1200 5 August 25 By FedEx Theron IRS - Apr 2525 Cap Fresno, Dear Mr. T1 Tlli. suppleme 2014 (the June unavailable recognize shurq Winthrop Shaw Pittman LLP venteenth Street, NW 1 Washington, DC 20036-3006 1 tel 202.663.8000 0? jeffei 2015 7 ing ls, SOD, Team 9 :Fl St. Suite 201 93721 Wing: tank you again for taking the time to speak with me. 3 letter and its attached exhibits (together, this ?Third $11 at the ?lings Crossroads Grassroots Policy Strategies ?Revised Protest?), (ii) May 7, 2014 (the ?First Suppleme 20, 2014 (the ?Second Supplemental Submission?) in 0rd information that bears upon a proper resolution of the a by the Internal Revenue Service (the ?Service?) as tax-c 1 GPS iniu 405573072v ally designated the First Supplemental Submission as the ?Suppleme ylawcom fax 202.663.8007 Jeffery L. Yablon tel 202.663.8441 y.yablon@pillsburylaw.com pplemental Submission?) made on February 28, :ntal and I er to present previously ,pplication of GPS to be :xempt under section ntal Submission.? This documen twas obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) 1 i Internal Re vgenue Service August 28 2015 Page 2 501(c)(4) of the Internal Revenue Code (the ?Code?). All of the information presented in the three refer eriiced documents, including the de?ned and capitalized terms, is incorporated herein 2 by referen Or August?S, 2015, the United States Senate Finance Committee released a bipartisan report titled The Internal Revenue Service ?3 Processing (4) Applications for Tax-Exempt Status Submitted by ?Political Advocacy Organizations from 2010-2013 (the ?BipartisaT-i Report?). The Bipartisan Report was accompanied by two sets of ?Additional Views,? one presented by Senator Hatch and prepared by Republican Staff (the ?Republican Report?) and one presented by Senator Wyden prepared by Democratic Staff (the ?Democratic Report?). These three reports (together, the ?Reports?), are attached hereto as Exhibits A, and c. I The? Bipartisan Report notes with disapproval that the Service functioned in a ?politicized atmosphere?3 with respect to the processing of applications for recc gnition of tax?exempt status under Code sections 501(c)(3) and 501(c)(4). Read together, however, the Reports demonstrate that the enate investigation of the politicized atmosphere of the Service was conducted in an atmosphere that was even more politicized. Nonetheless, it is poss ble to ignore the opinions and character zations contained in the Reports and focus upon the facts revealed therein that are 2 GPS does not believe a Penalty of Perjury Statement is necessary due to the 1ture and content of this Third Supplemental Submission but can provide such a statement upon request. 3 BipartisengReport, page 141. rylaw.com 405573072v1 This documient was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) i I i Internal Revenue Service August 28, 2015 Page relevant to the GPS for recognition of exemption. Accor request theit consider the following: I l. i Although there is no doubt that GPS has been repeatedly i [its own rules, the issue to be decided is whether GPS The Reports show that the Proposed Adverse Determ deference. violation 0 welfare or Service is net irrelevant because it casts serious doubts on the proce i eitermination Letter. While Appellate Conferees are char; i I, because of the institutional competence and expertise oi Adverse obj ectivelj in implicit presumption that, at least to some limited extei i I5 generally . Reports demonstrate, however, that incompetence, bia correct. 5 infected the review of application that no defei procedure ?This bipartisan report of the Committee concludes that between 20 obligation to administer the tax law with ?integrity and 1 to ful?ll its Republicaneport documents, there can be no doubt that GPS was targeted, enl?d its application was subjected to highly irregular proce: i i 2. The Reports con?rm that Lois Lerner made the deci: application after meetiryz with opponents of GPS but without readir dingly, we respectfully ination is entitled to no mistreated by the Service in NM be classi?ed as a social ganization under Code section 501(c)(4). But the wrongful treatment of GPS by the as to date and the Proposed ged with looking at cases the Service, there is it, the Service?s position is s, and disregard for ordinary "ence whatsoever is due: 10 and 2013, the IRS failed ?airness to all??4 As the speci?cally and expressly lures.5 iion to deny the GPS lg the GPS ?le. The 4 Bipartisar Report, page 141. 5 Bipartisan Report, pages 175-179. 1 yiawcom 405573072v i This document was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) Internal ReVenue Service August 28 2015 Page 4 Bipartisan Report does not address the issue of bias against conservative organizations. The Republicai Report says it was pervasive, however, while the Democratic Report says there was none. Fortunately, it is not necessary to resolve this disagreement in order to correctly decide the instant matter, because you can consider the objective facts contained in the Republican Report without accepting its characterizations. For example: ?While employed at the IRS, [Lois] Lerner maintained close ties to numerous outside advocacy groups that shared her goal of limiting spending by tax-exempt organizations on political speech. These groups took advantage of their direct access to Lerner and Other senior IRS of?cials, frequently asking the IRS to tighten its con 101 over political 3,6 i spending by tax-exempt organizations . . . . Lerner even met with some of them in person to discuss their proposals. i This con?rms what GPS has previously presented to the Service in its First Supplemental i Submissic n. 3. The hazards of litigation embedded in this case are extreme and unusual. The ?hazards inf litigation? presented by this case deserve careful attention. In litigation the Service will be in a position to which it is not accustomed, ii, defending itself against documented and substantiated charges of political bias, mismanagement, and procediural violations. 6 Republican? Report, page 154. i 40557.3072v?l This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) lntemal Revenue Service August 28 2015 Page 5 i Morleover, the Service will be defending the indefensible fac i Indeed, fo years the Service has been trying to retreat from this test unconstituti nally vague. As the Democratic Report demonstrates, intelligenceg? indeed, elected representatives who write our tax lavi is requirec by Code section 501(c)(4) as interpreted by Rev. Rul. 20 understand?7 ?the primary activity standard . . . is confusin no guidance at all on what ?political activity? Morieover, a comparison of the Republican Report and the that the Republican Senators and Democratic Senators on the Se] niover our tax laws and the Service itself disagree about i jurisdictio mechanicalelements of the law and (ii) the personnel at the Service law also disagree among themselves in this regard. Speci?cally, the ?testimony ieceived by the Committee?s investigators reveals that t] i i id Report, page 279. iq Report, page 279. 7 Democra 8 Democra 9 Democratid Report, page 279. i i 405573072vi and imprecise? .4 ts-and-circumstance test. largely because it is ?men of common is cannot understand what 04?6 and Rev. Rul. 2007-41: ?the rules for political activity by 501 are extremely hard to 8 ??political activity? is not well de?ned. The law provides virtually means.?9 emocratic Report reveals iate Committee with primary ven the most basic charged with applying the Republican Report says that 1e EO tax law specialists in This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) Internal R3 enue Service August 28, 015 Page 6 Cincinnati linew full well that Fprimarily? means But the Democratic Report declares that ?[w]hi1e some IRS staff members admitted to using a percentage test, such a test is not supported Bl regulations or caselaw.?11 At the same time, however the Democratic Report also notes that ?[w]ithout a percentage standard to apply, it is extremely dif?cult to make judgments about an ap lication from a 501(c)(4) nonpro?t that shows an intent to engage in political activity.?1 2 In slim, neither the people who wrote the law nor the people who administer the law know what :the law means or requires. But this does not stop the Service from demanding complianch Nu) knowledgeable person can seriously dispute that the facts-and-circumstances tests of Rev. Ruls. 004-6 and 2007-41 are unconstitutionally vague.13 If this matter goes to court, the Service will lose. While it is recognized that you cannot consider constitutional issues, the IRS Chief Coinsel can and should. Accordingly, we respectfully request that you consult with Chief Counsel at the very highest level. 10 Republican Report, page 264. 11 Democratic Report, page 279, note 26. 12 Democrati? Report, page 279. 13 Indeed, the Service itself has essentially conceded this point publicly. See ackground? Section of Notice of ProposeclRulemaking Guidance for Tax-Exempt Social Welfare Organizatic ns on Candidate-Related Political Activities; IRB 2013-52 (December 23, 2013). i yllawcom 405573072v This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) Internal Revenue Service August 28 2015 Page 7 Th: Revised Protest demonstrates that GPS quali?es as a tax Code sectioii 501(c)(4). The First Supplemental Submission demon by the Ser .11 to produce the Proposed Adverse Letter is tainted anc Second supplemental Submission demonstrates both that the Servic cannot be defended and that GPS will be able to succeed on its First federal courit. This Third Supplemental Submission provides additic bolster the arguments set forth in the First Supplemental Submissior Submission. It is the interests of all concerned to avoid the years of liti; the issuance of a ?nal adverse determination letter. The Service sho favorable determination letter to GPS. Res ectfully submitted this 28th day of August, 2015. MM X, ?2 Jgf?y L?ablon Pillsbury Winthrop Sh: 1200 Seventeenth Washington, DC 200 Facsimile: Tom ose?ak Jason Torchinsky Michael Bayes Holtzman Vogel Josef] 45 North Hill Drive, Si Warrenton, VA 20186 Telephone: 540-341-8 Facsimile: 540-341-8?? 405573072v?l -exempt organization under strates that the process used 1 highly questionable. The knows its legal position Amendment claims in mal support to con?rm and and Second Supplemental gation that will surely follow uld immediately issue a 1w Pittman LLP NW 6 Telephone: 202-663-8441 107 ak PLLC lite 100 808 :09 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) Internal Revenue Service August 25 2015 Page 8 Alvin Dunn Stephen S. Asay Pillsbury Winthrop Shaw Pittman LLP 1200 Seventeenth Street, NW Washington, DC 20036 Telephone: 202-663-8000 Facsimile: 202-663?8007 aw.com 405573072v This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) A . 114th 1 . SENATE st I S. IILITICPIQ THI: INTERNAL REVENUE PROCESSING OF AND APPLICATIONS FOR TAX-EXEMPT STATUS SUBMITTED ORGANIZATIONS FROM 2010?2013 COMMITTEE ON FINANCE UNITED STATES SENATE BIPARTISAN INVESTIGATIVE REPORT AS SUBMITTED BY CHAIRMAN HATCH AND RANKING MEMBER WYDEN AUG '5 2015 archived ?In be prinfed This document was Obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) Foreword Since the in conducted jurisdiction. historically Internal Rex years and tv Given the signi?cance of tax policy and its administration, focused a large portion of its time and resources overseeing renue Service (IRS), the Executive Branch agency charged iQ months ago, the Committee became aware of allegations targeting by of those or the IRS of certain tax-exempt organizations, based on the anizations. Serious allegations such as these strike at the ve :eption of our Nation, the United States Committee on Finance (Committee) has igilant oversight of the Executive Branch agencies and departments under its the Committee has the activities of the vith tax matters. Two regarding the potential ames and political views ry heart of the principal that the Na on?s tax laws are to be administered fairly and without regard to politics of any kind. According] these allegations warranted swift Committee response int investigati oversight a Despite the bipartisan 3 Chairman Chairmansl begun by Chairman i Committee While muc important matter. Co transpiring actio can act to We want tc who condu documenta necessary devotion tc Kimberly I Jim Lyons, 1 January 2015. Accordingly, despite several changes in the 1 has been reported about the alleged political targeting over 3 stress that this Committee has conducted the only bipartisa nsequently, this report will perhaps serve as the de?nitive ac at the IRS and the management failures and other causes the as. Hopefully, this report will provide a roadmap for how take sure this type of conduct does not happen again. ctied over 30 exhaustive interviews, reviewed more than 1.5 0 bring this investigation to closure. The Committee staff Brandt, John Carlo, Justin Coon, Michael Evans, Daniel Gos were a. an activity the. Committee is uniquely positioned to carry thorities and responsibilities with respect to the IRS. partisan political nature of these allegations, the Committee pirit and initiated a joint investigation on May 21, 2013, und aucus and then-Ranking Member Hatch. When Senator .ip of the Committee in February 2014, he agreed to continu hairrnan Baucus. This bipartisan cooperation has continued has continued its tradition of a bipartisan investigative effor acknowledge the hard work and countless hours of time ion, drafted numerous versions of this report, and performe duty made this investigation and report possible include the Todd Metcalf, Harrison Moore, Mark Prater and Tiffany Sr Orrin G. Hatch Ron Wyde he form of an I out as a result of its proceeded in true er the direction of former xden assumed the the bipartisan work unabated since I became chairmanship, the t. the last two years, it is investigation into the count of events it were at the root of the ongress and the public int by Committee staff million pages of :1 countless other tasks vhose diligence and following: John Angell, horn, Christopher Law, nith. 60,14?, This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) THE INTERNAL REVENUE PROCESSING OF 501(c)(3) AND 501(c)(4) APPLICATIONS FOR TAX-EXEMPT STATUS SUBMITTED BY ORGANIZATIONS FROM 2010-2013 Table ofIC ontents Page Number Bipartisan Investigative Report as Submitted bv Chairman Hatch And Ranking Member Wvden 1 Addition 11 Views of Senator Hatch Prepared bv Republican Staff 143 Addition 11 Views of Senator Wvden Prepared bV Democratic Staff 269 Timeline Of Signi?cant Events 320 Appendic es 410 This documeni was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Table of Contents BIPARTISAN INVESTIGATIVE REPORT AS SUBMITTED BY CHAIRMAN HATCH AND RANKING MEMBER WYDEN I. EXECUTIVE SUMMARY AND RECOMMENDATIONS .. 6 II. CKGROUND ON BIPARTISAN INVESTIGATION BY THE SENATE IANCE COMMITTEE .. 13 A. pe of the Investigation and This Report .. 13 B. e; Committee?s Access to Taxpayer Information Protected by Section 6103 of the In ernal Revenue Code, and Use of Taxpayer Information in This Report .. 14 C. Li Vitation on the Committee?s Access to Relevant Informatio .. 16 ummary of Information That Forms a Basis for this Report .. 17 he IRS Loss of Data, Failure to Notify Congress in a Timely Manner, and Results of IGTA Investigation .. 18 'ctions Taken by Committee Investigators to Mitigate the Information Gap .. 31 D. gal Background of 501(c)(3) and 501(c)(4) Organizations .. 32 E. Icture of The IRS Exempt Organizations Division and General IRS Procedures for viewing Applications for Tax-Exempt Status .. 33 NDINGS OF THE SENATE FINANCE COMMITTEE AND SUMMARY OF PPORTING FACTS .. 37 A. Management Lacked an Appreciation for the Sensitivity and Volatility of Political A vocacy Applications .. 37 B. I Management Allowed Employees to Use Inappropriate Screening Criteria That cused on Applicants? Names and Policy Positions .. 40 C. I Management Failed to Develop an Effective Plan for Processing Applications for litical Advocacy Groups .. 43 IRS Management Placed Exclusive Reliance on Test Cases for Too Long .. 43 Ljois Lerner?s July 2011 Solution to Resolve the Political Advocacy Applications was Flawed and Ineffective .. 44 The 2011 Triage of Political Advocacy Applications Was Not Properly Supported by EC Management and Predictably Failed .. 45 Lack of EO Management Oversight of the Political Advoca Development of the Guidesheet to Simply Stop in Novembe EO Management Allowed the Advocacy Team to Process Applications Without Proper Training and Support, and Fai Its Activities .. :y Applications Allowed :r 201 1 .. 46 olitical Advocacy led to Adequater Manage .. 47 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report 6. Although the ?Bucketing? Exercise of 2012 Resolved Many Pending Political Advocacy Applications, the IRS Has Not Yet Issued Determinations for Some Applications .. 48 D. Placement of Left-Leaning Applicants on the BOLO List Resulted in Heightened Scrutiny, Delay and Inappropriate and Burdensome Information Requests .. 49 1. The IRS Instructed Employees to Flag ?Progressive,? ?Emerge,? and ACORN Successor Applications at Training Workshops. .. 49 2. The IRS Placed the Terms ?Progressive,? and ?Occupy? on the BOLO List .. 49 3. Scrutiny of Left?Wing Applicants Resulted in Years-Lo ng Delays and Burdensome [nformation Requests .. 49 E. Tl e: Culture in E0 Contributed to a Lack of Ef?ciency in its Operations .. 50 1. EO Management Lacked a Sense of Customer Service .. 50 2. Remote Management and Workplace Flexibilities Affected the Ef?ciency of EO Determinations .. 53 3. Antagonism Existed Between EO Senior Executive Level Management and E0 Determinations Managers and E0 Line Employees .. 55 4. The IRS Failed to Ensure That All EO Employees Received Technical Training .. 56 F. Lois Lerner Oversaw the Handling of Tea Party Applications and Provided Limited In formation to Upper?Level Management .. 5 7 1. Lois Lerner Was Informed About the Tea Party Applications in April 2010 and Received Updates About Them .. 57 2. Lois Lerner Failed to Inform IRS Upper Management About the Tea Party Applications .. 59 3. Lerner Did Not Consult With IRS Chief Counsel William Wilkins About the Tea Party Applications .. 62 G. Even During the Committee?s Investigation, Some IRS Employees Continued to Screen Tea Party Applications Based on the Organization?s Names .. 63 H. For; a Three?Year Period, the IRS Did Not Perform Any Audits of Tax?Exempt Organizations That Were Alleged to Have Engaged in Improper Political Campaign Intervention .. 64 IV. DILLOWIN THE CITIZENS UNITED CASE, THE IRS FACED EXTERNAL RESSURE TO MONITOR AND CURTAIL POLITICAL SPENDING OF TAX- XEMPT ORGANIZATIONS .. 66 A. nployees Throughout the IRS Exempt Organizations Division Were Aware of the Citizens United Decision .. 66 B. "1ere was Extensive Press Coverage of Political Spending by Tax-Exempt Organizations allowing Citizens United .. 68 C. Many Members of Congress Expressed Their Interest in Political Spending by Tax- Exempt Organizations .. 69 2 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) Committee on Finance Bipartisan Investigative Report ctitioners and Interest Groups Requested IRS Action on Political Spending by Tax- D. Pr inpt Organizations .. 70 E. In lesponse to External Scrutiny and Increased Political Spending by Tax-Exempt anizations, the IRS Tracked Political Spending and Proposed Regulatory Changes .. 71 V. IRS IMPLEMENTED A SPECIAL PROCESS FOR HANDLING CERTAIN PES OF APPLICATIONS .. 74 A. eiTouch and Go (TAG) Spreadsheet Was Developed to Assist EODetermination A ents .. 74 B. Spreadsheet Evolved Into the Joint TAG/Emerging Issues Spreadsheet .. 75 C. Determinations Agents Were Trained in the Use of the New Spreadsheet at a Ju e/July 2010 CPE Training .. 77 D. erNew Spreadsheet Was Renamed the Spreadsheet .. 78 E. Determinations Developed a Process to Update the BOLO Spreadsheet .. 79 VI. A PLICATIONS SUBMITTED BY TEA PARTY ORGANIZATIONS WERE STEMATICALLY IDENTIFIED, CENTRALIZED AND SUBJECTED TO IGHTENED SCRUTINY ter the IRS Received and Approved the First Few ?Tea Party? Applications, it Prepared Sitive Case Reports and Added an Entry to the BOLO Spreadsheet .. 81 1. ea Party Applications Began to Draw Attention in E0 Determinations .. 81 2. 0 Technical Had Early Awareness of the Tea Party Applications .. 82 3. 0 Technical Assumed Responsibility for working Two Tea Party Applications as ?Test Cases? .. 82 4. 0 Technical Prepared the First SCR for the Tea Party Applications .. 83 5. lacing the Tea Party Applications on the SCRS Caused Delays in Their Processing .. 84 6. denti?cation of the Tea Party Applications as an Emerging Issue on the BOLO preadsheet Resulted in Centralization and Full Development of those Applications .. 84 B. Determinations Periodically Updated the Emerging Issues Tab of the BOLO readsheet .. 86 1. Until July 2011, the Emerging Issues Tab of the BOLO Spreadsheet Speci?cally Cindy Thomas Removed References to the ?Tea Party? Fror of the BOLO Spreadsheet .. After July 11, 2011, Cindy Thomas and John Shafer Made I Criteria Used by Screeners to Identify Applications Receive 2011 Emerging Issues Tab .. 3 Referenced the Tea Party Movement .. 86 In July 2011, Lois Lerner Directed that the References to ?Tea Party? be Removed From the Emerging Issues Tab of the BOLO Spreadsheet .. 87 the Emerging Issues Tab .. 87 J0 Changes to the Screening (1 from Tea Party Groups 88 Steve Bowling and Cindy Thomas Changed the BOLO Spreadsheet in January 2012. 91 Holly Paz and Lois Lerner Were Informed That EO Determinations Revised the July .. 93 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bip artisan Investigative Report 7. After Steve Miller Became Aware of the BOLO Criteria, Ho 1y Paz Revised the Process for Making Changes to the BOLO Spreadsheet and a New BOLO Spreadsheet Was issued .. 93 VII. PROCESSES USED BY THE IRS TO WORK THE TEA PARTY A PLICATIONS WERE INEFFICIENT, CUMBERSOME, INVOLVED LTIPLE LEVELS OF REVIEW, AND WERE PLAGU ED BY DELAY .. 95 A. Initial Process Used to Review the Tea Party Applications in 2010 Was Laborious Time Consuming .. 95 B. cause of Miscommunications Between EO Determinations Management and Staff, No a Party Applications Were Processed by ED Determinations for More than One Year ctober 2010 to November 2011) .. 97 C. paration and Review of EO Technical?s ?Test Cases? from 2010 to 2012 Added bstantial Delay to the Processing of the Tea Party Applications .. 100 D. Initiative to Develop a Guidesheet for E0 Determinations Was a Failure That Further ntributed to Processing Delays in 2011 and 2012 .. 103 E. 6 Initial ?Triage? of Tea Party and Other Political Advocacy Cases in 2011 presented Yet Another Unsuccessful Attempt by EC Technical to Assist EO terminations .. 106 F. Advocacy Team Failed to Approve or Deny any Applications Received From Tea ty or Other Political Advocacy Organizations From its Formation in December 2011 to 2012 .. 109 G. Multi-Step Review Procedure Established by EC Technical in 2012 for Political Advocacy Applications Reflected a Lack of Concern by IRS Management for the Need to P1 o?cess the Applications Expeditiously .. 113 H. '16 May 2012 ?Bucketing? Initiative Resulted in E0 Determinations Issuing the First Approvals of Tea Party and Other Political Advocacy Applications After Nearly Two and a Halerars .. 115 THE IRS SELECTED LEFT-LEANING APPLICANTS OR REVIEW AND SUBJECTED THEM TO HEIGHTENED SCRUTINY AND DE LAYS .. 118 A. E0i Determinations Flagged Left-leaning Applicants with the Names ?Progressive,? and ?Occupy? .. 118 PowerPoint Presentation Directs Employees to Flag ?Progressive? and ?Emerge? Applicants .. 1 18 BOLO Spreadsheets Include the Phrase ?ProgressiveIRS Determinations Manager Instructed Employees to Be Alert for ?Emerge? Groups ..ll9 Groups Related to ACORN. .. 120 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report 5. Groups Using ?Occupy? in Their Name Were Flagged Using the BOLO Watch List Tab .. 122 B. Li?t elral and Progressive Organizations Experienced Delayed Processing .. 123 C. Organizations Deemed to be ACORN Successors Experienced Delays .. 124 D. Inappropriate and Burdensome Information Requests .. 125 IX. ADDITIONAL FINDINGS NOT RELATED TO THE DETERMINATIONS PROCEE .. 126 A. Struggled to Decide How to Review Allegations of Improper Political Campaign Inliprvention by Tax-Exempt Organizations, Including Tea Party Groups .. 126 1. General Processes for Audits of Tax-Exempt Organizations. .. 126 2. The Changing Process for Handling Allegations of Improper Political Campaign lniervention .. 128 3. EO Determinations Employees Recommended that the ROO Review the Activities of Some Tea Party Organizations, and a Smaller Number of Progressive Organizations, for Improper Political Campaign Intervention .. 130 B. The IRS Failed to Produce ReSponsive Documents to a FOIA litequest in 2010 Seeking In :?ormation About its Handling of Tea Party Applications .. 131 C. TI GTA Reviewed Several Allegations of Improper Disclosures of Taxpayer Information by the White House and IRS .. 135 1. Kgoch Industries, Inc. .. 135 2. [\lgational Organization for Marriage .. 136 3. Disclosure of Tax-Exempt Applications to ProPublica .. 138 4. Republican Governors Public Policy Committee .. 139 x. DNCLUSION .. 141 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipai?lisan Investigative Report I. EX ECUTIVE SUMMARY AND RECOMMENDATIONS This bipartisan investigation of the Senate Finance Committee examined the Internal Revenue Service?s (IRS) handling of applications for tax-exempt status submitted by political advocacy organizations, following allegations that the IRS discriminated against some of these organizati ms based on their political views. reSponsib' ity to provide effective control, guidance, and direction over the processing of applicatio is for tax-exempt status ?led by Tea Party and other politic advocacy organizations. IRS managers either failed in their reSponsibility to keep informed ab the very existence of the applic itions, or failed to recognize the sensitivity of these applicat ons. In the case of the former, IRS managers forfeited the opportunity to shape the res onse to the in?ux of political advocacy applications by simply failing to read reports info ing them of the existence of those aaplications. In the case of the latter, IRS managers did not ke appropriate steps to ensure that the applications were processed expeditiously and accurat ly. Our inves?Lligation found that from 2010 to 2013, IRS management was delinquent in its Our investigation focused particularly on the Exempt Organizations 0) Division of the IRS, which is sponsible for administering the tax code provisions related 0 tax-exempt organizat ons, including processing and deciding applications submitt by organizations seeking tax-exempt status. Lois Lerner served as the Director of the 0 Division from January 2006 to May 2013. Lerner ?rst became aware that the IRS received plications from Tea Party groups in April or May 2010. For the next two years, Lerner failed tc adequately manage the E0 employees who processed these applications. Moreover, Lerner failed to inform upper-level IRS management of the serious delays in processing applications for tax-exempt status from Tea Party and other politically sensitive groups. Consequently, it was a year before the IRS Of?ce of Chief Counsel became involved, and nearly two years before Lemer?s superiors in the IRS management chain were aware of the gross mismanagement of Tea my and other sensitive advocacy applications. While un der the leadership of Lois Lerner, the E0 Division undertoo a number of initiatives aimed at ?nding a way to process the Tea Party and other political advocacy applications. Each of these initiatives was ?awed in design and/or mismanaged. In one example, EO management sanctioned the use of the Be On the Lookout (BOLO) list, which improperly identi?ed the Tea Party an other organizations by name and policy position. The IRS used the BOLO list to subject plications received from Tea Party groups to heightened scrutiny, even when that scrutiny as unwarranted because the applications gave no indicatioi? that the organizations would gage in political campaign intervention. Other initiatives to process political advocacy applicati ns sanctioned by ED management were under-planned, under-staffed and under- executec . In each case, these poorly formed initiatives ended in predictable failure and each failure resulted in applicant organizations enduring inexcusably long delays in receiving This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena Committee on Finance Bipartisan Investigative Report decisions 3n their applications. Those delays often proved to be harmful or fatal to the organizations by undermining the very purposes for which they were formed. The workplace ?culture? prevalent in the E0 Division was one in which little emphasis was placed on providing good customer service, a fact inconsistent with the promise to provide ?top quali service.? Indeed, the E0 Division operated without suf?cient regard for the consequerices of its actions for the applicant organizations. Not only did those organizations have to thstand delays measured in years, but many also were forced to bear a withering barrage oi'burdensome and inappropriate ?development letters? aimed at extracting information the IRS wrongly concluded was necessary to properly process the applications. Factors contributing to the dysfunctional ?culture? of the E0 Division included the of?ce structure )f the Determinations Unit that placed managers in of?ces located in geographic locales far from the employees they supervised, and employees and managers who frequently teleworked, in some cases up to four days a week. The con?uence of remote management and a dispersed workforce undoubtedly impaired coordination and communication within the Determinations Unit. Moreover, acrimony typi?ed the relationship between various organizat ons within the E0 Division and served to further embitter the workplace ?culture.? In the wa (e of the Citizens United decision in 2010, the IRS received an increasing number of allegations that tax-exempt organizations were engaged in political paign intervention inconsistent with their exempt status. Recognizing the importance of having a process to evaluate h'ese allegations, IRS management, including the Commissi Jner and Acting Commissioner, focused their efforts on devising a workable process that would allow the IRS to evaluate and investigate these allegations. Management?s efforts proved fruitless, and as a consequence, the IRS performed no examinations of 501(c)(4) organizations related to political campaign intervention from 2010 until 2014. The Corr rnittee?s investigation included a review of more than 1,500 000 pages of documents and interviews of 32 current and former IRS and Treasury employees. Issuance of this report was delayed for more than a year when the IRS belatedly informed th Committee that it had not been able to recover a large number of potentially responsive documents that were lost when Lois Lerier?s hard drive crashed in 2011. At the 3mmittee?s request, the Treasury Inspector General for Tax Administration (TIGTA) investigated the circumstances behind the loss of data and other related issues, and was ultimatelyable to recover 1,330 emails that had not been produced tc Congress. ?ndings are described below in Section Overall, the less than complete response to these cir :umstances cast doubt about the thoroughness of their efforts to recover all relevant records related to the investigation, as well as their candor to this and other Congressional committees. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sendte Committee on Finance Bip artisan Investigative Report Although it was not possible to completely produce the records that were lost, the Committee exhausteo all available measures to mitigate the amount of missing information by collecting additiona information from the IRS, other executive agencies, and outside sources. This report accurately summarizes the facts known to the Committee, and we bel' ve that our conclusions are supported by the record. Committee staff have agreed on numerous bipartisan investigative ?ndings. Some of these ?ndings are highlighted below, along with corresponding recommendations to address the underlyi problem. Greater discussion of these and other ?ndings related to the determination process a contained in Section and ancillary ?ndings are in Sect on Finding The handling of applications from advocacy orga izations may affect public con?dence in the IRS. To avoid any concerns that may exist that IRS decisions about particular taxpayers are in?uenced by politics, the following recommendations are made. Related Recommendation Publish in the instructions to all relevant application fc objective criteria that may trigger additional review of applications for tax-exempt tus and the procedures IRS specialists use to process applications involving political mpaign activity. Prohibit the IRS from requesting individual donor identities at the application stage, although generalized donor questions shouli continue to be allowed, as ell as requests for representations that, e. there will be no private inurement. tn elated Recommendation Revise the Hatch Act to designate all IRS, Treasury and Chief Counsel employees who handle exempt organization matters as ?further restricted.? ?Further restricted? employees are held to stricter rules than most government employees and are precluded from active particil: ation in political management or partisan campaigns, even while off-duty. By designating those employees as ?further restricted,? the public can be assured that any impermissible political activity by an IRS employee that is detected will res lt in serious penalties, including removal from federal employment. {elated Recommendation Create a position within the Taxpayer Advocate Service edicated solely to assisting organizations applying for non?pro?t tax?exempt status. min-1 Finding The IRS systematically screened incoming applications for tax?exempt status from more than 500 organizations and implemented procedures that resulted in delays. Until In addition to the recommendations enumerated below, Committee staff also considered whether the IRS should improve i 5 employee training program and whether it should modify the expedited review process. We have omitted tl eSe recommendations because they were included in recent report, Status of Actions Taken to Improve the Processing of Tax-Exempt Applications Involving Political Campaign Intervention, TIGTA Audit Report 2015?10-025 (Mar. 27, 2015) at 2. We encourage the IRS to follow the recommendations outlined in report. This docum int was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena .e Committee on Finance Bipartisan Investigative Report early 2012., certain top-level management was unaware that these applications were being processed in this manner. (See Section Related Recommendation The Exempt Organizations division should track the age and cycle time of all of its cases, including those referred to EC) Technical, so that it can detect backlogs early in the process and conduct periodic reviews of over?aged cases to identify the cause of the delays. A list of over-aged cases should be sent to the Commissioner of the Internal Revenue Service quarterly. Related Recommendation The Exempt Organizations division should track requests for guidance or assistance from the E0 Technical Unit so that management can assess the timeliness and quality of the guidance and assistanc 3 it provides to both Determinations Unit employees and the public. Related Recommendation The Exempt Organizations division should track requests for guidance or assistance from the Of?ce of Chief Counsel so that management can assess the timeliness and quality of the guidance and assistance it provides to both the Determinations Unit employees and the public. Any requests for guidance or assistance fr am the Of?ce of Chief Counsel that have not been responded to on a timely basis sl ould be reported to the Commissioner of the Internal Revenue Service. Finding The IRS took as long as ?ve years to come to a decision on applications for tax- exempts status submitted by Tea Party and other applicants potentially involved in political advocacy. The IRS lacked an adequate sense of customer service and displayed very little concern lJ'or resolving these cases. (See Section elated Recommendation The Internal Revenue Manu 1 contains standards for timely processing of cases. Enforce these existing standards and discipline employees vs ho fail to follow them. Managers should also be held accountable if their subordinates fail to follow these standards. elated Recommendation For all types of tax-exempt plicants, IRS guidelines iould direct employees to come to a decision on whether or not it will approve an pplication for tax-exempt status within 270 days of when an application is ?led. eat/25:! Finding Important issues were not elevated within the IRS. Some Sensitive Case Reports containing information about Tea Party applications were sent to top IRS managers in 2010, but the managers did not read them. (See Section Related Recommendation: Revise the Sensitive Case Report process or develop a more effective way to elevate important issues within the organization other than the Sensitive Case Reports system. Require the senior recipient of each Sensitive Case Report within the Division (a member of the Senior Executive Service) to memorialize speci?c actions This docum int was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena to Finding its employ managers Re 1rr Finding areas that Ii I e? Committee on Finance en in relation to each issue raised in the report, and require 5 the IRS Commissioner for review. 5: A contributing factor to the management problems tees, including some who worked from home as often as 4 vsiho remotely supervised employees 2,000 miles away. (See lated Recommendation: Evaluate whether current organiz rkplace locations are inhibiting performance. Make approp prove communication between employees and their manage Some managers within the E0 Division were not trained they managed, including one who did not complete any teclr Bipartisan Investigative Report uch report to be forwarded was the decentralization of iys per week, and Section ational structures and riate adjustments to rs. in the substantive tax mical training during the hat she served in a managerial EO position. (See Section I alated Recommendation: Set minimum training standards tior all managers within the 3 Division to ensure that they have adequate technical ability to perform their jobs. 10 years The IRS did not perform any audits of groups alleged to have engaged in improper ,ctivity from 2010 through April 2014. During that time, the IRS tried to implement asses to select cases for examination, but a memo from Judy Kindell, Sharon Light and er stated that this approach ?arguably [gave] the impression that somehow the political 3f] [the organizations] mentioned were considered in making the ultimate decision.? 'ecently discontinued use of the Dual Track process and now uses generalized :s when deciding whether to open an examination of an exempt organization?s political (See Section Finding at political 2 new proc Tom Mil] leanings The IRS 1 procedure activities (1 (A ti procedures to determine if: ons of impermissible RS opening an examination ation was warranted; and ensure that it carries out elated Recommendation Review the recently-enacted )?the process enables the IRS to impartially evaluate allegati )litical activity; (2) any of the referrals have resulted in the I lated to political activity, and if so, whether such an examin )iif necessary, the IRS should make further modi?cations to enforcement function in a fair and impartial manner. ant all recommendations of rt titled Examination 11 Should be Strengthened,? elated Recommendation The IRS should fully implem 1e Government Accountability Office in their July 2015 repc election: Internal Controls for Exempt Organization Selectic ti request that TIGTA :ndation #1 related to the ?71 reiated Recommendation No later than July 1, 2017, Vi onduct a review of the three points noted above in Recomme :vised E0 Exam procedures. 