy. 

Mr. SHULMAN. Yeah. No, I—that’s the extent of my memory. And 

I also, now that you bring this up—I haven’t looked at these dates. 

You know, I’m not at the agency anymore. I also had a discussion 

once where he convened a number of agency heads, talking about 

how to improve the government, generally. 

Mr. DESANTIS. Now, according to these logs, it was pointed out 

that there were over 100 times where you visited the White House, 

generally, having 118. And there are 46 of them where there is a 

purpose of health care. And it looks like it started in April of 2010 

and really continued throughout 2010. 

So when you were going to discuss health care, was that specifically to discuss the Affordable Care Act, a.k.a. Obamacare? 

Mr. SHULMAN. The IRS was tasked by Congress to have, you 

know, a role in the Affordable Care Act, and I had a number of conversations with—you know, at OMB and the White House about 

that. 

Mr. DESANTIS. One of your predecessors, Commissioner Everson, 

he testified about this issues with the Affordable Care Act. He said 

that he didn’t really recall ever going to the White House for policy 

discussions. I think he said he may have gone one time. 

And he said that he worried about the IRS being this intimately 

associated with kind of a signature initiative, that it may actually 

hurt the IRSs ability to conduct its core function of tax collection. 

Do you believe that there’s a danger in that? 

Mr. SHULMAN. You know, I believe the IRS is part of the executive branch, and when it’s tasked with a major job of implementation, it needs to have proper coordination. 

Mr. DESANTIS. Well, that didn’t really answer the question. I 

mean, putting this new, which could be a very intrusive burden in 

terms of American citizens having their health care being involved 

with the IRS, to be able to do that is obviously going to require resources and manpower. And I guess my question is, is there a danger that that could take away from the traditional functions of the 

agency? 

Mr. SHULMAN. The IRS is—when people think about the IRS, 

they think about collecting taxes. They don’t think about figuring 

out application for tax-exempt status. They don’t think about a lot 

of things. 

120 

So, over the years, Congress has loaded the Tax Code with many, 

many different functions, all within the Tax Code. And the job of 

the IRS is to administer the Tax Code. So I really—you know, the 

IRS is going to do what Congress asks it to do. 

Mr. DESANTIS. All right. I would just note that that still didn’t 

really answer the question, but I will yield back to the chairman. 

Thank you. 

Chairman ISSA. I thank the gentleman. 

We’re now going to go for this last 5 minutes that I mentioned, 

each side. 

Mr. Cummings? 

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

I’m going to be very brief. I—and this is something that we have 

not talked about yet, and it’s something that I just want to get you 

all’s opinions on. 

Mr. George, there are some organizations that, if the test for tax 

exemption under these circumstances were administered fairly, 

might not meet the test. Is that a fair statement? 

Do you understand what I’m saying? In other words, there’s a 

law, there are standards. And some organizations—I’m not talking 

about the ones here, but I’m talking about generally—might not 

meet the test. 

Mr. GEORGE. I guess in—— 

Mr. CUMMINGS. For tax-exempt status. 

Mr. GEORGE. I’m sure, in theory—— 

Mr. CUMMINGS. Yeah, I’m talking about in theory. 

Mr. GEORGE. —you’re right. Yes. 

Mr. CUMMINGS. Let me tell you what I’m really concerned about, 

in addition to all the other things that I’ve said. I’m concerned that 

all of this may have a chilling effect on employees, where they say, 

you know, when normally we would, you know, look at certain criteria fairly, not targeting anyone, but say, ‘‘Uh oh, I’m worried because I better let this go.’’ 

Let’s say, for example, we were talking about audits. And they 

say, uh oh, I’m not going to do this because I may be called in and 

told that I didn’t do things properly. 

Are you following what I’m saying? 

Mr. GEORGE. Yes. 

Mr. CUMMINGS. And so then you—then the organization does not 

do what it’s supposed to do. Are you following me? 

Mr. GEORGE. And not only am I following you, sir, there is evidence to that effect. With the passage of the Restructuring and Reform Act of 1998 and with the deadly sins, top 10 deadly sins, there 

was a steep fallout in IRS enforcement because IRS employees 

were afraid to be very aggressive as it relates to trying to recover 

money. 

