Former IRS chief denies knowing full extent of targeting at agency

Former Internal Revenue Service Commissioner Doug Shulman told Congress Tuesday that he only learned the full extent of the agency’s targeting of conservative groups after he left his post and did not know why employees initially implemented the policy.

Shulman said IRS staffers should have more quickly alerted their superiors about the higher scrutiny given to Tea Party groups seeking tax-exempt status — a feeling shared by the acting commissioner, Steven Miller.

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The two officials faced tough questions about the IRS scandal before the Senate Finance Committee, as lawmakers probe when senior officials at Treasury and the White House first learned about it and what steps they took to stop it.

A Treasury inspector general’s report found ineffective management at the agency led to Tea Party groups being subjected to delays and additional questioning.

Shulman, in his first testimony on the controversy, said the report left him “saddened” and “dismayed,” but he also noted that it didn’t find any political motivations by the employees.

“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,” Shulman, who left the agency in November 2012, told the committee.

The testimony frustrated Republicans already irritated by Miller’s contentious appearance before the House Ways and Means Committee last Friday and shed little additional light on when key figures in the White House and Treasury found out about the IRS targeting.

The White House said Monday that White House counsel Kathryn Ruemmler found out about certain details of the inspector general’s report and subsequently briefed senior staffers like chief of staff Denis McDonough. At the time, Ruemmler decided not to brief President Obama.

Both Miller and Shulman found out about the targeting in May 2012, but did not alert lawmakers — a decision that ranking Republican Sen. Orrin Hatch (Utah) called a “lie of omission.”

Shulman had told lawmakers in March 2012 congressional testimony that the agency was not targeting Tea Party groups after GOP lawmakers raised concerns.

Republicans were also hard-pressed to believe that there was no political motivation behind the targeting – especially after Shulman and Miller could not clearly state which staffers put the screening processes for Tea Party groups into place, and who decided to implement political screening terms a second time.

“I don’t know how we can come to the conclusion that it’s not politically motivated. We don’t even know who made the decision,” said Sen. Pat Toomey (R-Pa.). “On the face of it, it certainly appears that it’s completely politically motivated.”

Finance Committee Chairman Max Baucus (D-Mont.) said he too found the IRS’s actions intolerable, and said the answers from the IRS officials in charge when the targeting occurred were "unsatisfying."

"We haven't gotten to the bottom of this yet. And that's my intent, to get to the bottom of this," Baucus told reporters after the hearing. "What personnel did or did not know? Who really made these decisions? What were the instructions from people higher up? A lot of unanswered questions."

But Baucus and other Democrats on the panel — like other party lawmakers before them — also raised the broader question of whether the IRS was correctly enforcing whether political groups should obtain tax-exempt 501(c)(4) status, and whether the laws and regulations in that area are clear enough.

Democrats noted that the statute on 501(c)(4) groups – which allows those organizations to keep their donors secret – said that those groups should “exclusively” be social welfare organizations.

But the regulations on the matter now say that 501(c)(4)s must focus “primarily” on social welfare, which is interpreted to mean that less than half those groups’ work can be political.

“Clearly, a Mack truck is being driven through the 501(c)(4) loophole,” Baucus said.

Russell George, Treasury’s inspector general for tax administration, told Senate Finance that his organization would be reviewing how the IRS deals with “campaign intervention” by 501(c)(4) groups. George’s office wrote the report detailing the targeting of Tea Party groups.

Shulman, meanwhile, urged Congress to act on the issue, noting all the other issues that the IRS has to deal with. “This is a very hard task,” the former commissioner said.

For his part, Miller on Tuesday took responsibility for the planted question that led to the public disclosure of the IRS targeting, which set off a political firestorm that has left the White House on the defensive.

Miller said the agency was trying to get out ahead of a Treasury inspector general report. Lois Lerner, an IRS official who heads a division that oversees tax-exempt groups, disclosed and apologized for the agency’s actions at a conference on May 10 after being asked a question about oversight of political groups.

“We thought we'd get out an apology,” Miller said. “Obviously, the entire thing was an incredibly bad idea.”

A Treasury official said this week that the IRS had told the department three separate times that they would disclose the extra scrutiny for conservative groups, and Treasury had deferred to them.

Miller also said the agency was looking into whether staffers like Lerner should be disciplined for their role in the extra scrutiny, but that he would not be part of those discussions.

President Obama ousted Miller last week, and Danny Werfel, a top official at the Office of Management and Budget, is slated to take over as acting commissioner on Wednesday.

Lerner found out in June 2011 that staffers were giving extra screening to groups with “Tea Party” and “patriots” in their name and directed employees to end that practice. IRS staffers eventually changed the criteria for extra scrutiny once more to again give extra attention to groups with specific policy positions.

This story was posted at 11:12 a.m. and updated at 1:51 p.m.