10 This docum int was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report Finding #18: On multiple occasions, the IRS improperly disclosed sensitive taxpayer information when responding to Freedom of Information Act (FOIA) requests. Employees who were responsib elfor these disclosures received minimal or no discipline. (See Section Related Recommendation: Require all outgoing FOIA resPOInses to be reviewed by a sezojnd employee to ensure that taxpayer information is not improperly disclosed. Finding 9: In 2010, the IRS received a FOIA request from a freelance journalist seeking information about how the agency was processing requests for tax-exe status submitted by Tea Party groups. After 7 months, the IRS erroneously informed the journalist that they did not possess any documents that were responsive to her request. (See Section Ral'ated Recommendation Ensure that IRS procedures specify which organizational ur its within the agency should be searched when the IRS receives an incoming FOIA request on a particular topic. For example, when the IRS receives a FOIA request for records related to tax-exempt applications, the agency should search the records of all cc mponents within the Exempt Organizations division. Related Recommendation To be consistent with the intent of FOIA, employees handling FOIA requests should construe the requests broadly 1nd contact the requestor to clarify the scope of the request whenever necessary. However, the IRS should also take a ropriate measures to safeguard taxpayer information and avoid improper disclosure. Finding #10: The IRS has made Of?ce Communicator Server (OCS) instant messaging software available to its employees. Under the collective bargaining agreement with the National Treasury Employees? Union, the IRS agreed that it would not automatically save messages Sent to and from employees. As a result, messages can onlv be recovered if an employee elected to save them. TIGTA opined that this policy does ot necessarily violate federal recordkeeping laws, but noted that ?[w]hether OCS is being ed according to guidance depends on how OCS end-users are utilizing the system.? ee Section Related Recommendation: The IRS should review how em loyees use OCS. If the is not used for IRS business, the agency should eval ate whether it is aopropriate and necessary. If OCS is used for of?cial IRS oses, the IRS should take measures to ensure such use complies with federal recordkee ing laws. While the above ?ndings and others detailed more fully on the succe ding pages have been jointly a greed to by the Majority and Minority, those Staffs were un 1e to reach agreement on three areas as set forth below: 0 The extent, if any, to which political bias of IRS employees, including Lois Lerner, affected the processing of applications for tax?exempt status. 11 This document was obtained and uploaded by the Center for Resaonsive Politics (OpenSecrets.org) US. Sen 6 Committee on Finance Bipartisan Investigative Report 0 ether the IRS used improper methods to screen and process applications for tax- status submitted by progressive and left-leaning organizations. 0 involvement, if any, of Treasury Department and White House employees, including Pr sident Obama, in directing or approving the actions of the IRS. The Majority and Minority have rendered their own conclusions on these and other topics which are set forth more fully in the sections of this report entitled Additional Views of Senator Hatch Prepared by Republican Staff and Additional Views of Senator Wyden Prepared by Democratic Staff. 12 This document was obtained and uploaded by the Center for Resoonsive Politics (OpenSecrets.org) U.S. Sena .ei Committee on Finance Bipartisan Investigative Report II. ACKGROUND ON BIPARTISAN INVESTIGATION BY THE SENATE FINANCE COMMITTEE This section describes the scope of the Senate Committee on 'nance investigation; the Committee ?s access to taxpayer information and its use in this report; the Committee?s access to information relevant to this investigation; the ?3 loss of records potentially relevant to this investigation; the legal background of tax-exempt organizatio involved in the investigation; and, the way that the IRS processed applications for tax-exempt status. A. SCOPE OF THE INVESTIGATION AND THIS REPORT The Unit: States Senate Committee on Finance (the Committee) has exclusive legislative jurisdiction and primary oversight authority over the IRS. On May 1 0, 2013, Lois Lerner, IRS Director of EO, disclosed at a panel for the Exempt Organiza ions Committee of the Tax Section of the American Bar Ase ociation that IRS employees had selected certain 501(c)(4) tax-exempt applications that contained the words ?Tea Party? and ?Patriots? for further review simply because the applicatiops had those terms in the title.2 i On May 14, 2013, TIGTA released a report ?nding that the IRS ?used inappropriate criteria that identi?ec 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 :33 intervent on At the tir ?Patriot? conseque speculati White i7 of the IRS and TIGTA disclosures that groups with the in the name were selected for additional scrutiny, there was 1 that the singling out of conservative organizations by name nbe of political bias or motivation on the part of IRS employ on concerning the role of political appointees at the IRS, Tre Juse in the selection of these conservative organizations for] 2 America Section?s 3 TIGTA, TIGTA A1 iBar Association, Transcript of The Exempt Organization Tax Review Exempt Organizations Committee Meeting, Vol. 72, No. 2 pp. 126-127. inappropriate Criteria Were Used to Identify Tax-Exempt Applications 1 1dit Report #2013-10-05 3. l3 This documi?mt was obtained and uploaded by the Center for Res ords ?Tea Party,? ?9/12? or speculation and concern may have been a tees. There was further asury Department or the neightened scrutiny. May 10, 2013) ABA Tax or Review (May 14, 2013) ponsive Politics (OpenSecrets.org) US. SenaTe Committee on Finance Bipartisan Investigative Report On May 20:? 2013, the Committee sent a detailed letter to the IRS requesting that the IRS answer questions and turn over internal documents relating to the targeting co ntroversy.4 Simultaneously, the Committee began an in-depth bipartisan investigation to determine the facts surrounding the controversy. This investigation was prompted by the serious nature Of allegations that political considerations may have driven the heightened scrutiny of conservative-leaning organizations applying for tax-exempt status. The Corn. 'ittee held a hearing to publicly explore these issues on May 21, 2013, with Steven Miller, th en Acting Commissioner, Internal Revenue Service; Douglas; Shulman, Former Commissiqner, Internal Revenue Service; and J. Russell George, Treasury Inspector General for Tax Ad 'riistration, United States Department of the Treasury. The primary purpose of this report is examine the handling of applications for tax?exempt status from 2010 through 2013, but it also covers other topics related to the oversight oft Ix-exempt organizations. Committee:l staff did not investigate the administration and enfo rcement of other parts Of the Interr a1 Revenue Code, including individual taxpayers and corporate for-profit entities; nor did it inv mitigate the potential imposition of the gift tax for contributions made to tax-exempt organizaTons. Accordingly, these and other divergent topics are not overed by this report. B. THE ACCESS TO TAXPAYER INFORMATION PROTECTED BY SECTION 6103 OF THE INTERNAL REVENUE CODE, AND USE OF TAXPAYER INFORMATION IN THIS REPORT When taxriayers submit information to the IRS, they expect it to be tr sated con?dentially. Accordir gly, section 6103 of the Internal Revenue Code prohibits the IRS from disclosing any ?returns? Or ?return information,? and these terms are de?ned broadly.5 Violating section 6103 is a felon y, punishable by imprisonment and fines and also subject to civil lawsuits for damages.6 Section 1303, which was substantially tightened in 1976 in the wake of the controversy surrounding the Nixon Administration?s attempt to review the tax returns of political enemies, is an essential safeguard.7 It protects taxpayer privacy and prevents the IRS or anyone else from using tax payer information for political or otherwise inappropriate pu rposes. 4 Letter from Chairman Baucus and Ranking Member Hatch to the Acting Commissioner Steven Miller (May 20, 2013). i 5 26 U.S.C . 6103 (2013). 6 Section 213 states that criminal violations of section 6103 must be knowing, while under section 7431, civil violations rriust be knowing or negligent. Under section 7431(b), someone who discloses section 6103 information through a good-faith, non-negligent mistake is not liable. 7 This pra :tice did not begin with the Nixon Administration. At a 1976 hearing by a subcommittee of the Senate Finance Coinmittee, a witness included in the record a report by the Center for National Security Studies, which said, ?[t]he IRS has from time to time used its power to conduct audits of groups and individuals whose political views and activities were of concern to others. Special groups were established to conduct such audits under the Kennedy, Johnson, and Nixon Administrations. On at least one occasion an audit was conducted at the request of a congressi mal committee.? Hearing. Subcommittee of the Senate Finance Commiitee on Administration of the Internal Revenue Code, Federal Tax Return Privacy (Jan. 23, 1976) p. 10. 14 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. SenaTe Committee on Finance Bip 03 contains a set of narrow exceptions, which allow the IRS ri in certain limited circumstances and with appropriate safe x'iceptions for disclosure to federal or state law enforcement ces and for disclosure to various federal agencies for the pt nt statistics. Section 6 inforrnati there are circumst governme One of th inforrnati House Cc the chairr inforrnati pm at such time and in such manner as may be determined by allows the committees to have access to taxpayer-speci?c informatior undertakihi?g policy analyses or investigations. 3 exceptions, in section 6103(1), requires the IRS to provide )Ii requested by the Congressional tax committees (Senate Inmittee on Ways and Means, and the Joint Committee on r? 1 matter, staff who are designated by the chairman to revie on are themselves subject to the con?dentiality requirements ey are required to keep the information con?dential, subject I?Iowever, section 6103(t)(4)(A) goes on to provide that on obtained by or on behalf of such committee may be SL rate or the House of Representatives, or to both.? Thus, tax by the Finance Committee under section 6103(f) may be dis icim, and, hence, to the public,9 but only through the formal 3e vote to make a submission to the Senate. As a gene inforrnati words, th penalties inforrnati to the Set reviewed open sess Committ In the co under se< applicati the IRS ?conserv an even? nise of this investigation, the Finance Committee has receive .tion 6103(f). For example, Committee staff examined, in d1 ms for 501(c)(4) status were reviewed, to understand the tier .pplied. It also was important to consider whether particular ative? or ?progressive? organizations, in order to determine 1 ded approach. ing this report of the investigation, the Finance Committee ation and after consultation with the Senate Legal Counsel? In prepai consider 8 Section til? 3(f) also allows other non-tax) congressional committees to rece but only puqsuant to a Senate or House resolution. Further, section 6103 contains including allowing release of taxpayer-specific information to certain tax administ informatic niof Presidential appointees, and release of taxpayer-speci?c informatio pursuant to court order. 9 Contrast section 6103(f)(4)(A) with section 6103(f)(4)(B), which provides that it committee other than the Finance, Ways and Means, or Joint Committee on Taxat Senate or House ?only when sitting in closed executive session? (unless the ta submission to the House or Senate by one of the tax committees, in contrast, there the submissfon occur in closed session. 1 15 l. i artisan Investigative Report to disclose taxpayer guards. For example, of?cials in certain rpose of compiling taxpayer-Speci?c ommittee on Finance, axation),8 and it authorizes ten of the tax committees to designate staff members to ?inspect returns and return r[the] chairman.? This for the purposes of :w taxpayer-speci?c . of section 6103. In other to criminal and civil ]ny return or return bmitted by the committee ayer-speci?c information .closed to the hill Senate in and careful process of a extensive information :tail, how speci?c :ision-making process that applications were from whether the IRS was taking as decided, after careful shiof?ce, to include limited ive taxpayer-speci?c information, a series of other exceptions, rators, release of taxpayer-speci?c to criminal investigators formation obtained by a Ion may be submitted to the (payer consents). In the case of a is no equivalent requirement that This document was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) e! Committee on Finance US. Senat Bip artisan Investigative Report taxpayer information available to the Senate and the public, by making a formal submission to the Senate under section 6103(f)(4)(A). We have decided to do so for First, this I section 6103 is to protect taxpayer-speci?c information, section 6103 the need {pr the public disclosure in compelling circumstances, and it carefully ,onsidered process for a release: a submission by one of the House or Senate. Second, the disclosure of limited taxpayer information facilitates a ful b' There has 501(c)(4) institutior to provide Senate an included 15. Under Supreme Court and IRS interpretations of section dthereby allowing disclosure notwithstanding section 6103. some of the names of speci?c organizations, both conservati several reasons. approach is clearly permissible under section 6103. Although the principal purpose of also clearly contemplates establishes a formal and tax committees to the ly informative report. een a great deal of speculation about exactly what happened during the IRS review of organizations, and this has important implications for our governmental and political 6103, it would be dif?cult a a comprehensive review of the facts without making a formal submission to the ?0 In light of this, we have ve and progressive, who submittec section 501(c)(4) applications during this period, along with details about the handling of the apt Third, we We have have disc understar already is have limited the disclosure to the minimum necessary to pr in the public record. Accordi ly, the Committee has decided, on a bipartisan basis, to sub limited aterial covered by section 6103, to the full Senate in open se the futur the Committee will only disclose section 6103 material in circumst nces and with similar safeguards. ,4 LIMITATION ON THE ACCESS TO RELEVA To fully nvestigate this matter, the Committee sought all inforrnatior bearing how the IRS processed applications for tax?exempt status The Connliittee considered a vast amount of information receiving lications which are essential to understanding the underlyin; omitted material, redacted material, and summarized wherey lo'sed no personal names, ?nancial information, or other dete ding the essential facts. We have also, wherever possible, rt 5 facts. )vide an informative report. er appr0priate, and we Lils that are not necessary to :lied on information that mit this report, including ssion. We expect that, in similarly compelling NT INFORMATION that could have some from 2010 through 2013. approximately 1,500,000 pages of I conduct documents and conducting interviews of 32 individuals th 1 thorough review and reach the conclusions set forth in this '0 Section Section 61 allows for identify a necessaril? dif?cult. 5103 broadly public prohibits disclosure of ?return information? in ordei 03 de?nes ?return information? as information that can be identi? disclosure of aggregate data for statistical analysis as long as that data axpayer. Therefore, a report that does not contain return information pr be based on aggregated data, making a comprehensive review of the en 16 at enabled investigators to report. Unfortunately, the to protect taxpayer privacy. ad with a particular taxpayer, but Desn?t directly or indirectly otected under 6103 would tity speci?c facts at issue This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena IRS failed .e Committee on Finance to retain information that may have been relevant to this int Bipartisan Investigative Report restigation, which was lost when Lois Lerner?s computer crashed and the IRS errantly disposed ofbackup data. This loss of information was compounded by the lack of candor in notifying this and other Congress informati described extent of 1 In spite oi degree of i; nal committees about the missing documents. The Commi gap with records of other employees at the IRS and outsid blelow, a large number of Lerner?s records were never recov he failings in this matter may never be known. 'these limitations, the large volume of information we have i . . . con?dence in the accuracy of the conclusmns reached durm described this report. 1. Summary of Information That Forms a Basis for this Repo To comp te this investigation, Committee staff interviewed 32 currer ttee attempted to ?ll in the agencies; however, as ered. As a result, the full reviewed gives us a high our investigation, as rt and former IRS and Treasury epartment employees. The interviewees included: (1) emgloyees charged with reviewin and deciding tax?exempt applications; (2) managers who on including former Acting Commissioner Steven Miller; (3) legal exper tax-exem issues; (4) IRS executives and political appointees, includ Douglas hulman and Chief Counsel William Wilkins; and (5) two fo of?cials, .eputy Secretary Neal Wolin and former Chief of Staff Mar . . . Treasury ttomey Hannah Stott-Bumsted. Committee investigators a] s! who submitted applications on behalf of nonpro?t organiz iri the application process for 501(c)(3) and 501(c)(4) entitie 3w Lois Lerner, but she declined the Committee?s request. individu involved to intervi i rse of this investigation, Committee staff reviewed approxir In the co PIS, the majority of which were produced by the IRS and TIG docume Ir 0 response to the Committee?s May 20, 2013, document requ re quests, the IRS provided the Committee with approximately acuments. TIGTA provided the Committee with work papers and related used in the compilation of the audit report they released on "olduced other materials requested by the Committee. se to requests of the Committee Chairman and/or Ranking It Commission (FEC), the Department of Treasury, and the De In reSpor Election provided riecords to the Committee. The White House also provided number (of documents that were sent to or from Lerner. Additionally organizations provided information to the Committee about their inte 17 rersaw those employees, ts who were consulted on former Commissioner rmer senior Treasury Patterson, and current so interviewed numerous ations or were otherwise 5. The Committee sought nately 1,500,000 pages of TA: est letter and subsequent 1,300,000 pages of documentation that were ay 14,2013. TIGTA also dember, the Federal partment of Justice (DOJ) a production of the limited a number of nonpro?t ractions with the IRS. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen Committee on Finance Bipartisan Investigative Report The Corn ittee has asked the IRS and TIGTA to notify the Committee if they locate additional documen ithat are relevant to this investigation. We will supplement the ?ndings of this report if necess I. 2. IRS Loss of Data, Failure to Notify Congress in a Timely Manner, and Results 0 TIGTA Investigation on Friday, June 13, 2014, the IRS ?rst informed the Committee that, due to a hard ?of Lemer?s computer in 2011, the IRS had not produced all documents relevant to this inves igation.11 As described below, this disclosure came as a surprise to the Chairman and jember, who were prepared to start the formal process of issuing this report on tine 16, 2014. Many of the 41 document requests in the Committee?s May 20, 2013 e! IRS initiating this investigation involved records maintained by Lerner. Moreover, this Committee, as well as House committees, requested that the IRS produce all emails sent and received by Lerner from 2010 through May 2013. Thus, the unexpected announcement about Lenner?s hard drive crash cast doubt on the completeness of the record upon which the Committee?s draft report was based. In its June :13 letter, the IRS stated that ?Ms. Lerner?s computer crashed in mid?201 1? and despite ?multiple processes to recover information the data stored 3n her computer?s hard drive was determined at the time to be ?unrecoverable? by the IT professionals.? 12 As a result, the IRS concluded that ?[a]ny of Ms. Lemer?s email that was only stored on that computer?s hard drive woulld have been lost when the hard drive crashed and could no: be recovered??3 The IRS further exrilained that IRS employees, including Lerner, had limited storage space on the network irive and therefore had to save messages on their personal computers. Thus, the revelatio 1 about Lemer?s hard drive meant that an unknown quantity of emails sent and received by Lerner had not been retained by the IRS or produced to the Committee. These emails were particula signi?cant since they included messages transmitted during 2010 and the ?rst half of 2011 tile period when many of the most critical events in this matter occurred. Based or the June 13 letter and subsequent meetings with Commissioner Koskinen, Senators Hatch and Wyden quickly determined that the extent of data loss was not known. by letter dated June 23, 2014, then-Chairman Wyden aid then-Ranking Member Hatch asked Inspector General George to investigate six issues, enu erated in the letter and reproduced below. ?4 The Committee suspended release of this report until TIGTA completed its work. '1 Letter 13 em Leonard Oursler to Senator Wyden and Senator Hatch (June 13, 2014). '2 Id., Enclosure 3 p. 5. 13 1d ?4 Letter olm Chairman Wyden and Ranking Member Hatch to J. Russell George (June 23, 2014). 18 This document was obtained and uploaded by the Center for Resaonsive Politics (OpenSecrets.org) This docume US. Senate Committee on Finance Bip artisan Investigative Report 1 . . . . In respons etc the Committee request, TIGTA commenced a thorough investigation that included interviews of 118 witnesses and processing and reviewing more than 20 terabytes of data. On lune 30, 2015, TIGTA issued its ?nal report of investigation . principal ?ndings are as follows, and its full report of investigation is attached as an exhibit to this report. ?5 C0311 b) nmittee Request #1 to TIGTA: Whether Lernerpossibly suffering a loss of data,16 did, in fact, 10 her employees identi?ed se data. TIGTA concluded that four of the seven employees identi?ed in the ommittee?s letter experienc employee Nancy H: a. TIGTA that Lem on the co determin security i conclusic June 13, indicatin At that TIGTA protoco Speciali laptop?: ?needed lithe replaced the hard drive in Lerner?s computer with a new 2 El :agney. The circumstances of each loss are discussed below iLois Lerner i 31? 3 if anyone entered Lerner?s office on the day ofthe crash; 2({11 1] and seeing ?the blue screen.?19 Later that morning, a Lerner?s computer screen is black and won?t allow [the] er )iint, an IRS IT Specialist was assigned to respond to Lerner? *1at ?he was unable to recover any data from the hard drive, a i?did not observe any indications of tampering or physical :After replacing the hard drive, the IT Specialist noted that lnew fan system and possibly a heatsink due to overheating 15 TIGTA, ?5 The 0th Agent; Ty '7 TIGTA noted that concluded Id. p. 9. ?9 Id. p. litId. pp. :rsix employees are Nikole Flax, former Chief of Staff to former Acting Michelle Eldridge, Supervisory Public Affairs Specialist; Kimberly Kitchens, Revr [er Chumney, Supervisory Revenue Agent; and Nancy Heagney, Reveni Exempt Organizations Data Loss, Report of Investigation 54?1406-008- Exempt Organizations Data Loss, Report of InVestigation 54-1406-008- Lemer?s computer received a so?ware update on the afternoon of June tTat ?[t]here is no indication software [update] would have caused Lem 19 an?rmed that Lerner?s hard drive crash resulted in a loss of ?5 hard drive likely crashed between 5 and 7 RM. on Satur mputer?s failure to respond to a network query at 7 RM. 17 re?ndor no longer maintained logs for this period, so TIGTA on that issue. 18 Lerner ?described coming into of?ce in th ed hard drive crashes but did not lose any data. TIGTA found that the other three 5 iexperienced computer problems that resulted in a data loss Lerner, Julie Chen, and in turn. iata. TIGTA determined day, June 11,2011, based attempted to owever, the building was unable to reach a morning [of Monday, work ticket ?was entered iployee to log in.? 20 5 work ticket. He told 1nd following normal hard drive?? The IT lamage to Lerner?s Lerner? computer 3180 3:23 I (June 30, 2014). Commissioner Steven Miller; :nue Agent; Julie Chen, Revenue 1e Agent. 1 (June 30, 2014) p. 8. TIGTA l, 2011; however, TIGTA er's hard drive to crash.? 1d. p. 9. nt was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) U.S. Senat The IRS I ?worked 0 everheatir speci?call damage tc things, inc unusual fc causes for The Hewl computer making it An IRS recover d. failed bec asked He? the platte1 cause.?3O During he intention: Lerner ?v Ultimate] Regardle told network Diane Le subject. 3: e?Committee on Finance Bipa :ciuested technical support from Hewlett-Packard. A Hewlet niLerner?s laptop to replace the keyboard, trackpad, heat sin g; When interviewed by TIGTA, the Hewlett-Pan yjrecall working on Lerner?s computer and ?did not recall, 0 the laptop.?25 When asked for his opinion about the failure rtisan Investigative Report t-Packard employee then k, and fan due to an kard employee did not note in his records, any he stated many different hiding the environment, can cause damage to a computer, a ri Ii or hard drive, it could internally damage the mechanical co unusable.?28 riininal Investigation Division technician later examined the ita. He ?noted concentric scoring of the hard drive platters, ailse the drive heads had impacted the platters while in opera Niett-Packard employee ?what scenario could have caused of the disk, [he] opined an impact to the laptop or hard driv :rlinterview with TIGTA, Lerner ?denied hitting or damagin Llly? and ?did not recall any incidents that could have damag ra's not aware of anyone who might want to destroy the data i is of the cause, Lemer?s hard drive crash erased data releva FA that she regularly received a large volume of email that :torage. To keep her email functioning, Lerner and her assis tourneau, regularly moved messages to folders on her hard emer said that her June 2011 computer crash ?resulted in opined that ?it was so many components to fail at the same time.?26 He also ated that ?there are many ard drive failures, although overheating causing a hard dri failure? is uncommon.27 Bit-Packard employee further told TIGTA that there wa severe impact to a ponents of the hard drive hard drive in an attempt to inning that the drive had When TIGTA ard drive heads to impact was the most likely the hard drive ed her laptop.? Moreover, on her computer. ?31 y,I TIGTA did not reach a conclusion about the cause of Lermer?s hard drive crash. to Lemer?s job. Lerner ceeded the amount of ants, Dawn Marx and rive that were organized by a signi?cant amount of data beinlg?lost? and told TIGTA that it ?cost her ?a lot of time? because so much of her current work wa lost.?33 2? Id. p. 6. 25 TIGTA TIGTA, 26 TIGTA TIGTA, 27 TIGTATIGTA 32 Id. 33 TIGTA VIemorandum of Interview or Activity, Personal Interview of Mauricio I (e'mpt Organizations Data Loss, Report of Investigation 54-1406?008?1 V?emorandum of Interview or Activity, Personal Interview of Mauricio Organizations Data Loss, Report of Investigation 54-1406-008-I Elxempt Organizations Data Loss, Report of Investigation 54-1406-008- Memorandum of Interview or Activity, Personal Interview of Lois Lerne Exempt Organizations Data Loss, Report of Investigation 54-1406-008? 20 This document was obtained and uploaded by the Center for Res '1 errazas (Aug. 28, 2014) p. 2; June 30, 2014) p. 6. -. errazas (Aug. 28, 2014) p. 3; June 30, 2014) p. 6. I (June 30, 2014) p. 6. (July .9, 2104). I(June 30, 2014) p. 10. ponsive Politics (OpenSecrets.org) U.S. SenateiCommittee on Finance Bipartisan Investigative Report Neither GTA nor the IRS could determine the exact number of records that were lost, and not subseque 1y recovered, when Lerner?s hard drive crashed. Using an email transaction log maintaine :l by the Treasury Department, TIGTA calculated that ?as many as 23,000 to 24,000 email messages may not have been provided to Congress,? although TIGTA noted that this estimate ?could be high? because TIGTA was unable to compare these logs to documents that the IRS wasl able to recover from other custodians and produced to Congress.34 The efforts to "ecover Lemer?s emails through alternate means as describeil below likely yielded some, but not all, of these emails. b. Julie Chen Chen is a revenue agent in the Cincinnati E0 Determinations of?ce. The hard drive on Chen?s computer crashed on June 12, 2012. IRS IT was unable to recover data from her failed hard drive. Ch en told TIGTA that she saved case documents to her hard drive but did not save emails when her, inbox was full, she would delete old emails instead of archiving them on her hard drive. 35 As a result, Chen's hard drive crash did not result in the loss of any emails potentially responsive ito the Committee?s investigation. The IRS technician worked on Chen?s crashed computer stated that she did not recall any damage to the computer and did not determine a cause of the crash; nor was there any indication of intentional data loss.36 1Nancy Heagney Like Chem! Heagney is a revenue agent in the Cincinnati BO Determinations of?ce. The hard drive on {eagney?s computer crashed on November 6, 2012. Heagne routinely saved letters to taxpayers and emails on her hard drive. After the crash, Heagney was able to recover some, but not all of the emails archived to her hard drive. 37 The IRS technician who worked on Heagney?s crashed ornputer did not know if the computer was damaged and dic not determine a cause for the hard iriive failure.38 The technician did not see any indication of intentional data loss. ornmittee Request #2 to TIGTA: Whether, in addition to the se seven employees, any of 112 other IRS employees identi?ed as custodians of potentially relevant records iffered a data loss. age-i? Based CIT review of IT helpdesk tickets, TIGTA determined that 31 of the 119 employees (includir g? the 7 employees identified above in request experienced ?apparent hard drive failures 5 ince 2009.?9 Based on interviews of these employees and a review of records, TIGTA determir ed that seven of them lost data: Judith Kindell, Tax Law Specialist; Justin Palmer, 34 Id. pp. 35 TIGTA Memorandum of Interview of Activity, Personal Interview of Julie Chen (Aug. 28, 2014). 36 TIGTA Memorandum of Interview or Activity, Personal Interview of Pamela erritt (Sep. 15, 2014). 37 TIGTA Memorandum of Interview or Activity, Personal Interview of Nancy Heagney (Aug. 28, 2014). 3? TIGTA Memorandum of Interview or Activity, Personal Interview of Marilyn Florence (Sep. 15, 2014). 39 TIGTA Memorandum of Interview or Activity, Records Review of IRS Custodians and Hard Drive Failures (Sep. 4, 2014). i 21 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) i 1 US. SenaielCommittee on Finance Bipartisan Investigative Report Revenue Agent; Ronald Shoemaker, Supervisory Tax Law Specialist; Sonya Adigun, Superviso "y Tax Examining Technician; Kenneth Drexler, Attorney Advisor; Chen; and Heagney. The IRS asserted that the failure rate of these employees? ec uipment ?is consistent with the iodlustry standard new equipment failure rate of 5 to 6% over a three-year period.?40 TIGTA cc riectly noted that for three of these employees (Adigun, Drexler and Palmer), the IRS did not pr )duce responsive emails or documents to Congress.41 Based on the Committee?s 1 review of IRS records, it appears that their involvement with this matt :r was minimal, at most. Kindell?s hard drive crashed on August 11, 2010, which resulted in a loss of ?all of her archived email and work documents.?42 Kindell recovered some of the lost em ails by asking coworkers to resend th?om to her; she was unable to recover other electronic documents.? The IT Specialist ed on Kindell?s computer told TIGTA that he could not remember the circumstances of 1.44 who wor Kindell?s ciash, the cause, or if there were any indications that it may have been intentiona On Marcia 2011, Shoemaker?s hard drive crashed, resulting in the loss of ?all of his archived isaved ?les for the years 1994 through 2010,? including Shoemaker?s ?managerial erviewed by TIGTA, the not sure if he had ?ever emails an IIRS IT was unable to recover the lost documents. When i IT Specialist who worked on Shoemaker?s computer stated that he wa determined what caused Shoemaker?s hard drive to fail.?6 4% Committee Request #3 to TIGTA: What steps, if any, the IRS took to attempt to recover 1ta for each employee who lost data. The measures taken by the IRS to attempt to recover data immediately following the hard drive crashes ,Chen, Heagney, Kindell, and Shoemaker are described abcve. Efforts to iecover data from Lemer?s computer were more substantia than for the other employe as: identi?ed above. After the IT Specialist who initially responded was unable to recover data, Lerner contacted former IRS Associate Chief Inforrnati an Of?cer Carl Froehlich to say that ?si'ome documents in the ?les that [were lost] are irreplaceablp? and asked him to take further efforts to recover the ?les.47 Additional efforts to recover data by the IRS IT support and several Hewlett-Packard technicians were unsuccessful, so the hard crive was then sent to IRS 40 Letter? Olin Leonard Oursler to Chairman Camp (Sep. 5, 2014). 4? TIGTA Memorandum of Interview or Activity, Records Review of IRS Custodians and Hard Drive Failures (Sep. 4, 2014). 42 TIGTA Memorandum of Interview or Activity, Personal Interview of Judith Kir dell (Aug. 6, 2014). ?3 1d. 4? TIGTA Memorandum of Interview or Activity, Personal Interview of Frank Deo?iatteis (Oct. 3, 2014). 45 TIGTA Memorandum of Interview or Activity, Personal Interview of Ronald Si oemaker (Aug. 4, 2014). 46 TIGTA Idltlemorandum of Interview or Activity, Personal Interview of Aaron Signor (Sep. 5, 2014) (attachment Omitted). ?7 Email chain between Lois Lerner, Carl Froehlich, Lillie Wilburn and others (Ju 19 - Aug. 6, 2011) i 22 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) 1 U.S. Sena Committee on Finance Bipartisan Investigative Report nvestigation Division?s forensic lab. The IRS Criminal Investigation Division was 'ebover any data from the hard drive.48 Criminal 1 unable to The IRS (3r]minal Investigation Division returned the hard drive to the IT depot in Washingt in, DC. The IRS CI technician believed that ?data could still potentially be recovered using a th rd party donor hard drive or [by] hiring an outside vendor.??lg The IRS IT manager ?con?rmeddata may have been recoverable by an outside vendor, but decided the expense stifled due to ?nancial At this point, the IR ceased attempts to [ta from Lerner?s hard drive. Lerner told TIGTA that she ?was ?surprised? that IRS IT do more to recover her I Of?ce of Chief Counsel became aware of Lerner?s hard IRS took additional measures to recover and produce Lerner er other Congressional committees and the Department 0th ed these steps in its June 13, 2013 letter to the Committee: tetraced the collection process for Ms. Lerner?s computer to ailable in May 2013 were collected,? .dcated, processed, and included in [the production em ita collection of Ms. Lerner?s email,? Idnfirmed that back-up tapes from 2011 no longer exist because they have been cycled (which not uncommon [sic] for large organizations in both the private and lilic sectors);? darched email from other custodians for material on which a thor or recipient, then produced such email.?52 was not jL recover dz could not After the 2014, the Committe summariz drive failure in February documents to this istice. The IRS 6 I determine that all materials ax dz ail from an earlier 2011 Lerner appears as an serner-related emails is and other Committees.53 'forts that it took to recover :1 Shoemaker.54 After calculated that these efforts yielded ?approximately 24,000 January 1, 2009 and April 2011,? which were produced to th rrliber 5, 2014, the IRS informed the Committee of similar ei ape emails sent and received by Chen, Heagney, Kindell, an The IRS between On Septe and prod TIGTA efforts to 1 although pened its investigation of the lost documents in June 2014, 1 recover additional Lerner emails to avoid interfering with it continued to produce documents to the Committee throug 48 TIGTA, ?9 Id. Exempt Organizations Data Loss, Report of Investigation 54-1406-008- he IRS largely ceased investigation, January 2015. I (June 30, 2014) p. 7. 5? 1d. TIGTA noted that the IRS IT manager believed that ?Lerner had categorized the data present on the hard drive as being perisonal in nature.? This point is contradicted by Lerner?s own testimony about the contents of her hard drive, as discussed above. 5? TIGTA 52 Letter 53 1d. 54 Letter Memorandum of Interview or Activity, Personal Interview of Lois Lem oin Leonard Oursler to Senator Wyden and Senator Hatch (June 13, 20] orn Leonard Oursler to Chairman Camp (Sep. 5, 2014). 23 This document was obtained and uploaded by the Center for Res er (July 9, 2104). 4) Enclosure 3, p. 7. ponsive Politics (OpenSecrets.org) U.S. Sena Cc ei Committee on Finance 11? ta err to attempt to recover lost data; and if so, TIGTA should Bipe irtisan Investigative Report mittee Request #4 to TIGTA: Whether any additional measures could reasonably be perform its own analysis of ether any data can be salvaged and produced to the Committee. Ari initial uestion was whether TIGTA could recover data from Lem: well as drives of other custodians who lost data (Chen, Heagney, TIGTA dinot recover data from any of the hard drives: :r?s crashed hard drive, as Kindell, and Shoemaker). Alter the IRS ended its 2011 efforts to recover data from Lemer?s hard drive, the IRS gr vendor in charge of disposing of electronic media. TIGTA de drive was ?more than likely destroyed? at a shredding facility A was able to locate and take possession of Heagney?s failed hard drive, but was ur Tl GTA will see if an outside vendor can recover any informat It Next, - Bbtikup (disaster recovery) tapes from the email server; described in more detail on pages 12-20 of its report. In particular, recovery 2012. the Committee in April, May and June 2015. TIGTA subsequently puped it with other failed hard drives and gave the failed ha 31?9116, 2012.55 able to recover any information from the drive using standa 'led hard drives. It does not appear that TIGTA located eith ETA turned to other sources to attempt to recover lost data: ecommissioned exchange server hard drives and associated erner?s' Blackberrys and the Blackberry network server; oaner laptops used by employees while waiting for resolutio etwork transaction logs. efforts, which constituted an enormous amount of work ove backup tapes containing a backup of IRS email traffic from oin the sources identi?ed above, TIGTA produced approxin 55 TIGTA TIGTA nc electronic Exempt Organizations Data Loss, Report of Investigation 54-1406-008- ted that under IRS procedures and terms of the vendor?s contract with rriedia were not tracked throughout the disposal process, so TIGTA coul Lerner?s IRS medi aind visiting the Marianna shredding facility, TIGTA found no evidence been dest destroyed 56 Id. p. 12,. 