Lew learned of potential for 'troubling findings' at IRS in mid-March

Treasury Secretary Jack Lew was told about a government watchdog's investigation of the Internal Revenue Service in mid-March but did not learn the full extent of its findings until they were released earlier this month.

Lew told the Senate Banking Committee on Tuesday that he first learned about the possible problems during a "getting to know you" meeting with the Treasury's inspector general for tax administration, J. Russell George, on March 15.

At that meeting, George ran down a number of items for Lew, including the potential for "troubling findings" in regards to the agency's handling of tax-exempt applications for 501(c)(4) groups. Lew said he gave his support to the inquiry but did not learn the full extent of the IRS's targeting of Tea Party groups until George issued his report on the matter two months later.

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Lew's appearance before Congress was his first testimony since being sworn in as Treasury Secretary in February.

He said he was immediately outraged by the IRS's actions, in which agents selected Tea Party groups applying for tax exemption for additional questions, but emphasized that there was no evidence the administration pressured the agency. 

"I cannot say strongly enough how unacceptable this behavior was and how outraged I was when I read about it," he said.

"It's very important to note that there is no suggestion of any political interference with the process of making these determinations," he added.

Republicans expressed disbelief that Lew did not dig further into the matter with George immediately, after the potential for trouble was highlighted.

"I'm just surprised that you had no additional questions if there were troubling findings," Sen. Dean Heller (R-Nev.) said.

But Lew contended that his proper role was to allow George to complete his investigation before taking action, adding that the "well-established practice" at the Treasury was not to bring audit findings to the secretary until they were completed and ready for response.

"The practice at Treasury, quite appropriately, is when you're notified of the IG investigation, you allow the IG to do their work. You don't get in the way," he said. "That is what Treasury was doing. I don't think [George] expected me to take any action at this time because I was waiting for his report."

Republicans expressed skepticism that low-level IRS employees were the lone force behind the targeting, suggesting that more powerful administration players, either explicitly or implicitly, encouraged the crackdown on conservative groups. Several GOP members suggested the Obama administration had sown the seeds for the targeting by establishing a "culture" where such behavior could exist.

"You don't think it happened out of thin air, there was something that triggered all this?" Sen. Richard Shelby (R-Ala.) asked.

Sen. Bob Corker (R-Tenn.) called the outrage Lew expressed at the outset of the hearing "laughable" and accused top officials from President Obama on down of encouraging the IRS to take a tougher hand with Tea Party groups.

"When you have the president of the United States and the vice president and other leading folks in our administration using the type of language to explain the folks that were targeted, demonized, villainized, you would expect bureaucrats at lower levels are going to act in the way that they acted," he said.

Sen. Mike Crapo (R-Idaho), the ranking member on the committee, said George was simply told by IRS employees there was no outside political pressure.

"The report does not make a finding that there was no political pressure or political motivation," he said. "It was that they were not able to find it."