Mr. CUMMINGS. And I’m just—I’m just wondering, you know, how 

do we strike that balance? 

I know one thing, Mr. Wolin, is making sure the law is clear. Another thing is making sure that there’s some kind of guidelines 

that are consistent with fairness. What else can we do? 

Because we’ve got to have that balance. We cannot have employees who are sitting there shaking like a leaf on a windy day, believing that if they fail to properly do what they’re supposed to do, they 

121 

may get in trouble. But they also have to know that they—you 

know, what their guidelines are. 

And I’m just curious. Now, you said that you’re going to have a 

conversation with Mr. Werfel, the new Commissioner, Acting. And 

I’m just telling you, I’m trying to figure out, how does all that— 

taking what I just said into consideration, how do we help him to 

create an atmosphere where the employees can still do what they 

are supposed to do in the way they are supposed to do it without 

feeling like—feeling threatened? Does that make sense? 

Mr. GEORGE. It makes complete sense. And just to be clear, it’s 

more than a conversation, Congressman. We are going to work 

with Mr. Werfel. If he has the ability to make sure that his employees are trained, if they know that they have his confidence and he 

has their back, I think it will help address some of the concerns 

that you’re alluding to, sir. 

Mr. CUMMINGS. Mr. Wolin, do you have a comment? 

Mr. WOLIN. Congressman, I think that it starts with leadership. 

He has, I think, an impeccable record, Mr. Werfel, and is very wellsuited to hit the ground running to make sure that he starts the 

path toward restoration of not just the public’s confidence in the 

IRS but also, as you’re pointing out rightly, sir, the employees’ capability to do the job, the important job, they need to do. 

And I think that that partly is about holding people accountable 

for misconduct that occurred, and it’s partly about putting in place 

procedures and policies and a culture that makes sure that these 

kinds of things don’t happen again, that people are appropriately 

trained, that there’s clarity about what the rules are, and so forth. 

And that’s a process that he has begun today and will really move 

forward with, focus on, and with our full support. 

Mr. CUMMINGS. As I said at the beginning of the hearing, this 

is about trust and truth. And I want to thank all of you for being 

here today. This is an ongoing process. 

But I want us never to forget that it’s not enough to just investigate. We’ve got to bring about reform. And this is a—I think 

there are moments that come in life, as I close, Mr. Chairman, 

there are moments in life where incidents happen. And, at that moment, we must take advantage of the moment, because the moment 

will tell us that we need to change things and do something in a 

different way. But if we let that moment pass, usually things only 

get worse. 

And so I’m hoping that you all will—I know you left, Mr. 

Shulman, but I hope that we can get your cooperation in any way 

that you may be able to do it. Mr. Wolin, Mr. George, I hope we 

can—you’ll keep that in mind. Because the American people are 

very concerned about this. 

And, Mr. Chairman, I want to thank you for I think what has 

been a very good hearing. 

Chairman ISSA. Thank you, Mr. Cummings. 

Out of the 5 minutes, I’ll yield 1 minute to the gentleman from 

North Carolina. 

Mr. MEADOWS. Thank you, Mr. Chairman. 

Mr. Shulman, with this internal investigation that was done 

originally, am I correct in the person that headed that up, that left 

from Washington, D.C., and went to Cincinnati, was actually the 

122 

special adviser to Sarah Hall, who is now over our health care. Is 

that correct? Mr. Miller employed her to go and do this internal investigation? 

Mr. SHULMAN. As I stated earlier, I don’t know it to—— 

Mr. MEADOWS. So you have no idea what happens below you at 

all? 

Mr. SHULMAN. Congressman, that’s not what I’m stating. I actually didn’t know it and didn’t—to be an internal investigation. 

But—— 

Mr. MEADOWS. But you agree that it was her, and she is the special adviser to Sarah Hall, who is now over our health care? 

Mr. SHULMAN. To the best of my understanding—and I’ve read 

the report. That’s where I see it was special—— 

Mr. MEADOWS. Did you ever talk to Mr. Miller about that, who 

was going to head it up? 

Mr. SHULMAN. I think that—— 

Mr. MEADOWS. Do you know who Ms. Marks is? 