57 Id. 5? TIGTA This document was obtained and uploaded by the Center for Res lJard drive was, in fact, destroyed. Nonetheless, after interviewing the ve oyed. We have no reason to doubt conclusion that Lerner?s he Memorandum of Interview or Activity, Personal Interview of Pamela IV I 24 ien?s failed hard drive was sent to an IRS facility in Covingt is unclear if TIGTA determined the ultimate disposition ofI 1 rd drives to the iermined that Lerner?s hard 11 Marianna, Florida on 'd forensic tools.?56 on.57 on, Kentucky in 2012.58 iindell and Shoemaker?s er of them. 1 Jackup tapes; of IT problems; and :r the course of a year, are IGTA activated 744 disaster approximately November iater 6,400 documents to etermined that the IRS had I (June 30, 2014) pp. 7-8. IRS, the serial numbers of not con?rm with certainty that 'ldOI' employees who processed that Lerner?s hard drive had not rd drive was ?more than likely erritt (Sep. 15, 2014). ponsive Politics (OpenSecrets.org) A US. Senate Committee on Finance not produ committe :ed approximately 1,330 of these document to this Committ as}, or TIGTA.59 Finally, TIGTA examined the instant messaging system (called Bip artisan Investigative Report ee, other Congressional the Of?ce Communicator Server (OCSD to see if they could recover records related to the Committee?s investigation. These me employee Congress April 2013 if OCS conversations were searchable and co a I e1 Ctronic search for responsive emails so we need to be cau a question today about OCS. I was cautioning folks abor several occasions where Congress has asked for emails an ssiages were of particular interest to the Committee, as Lerner had asked an IT .lld be produced to it email and how we have there has been an tious for what we say in ails. Someone asked if OCS conversations were also searchable I don?t know, but them I would get back to them. Do you know?60 TIGTA agreed th it would not automatically save OCS messages. The only be saved 5 if an individual employee copied the text into an email or terrnined that under the terms of the collective bargaining agreement, the IRS way that messages would other electronic document. TIGTA ?nd that this retention policy was not necessarily a violation of National Archives and dministration (NARA) guidance, noting that ?[w]hether ?s guidance depends on how OCS end-users are utilizing the recover the substance of any OCS sessions between Leme Records to NA not able Committee Request #5 to TIGTA: For each employee who 10: IRS ?rst became aware that it had lost information potentially ommittee?s investigation. 1 The Committee asked this question because it did not learn of any 105 data unti June 2014. report contains the following informa ?rst learned that it may have been missing data from Chen, Heagney, her interview with TIGTA, Chen noted that she disclosed Inc when she'received an IRS litigation hold in May or June anything, the IRS did in response.? 1+ lhis interview with TIGTA, Shoemaker said that during at Dirgressional committee, or TIGTA, he mentioned tha (~Ije did not disclose this issue during his interview with the I i 59 TIGTA, E?xempt Organizations Data Loss, Report of Investigation 54-1406-008- 5? Email rain between Lois Lerner, Maria Hooke, and others (Apr. 9, 2013) IRSO 5? TIGTA Exempt Organizations Data Loss, Report of Investigation 54?1406?008 62 1d. p. 21. 63 TIGTA 25 I SS is being used according :program.?61 TIGTA was and other employees.62 st data, the date when the relevant to the of potentially relevant tion about when the IRS Kindell, and Shoemaker: he hard drive crash at the 2013. It is unclear what, if east one interview with a this hard drive had crashed. inance Committee.) It is I(June? 30, 2014) p. 3. 000726247-48. I (June 30, 2014) p. 22. Memorandum of Interview or Activity, Personal Interview of Julie Chen (Aug. 28, 2014). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report unclear if the IRS was aware of this disclosure and what, if anything, the IRS did in re: p'onse. 64 . . . report did not include information about when the IRS ?rst learned that Kindell and iHeagney lost data potentially relevant to this investigation report and interviews establish the following timeline of the knowledge of Lemer?s hard drive crash, and whether it resulted in data loss: 0 February 2 or 3, 2014 While the IRS was preparing a production of Lerner emails, former Counselor to the IRS Commissioner Catherine Duval ?noted a gap? in the number of Lerner emails sent before July 2011. Duval brought the gap to the attention of Thomas me, Deputy Associate Chief Counsel for Procedure Administration.65 0 Fe blruary 3, 2014 Duval and Kane mentioned the gap in Lern er emails at an internal meeting with Christopher Sterner, Deputy Chief Counsel for Cperations, and Stephen Manning, Deputy Chief Information Of?cer. The group decided to further investigate.66 0 Fe bruary 4, 2014 After investigation by attorneys under Kane?s supervision, ?it was determined that Lerner experienced a hard drive failure in June 2011.?67 a February 5 or 6, 2014 Kane, Sterner, Duval and Manning met again to discuss the issue. Kane noted that IRS Chief Counsel William Wilkins ?was included in the discussion at sc me point.? According to Kane, the discussion ?included whether to notify Congress or . whether more information was needed. The discussion also included how much of niner?s emails could be located elsewhere.? In his interview with TIGTA, Kane noted th ai ?one or two Congressional committees? were planning to release reports around that ti nfe, including the Senate Committee on Finance. Kane told TIGTA that it was decided tc ?tnot to report half or part of the story as Lerner emails were expected to be produced fc some time in the future.?68 0 March and April 2014 The IRS searched electronic records of other IRS employees for emails to and from Lerner. The IRS located a total of 24,000 emails.? 0 April 2014 Koskinen told TIGTA that he was ??rst told about Lerner?s hard drive f2 ilure in April 2014 by Duval, but was advised that a hard dr ve failure did not nedessarily mean a loss of data.? Koskinen explained to TIGTA that at this point, ?Duval Vt ais leading an effort to validate that email were actually missing; and, not that the gap in nail was attributable to something like an error in the backup system? or some other 'ror. Koskinen noted that this error checking ?was completed in April 2014.?70 6? TIGTA Memorandum of Interview or Activity, Personal Interview of Ronald Shoemaker (Aug. 4, 2014). 55 TIGTA Memorandum of Interview or Activity, Personal Interview of Thomas Kane (Oct. 22, 2014TIGTA Memorandum of Interview or Activity, Personal Interview of John Koskinen (June 19, 2015). 26 This document was obtained and uploaded by the Center for Resoonsive Politics (OpenSecrets.org) i 1 US. Senate Committee on Finance Bipartisan Investigative Report 1 0 Mi i-April 2014 Duval informed Treasury attorney Hannah Stott?Bumsted that ?there wa; an issue they (the IRS Of?ce of Chief Counsel) were looking into regarding Lemer?s em - Aphil, May, and June 2014 Led by Duval, the IRS prepared a ?white paper? that would be used to ?notify Congress of the problem identi?ed regarding the Lerner emails, how it was discovered and what steps were taken to ?ll in the apparent gap in her emails.?72 Koskinen told TIGTA that he ?wanted to secure as many emails that the IRS could locate . . . .. in order to provrde a more complete reporting to Congress . . 3?73 In summai vi, in early February 2014, the IRS ?rst became aware that it may have lost Lerner document: potentially relevant to this investigation. By the end of April 2014 at the latest, the IRS had con?rmed that relevant emails had been lost. Committee Request #6 to TIGTA: Whether there is any evidence of a deliberate effort to wi :hhold information from the Committee. As descri?t ed above, TIGTA could not come to a conclusion about the cause of Lerner?s hard drive cras 1.1 TIGTA did not suggest that the hard drive failures of the other four employees was deliberate oir intended to withhold information from Congress, DOJ, or TIGTA. Overall, TIGTA stated that evidence was uncovered that any IRS employees had been directed to destroy or hide from Congress, the DOJ, or The National Archives and Records Administration told the Committee that they do not believe the IRS violated federal recordkeeping laws 75 and Paul Wester, Chief Records Of?cer at NARA told TIGTA that IRS ?did nothing wrong as far as safeguarding records.n76 However, several of other ?ndings cast doubt on the thoroughness of the efforts to recover all relevant records related to this investigation, as well as ifs candor to this and other Congress onal committees. First, less than two weeks into its investigation, TIGTA identi?ed 744 backup server tapes that were like to contain Lerner documents. 77 The IRS did not attempt to recover data from these tapes, err antly determining that they had already been recycled, or believed that they did not contain relevant data. Indeed, until May 22, 2013, the IRS practice was to reuse and recycle old backup tapes every six months as a cost-saving measure.78 Thus, witi this practice in place, prior to 6; beginning of Congressional investigations the IRS should have already recycled any 7? TIGTA emerandum of Interview or Activity, Personal Interview of Catherine Duval (July 1, 2014). 72 TIGTA emorandum of Interview or Activity, Personal Interview of Thomas me (Oct. 22, 2014). 73 TIGTA emorandum of Interview or Activity, Personal Interview of John Kosk nen (June 19, 2015). 74 TIGTA, icempt Organizations Data Loss, Report of Investigation 54-1406-008?l (June 30, 2014) p. 18. 75 Letter fr David Ferriero to Senator Wyden and Senator Hatch (July 10, 2014) (some enclosures omitted). 7? TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008?l (June 30, 2014) pp. 21-2222, 2013, the IRS CTO changed the backup tape policy to an inde?nite retention in order to respond to ongoin investigations. 27 This docum nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) i 1 US. Senate Committee on Finance Bipartisan Investigative Report 1 backup tapes containing Lerner emails lost when her hard drive crashed in June 2011. This would prove to be incorrect, and TIGTA was able to recover approximately 1,007 emails that had not be ep previously provided by the IRS to the Committee, although most of those messages were sent after Lerner?s June 2011 hard drive crash.79 . A second trbubling ?nding is that in 2014, the IRS may have unwittingly destroyed a separate . batch of relevant backup tapes. TIGTA discovered that in March of 2014 after top IRS of?cials learned that Lerner?s hard drive had crashed IRS employees at a storage facility in West Virginia ?magnetically erased 422 backup tapes that are believed to have contained 1 . . . Lerner?s emails that were responswe to Congressronal demands and subpoenas.?80 I . . The email server housing these backup tapes was located in New Carr ollton, Maryland, and around May 2011, the IRS migrated to a new location in order to consolidate data centers.81 The New Carrollton server was then decommissioned and disassembled, and in April 2012, the majority, but not all, of the equipment was destroyed.? Several hard drives and backup tapes from the eicommissioned server continued to be stored in New Carrol lton until December 2013, when the RS had them removed in order to renovate the space.83 These components, server hard drivesi and backup tapes, were shipped to a storage facility in West Virginia. 84 According to TIGTA, the employees ?did not degauss the server hard drives that were shipped with the backup tapes bec ause their interpretation of the May 22, 2013, e-mail directive was that it was meant to preserve hard drives only.?85 However, the IRS employees did degauss the server backup tapps. Ultimately, TIGTA identi?ed an additional 422 backup tapes which were used to back up Lerner?s email between January 1, 2008 and December 31, 2 )1 1, but were errantly erased on March 4, 2014.86 Although it took TIGTA extensive time and resources to locate, identify, and process these tapes and prod Jde relevant records, this type of effort was justi?ed given the extent of data lost and the interest i 1 this matter by Congress, the DOJ and the public. The IRS should have exhausted this possibilityibefore it informed the Committee that ?back-up tapes from? 2011 no longer exist,? which pr Lived to be wholly incorrect.87 TIGTA noted that it ?did not uncover evidence that the IRS and its employees purposely erased the tapes ih order to conceal responsive e-mails from the Congress, tlTe DOJ and ?ill. 87 Letter f-om Leonard Oursler to Senator Wyden and Senator Hatch (June 13, 2014) Enclosure 3, p. 7. 38 TIGTA Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 3. 28 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report Instead, the; decision to erase these tapes appeared to be the result of employees being unaware of, or mis nfterpreting, several IRS directives to preserve documents: 0 The IRS issued litigation holds in May and June 2013 for records related to this matter. 0 In May 2013, IRS Chief Technology Of?cer Terence Milholland ?sent an e-mail to his se iior managers responsible for destroying media and asked them to preserve media that contain e-mail or data related to ?investigations? that were occurring.?89 0 On February 3, 2014, Duval sent a message to Deputy CIO Manning con?rming a pre 5 ious conversation with him about an ?apparent lack of Lois Lerner email from before Ma 9, 2011.? Per their earlier discussion, Duval asked Manning to take several steps, in :liiding to ?ensure that the earliest possible network back-up tapes are available for re view? and that no back-up tapes have been recyc ed since the hold on re cycling was instituted last Milhollar (I told TIGTA that he was ?blown away? to learn that the 422 backup tapes had been destroyed and opined that it ?was more signi?cant than the loss of Lerner?s hard drive?? We agree tha1 these tapes should not have been destroyed and are disappointed that IRS senior managem ent did not adequately secure them. Finally, I report shines light on the failure to notify Congress of the missing documentsiin a timely fashion. It is understandable that the IRS would take some amount of time to as siess the information gap and possible solutions before contacting Congress. But the dec to wait more than four months is inexcusable, particularly in View of the following: 0 dual and other senior employees believed the information gap to be signi?cant enough tc liaise with Chief Counsel Wilkins in early February 2014, and with Commissioner Koskinen no later than April 2014. 0 Based on testimony from Kane, it appears that the IRS was ur concerned with the assibility that this Committee or any other Congressional committee may have issued a report before the IRS disclosed the problem. 0 I: uval informed the Treasury Department about this issue in April 2014, which in turn informed the White House shortly thereafter.92 I uiring the period when the IRS knew about the data loss but did not tell the Committee, 0::mmittee staff were routinely in contact with the IRS - including Duval and other employees who had direct knowledge of the data loss about issues related to production of :documents. During these conversations, Committee staff informed Duval that the drnmittee would require Commissioner Koskinen to sign a statement attesting to the 39 TIGTA Memorandum of Interview or Activity, Personal Interview of Terence Milholland (June 1 1, 2015). 9? Email ?om Catherine Duval to Stephen Manning, and others (Feb. 3, 2014). 9? TIGTA Memorandum of Interview or Activity, Personal Interview of Terence Milholland (June 11, 2015). 92 Letter fi orn Neil Eggleston to Chairman Camp and Chairman Wyden (June 18, 2014). 29 i This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) Committee on Finance Bipartisan Investigative Report pleteness of the productions. Committee staff ?rst raised this issue to Duval i arch 27, 2014, and raised it repeatedly in April, May and early June. Neither Duval any other IRS employee gave any indication that the IRS had lost documents, a fact Iwould materially affect the ability to provide the required statement. 0 Th IRS disclosed the data loss only when Committee staff informed Duval that release of lie report was imminent, and placed a deadline on receipt of Commissioner skinen?s signed statement of Friday, June 13, 2014 the date when the IRS ?nally in rmed the Committee of the data loss. 0 11 after the IRS disclosed Lerner?s hard drive crash, it failed to provide a full account of ,hat it knew to the Committee. When IRS senior staff briefed Committee staff on Ju 16, they informed the Committee only of Lerner?s hard drive crash. Just hours later, th IRS told staff of a House committee that the IRS may have lost records of several ot er IRS employees who were relevant to this investigation. As a result, the Chairman and Ranking Member did not get a complete account of what the IRS knew until later thatiweek. Instead of proactively informing the Committee about the information gap, the IRS took the opposite approach. In a March 19, 2014 letter to Senator Wyden, Commissioner Koskinen said: eiare transmitting today additional information that we believe completes our production to your committee and the House Ways and Means committee of documents we have identi?ed as related to the processing and review of applications for tax-exempt st 31118 as described in the May 2013 TIGTA report. Ir light of these productions, I hope that the investigations can be concluded in the very near future.93 Even if Commissioner Koskinen was not personally aware of the information gap at the time of this letter, ,he statements contaihed in this letter which were surely made with the knowledge of senior IRS employees aware of the efforts underway to recover missing Lerner emails were deeply 'sleading. These statements stood uncorrected for nearly three months, even after the Commis ioner learned that his staff was still attempting to recover Lerner documents. Indeed, if the Com ittee had released its report as hoped for in the letter from Commissioner Koskinen, it would have been based on an incomplete record. By faili to locate and preserve records, making inaccurate assertions about the existence of backup I:ifata, and failing to disclose to Congress the fact that records were missing, the IRS impeded the Committee?s investigation. These actions had the effect of denying the Committee access tc records that may have been relevant and, ultimately, delayed the investigation?s 93 Letter fiom John Koskinen to Senator Wyden (Mar. 19, 2014) (emphasis added) 30 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senat conclusion I charge of 3. Ac After the I mitigate th A 5 pr viously produced to the Committee. IRS took remedial steps to recover and produce emails for Ki dell, and Shoemaker, as described in the letter of Septembe 20 5, Commissioner Koskinen signed a declaration attesting tc IR is productions, and promising that the IRS will p1 re vant records if they are discovered.95 A er a review of Lerner?s communications, Committee staff 86 fo pr Be fre: aC Se ar Even wit] number 0 know if Although exhauste efforts he circumst 9? Letter 95 Declara 96 Letter f1 0i 1 the bene?t of information from these sources, an informati records that were lost and not recovered will never be iese records would alter any of the findings in this report. 1 Fvery possibility for obtaining copies of relevant records. inces, and we believe that our conclusions are supported by i om Neil Eggleston to Chairman Camp and Chairman Wyden (June 18, i 3 Committee on Finance 1 verseeing the administration of the tax code. RS noti?ed the Committee of the loss of data, the Committe 6 information gap: 1 'ch resulted in the discovery and production of 1,330 record ti and/or received emails from employees of the Treasury EEC during the relevant period. Senator Hatch requested tl communications between their employees and Lerner. In aduced documents to the Committee. :June 18, 2014, the White House produced emails between Lsied on a review of Lerner?s communications, Committee st: quently sent and received messages from a friend who used dress. Some of these messages were relevant to the Commi ator Hatch requested that the employer produce all messag Lerner, and the company complied. it was not possible to completely reproduce the records lost v?e enabled the Committee to issue as comprehensive of a re Leonard Oursler to Chairman Camp (Sep. 5, 2014). (in of John Andrew Koskinen (July 1, 2015). 3 1 Bipa tipns Taken by Committee Investigators to Mitigate the I described above, the Committee asked TIGTA to search for a rtisan Investigative Report by more than one year. Without the candor, this Committee cannot ful?ll its nformation Gap 3 took several actions to and recover documents, that had not been Lerner, Chen, Heagney, r5, 2014.94 On July 1, the completeness of the 'oduce any additional etermined that Lerner had apartment, the and tat these agencies search esponse, each agency employees and Lerner.96 iff determined that Lerner his corporate email ttee? investigation. es between this employee on gap remains. The full vn. Nor is it possible to by the IRS, the Committee We are satis?ed that these port as possible under the the record. 014). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) This docume U.S. SenaT: The Comr under sect An organi Code if it specified] intervene behalf of! Thus, if a IRS may] Section 5 promotio ?operated the IRS or primary a of the cor social we 13 iCommittee on Finance 1 nittee?s investigation chie?y concerns organizations applyin; idns 501(c)(3) and 501(c)(4) of the Internal Revenue Code. zation may qualify for exemption under section 501(c)(3) of is organized and operated for religious, charitable, education )urposes.97 These organizations may not directly or indirect in (including the publishing or distributing of statements), ar 0: in opposition to) any candidate for public office.?98 This 501 organization engages in any amount of prohibited evoke its tax-exempt status and impose an excise tax. 10? provides tax?exempt status for organizations operate of social In 1959, the Treasury promulgated exclusivel to mean ?primarily engaged? in social welfare ansiders an organization to qualify for tax-exemption under ct'ivity is ?promoting in some way the common good and gei nmunity.? 103 The regulations provide that political campaigi [fare activity, 104 but a group recognized as tax-exempt under 97 26 U.S.C 9? Id. 99 IRS, The I00 Id. 26 U.S.C. 501(c)(4) (2014). appears in section 501(c)(3) as well as 501(c)(4), and in 1945 the US ?substantial?. nonexempt purpose will destroy exemption under section 501(c)(3). '02 26 ?exclusive States, 326 purposes. Commissic incorporate section 50 literally. But in 195 Congress 2 are allowe income? ?exclusive other activ Press, Jun School in businesses of social was neces regime S'e )rganizations that operate exclusively to promote social welfare have hac :l engage in unrelated nonexempt activity as long as they pay taxes on enerated as a result. See 26 U.S.C. 511-513. According to one tax-e) 1y.? could not mean ?exclusively? because ?later law acknowledged thes ities" if you tax them. See Alan Pram, Inside Washington: Con?icting Los Angeles, CA. Because of the statutory con?ict in provisions allowii Ielfare, some suggest that the 1959 Treasury regulation interpreting ?exc a R. 1} (1990); IRS, Social Welfare Organizations. Rt (1990). . 501(c)(3) (2014). Restriction of Political Campaign Intervention by Section 501(c)(3) Ta) 1 (1990). The IRS did not create this de?nition US. 279 (1945). But the Court did not interpret ?exclusively? literally e Comment Letter on 501(c)(4) Exempt Organizations from the Amer ner Koskinen dated May 7, 2014, at text accompanying footnotes 22-24 d? this interpretation, clarifying that ?exclusively? means ?primarily? for organizations. Congress also has demonstrated that the term ?exc ,i following revelations that some tax-exempt organizations also were 0] ended the law to add the unrelated business income tax (UBIT) regim 5, 2013, quoting Tax Professor Ellen Aprill, an expert on tax-exempt 1 and the provision requiring section 501(c)(4) organizations to be operat airy to resolve this statutory con?ict. Id. Thus, both the Better Business ort the argument that ?exclusively? is not to be read literally. 32 Bipartisan Investigative Report LEGAL BACKGROUND OF 501(c)(3) AND 501(c)(4) ORGANIZATIONS for tax-exempt status the Internal Revenue a1 and certain other ly ?participate in, or political campaign on prohibition is absolute.99 campaign intervention, the ?exclusively for the gulations that interpreted activities.102 As a result, :ection 501(c)(4) if its ieral welfare of the people 1 intervention is not a section 501(c)(4) may -Exempt Organizations. out of whole cloth. The term . Supreme Court ruled that a Better Business Bureau v. United and forbid all non-exempt can Bar Association to The 1959 regulations both section 501(c)(3) and lusively? cannot be interpreted tax-exempt status since 1913. aerating businesses tax-free, Under UBIT rules, nonpro?ts the ?unrelated business taxable empt organizations expert, 3 organizations could engage in Laws, IRS Confusion, Associated ganizations at Loyola Law nonpro?ts to operate unrelated ed exclusively for the promotion lusively? to mean ?primarily? Bureau case and the UBIT nt was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) U.S. SenaielCOmmittee on Finance Bipartisan Investigative Report engage in urlilimited issue advocacy related to its exempt purpose and some political campaign interventic as long as the group is primarily engaged in social welfare. ?05 Section 5C organizations must apply to the IRS to be recognized for tax-exempt status.106 Although the tax law allows section 501(c)(4) organizations to operate as tax-exempt without applying foi IRS recognition of their status, most organizations apply for an IRS determinatiOn.107 Another important distinction is that donors to 5 organizations may generally . i a tax deduction for the amount of their donation, while donations to 501(c)(4) organizatipns are not tax-deductible.108 Generally the tax laws do not require 501(c)(3) public charities or 50] organizations to publicly 'Sclose the identity of their donors. 109 By contrast, the identity of donors to section 527 political organizations are made public, as well as periodic reports of ontributions and .expenditurds filed by such organizations. 1 10 E. STRUCTURE OF THE IRS EXEMPT ORGANIZATIONS DIVISION AND GENERAL IRS PROCEDURES FOR REVIEWING APPLICATIONS FOR TAX-EXEMPT STATUS The IRS Ilsbd the general processes described in this section during all times relevant to the Committee?s investigation from 2009 through May 2013. The E0 Division within the IRS reviewed all applications for tax?exempt status. As described below, re venue agents in the Cincinnati EO Determinations of?ce resolved approximately 85% of incoming applications after reviewing the initial application with little or no additional follow- up. On Mile occasions, E0 Technical or the Of?ce of Chief Counsel, which are both located in Washing on, DC, reviewed applications. The IRS routinely elevated ?sensitive? issues within the E0 Division and to higher-level IRS management, sometimes up to the Of?ce of the Commiss idner. '05 IRS, Sccial Welfare Organizations. '06 26 U.S Cl 508(a) (2006). Notes Steven Miller (undated) IR30000505538-42. '08 26 U.S 170 (2014). '09 26 U.S C. 6104(b), (2014). 501(c) entities are required to submit to the IRS a list of persons who have donated $5,000 or more on an annual basis. This information generally is no. made public, except that the informaticn is made public for private foundations only. ?0 26 U.S C. 527(k) (2014). Informfit on in this section relies on Notes of Steven Miller (undated) IRM 1.54.1 (Jan. 1, 2006) and 729.3 (July 14, 2008). 33 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) I US. Senate (Committee on Finance Bipainisan Investigative Report All applications for tax-exempt status were initially routed to the EO Determinations of?ce in Cincinnati, Ohio. The E0 Determinations of?ce was comprised of 13 ?Groups? that processed applications for tax exemption. One group was responsible for performing an initial screening of applications. Employees in this group, referred to as ?scr :eners,? typically spent about 15-: minutes reviewing an incoming application and completed 20-30 applications per day. Scre niers had four options available for each application: 1. Re cOmmend approval of applications that raised no issues (approximately 35% of ap alications). The screening group manager would then conduct a ?nal review of the dr 1ft approval letter to the applicant. 2. Re fer the case to other EO determinations agents for minor development (approximately 50% of applications). These applicants appeared to meet the requirements for tax-exempt ste tus but lacked some required information, such as the articles of incorporation. 3. Refer the case to other E0 determinations agents for full development (approximately 13% of applications). Applications in this category left open estions as to the adequacy and scope of their exempt purposes, the inurement a private bene?t, or the preslence of activities inconsistent with exempt status. 4. Retpm a grossly incomplete application to the organization (a proximately 2% of applications). If an application was missing pages or submitte on the wrong form, the screener could return the application and require re-submissio Applicati 31:15 in the second and third categories were sent from the screener to revenue agents in the E0 Determinations of?ce, who would then follow up with the applicant to develop the case. While many of these revenue agents worked in Cincinnati, some were located in other IRS of?ces a und the country. The development process varied from case to case but typically includedTelephone calls and written correspondence (development letters) between the IRS and the applicant?s point of contact. Revenue agents had a fair amount of discretion about which issues needed to be developed and how much information was necessary. Most applications for tax-exempt status that were received by EC Determinations were processe i to completion by ED Determinations employees without outside assistance. Certain applicati ans, such as those that raised complex or novel questions or that contained sensitive or high-pro tile issues, were sent to E0 Technical. Typically, applications that were received in E0 Technical were assigned to a highly-graded Tax Law Specialist in one of the four EO Technical Groups. The Tax Law Specialist could either assume full control of 1he application or continue to work an the application in conjunction with an E0 Determinations revenue agent. The Tax Law Specialist was responsible for deve10ping the facts of the application, applying the law to those fac tsi, reaching a conclusion, and preparing a pr0posed determination on the application for tax exenTption. The Tax Law Specialist then submitted the proposed determination to a ?2 SFC Interview of John Shafer (Sep. 17, 2013) pp. 7-9. I 35 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) i U.S. Senat: Committee on Finance ?reviewer? review the proposed determination at this time, or could allow the Tax Bipa 'tisan Investigative Report Within the Tax Law Specialist?s Group. The Group Manager could also decide to Law Specialist and the reviewer to make the ?nal determination. A ?nal determination was made on a majority of applications?at the Group level. The Intern the IRS or individual al Revenue Manual (IRM) also speci?ed certain issues that was usual ylprepared by the manager in charge of the issue. The SCR the facts, hy the issue was important, and the proposed resolution. 1 ?3 issues we e?periodically distributed to E0 management, including Len certain re 6115 were also sent to top?level IRS management, including Commissr little pract idal value as a tool for guiding dif?cult issues to resolution, ignored and sometimes not even read by top management. I Once Technical placed an application on an SCR, additional proce before a final determination could be made. A proposed determinatim could not be effectuated without first providing the Manager of EO Te opportun to review the proposal. After the Manager of EO Techni review, en the proposed determination was sent to the Director of addition review. Accordingly, including an application or other ma at a mini m, the prOposed determination would undergo two additic Technic I anager, Director, Rulings and Agreements). These additi invariabl required more time to complete, thereby delaying the ultirr applicati n. In limite Washing on, DC. The only cases that required mandatory review by Counsel were proposed denials of tax-exempt status under section 50 applicati ans could be sent to the Of?ce of Chief Counsel for discretic ganization, including ?sensitive? issues, issues that impact a 5,,issues involving signi?cant dollar amounts, issues that were or could become y, and issues requiring coordination with the Of?ce of Chie way of elevating these issues was through a Sensitive Case Report (SCR), which should be elevated within large number of Counsel or Treasury. contained a summary of SCRs about tax?exempt 1er and her advisors, and the Of?discussed in greater detail below, the Committee determined that SCRs had as they were routinely dures were followed '1 made at the Group level :chnical with an I cal completed his/her ulings and Agreements for tter on an SCR meant that nal levels of review (EO onal levels of review ate disposition of the circumstances, pending applications were referred to the Of?ce of Chief Counsel in the Of?ce of Chief All other mary reasons speci?ed in the IRM litigatior I - including applications that presented novel issues of law or 115 "3 Sectior ?l.29.3.2(C) of the IRM (July 14, 2008) provides that the Group Manag< should be (ii) presen amounts; ll4 IRM ?5 IRM prepared to alert ?upper management" that a case: is likely to attract i tsjunique or novel issues; affects large numbers of taxpayers; (iv) pc ari has another issue that warrants attention. 73293.7(5) (July 14, 2008). 1l54.7.2 (Jan. 1, 2006). 36 the possibility of :r will determine whether an SCR nedia or Congressional attention; tentially involves large dollar ponsive Politics (OpenSecrets.org) apt was obtained and uploaded by the Center for Res . - TAA how-vulgar! moi- flan nr:far:n Faun {Ln CPD US. Senate Committee on Finance Tea Party Hilary Gc applicatio During th Assistant about imp a subset 0 issues that Daly?s 2010,Jun by name; intervention?; enumerated how many similar applications had been re employee Although the SCR ns every month until 2013. 3 summer of 2010, Tax Exempt and Government Entities (T asisages were the SCRs about the Tea Party applications prep e22, 2010, and July 26, 2010. ?8 These SCRs identi?ed discussed the legal issue as ?whether these organizations are [in Cincinnati and Washington were processing the applicai the Tea Party SCR was sent multiple times directly to IRS went unnoticed: d1 rr It It an awareness of something that was going on,? but, like Ingr I I 5 seeived two of Daly?s messages containing the Tea Party SC 1 vision Commissioner of Sarah Hall Ingram, receive essages containing the Tea Party SCR in 2010. Ingram had of the Tea Party SCRs sent to her, asserting that did not She explained that this was not out of the ordinary siegarded SCRs as she did ?not personally them parti: uments.?12? Instead of reading the SCRs herself, Ingram rectors to bring me the ones they thought they were worried eputy Commissioner of Joseph Grant, also received e?ssages containing the Tea Party SCR in 2010. Grant viewe a'd them. ?23 Although he received three Tea Party SCRs in as not aware of the Tea Party applications in 2010.124 ssistant Deputy Commissioner for Services Enforcement 1 ?7 SFC In ?8 Email containin taxpayer information omitted by Committee staff); Email from Richard eiview of Sarah Hall Ingram (Dec. 16, 2013) pp. 44-45. o;rn Richard Daly to Jennifer Vozne and others (June 6, 2010) Bipartisan Investigative Report cases and prepared the ?rst SCR on them in April 2010. Thereafter, either Hull or ehausen, another Tax Law Specialist in E0 Technical, prepared an SCR on these Division Executive Rlichard Daly sent emails to senior IRS management that contained SCRs ortant pending issues within the divisions. The SCR all SCRs that had been prepared by divisions within and included only the ere deemed most necessary for elevation to upper management. 1 ?7 Included in transmitted by Daly were ared by Hull on May 24, ac Tea Party organizations involved in campaign ceived; and explained how .ions. 1 ?9 pper management in 2010, all three of Daly?s no memory of reviewing read these [Tea Party Ingram routinely :ularly useful relied on [the about.? '22 all three of Daly?s SCRs as ?a heads up or Grant did not routinely 12010, Grant claimed that he Nikole Flax, R. One of Flax?s duties l63997-4013 (email attachments Daly to Jennifer Vozne, Nikole Flax and hEers (July 1, 2010) Email from Richard Daly to Sarah Ingram and others (Aug. 5?6, 2010) IR 000164044-72 (email attachments containing taxpayer information erview of Sarah Hall Ingram (Dec. 16, 2013?23 SFC Interview of Joseph Grant (Sep. 20, 2013) pp. 13-14. '24 1d. p. 11.; 38 I This docume rit was obtained and uploaded by the Center for Res I: 2131:1171 17:; ?3 tted by Corrunittee staff). aonsive Politics (OpenSecrets.org) U.S. Sena the Tea ,Committee on Finance applicatio s?ito ?[w]alking through a mine ?eld.?132 In the con ext of the Tea Party and other political advocacy application applicatio s? as ?sensitive? or ?high pro?le? and the preparation of SC than a pap Bipa cases during the period in 2010 when no determinations rtisan Investigative Report were being made on the s, the identi?cation of 3 proved to be no more exercise. The managers who had the responsibility and authority to oversee the processing of the applications and who were the intended recipients the information in the SCRS, eitl er elected to ignore the SCRs and thus missed the opportun' properly take steps Moreover those apph (See Secti applicatio impact ta: leaving in Since the that coulc In 2010, 1 single do August 2 employee exempt 8 early in the process to develop a plan to address their resolu placing the Tea Party and other political advocacy applicati ications to further delays by requiring that they undergo add on The managers who either did not recognize as or who did not make the effort to keep informed of issues :payers or the IRS effectively nulli?ed the salutary effects ?lace those parts of the SCR process that could delay resolu . i IRS MANAGEMENT ALLOWED EMPLOYEES TO USE INAP CRITERIA THAT FOCUSED 0N NAMES AND early 20003, the IRS used various methods to alert E0 empl 30 Determinations managers consolidated several lists of :iiment, called the BOLO list or spreadsheet, an acronym for )lO until May 2013, the BOLO spreadsheet was distributed 1 s; who used it as a reference tool when screening and reviev .a:tus. The BOLO spreadsheet was comprised of five ?tabs?: In 1d '33 Height 3 n?ed Awareness Issues (undated) 57291-308. 40 This document was obtained and uploaded by the Center for Res . ling applications for tax- to ensure that the IRS ianaged this workload, or failed to recognize the sensitivity of the applications and .ion. ons on the SCR subjected itional levels of review. the sensitivity of the that could adversely ofthe SCR process, while tion of the applications. PROPRIATE SCREENING POLICY POSITIONS oyees of important issues arise when reviewing incoming applications for tax-exemp?tjtatus. (See Section V.) ent and past issues into a Be On the Lookout. From 0 all EO Determinations 133 ponsive Politics (OpenSecrets.org) U.S. SenaT Committee on Finance Bipdrtisan Investigative Report Tab Name Tab Characteristics Purpose Emerging Issues Groups of applications for which th law or precedent Issues arising from signi?cant curre disaster relief organizations) Issues arising from changes to tax 1 world events ere is no established case nt events (excluding or other signi?cant Watch st 0 Applications have not yet been received 0 Issues were the result of signi?cant changes in tax law or world events and would require ?special handling? by the IRS when received TAG (a1 5d referred to Abusive tax avoidance transactions including abusive promoters and fake determination letters Activities that were fraudulent in ature including: applications that materially misrepresented operations or ?nances, activities conducted contrary to tax law g. as Potential Abusive) Foreign Conduits) 0 Applicants with potential terrorist connections TAG Histiorical (also 0 TAG issues that were no longer en countered, but that were referred tr!) as Potential of historical signi?cance Abusive Historical) Coordinated Processing 0 Multiple applications grouped together to ensure uniform processing 0 Existing precedent or guidance does not exist The BOI spreadsheet itself was not problematic; on the contrary, if used properly, it could have bee ?an effective way for management to communicate important directives to employees. A manadeiial failure occurred when the initial BOLO spreadsheet was distributed in August 2010 cor taining a ?Tea Party? entry that TIGTA found to be ?inapprrapriate,? because the mere use of th 3 ords ?Tea Party? should not have been enough to trigger review. At that time, E0 Determinations managers up to, and including, Cindy Thomas were aware of the ?Tea Party? entry. ?34 The problematic ?Tea Party? entry under the Emerging Issues tab of the spreadsheet read as allows: ?