Hearing of the House Ways and Means Committee - Status of IRS's Review of Tax Exempt Application Practices

Hearing

We are here today to learn about the corrective action that the Internal Revenue Service has taken to address mismanagement in processing of tax-exempt applications.

Mr. Werfel. Welcome to the Ways and Means Committee.

I am glad to see in your 30-day report that you have instituted management changes that span the entire IRS management chain. I see from your report that these changes reach into the Exempt Organizations Division and the team responsible for determinations on applications for tax exempt status.

I'm also interested in your recommendations for obtaining greater effectiveness within the IRS with respect to better early warning systems and risk management. We look forward to hearing your testimony on your new Enterprise Risk Management Program, which I understand will improve IRS accountability and responsiveness to stakeholders, such as Congress.

As your report makes clear, there was clear mismanagement on the part of the IRS Exempt Organizations Division in processing these tax-exemption applications. The Initial Assessment and Plan of Action appear to be a solid roadmap to addressing the problems and we encourage you to actively pursue this plan.

But for our Committee, which launched this investigation on a bipartisan basis, the backdrop for today's hearing is the troubling new information that has come to light about the report issued by the Treasury Inspector General of Tax Administration.

This week we learned for the first time that three key items: (1) the screening lists used by the IRS included the term "progressives"; (2) progressive groups were among the 298 applications that TIGTA reviewed in their audit and received heightened scrutiny; and (3) the Inspector General did not research how the term "progressives" was added to the screening lists or how those cases were handled by a different group of specialists in the IRS.

The failure of the IG's audit to acknowledge these facts is a fundamental flaw in the foundation of the investigation and the public's perception of this issue. I wrote to the IG and asked him to explain these omissions. And all Committee Democrats have asked today, Mr. Chairman, that you ask Mr. George to return to the Committee to provide the appropriate context for his report and answer questions under oath regarding all of these matters.

Our committee, in its oversight role, has an obligation to fully understand the manner in which the Inspector General conducted his audit, and at what direction.

Deeply troubling is that when asked about the new information that has come to light, the Treasury Inspector General's office initially said in media reports that "our audit report answered the questions it was asked to address" and that House Oversight Committee Chairman Darrell Issa had specifically requested that investigators "narrowly focus on tea party organizations." We asked TIGTA about this in a letter, and TIGTA responded that "many of the press reports are not accurate."

If some of the press reports were accurate, TIGTA's initial explanation of the scope of the audit is inconsistent with the description of the IG's audit work in the 2013 Audit Plan and the stated objective on the first page of the May 14, 2013 audit report. The stated objective was "to determine whether allegations were founded that the IRS: 1) targeted specific groups applying for tax-exempt status, 2) delayed processing of targeted groups' applications, and 3) requested unnecessary information from targeted groups."

The IG's failure to be forthcoming in the audit and at Congressional Hearings, even when asked directly if there was a screening list for "progressive" and whether progressive groups were included among the 298 applications reviewed by TIGTA, has contributed to the distortion of this entire investigation, including use of innuendo and totally unsubstantiated assertions of White House involvement.

Democrats have condemned the singling out of Tea Party by name. I hope our colleagues on the Republican side of the aisle will now join us in condemning the use of the term "progressives" on the screening lists and the failure of the IG to be forthcoming with this and other Congressional Committees.

We have also been fully supportive of letting the facts lead where they may. None of us -- including the Acting IRS Commissioner -- can describe how an application was processed once it was screened. I caution my colleagues from jumping to conclusions until we know all of the facts. Searching for the facts is the only way we are going to get back on the course that I hope is our mutual goal: fixing the problems at the IRS and restoring the trust of the American people.

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