Mr. SHULMAN. Yes, Nancy—— 

Mr. MEADOWS. Okay. Okay. Was she the special adviser to Sarah 

Hall? 

Mr. SHULMAN. I don’t know. I think, at the time, my best recollection is she was special adviser—— 

Mr. MEADOWS. You know, there’s two C’s here. Either there is a 

coverup, or it’s an extreme lack of curiosity on your part. 

I yield back. 

Chairman ISSA. I thank the gentleman. 

We now go to the gentleman from Ohio, Mr. Jordan. 

Mr. JORDAN. I thank the chairman. 

And I want to direct my questions to Mr. George. And let me 

first—putting aside the fact that I do think the audit was compromised by what both the chairman and the ranking member 

asked you about and talked about earlier with the interviews being 

conducted in the way they were with Ms. Paz present in almost all 

of them, but what I want to go to is the timeline you gave us, the 

TIGTA timeline. 

And on March 8th, you all meet with Oversight and Government 

Reform staff. You meet with the folks back here. And we talk 

about—you talk about this issue. Then you decide to do an audit. 

That meeting took place March 8th, 2012, when you first met with 

Oversight staff. Then you decide to do an audit. On May 29th, you 

brief the IRS—excuse me, May 30th, you brief the IRS about some 

preliminary findings. You give them a heads-up, but it’s not just 

a heads-up about we’re doing an audit. It’s a heads-up, we’re doing 

an audit, and, oh, by the way, we have discovered that ‘‘Tea Party,’’ 

‘‘Patriots,’’ ‘‘9/12’’ identifiers were used in groups applying for taxexempt status. 

Looks like 4 days, 5 days later, June the 4th, you give the same 

kind of heads-up to the Treasury general counsel, Chris Meade. 

So I really only have one question. Why didn’t you give us the 

heads-up? 

Mr. GEORGE. Actually, Congressman, if you look closer to the top 

of the timeline, it was March 1st that my office was contacted by 

staff of this committee. 

Mr. JORDAN. Right. 

123 

Mr. GEORGE. And we were—and requested by this staff to look 

into the matter. 

Mr. JORDAN. No, no, no, I get that. 

Mr. GEORGE. All right. 

Mr. JORDAN. We asked you to—but a few months later, you’re 

telling both the IRS and the Treasury Department that, so far in 

this investigation, we have uncovered that ‘‘Tea Party,’’ ‘‘Patriots,’’ 

and ‘‘9/12’’ were used to identify groups and single them out for different kind of treatment. 

Why didn’t you tell us the same—we’d have liked to have known 

that information. All we knew from you was, okay, we’re doing an 

audit. In fact, we hadn’t formally requested the audit. Mr. Issa and 

I sent a letter to you on June 28th. You’ve already given those 

guys, the IRS and the Treasury, the guys sitting besides you, 

you’ve already given them a heads-up about some initial findings. 

We didn’t—the first time we heard about that in any public way 

was a few weeks ago. 

So all I’m asking you is, why didn’t you afford us—— 

Mr. GEORGE. Yeah. 

Mr. JORDAN. —the same opportunity you gave them and say, 

‘‘Oh, you know what, we are doing an audit, and we have found 

that these terms were being used’’? 

Mr. GEORGE. But, again, sir, if you look through the timeline, 

there have been communications between—— 

Mr. JORDAN. No, no, I—yeah, but you have never once told us 

what you just wrote in writing you told them. 

I think it makes sense for people to ask the question. You’re giving a heads-up to the Democrat administration about the terms 

‘‘Tea Party,’’ ‘‘Patriot,’’ and ‘‘9/12’’ being used, but you’re not going 

to give a heads-up to the Oversight Committee, the very committee 

who oversees the inspector generals in our government, the very 

committee who asked for the audit, and you don’t give us the same 

heads-up, which includes those identifier terms. You don’t think 

that is unusual in an election year? 

Chairman ISSA. The gentleman’s time has expired. Please go 

ahead, Mr. George. 

Mr. GEORGE. Sir, I was not at these briefings, so I’m not certain 

as to exactly what information was communicated—— 

Mr. JORDAN. This is your stuff. You lay it out. You tell them 

those terms, and you don’t tell us? And somehow that’s fair? And 

we’re the ones asking for the audit? 