[t]hese cases involve various local organizations in the Tea Party movement [that] are applying for exemption under 501(c)(3) or The BOLO spreadsheet SFC Intelrview of Cindy Thomas (July 25, 2013) p. 67. 1?35 Email vhfain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) 5297 8?84. 41 1 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senatie iCommittee on Finance Bipartisan Investigative Report 1 directed agents to send Tea Party applications to Group 7822 and speCi?ed that Elizabeth Hofacre was the coordinator. A similar ?Tea Party? entry remained on every subsequent version of the BOLO spreadsheet until July 2011. During that itime, EO Determinations employees also screened incoming applications using words related to the Tea Party, such as ?Patriots? and As a result of these practices, every incc ming application from a Tea Party or related conservative organization was sent to Group 78212 for further review whether or not it reflected potential olitical campaign intervention which ultimately resulted in heightened scrutiny and extended delays. The versions of the BOLO spreadsheet that were circulated in 2010 and 2011 also contained entries de scribing ?Progressive? applicants on the TAG Historical tab of the spreadsheet, as well as Successors? on the Watch List tab of the spreadsheet. (See Section I . Paz and Leiner, who comprised upper-level EO management in Wasington, D.C., claimed that they were unaware of the ?Tea Party? BOLO spreadsheet entry until 1y 2011. As managers who were ultimately responsible for how the approximately 300 employees in E0 Determin a?ons reviewed incoming applications, this represents another signi?cant management failing. I erner, in particular, demonstrated a lack of understanding out how EO Determinations employees performed their day-to-day jobs, which hampered her ability to effectivelymanage EO.136 Following :a meeting in July 2011, Lerner directed that the ?Tea Party? BOLO criteria be changed 0% neutral language that identi?ed activities of applicants, instead of policy positions or names .of speci?c organizations. Although this successfully removed the inappropriate criteria that hadibezen on the BOLO spreadsheet for almost a year, as discussed below, this ultimately resulted inia broader class of applicants across the political spectrum being flagged, delayed, and scrutiniz The neutral criteria did not last for long. In January 2012, E0 Determinations Group Manager Steve Bcvsiling modi?ed the BOLO spreadsheet to include policy teriins intended to capture incoming applications from Tea Party organizations, and organizatio ns af?liated with the . Occupy all Street movement. Thomas approved these changes, as they did not identify any organizations by name. However, TIGTA determined and we agree that the January 2012 BOLO orieadsheet entry was also inappropriate. ?37 ?36 IRS mmagement above Lerner uniformly claimed that they were unaware of ti? BOLO or any criteria on the document until May 2012 at the earliest. It is less obvious whether these managers should have taken a more active role in su} el vising how EO handled incoming applications for tax-exempt status; arguably, upper?level managers in should have also been involved in decisions affecting large numbers of taxpayers. '37 In Jam 2012, Bowling also added a separate BOLO entry for ??Occupy? Organizations? on the Watch List tab of the report did not discuss whether this entry was inappropria e. 42 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena Lerner ant spreadsh impleme Thomas. process damage Despite a develop a inadequa 1 . The initia was for Technica Deterrnin Party app Carter ?ndings. a Tax La Advisort Counsel the initia neither a round of recomme mi .e Committee on Finance 1 Tu again claimed that they were not aware of the problem at until several months later. At that point, Lerner and Paz 0 ed new procedures that required all BOLO spreadsheet char These events illustrate yet another failing of management: 11: they knew was wrought with problems, and only impleme been done. i mber of attempts over a three-year period, BO manageme cohesive, effective approach for the processing of the Tea IRS MANAGEMENT FAILED TO DEVELOP AN EFFECTIVE APPLICATIONS FOR POLITICAL ADVOCACY GROUPS ito bring the applications to resolution. Management Placed Exclusive Reliance on Test C2 1 plan developed by Cindy Thomas in conjunction with H011 Technical to develop two Tea Party ?test cases.? (See Sec staff would then use its experience working these cases to 1: aiions agents so that those agents could process the balance lizcations. That plan proved to be inadequate. ll developed the two test cases, but took eight months to dra Those ?ndings were then subjected to a variety of reviews i Specialist in E0 Technical, in January 2011, Judith Kinde oithe EO Director, in April 2011, and eventually staff of the in August 2011. By the time Kindell reviewed Hull?s reco tiVe to work the two test cases was already more than one ye grieement nor disagreement with Hull?s views, but simply rec review by the Of?ce of the Chief Counsel. The Of?ce of th n[ded further factual development of the organizations? activ Bipz rider-supported and under?executed initiatives that individu Lrtisan Investigative Report Itic change on the BOLO arrected the criteria and Iges to be approved by :glecting to oversee a nting controls after more PLAN FOR PROCESSING at was never able to arty and other political advocacy applications. Instead, the period from 2010 to 2013 was marked by a series of under- planned, i ally and collectively proved 1885 for Too Long Paz in February 2010 :tion EO rovide guidance to E0 3f the then-pending Tea ft memos containing his ?rom Elizabeth Kastenberg, a Senior Technical Of?ce of the Chief endations in April 2011, ar old. Kindell expressed :ommended an additional Chief Counsel, in turn, ities. Consequently, the IRS was in August 2011 than it had been in 1 not much closer to reaching resolution on the two test cases \pril 2010. ipment of the two ?test needed to move the mas told Paz in October :ed to coordinate these cases It appears ithat only Cindy Thomas recognized that reliance on develc cases? a] one was misplaced and that a more comprehensive plan was applica ns that were forming a backlog in E0 Determinations. The t. 2010 theiulJ i?we are just ?sitting? on these applications? and that ?we ne 43 This document was Obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senat eiCommittee on Finance Bipartisan Investigative Report as a group ?38 Thomas asked Paz to meet with her ?to discuss the approach that is being used and orne up with a process so we can get these cases moving Instead, Paz assured her that the test cases would be resolved soon, since Kindell would review Hull?s recommer citations.140 Thomas?s cpncerns, coupled with a lack of results from Hull?s efforts to resolve the test cases, and the bunting backlog of undecided applications, should have prompted Paz, at some point in the conti tun between April 2010 and August 2011, to look for another solution for developing the guida ce required by EC Determinations to resolve the political advocacy applications. Instead lieeding the call sounded by Thomas in October 2010, Paz simply elected to press on with dev dpment of the test cases. As an added measure, Paz enlisted the assistance of yet another viewer, Kindell, who was generally regarded as a slow worker. Indeed Paz herself told the Com ittee that Kindell ?had a reputation of having dif?culty with deadlines and taking a of time on cases.?141 Paz?s decision to continue with the test cases and involve Kindell itised months of additional delays and never yielded any useful guidance that could be passed on to E0 Determinations. 2. Lois Lerner?s July 2011 Solution to Resolve the Political Advocacy Applications ?was Flawed and Ineffective In a July 2011 meeting, Lerner was apprised of the extent of the back og of Tea Party applications which had grown to nearly 100 and of the criteria be' used by the screeners to identify Tela Party applications. (See Section At that was also aware that many of these applications dated back to late 2009 and early 2010, si ce Steve Grodnitzky had informed her as early as April 2010 of the existence of the Tea Party 11ipplications. Grodnitzky also informed Lerner in April 2010 that there were 15 Tea Party appl cations then pending resolutio I At the time of the July 2011 meeting, many of the Tea Party applications were nearly a year-and- a-half olil.1 Furthermore, the two test cases were nowhere near after 15 months of effort by Hull, Kastenberg and Kindell. Amid this backdrop, Lerner concluded, and Paz concurred,1 that the IRS should continue with the plan to develop the :est cases. Lerner also concurred ?with Kindell that the recommendations on the test cases sh ould be reviewed by the Office ofthe Chief Counsel, an organization known for taking substantial periods of time to 1 respond to requests for assistance.142 i 133 Email ~torn Cindy Thomas to Holly Paz (Oct. 26, 20l0terview of Holly Paz (July 26, 2013) p. 166. '42 SFC Ir terview of Steve Grodnitzky (Sep. 25, 2013) p. 145. i 44 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senahe Committee on Finance Bipartisan Investigative Report Additionally, Lerner agreed with her staff?s recommendation that EO Technical prepare a guidesheet containing information and directions that would help E0 Determinations agents process t1 elpotential political advocacy applications. Lerner also dire :ted that the name ?Tea Party? be removed from the BOLO list, a move that did nothing to he% get the political advocacy applications resolved. In fact, the Lerner?directed name oh ge in the BOLO from ?Tea Part y? to ?Advocacy Orgs.? only exacerbated the backlog by en rging the universe of applications being systematically selected and placed on hold in the advocacy inventory from just Tea arty applications to organizations of every political (and in some cases non-political) stripe. Lerner?s decisions belie a lack of concern over the mounting numbers of political advocacy applicatic and their increasing age. Her decision to proceed with a guidesheet was, at best, a band?aid solution for the escalating number of unresolved political advocacy applications. Committee staff found little evidence of further active involvement by Lerner in the matter of the political advocacy applications until February 2012. This may have re?ected Lerner?s belief that her July 2.011 management directives were suf?cient to resolve the mounting backlog and alleviate :he long delays endured by many groups. In February 2012, the media started reporting on Tea nty and other political advocacy groups that received burdensome development letters. Spurred by these media reports and by complaints from constituents, Congressional interest in the handling of Tea Party and political advocacy applications a so began to collect momentt (See section Both Lerner and Paz were caught unaware by these media reports and Congressional inquiries. Paz told Sommittee staff that ?[e]veryone I think sort of became aware of it at the same time because 5 the press coverage. We all saw the letters through the press coverage.?143 The fact that Ler and Paz were made aware by media reports that E0 Determination employees were sending apprOpriate and sometimes intrusive development letters to Tea Party and other political dvocacy groups demonstrates their lack of management ovtrsight regarding the processing of these applications, a serious abdication of their respons'bilities as the senior manager; Within E0. The 2011 Triage of Political Advocacy Applications Was Not Properly Supported by E0 Management and Predictably Failed In September 2011, Cindy Thomas proposed to Holly Paz the idea oi'having EO Technical perform a ?triage? on the political advocacy applications then pending in E0 Determinations. (See Section This initiative appears to have resulted from Thomas?s concern with E0 Technicalis inability to provide the guidance necessary to resolve the Tea Party and other political advocacy applications, guidance that she had ?rst requested from Paz in February 2010. ?43 SFC Inteiview of Holly Paz (July 26, 2013) p. 144. 45 This document was obtained and uploaded by the Center for Resoonsive Politics (OpenSecretsorg) U.S. Sena Thomas a te, Committee on Finance Bipartisan Investigative Report sked that Paz assign someone knowledgeable to triage the nearly 160 backlogged political advocacy applications then awaiting development and decision in E0 Determinations. While the exercise t] effort, this Paz determined that Hillary Goehausen would perfomi the triage with ax Law Specialist in E0 Guidance, and would review the referred to as (Tax Exempt Determination System: determinatibn, Hillary Goehausen was relatively new to the IRS, hav Specialist I employee to undertake this important review. Unfortunately, the entir Lowe, a repository supportin incomplei informatii level of Goehause caveated anything Accordin Had this 1 reviewed One was seriously under-supported by E0 management. i in E0 Technical in April of that year. Accordingly, Paz as documents was not in TEDS so, for many of the applicatio eirecord, While Goehausen appears to have done a credible an that she had to work with, her recommendations on the a1: :rtainty that Thomas required to actually begin rendering dec n?s recommendation to Committee Staff as follows: I :hat before Determinations issued a letter they should 100 that had come in subsequently that could perhaps change gly, Thomas found the recommendations to be of little or no riage been properly supported with additional staff to assist tlgie entire record instead of just a part, the recommendations have bee some of ese applications to resolution months, and in some cases ye ultimatel decided. Instead, Paz allowed the opportunity to slip away the initia ive and further limiting the review to an incomplete set of re initiative contributed to the growing backlog of political advocacy ap] delays 4 Goehaus more useful to Thomas. The triage presented Paz with a pr erienced by applicants. idea to perform a triage of the applications was a precursor to the 2012 ?bucketing? 1at actually resulted in the resolution of a number of applications, unlike that later assistance from Justin plications in an electronic b. At the time of this 'gned a relatively junior Egg been hired as a Tax Law application package with us, Goehausen reviewed an job with the limited plications did not carry the :isions. Paz described believe her advice was and see if there was that answer.?144 use. Goehausen, and had she for each application would ime opportunity to bring ars, before they were by inadequately staf?ng cords. Failure of this alications and the mounting iLack of E0 Management Oversight of the Political Ad ocacy Applications .Allowed Development of the Guidesheet to Simply Sto in November 2011 and Lowe were tasked by Michael Seto, Manager of E0 echnical, with developing a ?guide: hieet? in July 2011. (See Section The guidesheet as intended to contain informat advocacy 201 anc from onl on and directions that would assist EO Determinations age circulated it to certain staff and managers for comment. H2 3 process political applications. Goehausen and Lowe completed a draft of the guidesheet in September ving received comments Hull, Goehausen sent the guidesheet out for comment again in early November. Several days later, David Fish, then Acting Director of Rulings and Agreements, decried the 144 pl 1 35. 46 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report I guidesheet as unworkable in its current form and ?too lawyerly.? 145 At that point in time, it appears th it further work by E0 Technical to re?ne the guidesheet simply ceased. It does not appear that management made any attempt to resume the process of completing the guidesheet again until February 2012. At that time, Lerner was called to Capitol Hill to explain to Congre: sional staff concerns about inappropriate and sometimes intrusive development letters received by constituents of a Congressman. During her meeting with Congressional staff, Lerner offered thatiEO had developed a guidesheet. Congressional staff reque sted a copy. Since developm :rit of the guidesheet had effectively ceased in November 2011, Lerner sought to expedite i scompletion so that she could comply with the request by Congressional staff. However, the guidesheet was never completed, as it was eventually superseded by a decision to instead train E0 Determinations staff in May 2012 on processing political advocacy applications. Allowing development efforts on the guidesheet to simply stop in November 2011 represented yet anothe r'serious lapse in oversight by E0 management. Develop ent of the guidesheet itself was an abject failure and again demonstrated the seeming indifference of EO management to ?nding a processing solution that would bring the political advocacy applications to resolution. As noted above, development of the guidesheet commenced in July 2011 and was terminated in May 2012. Over that period of ti e, and despite numerous attempts, staff of EO Technical with assistance from staff of the Of?c of Chief Counsel was unable to deliver a written guide on processing political advocacy app ications that could be used by non-attorney EO Determination agents. EO management?s inability to harness its resources to produce ?a solitary deliverable on a subject for which E0 is a source of authority further demonstrated its lack of competence. 5. Management Allowed the Advocacy Team to Process Political Advocacy iApplications Without Proper Training and Support, and Failed to Adequately ,Manage Its Activities In December 2011, E0 formed an ?Advocacy Team? to develop and decide the political advocacy applications. This project resulted in yet another failed attempt to reduce the backlog - of applications. (See Section Like the triage of 201 1, the Advocacy Team appears to have been ?a Thomas-inspired initiative. Thomas appears to be the only manager within 130 who expresse :1 concern with the time that the applications were pending resolution and who translated that conc ern into palpable action. While iomas?s idea to form the Advocacy Team was well-intention ed, unfortunately, she failed to prope 'ly manage its activities. Instead, she entrusted that responsibility to Steve Bowling, a ?rst-line manager, and Stephen Seok, an E0 Determinations employee, who both proved wholly inadequate for the task. Under the direction of Bowling and Seok, the'Advocacy Team failed to ?45 1d. pp. 132?33. 47 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senatie Committee on Finance Bipap'tisan Investigative Report I bring a single case to resolution until the ?bucketing? exercise of May 2012. However, the Advocacy Team will be most remembered for its attempts to extract extraneous information from applicants through incredibly burdensome and onerous development letters. A share of the blame for the failure of the Advocacy Team must also go to E0 Technical, which was responsible ifor providing technical guidance to the Advocacy Team. It is unclear to what extent, if any, E0 Technical actually provided guidance to the Advocacy Team. What is clear is that EO management exercised little or no coordination and oversight over the activities of the Advocacy Team, thereby allowing it to issue oppressive develOpment etters until that practice I was halted in February 2012 by Lois Lerner. 6. Although the ?Bucketing? Exercise of 2012 Resolved Many Pending Political Advocacy Applications, the IRS Has Not Yet Issued Determinations for Some Applications One positive development that can be attributed to the Advocacy Team?s inappropriate and sometimes intrusive deVelopment letters was that they created intense media and Congressional interest in the complaints voiced by Tea Party and other political advocacy groups who were receiving tliese letters. This attention, in turn, sounded the ?wake-up? call for upper IRS management, like Steve Miller. Once Miller became aware of the problem regarding the developrr ent letters, he ordered Nancy Marks, a Senior Technical Advisor, to conduct an internal investigation aimed at ?nding out what was going on in E0 Determinations. (See Section I Upon getting a report back from Marks, Miller approved her suggesti an to perform a ?bucketing? exercise where a team of EO Technical Tax Law Specialists and E0 Determinations agents scrutinized each application and its supporting documents to identify the applications that could be reiadily approved, those that required minor development before approval, and those . that requ red ?lrther development. As a consequence of the bucketing exercise, a signi?cant number of the Tea Party and other political advocacy applications were ?nally decided. While the bucketing exercise was the ?rst successful attempt to process some of the political advocacy ritpplications, it came too late for many groups that had waited years and eventually ceased aerating because they lacked approved tax-exempt status from the IRS. Moreover, the ?bucketi 1g? exercise did not resolve all backlogged political advocacy applications, as the IRS informed Committee Staff that 14 percent of the 298 political advocacy cases identi?ed by TIGTA 1 ei'nained unresolved in March 2014. As of April 2015, 10 of these applications were still pen ing resolution. A number of those applications date back to 2010. Indeed, the Albuqu que Tea Party, one of the original test cases assigned to Carter Hull in April 2010, was still aw 'ting a determination as of April 2015. Accordingly, while substantial progress has been made si de 2010 to reduce the backlog of political advocacy applica:ions, IRS management has not yet't een able to bring all of these applications to closure. 48 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena While mo were Tea applicant and descr Moreove IRS employees were instructed in a training workshop to 56 received Some left burdensome requests for information. (See Section 1. In the sur employee addition ?9/12 Pro ?Emerge, Organiza 2. Numerou ?Occupy BOLO SI employer signi?cai after an i inconsis the Watc organiza 3 e; Committee on Finance INFORMATION REQUESTS st of the potentially political applications that the IRS set asi Party and conservative groups, the IRS also ?agged some le' for processing. In order to centralize these cases for review pltions of several left-leaning groups were placed on the B01 om several left-leaning organizations and to subject them tc -1eaning applicants experienced processing delays ar Successor Applications at Training Workshops. nmer of 2010, the IRS EO Determinations of?ce held trainir were instructed to screen a wide range of potentially politi instructing screeners to ?ag applicants with names like ject,? the screeners were also instructed to look for the name and to be on the lookout for successors to disbanded Assoc ions fer Reform Now (ACORN) organizations. IBOLO List 5 ?iterations of the BOLO spreadsheet included the terms ?Pr from August 2010 through July 2012. The term ?Progress treadsheet tab titled TAG Historical or Potentially Abuse Hi :si no longer encountered applications with this term, but tha Ice. Successors? appeared on the Watch List tab nternal IRS research report concluded that ACORN may hax nt with its tax-exempt status. ?Occupy? was placed on the List tab after IRS Determinations employees noticed a nev :ions af?liated with the Occupy movement were seeking tax I . IRS Scrutiny of Left-Wing Applicants Resulted in Yeti Burdensome Information Requests Bipa trtisan Investigative Report Di IRS PLACEMENT OF LEFT-LEANING APPLICANTS ON THE BOLO LIST IN HEIGHTENED SCRUTINY, DELAY AND AND :1e for heightened scrutiny :"t-leaning tax?exempt and processing, names LO spreadsheet. :t aside applications secondary screening. Id inappropriate and The IRS Instructed Employees to Flag ?Progressive,? ?iEmerge,? and ACORN .g workshops where IRS :al applications. In 3a Party,? ?Patriots,? and 8 ?Progressive,? and iation of Community The IRS Placed the Terms ?Progressive,? and ?Occupy? on the ogressive,? and ive? appeared on the ;torical, indicating that IRS . the term still had historical 3f the BOLO spreadsheet 'e engaged in activities BOLO Spreadsheet under IS article that reported exempt status. rS-Long Delays and nerge applicants that were layed processing for left- Of the 27 organizations The Con delayed leaning 1 Imittee found several examples of ACORN-af?liated and Er for over three years. The press also reported examples of de groups such as Alliance for a Better Utah and Progress Texa. 49 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senaie Committee on Finance Bip that the inappropriately requested information concerning their do groups were left-leaning. . CULTURE IN E0 CONTRIBUTED TO A LACK OF EFFI OPERATIONS E0 Mana gemen regard to in E0 De erminations may have impeded communications and coordi artisan Investigative Report nors, at least three of those CIENCY IN ITS tolerated and even fostered a culture that was not coriiducive to ef?cient and effective operations. Lacking a sense of customer service, EO Manag ement operated without he effect of its actions on applicant organizations.- Remote management and telework nation between its employeesl Further, a pervasive atmosphere of antipathy existed betvv een the Cincinnati and Washingt the cultur on DC. offices of EO, fueled largely by the words and actio as of Lois Lerner. Lastly, 3 within EO permitted a manager with no technical training in the subject matter area over which she exerted supervisory authority to remain in her job for nearly a decade. 1. E0 Management Lacked a Sense of Customer Service The IRS mission statement reads as follows: Pi th While the recent rec received fai less than promised. Indeed, ommittee Staff found little to suggest that EO management concept (2 {customer service. Rather, EO management?s focus was ste whatever actions it felt necessary to develop applications with the goa information to support decisions (a goal that it has yet to achieve for that goal took years to achieve. While no one can fault E0 managem the dif?culty was that EO management struggled to ?nd a method of multiple rounds of detailed deveIOpment letters spanning over a num?t other than Cindy Thomas, EO management did not appear to be conc processir of applications might adversely affect the operations of th de ennination. The IRS for Arne] itreatment of the two test cases illustrates its customer serv ician Junto was closed in 2012 for failure to reSpond to a dev accurately the IRS sent American Junto three sets of development le which caused its founders to give up on the notion of securing tax-ex organization. In an interview with a news agency, one of the founder 50 ovide America?s taxpayers top quality service by helping th: eir tax responsibilities and enforce the law with integrity anc 0rd of processing political advocacy applications would sug :m understand and meet fairness to all. inission statement pledges taxpayers much in regard to customer service, the gest that many taxpayers was concerned with the badin centered on taking t1 of obtaining suf?cient ome applications), even if ent?s desire to ?get it right,? doing so, even with >er of years. Moreover, emed with how its organizations awaiting the ce failings. The application elopment letter. More tters over a two?year period empt status and dissolve the of the group stated that This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) This docum U.S. Senaie Committee on Finance neve? got it off the ground and the IRS is a large reason fort Bipr irtisan Investigative Report at.?146 As oprri12015, the secon test case, Albuquerque Tea Party, was still awaiting a decision from the IRS on its applicati which it ?rst ?led in December 2009. E0 Techr ical Group Manager Steven Grodnitzky told Committee Sta if the following: i . [D]1d you ever hear anybody at the IRS express any concern about the effect of this processing of these cases on these organizations? Did anybody say anything about it? A i Not to my personal recollection. I i Were you at all concerned about the fact that these cases, these organizations I were were either dissolving or not responding to the requests for development? Did that give you any sense for maybe there was not nod customer service here to these organizations? A. If an organization decided not to respond for whatever reason, that?s their 1 prerogative. And our policy and rules are if they don?t reSpond to a particular letter, we close it out FTE .147 Recognizi the impact that an organization?s ?process? may have on its customers and then tailoring reasona stateme organiza Cindy Tl exemptii three or Commit was awrire of instances in which applicants waited four or ?ve years applicati EO man deadline like a necessary and that process to minimize potential adverse effects would see way to provide good customer service. It is abundantly idmas told Committee Staff that the work plan goal for 0105' an under 501(c)(4) was 158 days, or approximately 5 months four years between receipt of an application and decision wa .e Staff that not the norm.?149 However, Paz also tol ons for tax-exempt status.150 a ers and employees routinely ignored the established IRM s?at various stages throughout the application processrefers to 2 from the "rview of Steven Grodnitzky (Sep. 25, 2013) pp. 135-37. stand 1p lication process. lterieW of Cindy Thomas (July 25, 2013) pp. 186-87. iterview ofHolly Paz (July 26, 2013) p. 11. ay, Short-lived Ohio Group was early test case for IRS (Sep. 23, 201: pplicants that stop responding to IRS communications and are deemed 51 ant was obtained and uploaded by the Center for Red ar from Grodnitzky?s that E0 management was not concerned at all with the ad erse impact that ions could experience if the IRS took years to process and ecide their applications. applications for .148 Holly Paz was asked if 5 normal. Paz stated to :1 Committee Staff that she for a decision on their guidelines, which specify xample, when an E0 for ?Failure to Establish,? which a have constructively withdrawn ponsive Politics (OpenSecrets.org) US. Senate} Committee on Finance Bipartisan Investigative Report Q. Was there, a reaction but I mean, did Lois realize that her words actually went back to employees, or did she perhaps just not? A. I know that when she referred to employees as backwater at one point in time, that employees were talking about it, you know, in Cinc1nnati As far as ?low? level,? she did [say] that on May the 10th .156 Thomas allso felt that Lerner did not value EO Determinations because the employees were not attorneys She expressed her views as follows: i . Everybody has different levels of experience and different ideas and things, and we all have things to bring to the table. And just because a person is a lawyer doesn?t make them any more important than anybody else But I think that it was almost like a feeling like we?re superior I?m superior because I?m in the Washington Of?ce, and you people in Determinations, you?re all not lawyers and you?re, like, backwater. ?57 Lois Lerr er?s polarizing words and actions had a demoralizing effect on both EO Determinations managerr eht and line employees. Those words and actions clearly exacerbated the atmosphere of antagonism that existed between the Cincinnati and Washington, .C. E0 of?ces. 4 The IRS Failed to Ensure That All E0 Employees Received Technical Training EO employees administer a complex and nuanced area of the Internal Revenue Code, which includes stlatutes, regulations, revenue rulings, and other guidance issued by the Treasury Departm ant. Although the IRS offered technical training to E0 employees, it did not ensure that all emplc yees received prOper or in some cases, any technical tra' ing. Sharon Camarillo was an area manager in E0 Determinations for 8 years before she retired in Decemb :rlZOlO. In that role, Camarillo oversaw several Groups of EO employees who evaluated applications for tax-exempt status that were submitted to the IRS, including the Technicz 1 Screening Unit, which was responsible for making the init al assessment of incoming applicat' ns. Yet Camarillo told Committee Staff that she ?had no technical training in the area of Exe Organizations, so I was not able to address technical issues.?158 As a res 1t of her lack of technical training, Camarillo was unable to provide feedback on substant vie issues and instead deferred to other managers within E0. An example of Camarillo?s deferen occurred in February 2010, when the manager of the Technical Screening Unit, John Shafer, rbught the ?rst Tea Party application to her attention. Camarillo explained that she '56 Id. p. 12?: ?57 Id. pp. 117?18.' '53 SFC Ir terview of Sharon Camarillo (Sep. 26, 2013) p. 7. Camarillo explained that she was scheduled to attend a 6-week training session at one time during her tenure in E0, but she was removed from the session after one day by ThomasThis document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen ?simply In the cul technical employee technical As the "eat amount of autonomy to manage the work of her division given a at :iterated what John had said and forwarded it on? to her manager, Thomas, ?[b]ecause I 1' was SO Ll i Committee on Finance Bip e'chnical, I did not have the E0 background.?159 uire of the IRS organization, it was not only acceptable for a to remain in that position for nearly a decade without comp training. . LOIS LERNER OVERSAW THE HANDLING OF TEA PARTY PROVIDED LIMITED INFORMATION TO artisan Investigative Report a employee who had no knowledge to be elevated to a managerial position, it was ale 0 acceptable for an eting any meaningful APPLICATIONS AND ANAGEMENT ector of EO who was well-versed in the tax law of exempt organizations, Lerner was . The most senior Of?cial in E0, Lerner was responsible for keeping upper IRS management informed about signi?cant issues wi is pi Lerner May 201 upper-1m from Tea applicatii 1 The Tea Cincinna Grodnit Party ap] stated: i Lge of the NY Times. 160 ?st became aware that the IRS received applications from Te Although Lerner became personally involved with the ha e1 IRS management remained largely unaware that the IRS Party groups. As a result, Lerner was left to oversee the ms with negligible oversight or accountability. Lois Lerner Was Informed About the Tea Party Appl Received Updates About Them Party applications were ?rst brought to Lerner?s attention so ti flagged them. On April 28, 2010, the Acting Manager of y, sent Lerner a chart summarizing the SCRs. The first ent )lications. Grodnitzky drew Lemer?s attention to this entry 1 )f note, we added one new SCR concerning 2 Tea Party case We ensure that all of our [senior] managers are aware of all 1 sues. Our job is to report up to our bosses on anything that i '1 DC. Currently, there are 13 Tea Party cases out in E0 Det oordinating with them to provide direction as to how to cone him the organization that she oversaw. As she explained to one of her subordinates: iighly visible hot button night end up on the front a Party groups in April or ndling of these applications, nad received applications )cessing of these ations in April 2010 and on after Jack Koester in E0 Technical, Steven Ty on the chart was the Tea his cover email, where he that are being worked here errninations and we are istently deveIOp those cases ased on our development of the ones in DC. ?61 [59 Id. p. 1i6. ?50 Email :hlain between Lois Lerner, Nanette Downing and others (May 10-11, 2C Email I ll) Tom Steven Grodnitzky to Lois Lerner, Robert Choi and others (Apr. 28 2010) 1. 57 This document was obtained and uploaded by the Center for Resaonsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report On May 13, 2010, Grodnitzky updated Lerner on the status of the Tea Party applications and other SClis prepared by EO Technical. ?62 Lerner responded by asking about the Tea Party applicati s, and speci?cally, the basis of their exemption requests. Lerner instructed Grodnitz y' that ?[a]ll cases on your list should not go out without a heads up to me please.? Grodnitzlyi then provided more information about the status of the cases (emphasis added): Weihave tea party cases here in EDT and in Cincy. In Technical], there is a application and a application. In Cincy, there are 10 and a couple of The organizations are arguing education, but the big issue for us is whether they are engaged in political campaign activity. We are in the development process at this point he re in DC, and I have asked the [Tax Law Specialist] and front line manager to cc ordinate with Cincy as to how to develop their cases, but not resolve anything until we gt ticlearance from you and Rob. 1e tea party cases, like the others on the list, are the subject cf an SCR, and I customarily give Rob a heads up, but of course can let you know as well before anything happens.?63 Lerner cc ntinued to receive updates about the status of the Tea Party applications throughout 2010, including revised SCRs that she received at the end of May 2010, in July 2010, in Septemb an 2010, and in November 2010. '64 Lerner g1 ew more concerned about the Tea Party applications in early 2011. On February 1, 2011, chael Seto, the Acting Manager of EO Technical, sent an up dated SCR table to Lerner. She ?Tea Party Matter very dangerous This could be th vehicle to go to court on the issue of whether Citizen?s United overturning the ban on corpora spending applies to tax exempt rules.? Lerner indicated that Chief Counsel and Judy Kindell needed to be involved with these applications and that they should not be handled by Cincinnati. 65 The follc 1 ing day, Paz advised Lerner that Carter Hull was supervising the applications handled by Cincinnati at every step and that no decision would be made until EO Technical completed the review of the 501(c)(3) and 501(c)(4) applications. Lerner noted that ?even if we go with a 4 '62 Email chain between Steven Grodnitzky, Lois Lerner, Robert Choi and others (Vlay 13-16, 2010) 67872-73. :63 1d ?64 Email ?rtim Steven Grodnitzky to Lois Lerner, Robert Choi and others (May 27, 2010) Email chaini between Theodore Lieber, Lois Lerner and others (July 27-30, 2010) [R80000807076?l 15 (email attachmer ts containing taxpayer information omitted by Committee staff); Email from Steven Grodnitzky to Lois Lerner, )bert Choi and others (Sep. 30, 2010) Email from Holly Paz to Lois Lerner, Robert Choi and others (Nov. 3, 2010) '65 Email :hain between Holly Paz, Lois Lerner and Michael Seto (Feb. 1-2, 201 l) 1R30000159431-33. 58 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) This docume U.S. Sena on the Tea get there A few mo advocacy for Lerner issue? a related to to a Speci Is - Eilucation of the public via advocacy/lobbying to ?make Arne] atements in the case ?le criticize how the country is being run. St The brief .el Committee on Finance Bipz Party cases, they may want to argue they should be 35, so it vithout saying the only reason they don?t get a 3 is political later, Lerner convened a meeting to further discuss the applications. In preparation for the meeting, Justin Lowe de The paper indicated that E0 Determinations Screening umber of 501(c)(3) and applications by organizations government Spending, taxes and related matters.? These ap group if they met any of the following criteria: e; Party,? ?Patriots,? or ?9/12 Project? is referenced in the sues include Government spending, Government debt, or tax rig paper also noted that: ore than 100 cases that meet these criteria have been identif 1 organizations have been approved. gTechnical is assisting EO Determinations by reviewing ?l tiers; and lDeterminations requests guidance on how to process the iformity. 168 lrtisan Investigative Report would be great if we can lctivity.? ?66 Tea Party and other veloped a brie?ng paper identi?ed as an ?emerging ?advocating on issues plications were being sent ase ?le. es. ica a better place to live.? ed so far, but only two es and editing development ases to ensure On July ,2011, Lerner discussed the Tea Party applications, including the BOLO entry and screenin describe media ar Lerner?s held at 2. briteria, with Thomas, Paz, Kindell and others. ?69 Lerner herein in Section although her management was dl Congress became involved in 2012. i Lois Lerner Failed to Inform IRS Upper Management i Applications ?rst line of management was the Division Commissri elevant times ?rst by Ingram and then by Grant. 170 While In 166 1d ?67 SFC In was resch '68 Email ?59 SFC Ir 55. '70 Ingran newly-er continued most of tl aht was obtained and uploaded by the Center for Res terview of Holly Paz (July 26, 2013) p. 86. The meeting was originally eduled for July 5,2011. ~ram Justin Lowe to Holly Paz and others (June, 27, 2011) tdrview of Holly Paz (July 26, 2013) pp. 86?89; SFC Interview of Cindy served in that role from May 2009 to December 2010, when she becam ated Services and Enforcement Affordable Care Act Of?ce. Until the to serve as the Commissioner of providing high?level direction eiduties as the Acting Director of Grant?s position as Division 1 59 irected changes, as argely passive until the About the Tea Party oner, a position that was gram was Division scheduled for June 29, 2011, but 65-66. Thomas (July 25, 2013) pp. 53? the Acting Director of the ring of 2013, Ingram also while Joseph Grant performed Commissioner of became ponsive Politics (OpenSecrets.org) In 19 OI Saran nau 1115mm \ucu 1U, guru} y. lo. U.S. Sena e1 Committee on Finance Bipartisan Investigative Report March 20 Around that time was also the ?rst point when Shulman became aware of the pending Tea Party applications. 131 Miller bec aine increasingly concerned with hOw the applications were being handled and, as Ingram explained, during a meeting with senior staff ?express[ed] great frustration, and I?m putting th mildly, that he wasn?t getting a complete descriptio of what was going Based on the information he received from Lerner, Miller ?was not comfortable respondinL ?to the congressional [requests] that he had at that point.?18: To alleviate these concerns, in April 2012 Miller ordered Nancy Marks to visit Cincinnati and ?nd out what was going on, then report to him directly. Lerner was notably absent from the group of employees sent to Cincinnati. Around that time, Miller informed Shulman of Marks? planned visit and also told Shulman that TIGTA was starting a review. ?34 1 On May 3 i2012, Marks briefed Miller on the key ?ndings from her trip to Cincinnati, which included: 1 The; use of inappropriate and sometimes intrusive development questions resulted from a lack of guidance and training by E0 Technical to E0 Determi iations; iere were 250-300 political advocacy cases in the queue; DlDeterminations agents used a list with ?Tea Party? and ?9/12? on it as sc reening criteria but that the problem with using such criteria had been ??xed? earlier; - Aniong the political advocacy cases in the queue were cases on both sides of the political Spectrum; 0 was reviewing treatment of the cases; and 0 Marks found no evidence of political bias.185 Soon aft: ribeing briefed by Marks, Miller conveyed to Shulman the salient points of Marks? ?ndings, including the existence of the BOLO list and its criteria, one of which was ?Tea Party.? Shulman was concerned that ?Tea Party? was on the BOLO, but he dI'dn?t follow up because Miller him that the issue was resolved and TIGTA was investiga ing. ?36 On May 30, 2012, InspectOi Ceneral George briefed Miller and Shulman about audit, and Speci?cally discussed his concern about screening criteria including the Tea Party, Patriots, 9/12 and other policy is sues. ?87 '31 SFC Interview of Douglas Shulman (Dec. 3, 2013) pp. 32-35. ?82 Inteiview of Sarah Hall Ingram (Dec. 16, 2013) p. 77. '83 Id. p. 79. '54 SFC Interview of Douglas Shulman (Dec. 3, 2013) pp. 35-37. ?35 SFC Int iew of Steven Miller (Dec. 12, 2013) pp. 133-141. '86 SFC Interview of Douglas Shulman (Dec. 3, 2013) pp. 37?44. ?37 TIGTA Summary of Brie?ngs to IRS and Treasury Leadership, Provided to SFC on May 19, 2014. 61 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) i U.S. SenaieCommittee on Finance G. DURING THE INVESTIGATION, SOM CONTINUED TO SCREEN TEA PARTY APPLICATIONS BAS NAMES On June follow ge erally-applicable procedures when reviewing applications f< Staff interviewed a number of E0 Employees in the month iinterviews, it is clear that the suspension Of the BOLO left at least so E0 Determinations employees continued to screen cases Party an other inappropriate terms in the organization name. Cindy Th )mas, who oversaw EO Determinations, explained that some still sent iparticular groups of employees for processing, even in the BOLO: lhaive asked the question about what are we supposed to do have a group that coordinates the cases when they come in cases. Are we, what are we supposed to do? And what I was 1 have cases go to a designated group for consistency purposes, really more of a routing document to instruct specialists or more than anything. And we are still having cases to be route he ailth care cases, they still get cases routed to them, and the aciVocacy cases they still are going to that group that was coor .One emp O?yee who screened incoming applications, Gary Muthert, the BOLD ?will lead to more inconsistent processing of applications.? confusion about how he should handle incoming applications from TE Let me ask you if currently, if you get two application Arkansas or Whatever, the other is for Americans for A else, are the cases treated the same or is there still cont consistently treat Tea Party cases? Q. In my Opinion there?s still concern because no one?s re ?94 Memo ndum from Karen Schiller, Interim Guidance on the Suspension ofBOl The mem randum instructed employees to immediately stop using the BOLO spre Issues tab nd the Watch List tab. However, employees were permitted to continu prevent ste, fraud and abuse. ?95 SFC Interview of Gary Muthert (July 30, 2013) (not transcribed). '96 Id. 63 Bipa 2013, the IRS suspended use of the BOLO list and instruc for me, it?s like what am I supposed to do with this thin rtisan Investigative Report IRS EMPLOYEES ON THE ted EO employees to )r tax-exempt status. 194 3 following this directive. a procedural void and that by looking for ?Tea types of, applications were absence of a formal th like health care cases? and we have the advocacy .old is that we can still that maybe the BOLO was seners where to route cases to the group that worked "oup that was coordinating :linating those cases. ined that the absence of ?195 Muthert also expressed :a Party organizations: a, one is for the Tea Party of ipple Pie, or something :ern over how to :solved the issue. I mean, r)196 .0 List Usage (June 20, 2013). dsheet, including the Emerging using other lists to identify and This document was Obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) U.S. Sena :ei Committee on Finance Bipartisan Investigative Report Another 3 haven't ha if he was :rieener, Jack Koester, stated that screeners ?really don't have any direction or we d'any? since the BOLO was suspended. ?97 On August 1, 2013, Koester explained that issigned to review an incoming application with the words ?Tea Party? in its name, he another IRS employee to also review the application, even if there was no evidence of ctivity: would ask political a If you saw I am asking this currently, if today if a Tea Party case, a group a i case from a Tea Party group came in to your desk, you reviewed the ?le and there was no evidence of political activity, would you potentially approve that case? Is that something you would do? I A At this point I would send it to secondary screening, pc litical advocacy. So you would treat a Tea Party group as a political advocacy case even if there was no evidence of political activity on the application Is that right? A 1 Based on my current manager?s direction, uh huh. 193 Based on this testimony, it appears that several months after TIGTA released their report, employee 1lacked appropriate instructions from management and possibly continued to pull out applicatic 115 containing the words ?Tea Party? for separate processing, despite the suspension of the BOLO and other assurances that the IRS had stopped these practices. 199 FOR A THREE-YEAR PERIOD, THE IRS DID NOT PERFORM ANY AUDITS OF EXEMPT ORGANIZATIONS THAT WERE ALLEGED To HAVE ENGAGED IN IMPROPER POLITICAL CAMPAIGN INTERVENTION After the Supreme Court?s Citizens United decision in January 2010, the IRS became increasingly concerned with the amount of money spent to influence elections by tax-exempt organizations. (See Section IV.) The IRS received an increasing number of allegations after Citizens ited that tax-exempt organizations were engaging in an impermissible level of egations would be reviewed EO Examinations Director eeded new procedures and the end of 2010, Downing campaign intervention. Under existing procedures, these all taminations employees who had discretion to open an audit. )Owning, Lerner and other managers believed that the IRS Lployee training to effectively process these allegations. By political by EC E, Nanette better err erview of Jack Koester (Aug. 1, 2013) p. 29. 39-40. As Koester and other EO Determinations employees explained, selcond review by an employee who was familiar with a particular type 0 ed to screen incoming applicants from Tea Party organizations in 2010 ofacre (Sep. 24, 2013) pp. 27-28, 44?45. Ie? Committee conducted the interviews referenced in this section, the IR 365 implementing new procedures for reviewing tax-exempt applications orbin, Expansion of Optional Expedited Process for Certain Exemption (Dec. 23, 2013); Memorandum from Stephen Martin, Streamlined Proce .014). We have no knowledge of whether the recent guidance has incoming applications for tax-exempt status. ?97 SFC In I98 1d pp. entailed a was ?rst Elizabeth '99 Since to employ Kenneth 501(c)(4) (Feb. 28, 1 applied to me secondary screening process applications. This same process Id. p. 35; SFC Interview of has issued additional guidance . See, e. Memorandum from Applications Under Section ssing Guidelines for All Cases affected the screening procedures 64 This documAnt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report suspended :11 examinations of 501(c)(4) organizations that were alleged to have engaged in improper litical campaign intervention. (See Section High?level RS managers, including Miller, Lerner and Downing, spent the next three years attemptin I devise a new approach that would enable the IRS to effectively evaluate allegations related toi; litical campaign intervention of tax-exempt organizations Although these managers understood the importance of the issue and devoted signi?cant time and resources to the project, they failei 0 put a new approach in place. As a result, from the end of 2010 until April 2014, the IRS not perform any examinations of 501(c)(4) organizations related to impermissible political ampaign intervention. 65 This document was obtained and uploaded by the center for Responsive Politics (OpenSecrets.org) U.S. Senaie Committee on Finance Sections IV through provide further detail about the Committee?s ?ndings related to the Determinations process. IV. The IRS Hall Ingr m, former Commissioner of and an employee of the years, ex lained: old question. Ingram election scrutiny (on the agency increased dramatically after the Supreme Cour Citizens On anue parts of holding and the denounce laws admiinstered by the FEC, observers quickly predicted that the c: 1 FOLLOWING THE CITIZENS UNITED CASE. THE EXTERNAL PRESSURE TO MONITOR AND CURT SPENDING OF TAX-EXEMPT ORGANIZATIONS Bipartisan Investigative Report farts that support the IRS FACED AIL POLITICAL This section describes the environment within which the IRS. case. Division operated from 2010-2013 in the wake of the Citizens United A. EMPLOYEES THROUGHOUT THE IRS EXEMPT ORGAN 12.1 as long been concerned with political spending by tax-exerr 1riTcllecades, the issue of what activities are on which side oft] itted, and the factual issues around who?s crossed the line 200 rther observed that the focus on political spending tended to ycles.201 Although the issue was not a novel one for the IRS United v. Federal Election Commission, 130 S. Ct. 876 (2011 AWARE OF THE CITIZENS UNITED DECISION he Bipartisan Campaign Reform Act of 2002 (McCain-Feing vas that ?[p]olitical spending is a form of protected speech oivernment may not keep corporations or unions from spend 2 individual candidates in elections.?202 Although Citizens 20202 Citizen. erview of Sarah Hall Ingram (Dec. 16, 2013) p. 33. 'oUnited v. Federal Election Commission, 66 pt organizations. As Sarah IRS for more than 30 1e line and what?s and who hasn?t, that is a intensify at the close of p, the level of extemal issued its decision in 3). ATIONS DIVISION WERE Ii; 21, 2010, the Supreme Court issued its decision in Citizens United, striking down gold Act). The chief nder the First Amendment, ng money to support or lnited directly addressed 158 might also have This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena .ei Committee on Finance Bipartisan Investigative Report implications for the Internal Revenue Code and IRS regulations. On the day after the decision was annm?p the Chief punsel?s of?ce. Lerner believed that the case would proba regarding campaign should pr: issue? in Tie courts. :riare as she thought that the case might result in a ?te 204 :1 others then prepared a few draft that could be poste effect of the holding on the enforcement of its regul. stablished law regarding the activities of tax-exempt organiz lnited did not address the requirements that Congress impos oFbeing tax-exempt.206 Ultimately, the IRS decided not to Lerner an explain th restated Citizens condition the case 0 would be answers observed Commiss public ev nits website though, as Ingram believed ?it was sort of hard cemmenting on the FEC case in an af?rmative way and alsc in the were already up on the Web in one format or a that ?[t]his is the danger zone no matter what we say.?208 Tl ioner Shulman and Steve Miller, so they could be prepared i ant.209 Line em cliyees in the E0 Division were also aware of the Citizens of any il?cation by management. On the day after the decision wa ati forwarded Politico?s analysis of the case to several of h] ike yesterday?s Supreme Court ruling is going to result in activities and the death of 5275.?210 in Cinci . ?[1]ooks 1 political . Two BO United 01 Determir Supreme the limit: expendit Determinations employees in Cincinnati assessed the potent 1 incoming applications for tax-exempt status. In August 20 ations noted that an incoming application ?appears to be usi Court case, ?Citizens United Federal Election Commissioz sin for pro?t and nonpro?t organizations with regard to pol ires.?211 The screener then recommended forwarding the ca 203 Email chain between Sarah Ingram, Lois Lerner, Steve Miller and others (I an. 2 204 1 205 Email chain between Nikole Flax, Sarah Hall Ingram, Cathy Livingston and 0th 206 1d 207 SFC In erview of Sarah I-Iall Ingram (Dec. 16, 2013) p. 40. Email chain between Nikole Flax, Sarah Hall Ingram, Cathy Livingston and otl' 75821 ~24. 209 1d 2'0 Email from Michael Tiemy to Faye Ng and others (I an. 22, 2010) 1R80000639 ,hain between Jack Koester, John Shafer and Gary Muthert (Aug. 3-4, 21 67 2? Email i ced, Lerner brought the case to the attention of upper-level management and 91y not change IRS rules tax exemption, but she recommended that the IRS prepare itself for inquiries regarding spending by 501(c)(3) and 501(c)(4) organizations. 203 Ingram agreed that the agency st of the tax-exemption to the IRS website to itions.205 The ations and explained that :d on organizations as a SCSI any guidance about to explain why the IRS because all the other mother.?207 Lerner also 1e were provided to the issue came up at a nited decision, independent issued, an E0 employee 3 colleagues, noting that it ore engaging in Lal impact of Citizens 10, a screener in E0 ng a recently decided 1? which loosened some of itical activities and se to upper management 2-24, 2010) ers (Jan. 24-25, 2010) ers (Jan. 24-25, 2010) 344-48. >10) This document was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) U.S. Sena e4 Committee on Finance Bipartisan Investigative Report based on ?the current political climate and sen31tiv1ty of the application?.212 The following month, an E0 Determinations employee alerted a colleague about political contributipns made by a potential applicant for tax-exempt status, which the employee believed were poss tile because of the Citizens United ruling.213 The impactlof the Citizens United ruling on the IRS would remain a topic of discussion throughOL the agency during the next several years, as noted below. B. THERE WAS EXTENSIVE PRESS COVERAGE OF POLITICAL SPENDING BY EXEMPT ORGANIZATIONS FOLLOWING CITIZENS UNITED Political splending was a topic of continued interest in the press during the 2010 election year and beyond. The IRS had an active role in media coverage, and sometimes made senior employees available for interviews with reporters or offered comments on behalf of the agency. Some senior managers and employees in E0 monitored the news and shared relevant articles about political spending by tax?exempt organizations with colleagues. These articles were often critical Oi the IRS and encouraged the agency to do more to rein in pOTlitical Spending. At times, the IRS helped reporters understand the tax law and agency processes. The following examples occurred during the height of the 2010 election cycle: 0 Ir August 2010, The Washington Post reporter Tim Famam had contacted the IRS about campaign-related activity by 501(c)(4) and 527 organizations.214 An employee in the Ir edia relations branch noti?ed Ingram, Miller and Jonathan Davis, Commissioner hulman?s Chief of Staff, that employees in provided existing data to Tim Penman)?? The Washington Post published Mr. Farnam?s story a few days later, which scussed how Citizens United ?has indirectly thrust the Interhal Revenue Service into the nidre prominent role of overseeing [campaign] expenditures.?216 The published article VI as circulated among IRS managers, including Lerner and In gram.? - 111 September 2010, a reporter from the New York Times contacted the IRS about the perations of 501(c)(4) organizations after the Citizens United decision, and speci?cally, rOssroads GPS.218 IRS press staff alerted Commissioner Shulman, Miller, Ingram, elrner, and others about the expected story, noting, ?One area raised as a concern are those groups that set up and function for a short period of time, and we are not aware of HMO 2l2 2?3 Email Tom Michael Condom to Gary Muthert (Sep. 28, 2010) 2?4 Email ?rdm Michelle Eldridge to Steve Miller, Sarah Ingram, Lois Lerner and cthers (Aug. 6, 2010) 52184. 2l5 2?6 Email :hain between Lois Lerner, Joe Urban and others (Aug. 22, 2010) 217 1d. 2'8 Email :Hain between Steve Pyrek, Terry Lemons, Sarah Ingram and others (Se 9. 21, 2010) 68 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senat the ac fo sh The press througho i dra art 3 Committee on Finance in until they ?le their return, well after their potential lobby ted by Miller, Lerner, Ingram, and others.220 The reporter I . cuSI Opined that ?the ?secret donor? theme will continue.?222 niagement, and the Commissioner?s of?ce.223 Employee outside of IRS management also followed the media?s cov: some staf ?level employees in E0 Determinations monitored the news Bipa vities are complete.?219 Ingram, Lerner and senior EO empl the reporter on background, and Ingram provided a statem cle focusing on political spending by 501(c)(4) organization ng on Crossroads GPS.221 Ingram stated that the article continued to run articles on political advocacy spending by 2011 and 2012. These articles were routinely distributed a1 ttisan Investigative Report ing efforts and other Judy Kindell spoke ant on the record that was ubsequently published an in the 2010 election, came out pretty well? and ax-exempt organizations nong E0 managers, :rage of this tOpic. Indeed, and shared among themselv many of the same articles noticed by upper managers pa icularly the E0 Tax hich often compiled relevant stories from other media sour es.224 A number of the inations employees who shared articles were responsible reviewing and deciding Journal, BO Dete incoming pplications for tax-exempt status. Thus, employees at eve aware of media?s coverage of spending by tax-exempt organizatio in the wake of the Citizens I In recent tax-exem parties nited ruling. SPENDING BY TAX-EXEMPT ORGANIZATIONS 3t organizations. Members of both houses of Congress an 2?9 Email chain between Michelle Eldridge, Steve Miller and others (Sep. 20, 2010) 22? 1d; Em: 22' Email c1 76. 222 IRS Urg As Campai Groups De Its Job, Ne Mother Jo; Welfare, (Oct. 15, 2 224 Is 501(c on E0 Tax Journal (A 2011) IRS by 501(c)( Whether 11 i1 chain between Nikole Flax, Steve Miller, Ron Shultz and others (Sep. Iain between'Steve Pyrek, Terry Lemons, Sarah Hall Ingram and others ecll to Investigate Charity for Possible Political Activity, Tax (A gn Money Pours In So Do Complaints, The Washington Post (Oct. 13, 2 nied Break by I.R.S. Are Named, New York Times (July 21, 201 1) 42 York Times (Mar. 8, 2012) How Dark-Money Gr: zes (June 13, 2012) How Nonpro?ts Spend Million rciPublica (Aug 20, 2012) The Feeble Grip 0-12) 1R80000180729-30. )64) Status Being Abused?, E0 Tax Journal (Sep. 14, 2010) 1 Law, E0 Tax Journal (Oct. 18, 2010) If You Can? pr. 14, 2011) 590; 3 Groups Denied Break by I.R.S. Are Ne )000531334-39; Groups Challenge Legality of IRS Regs as Failing to P1 4) Organizations, E0 Tax Journal (July 28, 2011) 69 This document was obtained and uploaded by the Center for Res . MEMBERS OF CONGRESS EXPRESSED THEIR INTE level of the IRS were REST IN POLITICAL years, Congress has become increasingly engaged in the issue of political spending by from both major political ~requently encouraged IRS action through speeches and direct requests to the IRS. 1R80000211382. 20, 2010) rRs0000219086-91. (Sep. 21, 2010) 1R80000508974- pr. 1, 2010) 010) 3 )00012346-47; The IRS. Does Jups Sneak by the Taxman, 3 on Elections and Call it Public on Big Political Cash, Politico 2236-40; New York Times Primer Beat Them, Join Them, E0 Tax med, New York Times (July 21, operly Limit Campaign Activity even Democratic Senators Ask Investigating Political E0 Tax Journal (Feb. 17, 2012) ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance From the end Of 2008 through early 2013, the IRS received 35 formal about tax- political 3 changes tc managemc getting fee 501 ?nalized: In additio in ?oor SI: continued interest by Congress ensured that the IRS and particularly focused As an age practition Many sur particular generally Ir 1 BXempt organizations?? These requests covered a wide ran IRS regulations.226 Incoming Congressional requests were 7 i to these 35 formal requests, members of Congress also Sp e'eches and made informal requests to the IRS, sometim these issues. . 5 PRACTITIONERS AND INTEREST GROUPS REQUESTED IR SPENDING BY TAX-EXEMPT ORGANIZATIONS ncy charged with serving the public, IRS employees had fre ers and other interested parties about political spending by t: p:orted speci?c reforms to the IRS regulations; but others fo organizations applying for, or holding, tax-exempt status. A representative of IRS interactions with the public are descril February 2011, Citizens for Responsibility and Ethics in ornmissioner Shulman asking the IRS to revoke the tax-exer iture Fund, Inc. The request was circulated among EO man 1 March 2011 and September 2012, Lerner, Kindell and Tree [adrigal corresponded directly with attorneys from the law changes to the regulations for 501(c)(4) organizatior . . . . . ossibility Of meeting With the outsrde ?rm to discuss their pr 225 Email received 226 1d 227 Email dm Lois Lerner to Holly Paz and others (July 24, 2012) 7966 228 E. g, 229 E. g, 23? Email 23' Email Email chaTn' between Gregory Colvin, Lois Lerner and Judith Kindell (Aug. 24-27 om Jorge Castro to Nikole Flax (Jan. 28, 2013) informal requests from members of Congress and staff that are nail from Lois Lerner to Holly Paz and others (Apr. 17, 2012) nail from Holly Paz to Lois Lerner (May 2, 2013) 'rom Joseph Urban to Holly Paz and others (Feb. 2, 2011) hpin between Lois Lerner, Ruth Madrigal, Holly Paz and others (Mar. 2 70 Hit and the typical clearance process for requests related to t: dback from high-level management in the Legislati? the Comrr.iSsioner?s of?ce. Beginning in July 2012, all Congressional organizations were vetted by Steve Miller?s Chief Of Staff, 1? Bipdrtisan Investigative Report Zongressional requests ge Of issues, including ding by tax?exempt organizations; imposition of the gift tiax on donors to tax? en exempt orianizations; questions about the status of a particular organiz cation; and suggested forwarded to senior IRS tx-exempt issues involved ve Affairs of?ce, and often reSponses involving Iikole Flax, before being about political spending I 228 Oikthrough staff.229 The 65 its top managers stayed 5 ACTION ON POLITICAL quent interaction with tax ix-exempt organizations. cused on the actions of few examples that are Jed below: ashington wrote to status of American agers.230 sury employee Ruth Of Adler Colvin about is. Lerner considered the Oposals.23] iring that time, the IRS also not captured in this exhibit. 9. 25929-30. 93-97. 2011) 2012) IR30000572618-19. This document was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) DUDD hub PIUPUDGL. These co tinual discussions with outside groups ensured that the IRS stayed focused on the issue of politic spending by tax-exempt organizations. . IN RESPONSE TO EXTERNAL SCRUTINY AND INCREASED POLITICAL SPENDING BY TAX-EXEMPT ORGANIZATIONS, THE IRS TRACKED POLITICAL SPENDING AND PROPOSED REGULATORY CHANGES Lois Lerner described what she may have believed was pressure on the IRS to address political advocacy activities, especially within the of?ce, in a speech at Duke University?s Sanford School of Public Policy in October 2010: The Supreme Court dealt it a huge blow [in Citizens United] overturning a 100-year Old precedent that said basically corporations could give directly in political campaigns, and everyone is up in arms because they don?t like it. The Federal Election Commission can?t do anything about it. They want the IRS to ?x the problem. The IRS laws are not set up to ?x the problem. So everybody is screaming at us right now, ?Fix it now before the election, can?t you see how much these peOple are spending?? I won?t know 2? Em '1 from Lois Lerner to David Fish (Sep. 30, 2011) 1R80000511994-2018. 233 Ema il'chain between Steven Miller, Faris Fink and others (Feb. 29, 2012) 23? Emailychain between Lois Lerner, Ruth Madrigal and others (Dec. 14-19, 2012) SFC Interview of Victoria Judson (Sep. 11,2013) pp. 40-43. I 71 This document was Obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senat i 3 Committee on Finance Bipartisan Investigative Report until I look at their 9903 next year whether they have done more than their primary act vity as a political or not. So I can?t do anything right now.2 35 After the 2010 election, the IRS became increasingly concerned with the amount and frequency of money spent to in?uence elections by tax-exempt organizations. Miller obs riting in 2012, Steve erved that after the decision, there was a ?rise of super Miller noted that the decision contributed to an increase in 501(c)(4) organizations that can engage in ?unlimited issue advo political Sp (21,2013: Th tha dat Near the quantify the effect that Citizens United had on political campaign inter organizati cacy? but ?limited political campaign activity.?237 Miller a1 ending by 501(c)(4) organizations at the Senate Finance Co ere is no doubt that since 2010 when Citizens United sort of some of that cash headed towards organizations. a and IRS data. That does put pressure on us to take a look. nd of 2012, employees in the E0 division began considering ans. In December 2012, employee Crist0pher Giosa so noted an increase in mmittee hearing on May released this wave of cash his is proven out by FEC B38 whether it was possible to vention by tax?exempt sent Lerner his preliminary analysis on sources of data that might be available. 239 Giosa suggested that EO consider By April I on politic: the author Si an an nlisting the Of?ce of Compliance Analytics to help with this .013, E0 and the Of?ce of Compliance Analytics had prepai il'spending in 501(c)(4) organizations?? As background in noted: ace Citizens United (2010) removed the limits on political s; unions, concern has arisen in the public sphere and on Cap onymity they can provide to donors.242 23$ SFC Tr (Oct. Iii/$10) 23" Steve 'ller notes (March 14, 2012) 237 1d. 2? senate I Greater Scrutiny (May 21, 2013). om Christopher Giosa to Lois Lerner and others (Dec. 6, 2012) 239 Email fr 240 1d. 24? Email fr 242 om Justin Abold to Lois Lerner, Holly Paz and others (Apr. 12, 2013) II scription of Video Available on Youtubecom, Lois Lerner Discusses inance Committee Hearing, A Review of Criteria Used project.240 'ed a detailed presentation formation for the report, vending by corporations itol Hill about the potential suse of 501(c)(4)s for political campaign activity due to their tax exempt status and the olitical Pressure on IRS in 2010 . entify 501(c)(4) Applications for 185323-27. 50000195666-90. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report The authors then provided a ?problem statement,? which stated that t]he public purpose of 501(c)(4)s may be diluted by political campaign activities as an unintended consequence of Citizens United.?243 In May 2013, E0 and the Of?ce of Compliance Analytics revised the presentation in advance of a May 7 brie?ng for then-Acting Commissioner Miller.244 The revised presentation, which was sent to M1 ller?s of?ce, made the following ?ndings: 0 The number of 501(c)(4)s reporting political campaign activities almost doubled from tax year 2008 through tax year 2010; and The amount of political campaign activities for large ?lers (de fined as organizations with to :al revenue of more than $10 million) almost tripled from tax year 2008 through tax year 2010.245 The report identi?ed two events that occurred contemporaneously with the drastic rise in the number of 501(c)(4) organizations that reported political campaign activities: the Citizens United decision and Congress?s consideration of the Affordable Care Act.246 Although the report did not concl ide that those events caused a rise in political spending, by singling them out, it is clear that the IRS viewed them as signi?cant, relevant factors. The IRS took a step to address concerns about political campaign intervention by tax-exempt organizations on November 29, 2013, when it proposed regulations that would provide guidance to 501(0) organizations on the types of political activities that would not be considered social welfare. After receiving more than 150,000 comments on the proposed regulations, on May 22, 2014, the IRS withdrew the regulations and stated that it planned to re-propose them after a thorough review of the submitted comments.247 As of the issuance of this report, the IRS has not proposed additional regulations or issued further guidance on this topic. However, the statements of Lerner and Miller, as well as the analytical work performed in 2013, make clear that the IRS has been working since 2010 to determine an apprOpriate response to external pressure following the Citizens United ruling. 243 . 2? Miller?s calendar shows that he organized a meeting on May 7, 2013 to discuss Data Matters" with Nikole Flax, Dear Silverman, Eric Schweikert and Joseph Grant (May 7, 2013) 245 Email chain between Justin Lowe, Justin Abold and others (May 6, 2013) IRSO )00494805-29. 245 247 IRS, Update on the Proposed New Regulation on 501(c)(4) Organizations (May 22, 2014). 73 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance V. The gene describedll certain ty] A Each of the Groups within EO Determinations had specialty areas and that fell vs with simi customer 'to be an The ?Tou 1. 3 If an age sent the 2 7830,an applicati and worl CERTAIN TYPES OF APPLICATIONS Bipartisan Investigative Report THE IRS IMPLEMENTED A SPECIAL PROCESS FOR HANDLING enabled by the creation of the BOLO Spreadsheet. This section describes the special procedures that the IRS put in place to process applications that involved political advocacy, whicl were al process that the IRS followed for processing applications )es of applications, particularly those that posed dif?cult iss . THE TOUCH AND Go (TAG) SPREADSHEET WAS DETERMINATION AGENTS vithin those areas.248 Cindy Thomas believed that having on lar issues promoted consistency in results, fostered greater ei satisfaction, as well as employee and manager satisfaction, 5 xpert in all issues.249 oh and Go? or Group (Group 7830) worked on appli Abusive tax avoidance transactions: a. abusive promoters; b. fake determination letters; Activities that were fraudulent in nature: a. applications that materially misrepresented Operati b. activities conducted contrary to tax law g. Forei Applicants with potential terrorist connections.250 '11: in the screening group determined that an application met tpplication to Group 7830, the group assigned to work TAG ather agent performed a ?secondary screening? of the applic on, in fact, met the TAG criteria. If it did, the application w: :ed to completion.252 2?3 Email from Cindy Thomas to Holly Paz (Mar. 16, 2011) 249 1d 25? Height 25' SFC In 252 Id :n'ed Awareness Issues (undated) terview ofElizabeth Hofacre (Sep. 24, 2013) pp. 31-32. 74 This document was obtained and uploaded by the Center for Res for tax-exempt status is above in Section Over time, the IRS developed special procedures for handling CS. TO ASSIST E0 processed applications 3 Group work applications ??ciency, and improved ince no agent was required cations that involved: ons or ?nances; gn Conduits); and the TAG criteria, he/she applications?? In Group ation to ensure that the is retained in Group 7830 ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report Over the course of time, the IRS identi?ed many applications that met the TAG criteria. In an effort to catalog those applications so that screening agents could properly identify them, around 2002 or 2003, E0 Determinations deve10ped a TAG spreadsheet.253 The TAG spreadsheet identi?ed the various TAG applications, explained the tax law issue presented in each application and provided further processing guidance to the E0 Determinations agents.254 The TAG spre a'dsheet eventually was expanded to include a second tab that referenced TAG issues that were no longer encountered, but were of historical significance.255 When new entries were made to tne spreadsheet, a alert? email was sent to E0 Determi April 2007, copies of TAG alert emails were also sent to Thomas, EO Manager Donna Abner and Washington DC. E0 attorney Ted Lieber for disseminating the information to others in DC. should he deem it .nations agents. Starting in Quality Assurance ,who was, ?responsible necessary.?256 The TAG all EO Determinations slip through screening and would be assigned to an spreadsheet was used not only by the screeners but also by agents.? On occasion, an application presenting a TAG issue might not be identi?ed as a TAG application.258 Ultimately, the application E0 Determinations agent who, in developing the facts surrounding the applicant?s activities, would determine that those facts involved a potential fraudulent trans action, or a tax avoidance scheme, or that the applicant might have terrorist connections.259 In identifying the application as a TAC application, the agent would be guided by the descriptive information contained in the TAG :adsheet. The agent would then send such an application to the TAG Group for work- up. Accordingly, it was considered important for all agents, not just the screeners, to have access to the TAG spreadsheet.260 . THE TAG SPREADSHEET EVOLVED INTO THE JOINT ISSUES SPREADSHEET .Applicat there wa 2 EO Dete could be 1 identi?ei 5 little established precedent. These issues also needed to be rrninations agents so that the applications could be sent to a 1 most of these issues through the initial screening process.? these issues were initially referred to as ?consistency cases.?263 130 ons often presented new issues that were not related to TAC processed and determinations could be made in a consistent 253 1a260 26? Email 262 Id. ?3 SFC In 3 Interview of Cindy Thomas (July 25, 2013) p. 66. terview of Elizabeth Hofacre (Sep. 24, 2013) pp. 31-32. 135-136. 256 Email trorn Cindy Thomas to Jon Waddell (Apr. 18, 2007) 1R800000084l3-14 terview of Elizabeth Hofacre (Sep. 24, 2013) pp. 30-33. torn Cindy Thomas to Holly Paz (Mar. 16, 201 1) 1R80000008593-602. terview ofElizabeth Hofacre (Sep. 24, 2013) pp. 17-18. 75 matters, and for which identi?ed and described for speci?c Group where they fashion.261 Screeners ?2 Applications containing Determinations agents and This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report managers treat them were recei the ?consi Determine wlere apprised of these ?consistency cases.? by email and pro vided direction on how to 264 However, at some point, agents had dif?culty keeping track of all the emails they ving on the ?consistency cases.?265 Accordingly, a decision was made to consolidate stency case? information sent by email into the existing TAG Spreadsheet so that EO LIIODS agents could easily access all of the information that t1 ey required in one convenierrt document.266 According 7830 and The sprea well as tal The Watc receive in events an List tab vs Detennin In April 2 should a1 want to example, we need 1 Detennin June/July attending G1 Is: Is: gly, Jon Waddell and Joseph Herr, Group Managers in E0 )5 for Emerging Issues and a Watch List??58 Emerging Issue ues arising from signi?cant current events (not disaster relie ues arising from changes to tax law or other signi?cant worl List contained a list of issues that the IRS had not yet recei the future. These issues were the result of signi?cant Chang ere generally identi?ed by E0 Technical staff and brought ations Program Manager. 27? 010, Thomas determined that the joint issues Spreadsheet th so contain a tab for ?consistency cases,? which she describec nsure consistent treatment (these cases are not TAG or Er a group ruling disbands and subordinates decide to apply f0] 0 make sure they are worked/treated the same.?272 She also ations agents and managers would be informed about the ne 2010 Continuing Professional Education (CPE) training ses and asked that the draft spreadsheet be completed and pres 264 pp_q 265 26? Email 267 1d. 2? Id. Waddell noted that ?the previous tabs for Archived and Removed TAG Issu spreadshei cumbersor 269 Height: 2'70 2? Email 272 Email ro'm Jon Waddell to Sharon Camarillo and Brenda Melahn (Apr. 6, 2010 me to include additional tabs of 100?s [of] former TAG issues.? Ihain between Holly Paz, Lois Lerner and Cindy Thomas (Feb. 18 - Mai >4-95. t. Since the spreadsheet is now a joint one between TAG and Emerging ned Awareness Issues hain between Cindy Thomas, Sharon Camarillo and Joseph Herr (Apr. 6 76 This document was obtained and uploaded by the Center for Res eterminations (Groups 7825 respectively), began creating a ?Joint TAG/Emerging Issues Spreadsheet.?267 :lsheet contained a tab for TAG applications encountered over the past 2-3 years, as were de?ned as follows: oups of applications for which there is no established case law or precedent and events.269 ved, but that it might es in tax law or world i would require ?special handling? by the IRS when receivecil.270 Issues on the Watch a the attention of the E0 an under development 1 as applications ?where we nerging Issues). For individual exemption - decided that E0 av spreadsheet during the sions that they would be :nted to her for review by es have been taken out of the Issues, we felt it would be too 16, 2011) IR30000008593-602. -l3, 2010) ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance the end of no longer 10, Elizabeth Hofacre, Emerging Issues Coordinator for Group 7825, sent a copy of In accord tabs for May 6, 20 the ?joint ?Tea Parti ?