Mr. GEORGE. But, once again, sir, this is not exhaustive in terms 

of what was communicated, and—but those were—— 

Mr. JORDAN. So are you telling us—you told this committee 

about the terms ‘‘Tea Party,’’ ‘‘Patriot,’’ and ‘‘9/12’’ being used in 

2012. You instructed this committee that those things were being 

used in 2012. Did you ever communicate with anyone on the Oversight Committee or any Member of Congress about that? 

Mr. GEORGE. I—— 

Chairman ISSA. The gentleman may answer, but that will be the 

end. 

Mr. GEORGE. Yes, I did not have discussions with—— 

Mr. JORDAN. Of course you didn’t. You just talked to them. 

Mr. GEORGE. —but my staff did, sir. 

124 

Chairman ISSA. Thank you. 

I really have no time left from the 5 minutes, so I will close this 

by saying that we will work—I’ve directed my staff to work, along 

with the minority staff, on an analysis with your office of the 

timeline of the initial audit period and, quite frankly, to come up 

with some future guidelines as to when an audit should turn into 

an investigation. 

Now, I understand from your earlier testimony that when an investigation begins an audit ends. It is the consideration of this 

chair that there was a time during this audit in which the knowledge was sufficient of the primary activities that did occur that an 

audit at least possibly should have been converted into an investigation, which I think would’ve changed a great deal of the procedures that we’ve had a discussion about here today. 

I’m not going to make any further judgment at this time. I’m 

going to ask my staff to work with your staff and the minority staff 

so that we can sort of put this together into a package and not be 

doing any—not limiting it to this preliminary timeline, if that’s acceptable with you, Mr. George. 

Mr. GEORGE. It is. But, again, sir—and we can speak offline because—— 

Chairman ISSA. Thank you. 

Mr. GEORGE. —there are certain protocols. These are criminal 

versus civil—— 

Chairman ISSA. Right. And that’s the reason I think this hearing 

is not the place to flesh it out further. 

And, with that, at the beginning of this hearing, I called four witnesses. Pursuant to a subpoena, Ms. Lois Lerner arrived. We had 

been previously communicated by her counsel—and she was represented by her own independent counsel—that she may invoke her 

Fifth Amendment privileges. 

Out of respect for this constitutional right and on advice of committee counsel, we, in fact, went through a process that included 

the assumption which was—which I did, which was that she would 

not make an opening statement. She chose to make an opening 

statement. 

In her opening statement, she made assertions under oath in the 

form of testimony. Additionally, faced with the interview notes that 

we received at the beginning of the hearing, I asked her if they 

were correct, and she answered yes. 

It is—and it was brought up by Mr. Gowdy that, in fact, in his 

opinion as a longtime district attorney, Ms. Lerner may have 

waived her Fifth Amendment rights by addressing core issues in 

her opening statement and the authentication afterwards. 

I must consider this. So, although I excused Ms. Lerner, subject 

to a recall, I am looking into the possibility of recalling her and insisting that she answer questions in light of a waiver. 

For that reason and with your understanding and indulgence, 

this hearing stands in recess, not adjourned. 

[Whereupon, at 3:28 p.m., the committee recessed, subject to the 

call of the chair.] 

(125) 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

126 


Insert offset folio 13 here 81742.013

Statement for the Record 

Congressman Matt Cartwright 

Full Committee Hearing on: "The IRS: Targeting Americans/or Their Political 

Belie/s" 

May 22,2013 

Thank you Mr. Chairman and Ranking Member Cummings. 

I am deeply troubled, like the rest of the nation, by the recent revelations that the IRS 

used inappropriate criteria to subject certain groups to special screening. As the 

Ranking Member of the House Oversight Panel's Subcommittee on Economic Growth, 

Job Creation and Regulatory Affairs, I believe that we should use the committee's 

investigatolY role to get to the bottom of why this happened and determine how to 

prevent it from ever happening again, instead of arriving with predetermined opinions 

and using this committee to score political points. 

To that end, I look forward to finding out answers, today and in the coming weeks, to 

the reasons behind the IRS's conduct. 