[c]oordin In June an the course ?Combine Coordinated Processing Issues, and a Watch List. 278 The specialists presentati dissemin were instl?ucted that ?Tea Party Cases? were an Emerging Issue becau Rt In Pc R1 Maseru:? EO Deter Watch Li the follov T1 Bipa April 2010.273 Thomas suggested that the name of the sprea ce with Thomas?s direction, Jon Waddell revised the oin1 cases, Emerging Issues, Coordinated Cases, and a Watch ssues? spreadsheet to her manager, Joseph Herr. The draft 5 ate with group 7825.?276 . E0 DETERMINATIONS AGENTS WERE TRAINED IN THE SPREADSHEET AT A ULY 2010 CPE TRAINING July of 2010, E0 Determinations provided CPE training t< of the training, the specialists were advised that they would (1 Issues Workbook? that contained tabs for TAG, TAG Hist on that advised them that a designated coordinator would m2 alerts in one standard email.279 During the course of the gh Pro?le Applicants :levant Subject in Today?s Media consistent Requests for 501(c)(3) and 501(c)(4) >tential for Political/Legislative Activity 11ings Could be Impactful280 minations also told its specialists that ?Successors to Acorn? st issue. The PowerPoint presentation instructed employees ring characteristics: Typically Applications Not Yet Received Issues are the Result of Signi?cant Changes in Tax L2 Issues are the Result of Signi?cant World Events 0 2731d 274 Id 275 Email fi 275 Email 277 SFC Int 2? Email 0 279 Heighte 230 1d hain between Cindy Thomas and Holly Paz (May 9-10, 2012) om Jon Waddell to Sharon Camarillo and Brenda Melahn (Apr. 27, 201 om Elizabeth I-Iofacre to Joseph Herr (May 6, 2010) erview of Cindy Thomas (July 25, 2013) p. 43. ned Awareness Issues (undated) 77 This documgnt was obtained and uploaded by the Center for Res es? as a sample entry under the Emerging Issues tab and dire rtisan Investigative Report dsheet be changed since it was limited to just TAG issues, but she offered no suggestions for a new name.?4 Spreadsheet? to include List.275 Subsequently, on preadsheet referred to cted agents to SE OF THE NEW its specialists.277 During soon be provided with a orical, Emerging Issues, ere shown a PowerPoint tintain the workbook and raining, the specialists 3e they involved: was an example of a that Watch List Issues had D) l. 04755?62. oonsive Politics (OpenSecrets.org) US. Senate Committee on Finance Special Handling is Required when Applications are Bipartisan Investigative Report eceived.281 Following; up on this training, on July 27, 2010, Elizabeth Hofacre prepared a ?Combined Issue Spreadshc of the :et? and distributed it to managers in E0 Determinations. 232 :adsheet informed the agents about Tea Party applications. The Emerging Issues tab The spreadsheet indicated that ?[t]hese cases involve various local organizations in the Tea Party movement [that] are applying directed cases are spreadshe The sprea Historica ?[c]omm party. Ac In additic The desc1 reformin; these cas From the 2010, the developn ?Combin I 40 THE NEW SPREADSHEET WAS RENAMED THE rent, various iterations of the spreadsheet had been called 'leing about, we decided to have when we introduced this i on'test to see if anyone can name it and we will give rOuld give them 59 minutes of administrative time. for exemption under 501(c)(3) or The entry in t1 iat ?[a]ny cases should be sent to Group 7825. Liz Hofacre currently being coordinated with Hofacre was provic et entry by Jon Waddell.283 dsheet distributed by Hofacre also contained an entry for tab with the issue listed as ?political activities.? Further, th )n thread is the word ?progressive.? Activities appear to lean tivities are partisan and appear as anti?Republican. You see I n, the spreadsheet included a reference to ?Acorn Successor 'iption stated that ?[?ollowing the breakup of ACORN, loca under new names. and resubmitting applications.?285 Scree as ?to the TAG Group.?286 outset of the development of the Joint TAG/Emerging Issue re was some question about what to call the new consolidate ed Issues Workbook? and ?Combined Issue Spreadsheet.? . no one really could think of a name for calling it so everyo 181 1d. 282 Email 283 SFC In 284 Email 2851d' 236 Id- irorn Elizabeth Hofacre to Steve Bowling, John Shafer and others (July 2 terview of Elizabeth Hofacre (Sep. 24, 2013) p. 109. ?rorn Liz Hofacre to IRS Staff (July 27, 2010) 1R80000008609-24. 78 This document was obtained and uploaded by the Center for Res Spreadsheet further is coordinating. These led the language for this rogressive? on the Tag entry stated that the toward a new political eferences to ?blue.??284 on the Watch List tab. chapters have been ners were instructed to send 3 SPREADSHEET spreadsheet in April (1 spreadsheet. While in Dint Spreadsheet,? Zindy Thomas stated that ne would know what we are we said we will have a er came up with a name we 7, 2010) 1R80000008609-24. oonsive Politics (OpenSecrets.org) U.S. Senaie Committee on Finance Bipartisan Investigative Report Sc Liz Hofacre was actually the one who came up with a name and we gave her 59 mnutes of admin. And she came up with ?Be on the Look Out,? and that was in August 2010.287 Elizabeth Hofacre indicated that Joseph Herr had suggested the name ?Be on the Look Out? or but gave credit for the suggestion to her, because he did not feel that it was appropriate to accept the award himself, since he had been a manager.288 On August 12, 2010, Hofacre distributed the ?rst spreadsheet to E0 Determinations agents in her capacity as Emerging Issues Coordinator. ?Tea Party? applications were speci?ca identi?ed under the Emerging Issues tab of the Spreadsheet as follows: ?[t]hese cases involve rious local organizations in the Tea Party movement [that] are applying for exemption under 50 or The BOLO directed agents to send Tea Party applications to Group 7 2 and advised that Hofacre was the coordinator.289 Jon Wa ddell provided Hofacre with the nguage for the Tea Party entry on the Emerging Issues tab. 190 The BOLO spreadsheet distributed by Hofacre also contained an entry for ?Progressive? on the Tag Historical tab with the issue listed as ?political activities.? Further, the entry stated that the ?[c]omm on thread is the word ?progressive.? Activities appear to lean toward a new political party. Activities are partisan and appear as anti-Republican. You see references to ?blue.??291 E, E0 DETERMINATIONS DEVELOPED A PROCESS T0 UPDATE THE BOLO SPREADSHEET Along th the introduction of the BOLO spreadsheet, EO determinations develOped a process for making changes, from time to time, to the spreadsheet. Prior to May 17, 2012, for TAG issues, Coordinated Processing applications, and Watch List applicat ons, a group manager would send an email requesting a revision to the manager of Group 7822. 292 If the Manager of Group 7822 agreed with the suggested revision, then the change was made and the Emerging Issues Jordinator sent out a BOLO alert to all EO Determinations agents and managers. If there was disagreement, then the manager of Group 7822 elevated the issue to Cindy Thomas for resolution. In addition, if the E0 Technical Manager contacted Thomas to advise her to ?watch for? certain types of applications, she would direct the Manager of oup 7822 to add the issue to the Watch List. For char ges to the Emerging Issues tab, prior to May 17, 2012, suggestions were sent to the Emerging Issues Coordinator in Group 7822, who researched the mapter and reported his/her 237 SFC Interview of Cindy Thomas (July 25, 2013) p. 43. 288 SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 127-128. 239 Email :hain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) 8-84. 29? SFC Ir telrview of Elizabeth Hofacre (Sep. 24, 2013) pp. 129?131. 29' Combined Spreadsheet TAG 8 12 10 (Aug. 10, 2010). 2? Email chain between Cindy Thomas and Holly Paz (May 9-10, 2012) 79 This documient was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena :e Committee on Finance Bipartisan Investigative Report conclusio to the Manager of Group 7822. The Manager of Group 72 22 then consulted with the Area Mantger and/or the E0 Determinations Program Manager for a final decision. The . Emerging Issues Coordinator then emailed changes to E0 Determinations agents and 293 managers Subseque at to May 17, 2012, this process changed. On that date, Holly Paz, Director of Rulings and Agreements, issued a memorandum requiring that all changes to the BOLO spreadsheet tabs (Abusive Transaction and Fraud Applications (TAG), Emerging Issues, Coordinated Processing applications and Watch List applications) receive the approval of the Group Manager of the Emerging Issues Group, the E0 Determinations Program Manager, and the Director of Rulings and Agreements. 294 293 Id. 294 Email ?h in between Holly Paz, Lois Lerner and Nikole Flax (May 17, 2012) 80 I This document was obtained and uploaded by the Center for Res aonsive Politics (OpenSecrets.org) U.S. Sena Committee on Finance Bipartisan Investigative Report VI. APPLICATIONS SUBMITTED BY TEA PARTY ORGANIZATIONS WERE SYSTEMATICALLY IDENTIFIED, CENTRALIZED AND SUBJECTED TO IHEIGHTENED SCRUTINY BY THE IRS This section explains how the IRS used the BOLO spreadshe at to systemically identijy incoming applications submitted by Tea Party organizations, and how being placed on the BOLO spreadsheet a?ected the processing of those applications. A. AFTER THE IRS RECEIVED AND APPROVED THE FIRST FEW APPLICATIONS, IT PREPARED SENSITIVE CASE REPORTS AND ADDED AN ENTRY TO THE BOLO SPREADSHEET The ?rst applications for tax exemption ?led by Tea Party organizations were received by ED Determin itions prior to March 2010.295 E0 Determinations processe the initial applications it received and in doing so, it approved two Tea Party organizations that had applied for exemption under 501(c)(4), and one Tea Party organization that had submitted an application for exemption under It would be more than 18 months before the IRS approved another applicatic ni from a Tea Party organization.297 1. Tea Party Applications Began to Draw Attention in E0 Determinations In early 2010, an application ?led by the Albuquerque Tea Party was assigned to Jack Koester, a screener in Group 7838, E0 Determinations.298 Koester had heard at out the Tea Party in news reports.299 Upon receiving the application from the Albuquerque Tea Party, Koester concluded that it was ?high pro?le? because of the possibility that it would attract media attention, so he infonned his Group Manager, John Shafer. It was standard practice for screeners to bring ?high pro?le? applications to the attention of their manager.3?? Subsequently, Koester sent Shafer an email in which he noted that ?recent media attention to this type of organization indicates to me 295 Email chain between Cindy Thomas, Steven Grodnitzky and others (Mar. 31 - Apr. 12, 2010) 14. 296 297 Based II data provided to the SFC by the IRS (Mar. 26, 2014). 29? SFC In erview of Jack Koester (Aug. 1, 2013) p. 8. 299 Id. p. 23.? 300M. pp.12-13. 81 This document was obtained and uploaded by the Center for Resaonsive Politics (OpenSecrets.org) This docume U.S. Sena that this is 1024 that Shafer, in Cindy embarrass 2. Upon rece Acting Albuquerque Tea Party Inc. We?re wondering if E0 Technical wants media atte given the 3. In early l\ Committee on Finance may engage in ?possible future political activities.?302 ing case involving a ?Tea Party? organization.?303 E0 Technical Had Early Awareness of the Tea Party A iying Camarillo?s February 25, 2010 email, Thomas contact mager of E0 Technical. Thomas told Paz that have a :ntion.?304 Paz, in reply, stated to Thomas, think sending potential for media interest.?305 E0 Technical Assumed Responsibility for Working Tw as ?Test Cases? Iarch 2010, Shafer asked Gary Muthert, a screener in his Gri the case Bipartisan Investigative Report a high pro?le case.?301 Koester also indicated that the organization stated in its Form tilrn, forwarded Koester?s email to Sharon Camarillo, his Area Manager, who sent it to amas, asking that Thomas ?let ?Washington? know about this potentially politically pplications ed Holly Paz, then the Form 1024 for: the case because of recent it up here is a good idea 0 Tea Party Applications )up, to conduct a search of inventory management systems used by to dete ine if any other Tea Party organizat ons had ?led applications for tax exemption.306 Muthert fo (1 that there were seven applicati ns pending from Tea Party organizations, and that three ad tional applications had already en approved for tax?exempt status.?7 When Thomas was made aware of the existence of these 0 application, she apprised Paz, asking Paz whether she war ted ?all of them or do you a few and then give us advice as to what to do with the rem Paz only wa acknowl dged receipt of the ?one Tea Party case up here that was 3 ant up from Determi ations] just a few weeks ago Paz then stated that she was unaware that there were more, an said think we should take a few more cases (I?d say 2) and would ask that you hold the rest Determir ations] in working the other cases. til we get a sense of what the issues may be. Then we will n309 work with 30? Email chain between Jack Koester, John Shafer, Sharon Camarillo, Cindy Thoriias and others (Feb. 25 - Mar. 17, 2010) IRS 30?. 303 1d. 304 3051i 306 SFC In 307 1d 308 Email 309 0000180869-73. terview of Gary Muthert (July 30, 2013) (not transcribed). :hain between Cindy Thomas, Holly Paz and others (Feb. 25 - Mar. 17, 3 82 nt was obtained and uploaded by the Center for Res i010) IRS0000180869-73. ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report 4. E0 Technical Prepared the First SCR for the Tea Party Applications On or around March 18, 2010, Steve Grodnitzky, Manager of EO Technical Group I, became Acting anager of EO Technical.310 Several weeks later, Grodnitzky inquired of Donna Elliot- Moore, a Tax Law Specialist in E0 Technical, about the speci?c activities of the two Tea Party organizations whose applications were then pending in E0 Technical. One of those applications was for exemption under 501(c)(4) from the Albuquerque Tea Party, and the other was for exemption under 501(c)(3) from the Prescott Tea Party. Elliot?Moore advised Grodnitzky on April 1, 2010 that with regard to the activities of both organizations, looked brie?y and it looks morel educational but with a republican slant obviously?? Grodnitzky responded ?[t]hese are high pro?le cases as they deal with the Tea Party so there may be media attention. May need to do an CR on them.?312 Elliot?Moore noted in response that ?[t]he Tea Party movement is covered in the Post almost daily. I expect to see more applications.? Grodnitzky then contacted Cindy Thomas on April 2, 2010, and advised her that think there needs to be an SCR on the Tea Party cases, due to the high media attention. Actually, you can?t turn on the television news without hearing about the movement??3 Thomas concurred in Grodnitzky?s assessment. Grodnitzky assigned the two Tea Party applications to E0 Technical Group 2, managed by Ronald Shoemaker.314 Shoemaker, in turn, assigned the two applicat ons to Carter (Chip) Hull, a Tax Law Specialist in Group 2. Hull, a veteran of the IRS since 1965, was considered to be a subject-matter expert on 501(c)(4) organizations}15 Grodnitzky directed Shoemaker to prepare an SCR the Tea Party applications.316 The Tea Party cases met the criteria for preparation of an SCR ecause the applications were likely to attract media attentioin. Accordingly, Hull prepared the ?rst SCR on the Tea Party applications which is dated April 19, 2010. In the SCR, Hull noted that the applications from the Albuquerque Tea Party and the Prescott Tea Party were ?[1]ikely to attract media or Congressional attention.? Hull further indicated that ?[t]he various ?tea party? organizations are separately organized but appear to be part of a national politically conserv iVe movement that may be involved in political activities. The ?tea party? organizations are being followed closely in national newspapers (such as the Washington PoSt) almost on a daily basis.?317 31? SFC Interview of Holly Paz (July 26, 2013) p. 16. . Email chain between Donna Elliot-Moore, Steve Grodnitzky and others (Mar. 3 1 - Apr. 2, 2010) 1R80000155413-14. 312 313 3?4 Email :hain between Steve Grodnitzky, Ronald Shoemaker and others (Mar. 31 Apr. 5, 2010) 67. 3?5 SFC Interview of Ronald Shoemaker (July 31, 2013) (not transcribed); SFC Interview of Carter Hull (July 23, 2013) (no transcribed). 3?6 Email :hain between Steve Grodnitzky, Ronald Shoemaker and others (Mar. 3 - Apr. 5, 2010) 67. 3? Division Sensitive Case Report (Apr. 19, 2010) 83 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena Grodnitzl proposed review be those nee Deterrnin on the SC applicatic there wer contribut Detennin 6. As desc Issues 8%eadsheet? (subsequently re?ned and renamed Spre coincide tally with the identi?cation of the ?rst Tea Party application the SCR. organizat applicatii arising fr spreadsh Inclusior the mann next few then ?centralized? by sending them to the Emerging Issues Group (78 subjectec In order secondar te Committee on Finance Bip . Placing the Tea Party Applications on the SCRs Cause Processing :y?s decision to place Tea Party applications on the SCR eff determinations for those applications now required at least fore they could be released. Since the applications on the tied to ?rst be resolved before all other Tea Party applicatio ations could also be brought to closure. Any delay in the di would result in a corresponding delay in the disposition 0 ns pending in E0 Determinations. As explained in greater substantial delays in the processing of the ?test cases? and to delays in the processing of the Tea Party applications a ations. Identification of the Tea Party Applications as an Eme Spreadsheet Resulted in Centralization and Full Devel Applications ed more ?Jlly above, E0 Determinations developed the net 318 Joseph Herr and Elizabeth Hofacre added applicatiOns re iOns to a draft version of the spreadsheet as early as May 6, 1 ans met the criteria for an ?emerging issue? (absence of estal om signi?cant events, etc.).319 Ultimately, the spreadsheet set and distributed to E0 Determinations agents on August 1 of the Tea Party reference in the Emerging Issues tab of the er in which the Tea Party applications were processed by EC years. Speci?cally, applications identi?ed as originating to full development for possible political advocacy.321 to identify what was, in fact, a ?Tea Party? application, the y'screeners in E0 Determinations developed screening crite1 3'3 Email 3'9 Email 32? Email 32' SFC In hain between Jon Waddell, Sharon Camarillo, Brenda Melahn and other 29335-48. hain between Elizabeth Hofacre, Joseph Herr and others (May 6-7, 201( hain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) II terview of Elizabeth Hofacre (Sep. 24, 2013) p. 47. 84 rtisan Investigative Report Delays in Their ctively meant that 0 additional levels of were the ?test cases,? 3 pending in E0 osition of the applications all other Tea Party etail in Section ose delays, in turn, aiting action in E0 ging Issue on the BOLO pment of those ?Joint Tag Emerging adsheet?) in early 2010, and their placement on ceived from Tea Party 2010, because these >lished precedent, issues vas renamed the 2, 2010.320 BOLO spreadsheet shaped Determinations over the vm Tea Party groups were 22). There they were sreening agents and 'ia. If an application met (Apr. 6-13, 2010) 1) {80000352978-84. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen: ite Committee on Finance Bip artisan Investigative Report the screening criteria, it was sent to Group 7822 for centralized handling as a Tea Party applicatic The following are issues that could indicate a case to be considere case 2 Is tC 4.S Applicati terms, bu centraliz? Similarly balanced America ?Patriots centraliz During October organiza in. John Shafer summarized the criteria as follows: ind sent to Group 7822 for secondary screening. sues include government spending, government debt and tax ducate the public through advocacy/legislative activities to live. - :atements in the case ?le that are critical of how the country ons that merely contained the words ?Tea Party,? 12,? did not otherwise evidence political campaign intervention :d in Group 7822 as ?Tea Party? applications and there recei applications that referenced activities such as advocating ft were also considered to be ?Tea Party? applications. Acc< :d in Group 7822 where they were fully developed.324 2010), screeners sometimes sent to Group 7822 applications tions on the left of the political spectrum that involved possii interven invento 'on.325 Hofacre returned these applications to the screeners Tea Party,? ?Patriots? or ?9/12 Project? is referenced in the a potential ?tea party? :ase ?le. .es. iake America a better place is being run.322 atriots,? and other like were nevertheless ved developmen )r smaller government and 323 budgets, that criticized how the country was being run, or t1 at suggested ways to make a better place to live, but that did not contain words like ?Tea Party? or 12? or )rdingly, they were lizabeth Hofacre?s tenure as Emerging Issues Coordinator in Group 7822 (May 2010 to received from ale political campaign or placed them in general and they were subsequently assigned to any EO Determin ions agent, since they did not mee the criteria for a Tea Party application.326 Similarly, Hofac returned to the screeners or to ge eral inventory applications received from groups on the rig that did 0t meet the Tea Party criteria.327 Applications so returned and dete succeed' and cent unneces: inations were made on them.328 In contrast, and as descri sections, applications identi?ed as ?Tea Party? applicatio ralized in Group 7822 were subjected to long delays, multipl arin burdensome development. 3? Email 323 SFC 328 ?hain between Holly Paz, John Shafer, Cindy Thomas and others (June 1 terview of Elizabeth Hofacre (Sep. 24, 2013) p. 118. 50-52; Email chain between Holly Paz, John Shafer, Cindy Thomas and 66837-40. terview of Elizabeth Hofacre (Sep. 24, 2013) pp. 45-52. 85 of the political spectrum vere assigned, processed bed more fully in ns by ED Determinations reviews, and -10, 2011) others (June 1-10, 2011) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US Senate Committee on Finance Bip artisan Investigative Report B. E0 DETERMINATIONS PERIODICALLY UPDATED THE EMERGING ISSUES TAB OF THE BOLO SPREADSHEET The Emei ging Issues tab of the BOLO spreadsheet underwent several major revisions between 2010 and 2012. Until May 2012, most of these changes had little practical effect in the way that EO Determinations employees screened and processed incoming applications from Tea Party organizations. 1. Until July 2011, the Emerging Issues Tab of the BOLO Spreadsheet Specifically iReferenced the Tea Party Movement From its :arliest iteration in May 2010 until the July 2011 revision, the BOLO Speci?cally referenced the Tea Party movement.329 For example, in October 2010, when Elizabeth Hofacre relinquished her position as the Emerging Issues Coordinator to Ronald Bell, the Emerging Issue tab read as follows: Issue Name: Tea Party I: sue Description: These cases involve various local organizations in the Tea Party rr ovement that are applying for exemption under 501(c)(3) or 501(c)(4). Disposition of Emerging Issue: Any cases Should be sent to Group 7822. Liz Hofacre coordinating. These cases are currently being coordinated with H. In February 2011, the language was revised as follows: I isue Name: Tea Party isue Description: Organizations involved with the Tea Party movement applying for xemption under 501(c)(3) or 501(c)(4). (DH Disposition of Emerging Issue: Forward case to Group 7822. Ron Bell (coordinator). Cases are being coordinated with E0 Tech Chip Hull.?1 The refe'ences to the ?Tea Party movement? in the Emerging Issues .ab of the BOLO spreadsheet were meant to describe organizations that were part of the actual Tea Party movement.332 329 Email chain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) IRS0000352978-84. 330 "331 1d. 332 SFC Interview of Joseph Herr (June 18, 2013) (not transcribed); SFC Interview of Ronald Bell (July 30, 2013) (not trans :ribed). 86 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecretsorg) U.S. Sena On July 5 Holly Pa: brie?ng identify participa should nc Lerner the impre motivatic cc 01 During tl Party? re reference 3 Immedia tab. 340 I: . In July 2011, Lois Lerner Directed that the References Lt6 Committee on Finance Removed From the Emerging Issues Tab of the BOLO 2011, Lois Lerner convened a meeting with various memb plications as ?Tea Party? applications.334 The criteria were ts.335 During the course of the meeting, Lerner directed tha 1 longer be referred to as such, but instead should be called apparently concerned that referring to the organizations b? sSion of bias.337 On July 5, 2011, Cindy Thomas described n: for the name change as follows: Dis expressed concern with the ?label? we assigned to these :ntered around the fact that these type things [sic] can get us hen outsiders request information and accuse us of ?picking 'ganizations even though we all know that isn?t what is takin ference in the Emerging Issues tab of the BOLO Spreadsheet to advocacy organizations. 339 Cindy Thomas Removed References to the ?Tea Party Issues Tab of the BOLO Spreadsheet he entry now read as follows: sue: Advocacy Orgs .sue Description: Organizations involved with political, lot (emption under 501(c)(3) or 501(c)(4). 3? Email 334 Email from Justin Lowe to Holly Paz (June 27, 2011) 335 Email 336 337 SFC In 338 Email 339 1d 340 1d hain between Cindy Thomas, Ronald Bell and others (July 5, 2011) IRS hain between Cindy Thomas, Steve Bowling, John Shafer and others (It erview of Holly Paz (July 26, 2013) p. 87. hain between Cindy Thomas, Steve Bowling, John Shafer and others (J1 87 Bip artisan Investigative Report to ?Tea Party? be Spreadsheet ers of her staff including iCindy Thomas and others, to discuss the Tea Party applications and options for processinigthose applications??3 In preparation for the meeting, Lem aper that stated the criteria that the screeners in E0 Determi er?s staff assembled a nations were using to then discussed by the ?Tea Party" organizations advocacy ,1 their name would create to her staff Lemer?s :ases. Her concern was in trouble down the road on? certain types of .g place.338 l6, meeting, Lerner and those present worked out new language to replace the ?Tea with a more general From the Emerging tely after the meeting, Thomas made the agreed-to changes to the Emerging Issues ibying or advocacy for 0000620735?402011) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena Committee on Finance Bipalnisan Investigative Report Disposition of Emerging Issue: Forward case to Group 7822. Ron Bell is coordinating cas es with E0 Tech Chip Hu11.3?? Thomas ir formed Steve Bowling and John Shafer that she had made the above?described change to the Emerging Issues tab.342 She also advised Bowling and Shafer th at ?Lois did want everyone to know that we are handling the cases as we should, the Screening Group starts seeing a pattern of cases and is elevating the issue.?343 On July 1 l,l2011, Ronald Bell sent the revised BOLO spreadsheet to I30 Determinations employee; in accordance with his responsibilities as the Emerging Iss "es Coordinator.344 While Bell informed recipients of the BOLO Alert email to be on the lookout for applications for exempticii under 501(c)(3) for ?green? energy, his cover email failed to apprise recipients of the changes ade to the Emerging Issues tab.?5 4. After July 11, 2011, Cindy Thomas and John Shafer Made No Changes to the Screening Criteria Used by Screeners to Identify Applications Received from Tea Party Groups After Bell transmitted the revised July 11, 2011, BOLO spreadsheet tlo EO Determinations staff, John Sha Fer, the Screening Group Manager, made no changes to the use of the criteria by the screeners to identify Tea Party applications.346 The following colloquy occurred during Shafer?s interview by the Committee: Q. Okay. Okay. So Exhibit 8, whatever you want to call it, the numbers 1 through 4 that are in your Exhibit 8 [applicant?s name included ?Tea Party,? ?Patriots,? or or statements existed in the application about government spending/debt, making America a better place to live, or that were cri :ical of the way the country was being run], that?s how the cases were being screened at that time in June of 201 1? A. Yes, it was. Q: And then after this meeting with Lois Lerner in July of2011, you did not direct your screeners to make any changes in how they were screening cases? A. Not to my knowledge .347 3? Email :hain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) ?2 Email :hain between Cindy Thomas, Steve Bowling, John Shafer and others (J 11y 5, 201 1) 343161. 344 Email frOm Ronald Bell to E0 Determinations employees (July 11, 2011) IRSC 000618365?70. 345 1d. 34? SFC Ir terview of John Shafer (Sep. 17, 2013) pp. 120-122. ?7 Id. p. 21 and Interview Exhibit 8. 88 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecretsorg) US. Senate Committee on Finance Shafer ma did want 6 his screen 201 l, the Party app] Similarly, Party? to did not fe processin A w] tr: The Corn other mar accordani BOLO The scree as ?Advc spreadsh Group, 1N spreadsh . veryone to know that we are handling the cases as we shouli Group was handling the Tea Party cases correctly.348 Th screeners received no direction to change the way that they 1 ications. Cindy Thomas understood the July 11, 2011 change directe ?aidvocacy org.? in the Emerging Issues tab to be no more th :1 that the name change necessitated any revisions to the way cases that involved political advocacy issues. Thomas told gain, I believe that all along that we were including all cases 1y would I believe that something needed to be changed whe :ating all cases the same and putting them all in the bucket.? :nittee found no evidence to suggest that Lois Lerner followc .ager to ensure that EO Determinations was properly screeni :e with the revised ?Advocacy orgs.? entry of the July 2011 readsheet. a. How Screeners Processed Applications Received Bipa .rtisan Investigative Report de no changes because he interpreted Thomas?s email in whi ch she advised that ?Lois 1 as con?rmation that arefore, after July 11, ad been processing Tea :1 by Lerner from ?Tea an a name change.349 She IEO Determinations was the Committee: with political activity. So :n I believed that we were 0 :d up with Thomas or any ng applications in Emerging Issues tab of the tom Tea Party and Af?liated Groups After the July 2011 BOLO Chan ners appear to have continued to apply the Tea Party screen cacy orgs.? after the July 2011 change to the Emerging Issue set.? During the Committee?s interview of Gary Muthert, Iuthert was shown a copy of the July 27, 2011 Emerging Iss Bet and was asked the following: But if I?m understanding what you said just a couple continued to look for organizations that were af?liatec ?agged them as advocacy organizations, and you sent is that right? Yes?Tea Part terview of John Shafer (Sep. 17, 2013) p. 120. terview of Cindy Thomas (July 25, 2013) p. 91. terview of Gary Muthert (July 30, 2013) (not transcribed). Muthert stat: erging Issues tab of the BOLO spreadsheet, he continued to send applica to Group 7822 for full development. 89 2,6 ing criteria to identify cases as tab of the BOLO screener in John Shafer?s .168 tab of the BOLO minutes ago, you lwith the Tea Party, you them to the BOLO group, :d that after the July 201 1 change tions that contained the words This document was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report Q. Okay. And that continued when this was, this document, Exhibit 6 [July 27, 2011 Emerging Issues tab], was out? A. Yes.352 It is probable that the screeners? continued use of the Tea Party criteria after the issuance of the July 11, 2011 Emerging Issues tab was a consequence of Thomas and Shafer?s understanding that the sc 'eeners were ?handling the cases as [they] should.? Moreover, continued use of the Tea Party screening criteria was not necessarily inconsistent with the July 2011 revised description now found in the Emerging Issues tab, since cases that met the Tea Party criteria may also have net the description of ?Advocacy orgs.?353 Thomas erself believed that all Tea Party applications involved political activity and required full develTpment. She stated to the Committee as follows: Q. Did you think that all Tea Party cases involved political activity? A. There was actually a case that had, from my understanding, there was a case that had Tea Party in the name and it was not a political case at all, that it was like Little Suzie?s Tea Party, a little kid?s group. Q. But other than those that involved children?s tea parties, all of the ones that are associated with the Tea Party movement, did you think they were all involving political activity? A Yes, those as well as all cases that involved any political activity.354 Accordingly, even after the July 2011 change to the Emerging Issues tab of the BOLO spreadshlet, EO Determinations management and E0 Determinations screeners continued to treat app cations received from Tea Party organizations much the same as they had before the July chan ge. b. How Screeners Processed Applications Received from Organizations that Did Not Engage in Political Campaign Intervention After the July 2011 BOLO Change In Septe ber 2011, Paz grew concerned about the growing number of political advocacy cases pending EO Determinations. She told David Fish that there were liiow over 100 political advocacy cases on hold in E0 Determinations. She went on to state that meeting with 352 Id. 353 This is consistent with ?nding that all applications received by E0 rn organizations with ?Tea Party,? atriots,? or ?9/12? in their names were forwarded to Group 7822 for full development. TIGTA, Inappropr ate Criteria Were Used to Identify Tax-Exempt Applications for Review, TIGTA Audit Report 2013-10? 053 (May 14, 2013) p. 6. 35? SFC Interview of Cindy Thomas (July 25, 2013) p. 91. 90 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena e'COmmittee on Finance Bipartisan Investigative Report Cindy in Cincy last week and looking at some of the cases, it is clear to me that we cast the net too wide a nd have held up cases that have nothing to do with lobbying or campaign intervention org distributing educational material on the national Thomas shared Paz?s concern. in her view, the description of ?Advocacy orgs.? in the Emerging Issues tab was ?way too broad,? and resulted in sending to Group 7822 for full development applications that did not contain political advocacy issues, but rather presented lobbying issues 356 Thomas stated that the July 2011 description of ?Advocacy orgs.? ?caused confusion among 1he groups in Cincinnati and the employees because they then started believing it included man y, many more types of cases that just political advocacy-type cases.?357 5. Steve Bowling and Cindy Thomas Changed the BOLO Spreadsheet in January 2012 In January 2012, Steve Bowling discussed with several of the revenue agents in Group 7822, including Ronald Bell, the Emerging Issues Coordinator, ways to revise the Emerging Issue tab so as to narrow its focus to avoid selecting applications that did not include political advocacy issues.358 At the same time, Cindy Thomas told Steve Bowling that an entry for Occupy organizations needed to be included on the Watch List or BOLO bec se of press reports that Occupy crganizations may apply for tax-exempt status. 359 Initially, IIiilowling emailed Thomas two options for updating the BOLO criteria as follows: scenario 1 BOLO Current Political Issues: Political action type organizzitions involved in limiting/expanding government, educating on the constitution and bill of rights, Social economic reform movement. Note: typical advocacy type issues that are currently listed on the Case Assignment Guide (CAG) do not meet these criteria unless they are also involved in activities described above. 2nd scenario 2 BOLOs Tea Parties: Typically involved in the tea party movement, further the principles of the constitution and bill of rights, pro mote voter 355 Email ?rom Holly Paz to David Fish and Andy Megosh (Sep. 21, 2011) IRSOOC 0010131. 356 SFC Interview of Cindy Thomas (July 25, 201393; SFC Interview of Ronald Bell (July 30, 2013) (not transcribed). 359 SFC Ir terview of Cindy Thomas (July 25, 2013) pp. 93-94; Email chain betwe 3n Mary Sheer and Peggy Combs (Ian. 9-2C, 2012) IR50000013412. 91 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance BipaTrtisan Investigative Report registration, may refer to governmental reform, and/or 912 projects. ?Occupy? orgs: Involve organizations occupying public space protesting in various cities, call people to assemble (people?s assembilies) claiming social injustices due to ?big-money? in?uence, claim the dem Jcratic process is controlled by wall street/banks/multinational corporations, could be linked globally. Claim to represent the 99% of the public that are interested in separating money from politics and improving the infrastructure to fix everything from healthcare to the economy.360 Thomas vetoed the second suggestion based on her understanding of Lemer?s concerns about how the reference to ?Tea Party? would create the appearance of bias. 36? As a compromise, Thomas .iggested that Bowling use the ?rst scenario for the Emerging Issues tab while adding Occupy to the Watch List tab.362 Bowling accepted Thomas?s sugges .ion and revised the Emerging Issue and Watch List tabs of the BOLO spreadsheet accordingly. ?educati 363 on the constitution and bill of rights? were attempts to describe the agenda of the Tea The refeignces to ?political action type organizations involved in limiting? government and Party without using the term ?Tea Party.?364 The reference to ?Social economic reform/movement? was ?code? for the Occupy organizations.?5 Bell queried Bowling why it was nece isary to include the ?Social economic? reference in the Emerging Issues tab as well, but 35? Email chain between Cindy Thomas and Steven Bowling (Jan. 20?24, 2012) 1R550000621814-17. 35' Id; SFC Interview of Cindy Thomas (July 25, 2013) pp. 93-95. 362 Id 363 SFC Interyiew of Cindy Thomas (July 25, 2013) pp. 93-95; Email chain betwee 1 Holly Paz, Lois Lerner and Nikole Fla (May 21, 2012) When asked by Committee Staff who was responsible for the January 25 2012 revisions to the BOLO spreadsheet, Bowling stated as follows: Q. Can you tell me who the change came from, the language here under ?issue description? that?s different? A. No, I don?t know where the change came from. *ikik Q. So you?re not sure who instructed you to make this change but it was somebody above you in the command chain? A . 3 Yes, that?s the way it would be. C. Do you know if this change was directed by Ms. Esrig, Thomas or was it somebody in Washington who directed it? A. I don?t know who directed it. SFC Inter view of Steve Bowling (June 13, 2013) (excerpt above transcribed by SE staff). These statements by from the staff. 35? SFC Ir terview of Ronald Bell (July 30, 2013) (not transcribed). subsequent to Bowling?s interview on June 13, 2013, but also with Thomas?s statements to Committee Bowling QFKCommittee staff were not only inconsistent with the documentary evidence that the Committee received 365 Email :hain betWeen Ronald Bell and Steve Bowling (Jan. 25, 2012) 92 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Semi}: Committee on Finance Bipartisan Investigative Report Bowling responded that organizations other than the Occupy groups were advocating a similar position?? 6. Holly Paz and Lois Lerner Were Informed That E0 Determinations Revised the July 2011 Emerging Issues Tab On February 22, 2012, Paz asked Thomas to provide some information regarding the number of political a ivocacy cases that were then pending, whether cases that met the BOLO description received fill development, and ?how do we currently have this described on the bold??367 Thomas It plied to Paz on that same day that there were 208 pending political advocacy cases, that ?I[a]11 cases meeting BOLO criteria are supposed to go to full development,? and she attached a copy of the then-current BOLO spreadsheet.368 The Emerging Issues tab of the attached spreadsheet re?ected the changes that Bowling had made, aan Thomas had approved, on January 25, 2012. Subseque 1t;1y, on May 15, 2012, Thomas sent Paz and Lerner another copy of the BOLO Spreadsheet, including the Emerging Issues tab that re?ected the changes made on January 25, 2012.369 7. After Steve Miller Became Aware of the BOLO CriteriL, Holly Paz Revised the Process for Making Changes to the BOLO Spreadsheet and a New BOLO Spreadsheet Was Issued On May I 2012, Steve Miller was briefed by Nancy Marks on the ex1stence of the BOLO entry for ?Tea Party? and the criteria used to identify applications as Tea Party applications.370 Miller told the ommittee that when he ?rst heard of the criteria, he thought that it ?was stupid and inappropriate.?371 When Lerner found out that the July 2011 description of ?Advocacy orgs.? in the Emerging Issues tab had been subsequently changed, she ?put her head on the table and said, thoughtl had ?xed it.??372 Miller then directed Holly Paz to look into the process by which changes 1 ere made to the BOLO Spreadsheet and to make adjustmen:s to the process-1?73 It is ?55 Id. In :sponse to a written questionnaire from the Committee, Bowling allege that he did ?not understand the difference setween liberal organizations, Tea Party groups, or any other political oups.? See IRS Employee Responses to Written Questions from Finance Committee Staff (Dec. 19, 2013). also made similar assertions to the Comm ttee staff during an interview on June 13, 2013. Bowling?s statements the Committee are at odds with his appare tunderstanding of the political viewpoints espoused by both Tea Party nd Occupy organizations, as evidencedly the language he developed and proposed to Thomas for inclusion in BOLO spreadsheet. 357 Email chain between Holly Paz, Cindy Thomas, Roberta Zarin, Lois Lerner an others (Feb. 22, 2012) 37 39-48. - 368 359 Email chain between Lois Lerner, Holly Paz and Cindy Thomas (May 15, 2012 37? SFC In erview of Steven Miller (Dec. 12, 2013) pp. 133?141. 37? 1d. p. 139. 3? SFC In .erview of Sarah Hall Ingram (Dec. 16, 2013) p. 107. 373 Email chain between Holly Paz and Cindy Thomas (May 9-10, 2012) 04755-62. 93 This document was obtained and uploaded by the Center for Res onsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report possible that Miller was concerned about how the Emerging Issue tab Lerner or l?az?s knowledge or consent. ad been changed without On May 1 was amen 2012, Paz asked Thomas to explain the process by which Issues Coordinator who then consulted with the Area Manager and/or determine On May 1 Emerging EO Deterr In June 20 followsPaz also of the by the rex This desc Emerging Shortly t1 if the matter would be added to the Emerging Issue tab.375 7, 2012, Paz issued a Memorandum to Thomas advising that ninations Program Manager, and the Director of Rulings and 12, 2012, the BOLO Spreadsheet was revised.377 The Emer ue: Current Political Issues ue Description: 501(c)(3), 501(c)(4), 501(c)(5) and 501(c) iicators of signi?cant amounts of political campaign interve exempt purpose and/or excess private benefit). Note: advoc )bying) that are currently listed on the Case Assignment Gui teria. sposition of Emerging Issue: Forward case to Group 7822 lirected-Thomas to remove references to ACORN and Occur eadsheet, since ?the issues we are concerned about in those ised language in the Emerging Issues tab.378 ription remained in the Emerging Issues tab until April 2013 Issue? entry was changed to re?ect that the cases should be rereafter, on June 20, 2013, the IRS suspended the use of the 374 37S Id 375 Email 377 Email 373 Email 379 BOLO 33" Memorandum from Karen Schiller, Interim Guidancc on the Suspension of BOI hain between Holly Paz, Lois Lerner and Nikole Flax (May 17, 2012) IF hain between Holly Paz, Nancy Marks and Sharon Light (May 14, 2013 "olm Holly Paz to Cindy Thomas (June 1, 2012) Spreadsheet (Apr. 19, 2013) 94 This document was obtained and uploaded by the Center for Res Emerging Issues tab ed.374 Thomas informed Paz that suggestions for additions ere sent to the Emerging Program Manager to any changes to the Issue tab would now require the approval of the Emerging Issues Group Manager, the Agreements.376 ging Issues tab stated as 6) organizations with tion (raising questions as .acy action type issue de (CAG) do not meet this ?y from the Watch List tab ases should be captured? when the ?Disposition of sent to Group 7823.379 BOLO spreadsheet.380 30000437639-41. IR80000195830-31. ,0 List Usage (June 20, 2013). ponsive Politics (OpenSecrets.org) This document was obtained and uploaded by the Center for Res U.S. Sena eCommittee on Finance VII. Bipartisan Investigative Report THE PROCESSES USED BY THE IRS TO WORK THE TEA PARTY APPLICATIONS WERE INEFFICIENT, CUMBERSC ME. INVOLVED MULTIPLE LEVELS OF REVIEW, AND WERE PLAGUED BY DELAY Tea Party applicants. This section identi?es various measures taken by the IRS that harmed No solitar other poli Rather, a decisions make dec event can be said to have caused the delays experi .ical advocacy organizations in the processing of their applic :on?uence of events, some inter-related and most involving or the absence of management oversight, effectively resultec sions on these applications. A. INITIAL PROCESS USED TO REVIEW THE TEA PARTY AP BORIOUS AND TIME CONSUMING In early pril 2010, Carter (Chip) Hull, Tax Law Specialist, E0 Tech working 11 two of the ?rst applications received from Tea Party grou] Party an Brescott Tea Party).381 Hull had been assigned to process his exper ences could then be shared with E0 Determinations, the ent responsi 'lity for processing the Tea Party applications.382 Hull comr reviewin the case ?les and preparing development letters aimed at el the orga zations about their planned activities.383 This information determin whether the planned activities of these organizations were exempts atus they were seeking.384 All other applications received from Tea Party organizations remaine in late A ril 2010, were assigned to Elizabeth Hofacre, the Emerging Determi ations, Group 7822.385 In mid-May 2010, Steve Grodnitzky directed Hull to share with Hofacre the development letter q.ue and Prescott Tea Party applications.386 Grodnitzky told questions had been tailored to the facts of each application, 1 Technic Albuquei how the 38384 335 Email 3? Email I erview of Carter Hull (July 23, 2013) (not transcribed). erview of Ronald Shoemaker (July 31, 2013) (not transcribed). erview of Carter Hull (July 23, 2013) (not transcribed). hain between Cindy Thomas, Steve Grodnitzky, Ron Shoemaker and ot 31051-52. hain between Steve Grodnitzky and Carter Hull (May 17, 2010) 9S :nced by the Tea Party and ations from 2010 to 2013. poor management 1 in the IRS taking years to PLICATIONS IN 2010 WAS nical Group 2, began as Albuquerque Tea Lese two ?test cases? so that lty with primary nenced his work by iciting information from vas necessary for Hull to :onsistent with the tax- :1 in E0 Determinations and Issues Coordinator in E0 Acting Manager of E0 Hull had prepared for the Hull to explain to Hofacre est Hofacre simply copy the iers (Apr. 23-26, 2010) 0631583-84. ponsive Politics (OpenSecretsorg) U.S. Senat developme developmc documents letters to t] reSponses him, as we Hofacre Determine managemi broad disc Committee on Finance ultimate Bipartisan Investigative Report letters. In carrying out this directive, Hull advised Hofacre to send each of her draft letters to him, together with copies of the applications and supporting .337 Under the process imposed by Hull, Hofacre could not release the development it; applicants without Hull?s concurrence.388 When Hofacre began to receive to some of the development letters, Hull instructed Hofacre to send those responses to ascribed this process as highly unusual.390 In Hofacre?s experience, EO .tions agents would sometimes contact EO Technical specialists, with prior :nt approval, to pose a question or two.391 Typically, EO Determinations agents had retion in processing applications and could make recommendations regarding the 'sposition of an application, or whether additional information was required of the applicant. 92 This was not the case for the Tea Party applications.393 With regard to those applicatio s, Hofacre was not permitted by Hull to exercise any discretion regarding the applicatio S394 Hofacre felt that for several of the Tea Party applications, she had suf?cient informati applicatio effectivel In Octobe Hull revie as he at 1e th 337 SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 52?70. 383 389 390 391161. 392 1d. 393 Id. 3941d_ 395 396 in her possession to make a recommendation to either approve or deny the n, or to request additional information.395 However, she was. unable to do so, as Hull controlled all the decisions regarding how the Tea Party applications were handled.396 :2010, Cindy Thomas grew concerned with the ef?cacy of this process under which 'wed each determination letter and informed Holly Paz, then Manager of EO Technical, 1 have a concern with the approach being used to develop the tea party cases we have -re in Cincinnati. Apparently, an additional information letter is prepared for each case id the letter is faxed to Chip Hull for him to review. After he reviews, we send out the tter. In some instances, the organizations have responded and we are just ?sitting? on ese cases. Personally, I don?t know why Chip needs to look at each and every a iditional information letter we need to coordinate these cases as a group and not try to work them one by one. 397 Email chain between Cindy Thomas, Holly Paz, Sharon Camarillo, Steve Bowl ng and others (Oct. 26, 2010 - Jan. 28, 20151) (emphasis added). 96 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecretsorg) U.S. Senate Committee on Finance Bipartisan Investigative Report Sometime in August 2010 and continuing unabated through to October 2010, Hull ceased communicating with Hofacre for reasons unknown to Hofacre.398 She continued to draft development letters and to send them to Hull along with copies of the applications and supporting documents, but Hull never responded to her.399 Without Hull?s concurrence, Hofacre was unable to send any further development letters to applicant organizations.400 When organizati 3115 called Hofacre to inquire about the status of their applications, Steve Bowling, her Group ager instructed her to tell the callers that their applications were ?under review.?401 Hofacre ew increasingly frustrated with this process.402 She likened it to ?working in lost luggage? nd she ?dreaded when the phone rang??3 While she elevated the matter of Hull?s non-respo siveness to Bowling, Bowling merely instructed Hofacre to continue to prepare developm nt letters and to send them to the silent Hull.404 In Octob 2010, Hofacre left E0 Determinations, in large part due to her frustration over a lack of ?auton my? in the processing of the Tea Party applications and because of her concern that ?high-pro?le? applications that could have ?imploded? at any time.405 When Hofacre left E0 terminations, only a few development letters had been sent out on the 40 Tea Party 3 then pending in E0 Determinations.406 A substantial number of the applications either re ained unworked, or had been reviewed by Hofacre and drafi development letters had been pre ared, but not released.407 This was due in large measure to the requirement that Hull review 6 application, development letter, and response, a process that was necessarily laborious and which was delayed, for unexplained reasons, in August 2010 when Hull ceased commun' ating with Hofacre. B. CAUSE OF MISCOMMUNICATIONS BETWEEN E0 DETERMINATIONS MANAGEMENT A STAFF, No TEA PARTY APPLICATIONS WERE PROCESSED BY E0 TERMINATIONS FOR MORE THAN ONE YEAR (OCTOBER 2010 TO NOVEMBER 2011) With Hoi?acre?s departure from E0 Determinations in October 2010, Ronald Bell assumed responsil ility as the Emerging Issues Coordinator in Group 7822.408 Before her departure, Hofacre briefed Bell on his new duties, told him that Chip Hull was the E0 Technical contact for 398 SFC In erview of Elizabeth Hofacre (Sep. 24, 2013) pp. 58-70. 399 Id. 40.0 Id. 401 402 1d. 403 404161]. 405 Id. 406 SFC Interview of Ronald Bell (July 30, 2013) (not transcribed). 407 Id 408 Id. 97 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report the Tea Party applications, and forwarded to Bell some draft development letters that she had 09 prepared.? Upon the assumption of his new duties, Bell was also apprised by Steve Bowling, his Manager, that E0 Technical was preparing guidance for E0 Determinations to use to process the Tea Party applications.410 Bell interpreted this to mean that he should perform no work on the Tea Party applications until receiving that guidance from E0 Technical.411 Thus, in lieu of reviewing Tea Party applications and preparing draft development letters as Hofacre had done, Bell worked on auto-revo :ation cases.412 In November 2010, Hull?s three-month period of inaccessibility appears to have come to an end when he contacted Bell and requested that Bell send him draft development letters for his review/?3 Bell informed Bowling of Hull?s request and Bowling, in turn, informed Sharon Camarillc the Area Manager.414 Bowling told Camarillo that ?Ron is getting phone calls on these case and his typical answer is ?the case is under review.?415 Camarillo sent Bowling?s email to Thomas who advised that she would follow up with Holly Paz for a status report.416 I Thomas called Paz and discussed with her EO Technical?s plan for dealing with the Tea Party applicatic ns.417 Paz told Thomas that E0 Technical was writing a brie?ng paper on the two applicaticns under its review and would soon raise the issues in these applications with Judith Kindell, Senior Technical Advisor to Lois Lerner.??18 After her conversation with Paz, Thomas advised owling and Camarillo as follows: If Judy does not believe they have a basis for denial for the egregious situations, then they will most likely recommend all cases be approved. In the meantime, the specialist(s) need to continue working the applications as they have and will need to advise applicants that the cases are still under review.419 ?09 SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 150-152. ?0 SFC Interview of Ronald Bell (July 30, 2013) (not transcribed). 4" 1d. Bel told the Committee that Bowling did not directly instruct him not to work the Tea Party applications. Rather, Be 1 stated that Bowling knew that Bell was working on the auto?revocation cases, and therefore must have known tha he was mt working on the Tea Party applications. Bell also told the Committee that Bowling prepared Bell?s performance appraisal for this time period, an act that would have necessarily required Bowling to know what work Bell had performed during the performance assessment period. 4?2 Id. Section 60330) of the Internal Revenue Code (2010) requires the automatic revocation of exempt status for any organization that fails to ?le a required return for three consecutive years. 4'3 Email chain between Steve Bowling, Sharon Camarillo and Cindy Thomas (No v. 16-17, 2010) 415 4l6 4?7 Email chain between Cindy Thomas, Sharon Camarillo, Steve Bowling, Holly l?az and others (Oct. 26, 2010 - JanThis docum int was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report Bowling parently failed to communicate to Bell the clear directive of Thomas that the Tea Party app?ations needed to be worked, and/or failed to take any action to ensure that Bell was, in fact, wc rking the applications. As a result, Bell sent no development letters to Hull and continued to work auto-revocation cases.420 In March 2011, Thomas requested of Michael Seto that EO Technical develop an ?action plan? for processing the Tea Party applications.? In reply, Seto provided Thomas with an update on the two ?test cases? being worked by Hull.422 Thomas passed this information to Bowling, stating: We still need to continue to work cases to the extent we can and then wait to issue the approval or denial letter. EOT needs to meet with Judy Kindell, senior technical advisor to E0 Director, and then Lois Lerner before they can ?nalize the guidance for us. I wOuld not expect to receive anything until sometime in May 2011.423 For reasons that are unclear to the Committee staff, Bowling once again failed to follow through with Thorpas?s directive and ensure that Bell understood that he should be working on the Tea Party app ications, or was, in fact, actually working on the applications. Steve Bowling?s failure to communicate Thomas?s directives of November 2010 and March 2011 to e11 regarding the processing of the Tea Party applications, and his neglect to take any measures to ensure that Bell was actually working those applications, resulted in Bell focusing almost exclusive attention on auto-revocation cases from October 2010 to November 2011.424 A factor further contributing to Bell?s disregard of the Tea Party applications was that he received no guidance from E0 Technical on what to do with those applications during his tenure as Emerging; Issues Coordinator. When the screening group sent Bell an application from a Tea Party group during this period of time, he performed secondary scree ing on the application to ensure th at it was, in fact, a Tea Party application.425 If it was, he placed the application in a ?le cabinet and returned to his work on auto-revocation cases.426 Aside from performing the secondary screening function, Bell did not review the Tea Party applications and did not prepare any development letters from October 2010, when he assumed responsibility as Emerging Issues ?20 SFC Interview of Ronald Bell (July 30, 2013) (not transcribed). 42? Email chain between Cindy Thomas, Michael Seto, Holly Paz and others (Mar. 29 - Apr. 13, 2011) 76953-55 (Email attachments containing taxpayer information omitted by SFC staff:erview of Ronald Bell (July 30, 2013) (not transcribed). 4251d_ 426 99 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report Coordinator, until November 2011, when Stephen Seok replaced Bella Emerging Issues Coordinator.427 Instead, the applications simply sat in a ?le cabinet during this period of time.428 According between to develop Cincinnati for over a year. C. PREPARATION AND REVIEW OF E0 CAS 2010, Holly Paz, the then-Acting Manager Of EO Technic :chnical would work two Tea Party applications to completi In Februar that E0 DED SUBSTANTIAL DELAY TO THE PROCESSING OF THE TE lessons let the remair several ye Determine Hull?s as show that Albuquer dated Jan ary 10, 2011, some six months later.431 On that date, Hull I complete a memorandum for the ?le (memo).432 In the two-page me the Albu erque Tea Party should be granted tax-exempt status. Hull six onths to prepare the two page memorandum. On the fo lowing day, January 11, 2011, Hull submitted the memo to Kastenbe g, a Tax Law Specialist in E0 Technical, Group 2.434 Kaste and reco mended that it be sent to Judith Kindell, Senior Technical A her consi campaign ar period directly impeded its ability to develop the guidance to process the Tea Party and other political advocacy a notes for one of the two ?test cases? assigned to him, the A he completed development of the application on July 8, 201 ue Tea Party?s articles of incorporation.430 Hull?s next entr 433 elrationfl35 Kindell regarded herself as the ?go to? person f( intervention by tax-exempt entities.436 427 423 429 Email Cl 43? Technical Case History for Albuquerque Tea Party, 431 1d . 4? Id. 433 Email 4? Technic 435 SFC Int ?36 SFC Int iain between Holly Paz, Cindy Thomas and others (Feb. 25 - Mar. 17, 2 rain between Michael Seto, Cindy Thomas, Holly Paz and others (Mar. .2735-53. a1 Casc History for Albuquerque Tea Party, 1R80000001323-24. erview of Carter Hull (July 23, 2013) (not transcribed). erview of Judith Kindell (July 18, 2013) p. 12. 100 Lrned in doing so, would provide EO Determinations with gt ing Tea Party applications.429 The inability to resolve ly, miscommunications at the ?rst level of management in E0 Determinations owling and Bell, coupled with a failure of E0 Technical to the Tea Party applications, caused those applications to remain unworked in vrovide guidance on how Es? FROM 2010 TO 2012 A PARTY APPLICATIONS 11, advised Cindy Thomas 3n and then, based on the Lidance on how to process the ?test cases? over a a required by EO pplications then pending. Ilbuquerque Tea Party, 0 when he received the in the case history is Ioted that he had mo, Hull concluded that is unclear why it took 118 reviewer, Elizabeth :nberg reviewed the memo Idvisor to Lois Lerner, for 3r issues relating to political )10) Z9 - Apr. 13, 2011) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance In accorda memo to Kindell.?37 Around this time, Hull completed a draft denial Bipa nce with Kastenberg?s recommendation, on March 24, 2011, rtisan Investigative Report Hull forwarded the fthe other ?test case? assigned to him, an application for 501(c)(3) status from a conservative organization called American Hull and initially re letter.439 primarily recommer letter be s: Kindell?s Subsequei Counsel?s Junto.438 Lastenberg met with Kindell on April 6, 2011, nearly three commended consulting with Kindell, to discuss both the me: During the meeting, Kindell raised a question whether Amen Fo'r private bene?t rather than for a tax-exempt purpose.440 ded that the issue of private bene?t be developed and that th ant to the Of?ce of the Chief Counsel so as to secure its View recommendation and sent a development letter to American 1tly, he sent his draft approval memo for the Albuquerque Tr Of?ce on May 25, 2011,443 followed on July 19, 2011 by hi onths after Kastenberg no and the draft denial can Junto was organized Ionsequently, Kindell memo and draft denial 8.441 Hull followed up on Junto on April 27, 2011.442 :a Party to the Chief draft denial letter for American unto.444 (1 several other 11, to discuss the two ?test led that the Of?ce of Chief eeting, Spellman organizations during tters aimed at eliciting this Chief Counsel?s Of?ce in (astenberg next met with Don Spellman, Senior Counsel, an ltiVCS from the Of?ce of the Chief Counsel on August 10, 20 Four months had now lapsed since Kindell ?rst recommenc eview the memo and draft letter. During the course of the ided that EO Technical further develop the activities of both ear 2010.446 Spellman offered to review the development le on, but EO Technical never sought further involvement of th he applications.447 Hull and represent; cases .?445 Counsel recomme election inforrnati either oft Goehausen, a Tax Law en prepared and sent out a letter (the second) for the In Nove ber 2011, Michael Seto transferred the ?test cases? to Hillar Specialis in E0 Technical, Group 1.448 In that same month, Goehaus develop ent letter (the third) for American Junto and a development 437 Technical Case History for Albuquerque Tea Party, 1R30000001323-24. ?38 Email chain between Michael Seto, Cindy Thomas, Holly Paz and others (Mar. Hull had been assigned an application for exemption under 5C Party but had closed the application in May 2010 for ?failure to establish? when the respond to a development letter. On June 30, 2010, Hull was assigned the applicati submitted by American Junto as a replacement ?test case.? 439 Technical Case History for Albuquerque Tea Party, 1R80000001323-24. 44? Email chain between Judith Kindell, Lois Lerner, Holly Paz and others (Apr. 7, Id. 442 Email hain between Hillary Goehausen, Michael Seto, Carter Hull and others 61. 443 Techni 4? Sensiti ?Apr. 13,2011) from the Prescott Tea Prescott Tea Party did not on for exemption under 501(c)(3) 201 1) Feb. 28, 2012) :al Case History for Albuquerque Tea Party, re Case Report (Oct. 19, 2011) te'rview of Carter Hull (July 23, 2013) (not transcribed). terview of Donald Spellman (July 10, 2013) pp. 23-36. terview of Carter Hull (July 23, 2013) (not transcribed). 101 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Albuquerque Tea Party.449 In December 2011, a representative of Am Goehausen that it would not respond to the third IRS development lettc 311 had been Goehausen closed the American organizati ?failure to establish,? thus leaving only one remaining ?test case,? the Goehausen received the Albuquerque Tea Party?s response to the deve 2012, and chmmenced drafting a letter denying that group tax exempt' letter reversed the conclusion that Hull had previously reached in his which he In April 0 :oncluded that the application should be approved. f2012, Nancy Marks visited Cincinnati at the direction of Bipa rtisan Investigative Report erican Junto informed :r and that the unto application for Albuquerque Tea Party. lopment letter in January n.452 Goehausen?s draft anuary 2011 memo in 45] eve Miller, then Deputy Commissioner for Services and Enforcement, because of Miller?s con ems over how E0 Determinz Ltions was processing political advocacy applications.453 A ong other things, Marks found that there were between 250-300 political advocacy application awaiting determination, so she rec Determinations by reviewing each political advocacy application thro exercise.454 The object of this endeavor would be to separate applicat decided f1 om those that either required varying degrees of developmei denials, and to place them in respective ?buckets? where they could be Miller concurred in the recommendation and the ?bucketing? exercise and extended into early June 2012.456 The deci on to assist E0 Determinations by ?bucketing? the applicat] effectivel cases.? 11 longer rel cases? ha developrr resulted i reach dec Moreove Chief Co intervals 1 May of 2012, when the IRS decided to pursue the ?bucket' on the ?test cases? for the development of guidance, two 0 been closed for ?failure to establish? and the third was still Lent/drafting stage. The two year period during which the ?t the development of little or no guidance that could be used isions on the growing backlog of Tea Party and other politic r, imuch of the two year period that EO Technical, Judith Kir unsel Spent focusing on the ?test cases? was marked with of inactivity, and a lack of any sense of urgency. 449 Email 61454 455 1d. 45? Email SFC Inten hain between Hilary Goehausen, Michael Seto, Carter Hull and others (I erview of Steve Miller (Dec. 12, 2013) pp.128-l45. hain between Cindy Thomas, Bonnie Esrig, Peggy Combs and others (1V view ofHolly Paz (July 26, 2013) pp. 153-162. 102 . oinmended to Miller that EO Technical staff provide direct ssistance to E0 gh a ?bucketing? ons that could be quickly it or that were likely worked to completion.455 began in mid-May 2012 ons in this fashion superseded the plan to develop guidance for E0 Determinations by working the ?test g? exercise and to no ut of three of the ?test in the est cases? had been worked by E0 Determinations to al advocacy applications. idell and the Of?ce of the )tracted delays, unexplained eb. 28, 2012) lay 8?9, 2012) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report Inability to resolve the ?test cases? and to develop the guidance that BO Determinations had ?rst asked for in February 2010 contributed substantially to the delays experienced by the Tea Party and other advocacy organizations in securing decisions on their applications for tax exemption. D. THE INITIATIVE To DEVELOP A GUIDESHEET FOR E0 DETERMINATIONS WAS A FAILURE THAT FURTHER CONTRIBUTED To PROCESSING DELAYS IN 2011 AND 2012 On July 5, 2011, Lois Lerner convened a meeting with Holly Paz, Nan 3y Marks, Cindy Thomas, and staff "om EO Guidance and E0 Technical, including Justin Lowe and Hillary Goehausen.457 The purpose of the meeting was to discuss the Tea Party applications then pending in E0 Determinations, which at that time, numbered in excess of 100, and to decide how to best process th ose applications.453 After being brought up to date on the Tea Party screening criteria and the ef :?orts of EO Technical to assist EO Determinations, Lerner made three decisions regarding the processing of these applications. First, Lerner directed that the groups no longer be referred tc as Tea Party organizations, but rather be called ?advocacy organizations.?459 Second, Lerner determined that EO Technical should proceed to secure review of the two test cases by the Of?ce of the Chief Counsel.460 Third, Lerner approved the suggestion contained in the brie?ng paper prepared by staff for the meeting that a ?guidesheet? be prepared by EC Technical for use by ED Determinations.461 As Paz explained to the Committee [t]ihe idea iS that the guide sheet would help the Determination; Unit in developing the cases and then also analyzing what they got in response to the development letter, in guring out, for example, whether certain pieces of information indicated campaign intervention or did not indicate campaign intervention.462 5-: Later in July 2011, Michael Seto directed Hillary Goehausen to draft the guidesheet and Justin Lowe, a Tax Law Specialist in E0 Guidance, to review Goehausen?s draft.463 Goehausen had commenced her career at the IRS in April 2011.464 She prepared a dr aft that was reviewed by Lowe and sent it out to Judith Kindell, Chip Hull, David Fish, Elizabeth Kastenberg and others for comment on September 21, 2011.465 Only Hull provided comments to Goehausen, so Goehausen sent a revised version to the same recipients on November 3, 2011, again 457 SFC Interview of Holly Paz (July 26, 2013) pp. 86-96. 458 Id.; Em ill from Justin Lowe to Holly Paz (June 27, 2011) ?59 SFC Interview of Holly Paz (July 26, 2013) pp. 86?96. 460 45? Id. The suggestion contained in the brie?ng paper used for the meeting stated that composes a list of issues or political/lobbying indicators to look for when investigating potential political intervention and excessive lobbying, such as reviewing website content, getting copies of educational and fundraising materials, and close scrutiny oi?expenditures." Email from Justin Lowe to Holly Paz (June 27, 2011) 462 SFC In erview of Holly Paz (July 26, 2013) p. 96. 453 Email hain betWCen Michael Seto, Hillary Goehausen and others (July 23-24, 201 1) 45? SFC Interview of Hilary Goehausen (July 11, 2013) (not transcribed). ?65 Email Torn Hilary Goehausen to Judith Kindell and others (Sep. 21, 2011) 1RSO000636285-97. 103 I This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report move from Lerner?s a draft for comment in requesting comments.466 Regarding the four months that it required to decision in early July 2011 to prepare a guidesheet to the circulation of early Nove mber 2011, Paz told the Committee the following: Q. Did you feel that the 4 months to get to this stage was a suitable or an appropriate period of time to deve10p a document like this? A. I thought it could have been done faster.467 468 On Noveiinber 6, 2011, David Fish, then-Acting Director of Rulings a1 with regard to the guidesheet that ?the document won?t work in its pre: to work with Determinations] to make it a usable document.?469 I guidesheet was ?too lawyerly? to be of assistance to the agents in BO 1 stated to the Committee as follows: 1d Agreements, sent form. I think we need Iish apparently felt that the Determinations.470 Paz opined Q. Okay. So November 6th Mr. Fish, who is the Acting Director of Rulings and Agreements, concludes that the guidesheet won?t work in its present form. So now that means that all the effort that has been expende since what, July 5, or since whenever Ms. Goehausen began working on that to November 6, which is a period of about four months, is pretty much gone. Rigliit? That effort hasn?t resulted in anything useful at this point. A That?s correct.? Subsequently, on February 24, 2012, Paz transmitted a copy of the November 2011 iteration of the guide sheet to Don Spellman, Senior Counsel in the Of?ce of the Chief Counsel, for his review.472 Because Paz sent Spellman a version of the guidesheet from November 2011, it appears tl 1at further work by EO Technical on the guidesheet was esse :ntially suspended in r2011, possibly because of the determination made by David Fish that the guidesheet the helpful to E0 Determinations agents. Spellman reviewed the guidesheet shortly iving it from Paz and sent an email to Janine Cook letting her know that: Novembe would no after rece 456 Email 3v. 3, 2011Manager (1 469 Email 47? SFC In 47? 1d. p. 472 Email i hain between Hillary Goehausen, Judith Kindell and others (Sep. 21 - erview ofHolly Paz (July 26, 2013) p. 125. 3. Paz was on maternity leave from October 24, 2011 to February 6, 201 EO Guidance, served as Acting Director of Rulings and Agreements. hain between David Fish, Michael Seto, Cindy Thomas and others (Oct. 20827-41; SFC Interview of Holly Paz (July 26, 2013) pp. 133-134. terview of Holly Paz (July 26,2013) p. 133. 34. .hain between Holly Paz, Don Spellman and others (Nov. 21, 2011 - Feb 104 2. During that time, David Fish, 24 - Nov. 6,2011) . 24, 2012) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance Bipartisan Investigative Report [i]t?s nowhere near ready for prime time. It?s a good start, but needs corrections, additions, changes all over. The law in particular needs ?xing. The development questions are good, but not complete. On that sa let Lerner provide th guidesheet to Congressional staff and to post it on the IRS website. ne day, Lerner emailed Spellman and his supervisor Janine Cook and asked that they ow their concerns with the guidesheet as soon as possible, as Lerner intended to 474 Spellman rovided comments to Lerner on the guidesheet during the vs eek of March 5, 2012.475 However, Lerner did not feel that the revisions made by Spellman would be help?ll to E0 Deterrnin tions agents working the applications and requested further :hanges in the format.476 Spellman rovided yet another version of the guidesheet to Lerner on April 25, 2012.477 On April 27, 012, Nikole Flax, the Assistant Deputy Commissioner for Services and Enforcement, sent the Health ril 25, 2012 version of the guidesheet prepared by Counsel to Cathy Livingston, Counsel in the Of?ce of Chief Counsel, and asked Livingston to provide a ?gut reaction."478 Livingston reviewed the guidesheet and concluded as follows: I am concerned about this document that Counsel has sent forward, both for its practical Paz expressed the following to the Committee: A. Yes. correct? 473 ut lity in Cincinnati and also for what it doesn?t make clear and what it may be perceived 'as implying about existing guidance . The product re?ects, to me, the best efforts of a te 1m that has not had the requisite experience working with the cases and issues.47 9 Okay. But I guess my point is, though, that this effort that had been undertaken to prepare a guidesheet had commenced sometime after July and here we are now April of the following year and we are still talking about a draft document where people are commenting on. Is that correct? Q. And in all that intervening period of time the guideshe et hasn?t been able to be used by anyone in EOD in kind of the way it was inter ded to be used. Is that 47? Email chain between Lois Lerner, Don Spellman, Janine Cook and others (Feb. 24 - March 1, 2012) 94977-80. 475 Email chain between Don Spellman, Lois Lerner and others (Mar. 5, 2012) IRS 0000057789-90. 475 Email chain between Janine Cook, Lois Lerner, Victoria Judson and others (Mar. 19-21, 2012) IR30000056992- 7043. 477 Email from Don Spellman to Lois Lerner and others (Apr. 25, 2012) IR80000512392-446. ?3 Email chain between Nikole Flax, Cathy Livingston and others (Apr. 26 - May 1, 2012) 18-21. 479 105 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance Bipartisan Investigative Report A. That?s correct.480 In May 2012, Steve Miller approved a recommendation to send a team of employees from E0 in Washingtc 11 DC. to Cincinnati to provide a training workshop to the E0 Determinations agents on how to process applications involving potential political advocacy issues.481 The training took place on May 14-15, 2012.482 Paz told the Committee that the workshop was an alternative to the guidesheet. We were never able to get Counsel to sign off on the guidesheet and give a ?nal blessing to it. So we, at that point, had ab andoned the guidesheet.483 Nearly 10 months after Lerner had ?rst decided to develop a guidesheet, and after substantial investment of time and labor by staff from E0 Technical, E0 Guidance and the Office of the Chief Counsel, the abandoned further efforts to complete the guidesheet. Together with the ?test case..,? the guidesheet was intended to serve as part of the guidance that E0 Technical was responsib eE for providing to E0 Determinations to assist it in processing the Tea Party and other political advocacy applications. As with the ?test cases,? E0 Technic 11 was never able to deliver to E0 Determinations a useful product. EO Technical?s inability to produce a set of written instructio is in the form of a guidesheet for processing political advocacy applications after nearly 10 months of effort further delayed EO Determinations processing of Tea Party and other political a dvocacy applications. It cannot be disputed that the initiative to develop the guidesheet was an urmitigated failure. Miller best summed it up as follows: Was [the guidesheet] the tool that EOD really needed to get the cases moving along? A. Clearly it wasn?t, because it didn?t work.484 E. THE INITIAL OF TEA PARTY AND OTHER POLITICAL ADVOCACY CASES IN 2011 REPRESENTED YET ANOTHER UNSUCCESSFUL ATTEMPT BY E0 TECHNICAL To ASSIST E0 DETERMINATIONS In September 2011, Holly Paz and Sharon Light, Senior Technical Ailvisor to Lois Lerner, visited ED Determinations in Cincinnati.485 During this visit, Paz and Light met with Cindy Thomas and during the course of a discussion on the advocacy applications, Thomas showed an advocacy application to Light. 486 In one Sitting, Light reviewed the application and did internet 43? SFC In erview of Holly Paz (July 26, 2013) p. 153. 4? SFC In erview of Steve Miller (Dec. 12, 2013) pp. 121-122. ?32 Email chain between Cindy Thomas, Bonnie Esrig and others (May 8-9, 2012) 1R80000596252. 483 SFC Interview of Holly Paz (July 26, 2013) p. 163. 484 SFC In tei'view of Steve Miller (Dec. 12, 2013) p. 122. 435 SFC Interview of Cindy Thomas (July 25, 2013) pp. 143-148. 486 Id. 106 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report research 0 the organization and concluded that the application should be approved.487 Thomas then sugge sted to Paz and Light that perhaps other political advocacy applications could also be quickly approved, if EO Technical staff knowledgeable about political advocacy issues could review the se applications.488 Thomas suggested providing EO Techni :al with a list of all the political a ivocacy applications then pending in E0 Determinations so that Tax Law Specialists in E0 Technical could ?triage? the applications.439 The ?triage? would consist of reviewing the applications in TEDS, the electronic data base that served as a repository for those records, and identifying applications that could be approved as well as those that could not.490 Paz stated to the Committee as follows: Q. What was the overall goal of the triage? A. It was to ?nd some cases that could be approved based on the information that we had so that we could close some of the cases, the taxpayers wouldn?t have to wait any longer.491 Paz agreei with Thomas? suggestion to perform a ?triage? on the pending applications and indicated that Hillary Goehausen and Justin Lowe would perform triage responsibilities/w2 Shortly thereafter, on September 15, 2011, Thomas sent to Paz a list of all advocacy applications then pending in E0 Determinations together with their EINs and other information.493 Goehausenand Lowe commenced reviewing PDF copies of the applications in TEDS and on October 24, 2011, a spreadsheet containing the results of their review of 162 Tea Party and other political advocacy applications was sent to Thomas.?4 Goehausen and Lowe made notations on the Spreadsheet for each application, such as ?general advocacy,? ?lobbying,? ?website has substantial in?ammatory rhetoric,? ?political campaign activity,? etc.495 On October 25, 2011, Thomas wrote to Michael Seto regarding these notations and stated the following: [n]ot sure where this leaves us and I?m unclear as to what action is being suggested for some of these cases. Speci?cally, if the comment indicates ?general advocacy,? what does that mean additional development or what? 496 487 488 439 49? Email chain between Cindy Thomas, Holly Paz and others (Sep. 15 - Nov. 15, 2011) IRM 7.15.6 (Jme 12, 2013). 49' SFC Interview ofHolly Paz (July 26, 2013) p. 131. 492 SFC Intenview of Cindy Thomas (July 25, 2013) pp. 145-146. 493 Email chain between Cindy Thomas, Holly Paz and others (Sep. 15 Nov. 15, 2011) 494 495 496 Id 107 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance Bipartisan Investigative Report Goehausen attempted to explain the notations to Thomas on October 26, 2011.497 Thomas wrote to Seto on October 30, 2011, again expressing confusion over the notations and stating her expectatio '1 that the ?triage? would speci?cally identify applications that could be approved, or that required more development, or that should be denied.498 Seto followed up with Thomas on November 6, 2011, promising that Goehausen would revise the spread sheet to comply with Thomas?s expectation.499 Thomas explained her concerns with Goeha usen?s notations as follows: when I reviewed some of the comments, I didn?t ?nd it very helpful, because what I was looking to get is just tell us whether this case can be approved or not, similar to what Sharon Light did when she reviewed that one case. But there were comments on the Sp 'eadsheet and I didn?t know whether that meant approve the case, don?t approve the case, or what. So I sent it back to Mike and this process happened, I believe, three times that the spreadsheet was sent back and that the review took place like about three times.500 On November 22, 2011, Seto sent Thomas a revised spreadsheet and informed Thomas that of the 162 a plications Goehausen reviewed, 12 might qualify for exemption, 15 were possible denials, a that the remainder (135) required further development.501 Goehausen?s recomme dations were based only on a review of the organizations? plications, and not on any supporti documentation that the organizations may have submitted fter ?ling their applicatic n's.502 Since Goehausen?s review was limited to examining applications, her recommendations were offered with the caveat that EO Determinations needed to perform further development before approving or denying any applications.503 In view of the tentative nature of Goehausen?s recommendations, Thomas was unable to direct her staff .0 approve or deny any application.504 She explained her actions to the Committee as follows: . I just wanted them to tell us this case is okay to approve or not approve . I didn?t give this [spreadsheet] to anybody that worked for me becaus I wanted it perfected in .C. so that I could?take this spreadsheet and give it out and say here, follow this 497 Id 498 Id 499 Id. 50? SFC Interview of Cindy Thomas (July 25, 2013) p. 146. 