What we do know is that the recent Inspector General's report sheds some light on the 

situation. 

As the report details, from 2010 onwards, there was a significant rise in the number of 

applications for tax-exempt status. In 2011, the IRS received almost 60,000 applications 

for tax-exempt status as 501(C)3 charities and more than 2,000 as 501(c)4 social-welfare 

organizations. 

The Inspector General's staff reviewed almost 300 applications that the IRS field office 

had tagged as potential political cases and reportcd, '[i]n the majority of cases, we 

agreed that the applications submitted included indications of significant political 

campaign intervention.' In the end, of the 298 applications they flagged for further 

review, 207 were from organizations that actually did appear to be political groups. 

In this context, I believe the folloVv'ing questions suggest themselves, I'd like answers to 

them, and I believe the American people arc entitled to the answers: 

1. Why did the IRS receive an extraordinarily high number of applications in 2010, 

2011 and 2012? Was this affected by the Citizens United decision? 

2. During this period, was the IRS provided with the proper staffing and funding to 

handle the increased workload? What would have helped the IRS cope with the 

influx of applications? Clearer regulations? More guidance from Congress? 

3. Did the IRS's improper prioritizing of political groups lead to any actual incorrect 

determinations regarding their eligibility for tax-exempt status? 

4. Did the IRS's improper targcting affect the 2012 election in any way? If so, 

specifically how? 

The purpose of this committee is to find solutions, not engage in partisan bickering. 

I look forward to having such a discussion and I yield back. 
127 


Insert offset folio 14 here 81742.014

Appendix I: Updated Briefing for Senate and 

IIouse Committees 

Page 16 

9 

GAO·Il·547 IRS Budget 2012 
128 


Insert offset folio 15 here 81742.015

RPTS BLAZEJEWSKI 

DCMN ROSEN 

[1:35 p.m.] 

BY MR. BREWER: 

Q Ms. Paz, I want to turn to the TIGTA audit. Were you 

interviewed as part of this audit? 

A Yes, I was. 

Q How many times were you interviewed? 

Mr. Campos. Approximately. 

189 

Ms. Paz. At least once. I met with them on several occasions. 

I think myself was interviewed once, but did meet with them on more 

than one occasion to discuss various aspects of the investigation 

documents that they needed or additional individuals that they needed 

to talk to. 

BY MR. BREWER: 

Q Okay. And were you interviewed alone or with other people? 

A Alone. 

Q So once alone and then other times it was the document --

A We had meetings. I mean, as you can see, they did an 

analysis of the cases, of a sample of cases, and we met to discuss the 

results of their review. 

Q Okay. Did you ever accompany any other employees to their 

interview with the TIGTA folks? 

A Yes. I sat in on all the interviews, but they, the 

arrangement we had worked out with TIGTA was that I would leave at the 
129 

Æ 


Insert offset folio 16 here 81742.016

190 

end of the interview so they could ask everyone interviewed any 

questions that they wanted to ask without anyone else present, so that 

was done. 

Mr. Hixon. How did that arrangement come about? When TIGTA 

approached you about conducting their audit, did you request that you 

be present for all the interviews? 

Ms. Paz. Yes, I believe - - I can' t remember if I made the request, 

or if Lois Lerner made the request, but we had discussed that in order 

for the IRS to be able to respond to the report, we had to understand 

what information TIGTA had and what they had been told, but, you know, 

obviously they did want to allow for employees to provide any 

information that they were uncomfortable, for example, of explaining 

in front of someone in the management chain, so we did provide for that. 

They had a period of time at the end of the interview where I was not 

present. 

Mr. Hixon. And did every interview, did you leave the room at 

the end and the employee stayed and continued to speak with TIGTA? 

Ms. Paz. Yes, unless I think there may have been a few times where 

TIGTA concluded that they didn' t need - - they didn' t have any questions 

that they wanted to ask without me present, and that was really a 

decision that was made by the two individuals from TIGTA who were 

conducting the interviews. 

Mr. Hixon. Did any employee ever express concerns or 

reservations about, you know, being interviewed in that manner? 

Ms. Paz. Not to my knowledge.