50' Email :hain between Michael Seto, Cindy Thomas and others (Nov. 22 - Dec. L2, 2011) 502 SFC Interview ofI-Iolly Paz (July 26, 2013) p. 135. 503 [d 50? SFC Ir terview of Cindy Thomas (July 25, 2013) p. 147. 108 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena1 Committee on Finance direction. But I didn?t do that because it was unclear to me. It was being recommended by the Washington of?ce.505 The effort eXpended in performing the ?triage? of Tea Party and politi< from September 15, 2011 to November 22, 2011, failed to achieve its 1 Bipartisan Investigative Report was unclear to me what :al advocacy applications goal of providing EO Determinations with the information and direction necessary for it to approve or deny any of the pending a oplications. Paz summarized the utility of the triage effort as a whole in the follow mg terms: Q. Was EOD able to take the results of that triage effort and actually implement them? A. From what I understand, they did not . 3k 31? Okay. So would it be fair to say that the entire triage effort, the triage effort, at least this ?rst triage effort in 2011 then resulted in nothing useful? A That?s correct.506 F. THE ADVOCACY TEAM FAILED To APPROVE OR DENY ANY A FROM TEA PARTY OR OTHER POLITICAL ADVOCACY FORMATION IN DECEMBER 2011 To JUNE 2012 put 2010 and 2011, Cindy Thomas had repeatedly asked E0 3 the Tea Party applications that she had ?rst been promised Thomas did not receive the promised guidance in 2010 or 21 ided Thomas with a copy of the draft guidesheet, but Thom; ations agents may not find it useful.508 Thomas, now armed :ntative results produced by the ?triage? of applications per? an and Justin Lowe, decided to try to move the political advc gly, on Steve Bowling?s recommendation, Thomas replaced Throughc to proces 2010.507 Seto prox Determin and the te Goehaus Accordin SOS I 506 SEC In 507 Email chain betw between between between Cindy informatic Dec. 12, 2 SFC In 509 Id. pp. erView of Holly Paz (July 26, 2013) p. 135. hain between Holly Paz, Cindy Thomas and others (Feb. 25 - Mar. 17, 2 een Cindy Thomas, Holly Paz and others (Oct. 26, 2010 - Jan. 28, 2011: indy Thomas, Holly Paz and others (Oct. 26, 2010 - Mar. 2, 201 l) IRSO indy Thomas, Michael Seto and others (Mar. 29 - Apr. 13, 2011) IRSOO indy Thomas, Holly Paz and others (Sep. 15 - Nov. 15, 2011) mas, Lois Lerner and others (Nov. 3, 2011) (Email ,omitted by Committee staff); Email chain between Michael Seto, Cinc 011) terview of Cindy Thomas (July 25, 2013) p. 147. 147-48. 109 .PPLICATIONS RECEIVED IIZATIONS FROM ITS Technical for the guidance by Holly Paz in February )11. In late 2011, Michael 18 was told that BC with the draft guidesheet armed by Hillary cacy applications.509 Ronald Bell as coordinator 010) Email IRS 000043 523 8-39; Email chain )00620724-26; Email chain )0576953-55; Email chain 57399-426; Email chain between attachment containing taxpayer ly Thomas and others (Nov. 22 - This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senat for the pol 7822.510 Party and 1 each of the agents in To assist i results of 1 and shortl? 2011.515 I it'been apl discussed process th At the tim awaiting Bowling a Througho assigned developm developm Committee on Finance itical advocacy applications with Stephen Seok, an E0 Detei Ioncurrent with that change, Thomas formed the ?Advocacy Jolitical advocacy applications.511 The team consisted of 12 Groups within EO Determinations.512 These agents were a ach Group. a processing the applications, Seok was provided a copy of he ?triage.?513 He provided the team members with a copy 1 thereafter convened the ?rst meeting of the Advocacy Tear it this point, the Of?ce of the Chief Counsel had not review 3 political advocacy applications through the use of ?templat e?cision.517 While Seok served as Coordinator for the team, nd provided Bowling with periodic updates on the team?s at at the remainder of December 2011 and into the ?rst half of volitical advocacy applications to the team members and rev1 ent letters.? In his report to Bowling dated February 13, 2C ent letters had been sent out for most of the applications that t'for a few applications, no responses had yet been received Bipaiitisan Investigative Report minations agent in Group Team? to process the Tea GS-13 agents, one from mong the highest graded he guidesheet and the 3f the draft guidesheet514 on December 16, ed the guidesheet nor had Jroved for use by management. During the December 16, 2011 meeting, the members the history of the advocacy applications, the purpose of the team, and how they would e? development letters. 5 1 5 of the meeting, Seok identi?ed approximately 172 political advocacy applications he reported to Steve tivities.5 ?8 January 2012, Seok ewed their draft 112, Seok indicated that had been assigned and 520 On February 15, 2012, that excep Seok circr document template I donors an 5 copies of several draft it questionsm Among the eeking: the identity of hers; copies of every 112lth to the Advocacy Team members as well as to Bowling s, including a document that contained template developmer questions, which numbered in excess of 80, were questions the amounts and dates of donations; the identity of volunte webpage including social networking sites and blog sites; detailed descriptions of all events sponsored by the organizations; and copies of all handouts distributed by the organizations.522 510 Id. 5? Email chain between Michael Seto, Cindy Thomas and others (Nov. 22 - Dec. 12!, 2011) 5? Ids, Ema i1 chain between Cindy Thomas, Nancy Marks and others (Apr. 17-23, 2.012) 5?3 SFC Int :rview of Cindy Thomas (July 25, 2013) pp. 147-48. 5'4 Email from Stephen Seok to Ronald Bell and others (Dec. 12, 2011) 5'5 Email 0 rain between Cindy Thomas, Nancy Marks and others (Apr. 17-23, 2012) 1. 5 6 5'7 1d. Text discussing the 172 pending cases notes ?37 c3 125 04;? ?[m]ostly advocacy with strong or some political activities, at least implied;" ?[a]bout 155 cases reviewed by 130 Tech: Favarable 13, Denial 13, All others: Development Needed;? ?30 Something EA party, Several 912, Repeal PPACT (Patient Protection and Affordable Care Act), Enact Universal Single ?Payer Health Case [sic] System, etc." ?8 Email chain between Stephen Seok, Steve Bowling, Holly Paz and others (Jan. 8 - Aug. 7, 2012) 4203 -08. 519 Id 520 1d. 52' Email f'om Stephen Seok to Steve Bowling and the Advocacy Team (Feb. 15, 2012) 522 110 This documint was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report Seok used the draft guidesheet that had been provided to him to prepare the template questions. 523 In addition, Seok and other Advocacy Team members apparently used earlier iterations of the draft template questions to prepare some of the development letters sent to Tea Party organizations in January and early February 2012. Beginning about the middle of February 2012, the IRS began to receive Congressional inquiries about the processing of applications for tax exemption ?led by Tea Paity organizations?? The inquiries were prompted by complaints from Tea Party groups seeking tax-exempt status that had recently received development letters from the IRS containing questions that appeared to be burdensome, inappropriate, and sometimes intrusive.525 Many of the development letters requested information such as the names of all donors, donation amounts and dates of donations; the identi 'es of all volunteers; and whether board members and of?cers would run for political office.526 The application for tax-exempt status (IRS Form 1023) does not require the provision of donor- entifying information. However, if an organization seeking tax-exempt status under section 5 1(0) provided information to the IRS regarding its donors du ring the application process rsuant to a follow-up request by an agent for donor?identifying information in connectio with an application, then that information could be disclosed if the organization?s applicati were subsequently approved. In contrast, 501(c) ?lers are required to disclose annually names and addresses of anyone who contributed $5,000 I more as part of the Form 990 Sche ule B, but Schedule B. is not required to be made public, except in the case of private foundati 5. Therefore, IRS agents requesting an organization?s donor information during the applicatic n, process subjected that donor information to a different standard of disclosure than otherwise applicable to 501(c) organizations. In addition to Congressional inquiries, news articles began to appear in February 2012 reporting that Tea Party organizations that were awaiting determinations from the IRS on their requests for tax-exempt status had recently received burdensome development letters.527 These development letters, which in some cases contained over 80 separate questions, also allowed only 14 days for reply. Moreover, many of the letters received by the applicant organizations contained duplicate requests. 523 In response to both mounting Congressional inquiries and media stories about intrusive development questions that had been received by Tea Party organizations, Steve Miller, then 523 SFC Interview of Steve Miller (Dec. 12, 2013) p. 113. The close relationship between the draft guidesheet and - the template questions clearly suggests that the former was used to prepare the latte r. 524 SFC In erview of Holly Paz (July 26, 2013) pp. 141?142; Letter from Senator Orrin G. Hatch to IRS Commissi )n'er Shulman (Mar. 14, 2012) . 525 Email chain between David Fish, Keith Frank, Andy Megosh and others (Feb. 17-21, 2012) 525 Email om Michele Eldridge to Steve Miller and others (Mar. 1, 2012) 3341681-83. - 517 Email chain between Faris Fink, Steve Miller, Shane Ferguson and others (Feb. 29, 2012) 1R30000341677-80. '523 Email chain between Lois Lerner, Holly Paz, Cindy Thomas and others (Feb. 24 - Mar. 1, 2012) 94977-80. 111 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report Deputy Commissioner for Services and Enforcement, took several remedial actions.529 Regarding donor information, Miller directed that the IRS inform recipients of the development letters that they need not provide the donor information.530 For organizations that had already provided that information, Miller was apprised by the Of?ce of the Chief Counsel that the donor informatic 11 could be destroyed since it had not been used.531 Accordingly, in most cases, the donor infc rmation was destroyed.532 Organizations were also allowed more time to respond to the development letters and were permitted to submit sample web pages, in lieu of screen shots of every page.533 Moreover, Cindy Thomas disciplined Seok as the ijority of instances where donor infc rmation had been requested were applications that Seok had worked.534 In addition, Seok was eventually replaced as Coordinator for political advocacy applications.535 However, in January 2 )13, Thomas promoted Seok to the Group Manager position 536 The most signi?cant consequence for the processing of political advocacy applications resulting from the issuance of the inappropriate, burdensome and sometimes intrusive development letters occurred on February 29, 2012. On that date, Lois Lerner instructed Paz to ensure that EO Determin itions sent no further development letters until the letters were adjusted.537 Paz so advised Thomas, and Thomas in turn directed Bowling to cease assigning any more political advocacy applications ?until we have the template questions from DC ?533 On February 29, 2012, the Advocacy Team effectively ceased processing Tea Party and political advocacy applicaticns, an activity that it would not resume again until mid-May 2012, when the IRS next attemptec to process the Tea Party and other political advocacy applications through the ?bucketin g? initiative described below. While the: idea to form the Advocacy Team to ?nally work the Tea Party and other political advocacy applications appears to have been well-intentioned, the team was ill?equipped to carry out that tisk. The guidesheet relied on by the team was a draft only, and as explained in greater detail within this report, the IRS was never able to resolve its shortcomings. Additionally, the results of the ?triage? performed in 2011 which the Advocacy Team also used as guidance were of dubious value, since the conclusions reached in that exercise were premised on a review of only partial records. Lastly, and perhaps most signi?cantly, the Advc cacy Team appears to have suffered from a lack of effective leadership. While Seok?s errors may be explained somewhat by 52" SFC Interview of Steve Miller (Dec. 12, 2013) pp. 123-129. 530 53? M. Miller explained during his interview that if donor information had been ret tined by the IRS and the organization?s application was subsequently approved, the donor information would then become public. 5'32 1d. Ho Never, in at least one instance, donor information was not destroyed. See Email from Sharon Light to Lois Lerner (Apr. 19, 2013) 533 SFC Interview of Steve Miller (Dec. 12, 2013) pp. 123-129. 53? SFC Interview of Cindy Thomas (July 26, 2013) pp. 134-39. 535 1d. 536 537 Email chain between Lois Lerner, Holly Paz, Cindy Thomas and others (Feb. 2 9, 2012) 538 112 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senat Committee on Finance Bip isan Investigative Report his apparent lack of managerial experience, Bowling was aware of the emplate questions, but failed to re manage th sometimes already heightened by years of delay in the resolution of their applicat' ns. cognize the predictable consequences of their use. In sum, intrusive questions to be asked of a group of organizations owling failed to properly 3 activities of the Advocacy Team, allowing burdensome, 0 en irrelevant and hose sensitivities were 539 G. TH MULTI-STEP REVIEW PROCEDURE ESTABLISHED BY E0 TECHNICAL IN 2012 FOR PO LITICAL ADVOCACY APPLICATIONS REFLECTED A LACK CONCERN BY IRS MANAGEMENT FOR THE NEED TO PROCESS THE APPLICATIO EXPEDITIOUSLY In March Determine 501(c)(4) applicatio 2012, Cindy Thomas informed Michael Seto, EO Technical tions was ready to send to E0 Technical the ?rst applicatio anager, that ED for exemption under that it thought should be approved.540 In apparent anticipati of reviewing the ?rst and recommendation, and presumably the others that wou follow, Michael Seto announced a multi-step process for providing technical assistance to E0 Determinations on advocacy 1. applications.541 The process involved the following steps: Hilary Goehausen, E0 Technical, analyzes the application recommendation; for his review; When Goehausen and Lowe complete their review and rec Michael Seto for his review; Seto then schedules a meeting with Cindy Thomas and Do Quality Assurance, to update them on E0 Technical?s anal its comment/concurrence; When the Of?ce of Chief Counsel completes its review, with Lois Lerner, Holly Paz and David Fish to discuss the The analysis/recommendation is released to E0 Determin: 539 These affected th recommen 2012. As that exceec (attachmer Bowling a elevated Brie?ng fc 540 Email 21. Email a a gregious de?ciencies in Bowling?s management of the advocacy team iation for an award for the period which encompassed the events descril: led 2% of his annual salary. Email from Brent Brown to Lois Lerner ant containing sensitive personnel information omitted by Committee stafi stellar cash performance award in 2012, but upon Cindy Thomas?s reass In to the position of EO Determinations Manager along with I on Wadde Ir SFC Staff (July 7, 2015). hain between Cindy Thomas, Michael Seto, Steve Bowling and others (l hain between Justin Lowe, Michael Seto, Steve Grodnitzky and others 949 82?84; Email from Michael Seto to Steve Grodnitzky and others (Ma assessment of his performance. In fact, the IRS performance re?. result, Bowling received a bonus that was among the highest for TEGE 113 Goehausen submits her analysis and recommendation to It and forms a tstin Lowe, E0 Guidance ommendation, it is sent to nna Abner, Director EO .ysis and recommendation; The analysis and recommendation are then sent to the Of?ce of the Chief Counsel for eto schedules a meeting recommendation; Itions. not appear to have adversely iew board gave him the highest ed above in late 2011 and early front?line managers, an amount :1 Dawn Marx (Nov. 29, 2012) Not only did the IRS give i gnment in August 2013, it also 11 and Donna Abner. IRS Mar. 6, 2012) Ian. 31 - Mar. 5,2012) r. 9, 2012) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senat: Committee on Finance Bipaitisan Investigative Report It is uncleai; assistance rom EO Determinations were actually subjected to the mult this ?process.?542 What is clear, however, is that any reque eterminations that was processed in this fashion would take igh all the steps. Steve Grodnitzky stated to the Committee who the originator of this process was, and how many requests for technical ple handoffs that st for technical assistance considerable time to as follows: characteriz from E0 move Q. and looking at this process and the seven steps, do you think it would have an effect on your the processing speed or the time it won (1 take to move cases through your - your Group 1? Well, the more individuals that look at a particular case, theoretically the longer it would take to resolve. Okay. In looking at this process, do you think that this slow down the movement of cases through your group? would expedite or perhaps Having more people that are involved in the process we uld result in a case taking longer to resolve. So this process would slow things down, right? Q. A. (1.543 Yes, it coul Of?ce of Chief Counsel to lowing: ed about the length of time that it generally required for the a request for advice, Grodnitzky told the Committee the fol When ask respond t< ies on what their well, let speak for my experience It could be 3 months, 6 months, a year. It depends. it vai 3 step back. I don?t want to speak for counsel, but I can only in 8) This proc groups fruitless applicatic that man. unconcer seeking the proce that any months. application subject to the seven steps would languish witho working with counsel, and it would it?s varying of .perience, counsel has taken can take a great deal of times? ess was instituted at a time when some of the applications re ere already two and a half years old. It was also instituted a1 :ffort by EO Technical in working ?test cases,? developing )ns. Implementation of the multi-step review process at this 1gement within E0, whether at the E0 Technical level or big ned about the already long delays endured by many Tea Part 0 engage in some level of political advocacy. Rather than lo ssing of these long delayed applications, EO devised a pro 542 SFC In 543 544 terview of Steve Grodnitzky (Sep. 25, 2013) pp. 137-146. 114 time, but in my 14 ceived from the Tea Party ter better than two years of uidesheets, and triaging juncture clearly evidences gher, was seemingly and other applicants oking for ways to expedite resolution for many more 1:55 that virtually guaranteed This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipairtisan Investigative Report H. THE MAY 2012 INITIATIVE RESULTED IN E0 DETERMINATIONS ISSUING THE FIRST APPROVALS 0F TEA PARTY AND OTHER POLITICAL ADVOCACY APPLICATIONS AFTER NEARLY Two AND A HALF YEARS In March 2012, Steve Miller, then Deputy Commissioner for Services and Enforcement, grew increasingly concerned about the processing of Tea Party and other po iticai advocacy applications.S45 His concern was prompted by stories in the media and Congressional inquiries regarding the apparent issuance of intrusive and burdensome development letters by E0 Determinations to Tea Party groups.546 Miller sent Nancy Marks, Spe :ial Assistant to the Cc mmissioner, to Cincinnati to determine how EO Determinations was processing the Tea Party and other political advocacy applications.547 In late April, Marks and several others arrived in Cincinnati and interviewed employees involved in the processing of political advocacy applications.548 Marks also examined applications for exemption ?led by political advocacy organizat' indicated from a fai guidance. ns.549 She reported back to Miller on May 3, 2012 and among other revelations, at the use of unnecessary and sometimes intrusive development questions resulted Lire by E0 Technical to provide EO Determinations with adequate training and 50 Marks also told Miller that there were approximately 250-300 applications pending decision that involved possible political advocacy.551 Marks recommended, and Miller agreed, that EO Technical and E0 Determinations personnel would review all of the political advocacy applications through a ?bucketing? exercise that would allow applicat ons to be quickly approved if they met the requirements for exemption. 552 In May 2 312, Cindy Thomas advised members of her staff that certain EO Determinations personnel, as well as ?a few additional folks from would place the advocacy applications in one of the following four buckets: 1. Favorable (no further substantive development needed). 2. ivorable (limited development with approximately two or three questions to ask the applicant). 3. Signi?cant development. 4. Probable denial.553 545 SFC In erview of Steve Miller (Dec. 12, 2013) pp. 129-145. 546 547 548 Email chain between Holly Paz, Cindy Thomas, Donna Abner and others (Apr. 549 55? SFC Interview of Steve Miller (Dec. 12, 2013) pp. 129-145. 55l 552 553 Email chain between Cindy Thomas, Bonnie Esrig and others (May 8-9, 2012) 115 20-23, 2012) IRS0000003152-55. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senat Thomas closed qu' The bucke specialists Committee on Finance Bipa kly and then move to Bucket 2_n554 ting was preceded by several days of classroom training for . Holly Paz described the approach used to train the special} as se th WI The buck Two employees, one from E0 Determinations and the other from E0 applicatic recomme employee disagreen could not, then the disagreement was elevated to Sharon Light, Senior EO Director, who would make the determination as to the appropriate away to discuss issues that come up. We also talked a lot a a 0n the application; how would you ask a development ques 3 question look like? And then worked through what would )uld get at what you needed to know but not be too burdenso sting of applications commenced on May 16, 2012556 nl.558 Each employee reviewed the application independentl rent, the employees would meet and attempt to reconcile the and extended for three weeks. Technical, reviewed each and made a idation as to the bucket to which the application should be assigned.559 If the two 3 agreed on the bucket, the application was assigned to that bucket.560 If there was it differences?? If they rtisan Investigative Report informed her staff that, ?[m]ost likely, we?ll try to get those cases in Bucket 1 the E0 Determinations as follows: did it in a workshop format where we used the real cases that we had and used those bout, here?s an issue you tion about it? What would be a good question that me to the applican 555 557 Technical Advisor to the bucket. 562 On June 2012, Paz reported to Cindy Thomas and Lois Lerner the results of the now completed bucketing exercise as follows: 83 CBS bucketed: 15 approval 16 limited development 23 general development 28 ilikely denial 199 0/45 bucketed: 65 approval 48 limited development 56 general development 554 . 555 SFC Interview of Holly Paz (July 26, 2013) p. 162. 556 Email :hain between Cindy Thomas, Bonnie Esrig and others (May 8-9, 2012) 557 SFC Interview of Holly Paz (July 26, 2013) pp. 160-161. 558 1d. 559 .560 Id. 561 562 [d This document was obtained and uploaded by the Center for Res 116 ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report 30 likely denial563 While the bucketed applications were from groups on both the political right as well as the left, the majority of the applications were from right-leaning organizations. On July 18, 2012, Judith Kindell nc ted this fact to Lois Lerner as follows: Of the 84 cases, over half appear to be conservative leaning groups based so ely on the name. The remainder do not obviously lean to ei1 her side of the political sp ectrum. Oi'the 199 cases, approximately appear to be conservative leaning while fewer than 10 appear to be liberal/progressive leaning groups based solely on name. The remainder do not obviously lean to either side of the political spectrum.564 Political advocacy applications received after June 8, 2012, were bucketed in E0 Determinations.565 Commencing in June 2012, 41 applicants for exemption, including Tea Party and other political advocacy groups, received approval letters from the IRS.566 These approvals represented the ?rst approvals of political advocacy applications since early 2010 when the IRS had granted tax exemption to one 501(c)(3) and two 501(c)(4) Tea Palty organizations. In addition, 31 development letters were prepared and sent out in June 2012 by EO Determinations on other bucketed applications.567 These were the ?rst development letters issued by EC Determinations since February 29, 2012, when Lois Lerner suspended the further issuance of deve10prr ent letters. For applications that were likely denials and that had been placed in bucket 4, 130 Technical prepared the majority of deveIOpment letters and worked the applications.568 From June 2012 to December 2012, the IRS approved a total of 133 political advocacy 569 applicatic us While noi entirely free from problems, the ?bucketing? exercise represented the ?rst IRS initiative in two and a half years that actually succeeded in bringing political advocacy applications to closure. Yet, as of March 2014, more than four years since the ?rst political advocacy applications were ?led, 22% of those applications were still unresolved. While the IRS succeeded in closing most of the applications in the ensuing year 10 organizations were still waiting a determination as of April 2015.570 563 Email chain between Holly Paz, Lois Lerner, Donna Abner and others (June 8, 2012) 55? Email from Judith Kindell to Lois Lerner (July 18, 2012) 1R80000585328. 565 Email chain between Holly Paz, Lois Lerner, Donna Abner and others (June 8, 2012) 5?6 Email chain between Cindy Thomas, Holly Paz, and Donna Abner (June 27-28, 2012) 567 568 SFC In erview of Cindy Thomas (July 26, 2013) p. 108. 569 Calculation based on data provided to the SFC by the IRS (Mar. 26, 2014). 57? Based on data provided to the SFC by the IRS (Apr. 8, 2015). 117 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena IRS Exem applying H. I ap lications that were potentially political organizations. In some ses, after selecting left-leaning applicants, E0 Determinatic A Power] Cincinna tie Committee on Finance Bipa THE IRS SELECTED LEFT-LEANING APPLICANTS SUBJECTED THEM TO HEIGHTENED SCRUTINY rtisan Investigative Report 5 FOR REVIEW AND AND DELAYS This section discusses how the IRS handled applications for tax status submitted by various types of progressive and left-leaning organizations. \4 5 exempt pt Organizations employees also selected left-leaning and p1 tax-exempt status for special processing: mes associated with left-leaning applicants were placed on torical tabs of the BOLO list. S: screeners were instructed during training sessions in 2010 DETERMINATIONS FLAGGED LEFT-LEANING APPLICANT AND PowerPoint Presentation Directs Employees to Flag ?Emerge? Applicants Joint presentation and notes from a July 28, 2010 screening ogressive organizations tihe Watch List and Tag to select left-leaning ns transferred the cases to '106 from the Washington 3 WITH THE NAMES rogressive? and workshop meeting in ns with the words .i show that IRS employees were instructed to ?ag applicatic ?progressive? and applications associated with Emerge (an organizat' female screening names an 57' Screeni d/or titles were of interest and should be ?agged for review: 12 Project merge regressive {e The People ally Patriots, and ng Workshop Notes (July 28, 2010) Screening W01 169695-720. 118 This document was obtained and uploaded by the Center for Res that sought to train emocratic political candidates) and to send them to Group 7 22 for secondary .571 The notes from the meeting state that Gary Muthert in 'cated that the ?following 'kshop Presentation ponsive Politics (OpenSecrets.org) U.S. Senai 0 Pink-Slip Program572 This Pow: with a pic additional Progressii 2. Numerous Historical applicatio ?progress i iterations of the BOLO spreadsheet included the term ?Pro1 ns containing the word ?Progressive? to the TAG Group. Th Committee on Finance Spreadsheets Include the Phrase ?Progressive? tab. For example, a BOLO list dated August 12, 2010, instr ve? further instructed screeners that the: mmon thread is the word ?progressive.? Activities appear Bipartisan Investigative Report :rPoint presentation from this screening workshOp also had a slide that read, ?Politics? ture of an elephant and a donkey. One slide stated ?Look for names like? preceding slides with the words ?Tea Party Patriots 9/12 Project Emerge re. . ..We the People? under the heading ?Current Activities.?573 gressive? on the TAG ucted screeners to send BOLO list entry for lean towards a new litical party. Activities are partisan and appear as anti-Republican. You see references ?blue? as being ?progressive.?574 pc to Accordin placed on frequentlj to IRS agent Ron Bell, who was responsible for the BOLO the Tag Historical tab after IRS employees were not seeing 575 1. list, screening terms were applications as 3. Determinations Manager Instructed Employees to Groups Be Alert for ?Emerge? In Octobe state char S, an organization with e, on SCRs subjecting the screeners were instructed OLO, but an IRS 2008, to look for sensitive? cases. 576 :r 2008, the IRS placed two applications from Emerge group aters that trained Democratic women to run for political of?c applicants to multiple layers of review. The Emerge applications that to flag at the screening workshop were not speci?cally listed on the Determi .ations manager alerted screeners via email on September 24 applicanlis with ?Emerge? in their name along with other ?politically pending litigation between tonal Emerge cases were 10.578 As explained Technical review of the applications was delayed because of nd the Democratic Party Leadership Council. 577 Two addit SCR, one in June 22, 2009, and another on January 18. 20 572 Screening Workshop Notes (July 28, 2010) 1R80000012315-17. 573 Screening Workshop Presentation (July 28, 2010) 57" BOLO Spreadsheet (Aug. 12, 2010). 575 SFC In erview of Ron Bell (July 30, 2013) (not transcribed). 576 Email from Joseph Herr to Elizabeth Hofacre and others (Sep. 24, 2008) 577 Division Sensitive Case Report (Oct. 21, 2008) 573 Division Sensitive Case Report (June 22, 2009) TE Report (Jan. 18, )001 1492?4. Division Sensitive Case 119 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report greater detail in Section (B) below, the decision to review the Emerge :ases pending the outcome of litigation contributed to delays in processing these cases. 4. Employees Were Instructed to Give ?Special Handling? to Groups Related to ACORN Another PowerPoint presentation presented at training events in June and July of 2010 titled ?Heightened Awareness Issues,? listed ?Successor to Acorn? as a Watch List Issue specifying that ?[s]pecial handling is [r]equired when [a]pp1ications are ACORN (Association of Community Organizations for Reform Now) was a national ?community organization group? with local chapters that ?fought for liberal causes like raising the minimum wage, reg stering the poor to vote, stopping predatory lending and expanding affordable housing.? 53? In addition, ACORN assisted lower income families with tax return preparation. 58? The national organization declared bankruptcy in the wake of accusations of fraud, embezzlement, and mismanagement, but several local organizations decided to regroup under new name 5.582 On Marcl' 22, 2010, Cindy Thomas noti?ed EO Technical that descendants of ACORN were reorganizmg, citing three speci?c organizations that were likely to submit applications.583 In April 201 0, Sharon Camarillo emailed Cindy Thomas and Robert Choi telling them that E0 Determin ations received two ACORN-successor cases.584 Also in April 2010, an IRS interof?ce research team completed its research into allegations of illegal ac1ivity by ACORN, its af?liates and employees. The research team was formed to investigate allegations that ACORN was engaged in actions inconsistent with tax-exempt status, including systematic commingling of funds between taxable and tax-E xempt entities and individuals associated with ACORN. The Research team found evidence of: the cover-up of an embezzlement committed by a board member; possible con?icts created by employees working for multiple af?liates and staffers and members serving on the Board of Directors; improper money transfers among the af?liates; lack of proper documentation of ?nancial transactions; and possible improper use of donations as well as pension and health care bene?t funds. The research :eam concluded that these ?ndings, together with apparent loose governance and a lack of respect for the corporate structure, warranted a closer examination by the IRS into the ?nancial practices of ACORN and its af?liates to determine if its tax-exempt status was 579 Heightened Awareness Issues (undated) Email from Chadwick to Donna Abner and others (May 18, 58? Acorn Brink of Bankruptcy, Of?cials Say, New York Times (May 19, 2014). 581 532 533 Email chain between Cindy Thomas, Steven and others (Mar. 22, 2010) 584 Email from Sharon Camarillo to Cindy Thomas and Robert Choi (Apr. 28, 2010) 120 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report appropriate.585 This report was shared with IRS management, including Sarah Hall Ingram, Joseph Grant and Lois Lerner, in June and July 2010.586 The August 12, 2010 BOLO listed Successors? as an ?Issue Name? on the List? tab. The description states that ?Following the breakup of ACORN, local chapters have been reforming under new names and resubmitting applications.? Screeners were instructed to send these cases ?to the TAG Group.?587 An entry for ?Acorn Successors? appeared on copies of the BOLO lists, ?rst on the BOLO List tab and then on the Watch List tab, examined by Committee staff from 2010 until Holly Paz removed it in June 2012.583 An Octob :r 7, 2010 email from Jon Wadell alerted Steven Bowling and Sharon Camarillo to two elated cases. Waddell recommended ?an alert be sent informing agents/screeners that to be on the lookout for the following name an application factors associated with Acorn related cases.?589 In addition, he suggested adding the following ?factors to the Watch Issue DeScription section fo this category?: 1. The name(s) Neighborhoods for Social Justice or Communities Organizing for Change 2. Activities that mention Voter Mobilization of the 3. Advocating for Legislation to Provide for Economic, Heal are, and Housing Justice for the poor. 4 Educating Public Policy Makers Politicians) on the above subjects.590 Sharon Crimarillo forwarded the alert to John Shafer instructing that his screeners ?be on the lookout for these cases.?591 John Shafer forwarded Camarillo?s email to IRS screeners in his group'sm The Watch List tab of the February 2, 2011 BOLO instructed IRS screeners to look for the words or ?Communities for Change in the name and/or throughout the application.? It read: 585 IRS, AC ORN Research Activities Summary Report (Apr. 28, 2010) 5482-87. 5?36 IRS, Memorandum on Investigative Research Findings (June 21, 2010) Email from Nancy Todd to Sarah Hall Ingram, Joseph Grant, Lois Lerner, and others (July 8, 2010) IR 80000713482. 537 Combined Spreadsheet TAG 8 12 10 (Aug. 12, 2010). 5? Id; Email chain between Holly Paz, Cindy Thomas and others (June 1, 2012) 539 Email iain between I on Waddell, Steven Bowling, Sharon Camarillo and other? (Oct. 7-8, 2010) 590 59' Email chain between Jon Waddell, Sharon Camarillo, John Shafer and others (C ct. 7-8, 2010) 592 Id. 121 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Lc ar AI ACORN Januar Occupy i1 within the seeking ti Detennin referred Steven properly words Vt th at St St Bipz cal chapters of the former ACORN organization have reforn requesting exemption under section 501(c)(3). Succession CORN and Communities for Change in the name and/or thro :ases were also being screened in 2012. Ron Bell wrote an 012 stating: re got a case that I believe is an acorn successor org. I googl at is where several websites (such as the capital research cen orn successor. The BOLO list states to contact you. . .Please ocess this case.594 [sic] Groups Using ?Occupy? in Their Name Were Flagged List Tab 2012, the IRS Determinations of?ce began screening orgar 1 their name on the Watch List tab on the BOLO. After a ne 3 IRS that suggested some organizations af?liated with the tx-exempt status, Cindy Thomas told Steven Bowling, the ations group that handled political advocacy cases, that the his Group so they could be worked ?with the advocacy cas awling told Cindy Thomas that the BOLO list would need to flag the Occupy cases, but expressed frustration that the IRS ea Party? or ?Occupy? in screening.596 Thomas replied: 7e can?t refer to ?tea party? cases because it would appear as em out and not looking at other Republican groups or Demo ow about a compromise What do you think about changin lvocacy organizations on the Emerging Issues tab to that wh :enario then, you could include the Occupy description f1 latch For tab specifying that these cases should be referred tt ill have the same grade 13 agents working the advocacy and 593 BOLO 594 Email 595 Email Email cha 596 Email 597 Email from Cindy Thomas to Steven Bowling (J an. 24, 2012) Spreadsheet (Feb. 2, 2011) ro'm Ronald Bell to Carter Hull (May 13, 2012) IRSR0000054963. hain between Cindy Thomas, Steven Bowling and Peggy Combs (J an. 2 between Cindy Thomas, Steve Bowling, Peggy Combs and Mary Shee 013414-15. hain between Cindy Thomas, Steven Bowling and Peggy Combs (Jan. 2 122 irtisan Investigative Report ied under new names and indicators include ughout the application.593 mail to Carter Hull on ed the name of the org and ter) indicate that it is an advise how you want to Using the BOLO Watch iizations with the term ws article was distributed ccupy movement were anager of the IRS )ccupy cases should be es'ia595 be modi?ed in order to did not want to use the though we?re singling cratic groups. the description for ich you?ve included under 'om your scenario #2 on the 3 your group? We could Occupy cases.597 0, 2012) (Jan. 20, 2012) 0, 2012) TR80000013418-19. 1-17. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bip artisan Investigative Report After receiving this instruction from Thomas, Bowling added ?Social economic reform movement? to the BOLO entry for ?current political issues.? In addi ?Occupy args? to the BOLO Watch List tab. Ronald Bell wrote an 1011, Bowling added ail to Bowling questioning the need inI? a separate entry for ?Occupy orgs? on the Watch List since he thought ?Social economic reform. . .was our ?code word? for the occupy organizations. think we can leave it in. Some of the orgs are pushing that other than Emails ritten in May 2012 show that at least two Occupy cases were after the term was added to the BOLO list.599 The next month, Holly Bowling replied, occupy groups.?598 ?agged by IRS screeners Paz had Cindy Thomas revised the BOLO list to ?remove the references to Acorn and Occupy from the ?Watch List? and repla liberal groups with neutral language.600 B.L Some tax :ed the ?Emerging Issue? description of ideological position BERAL AND PROGRESSIVE ORGANIZATIONS EXPERIENCED ?exempt applicants af?liated with Emerge, ACORN success 5 of conservative and DELAYED PROCESSING or groups, and other left- leaning applications waited years for a determination from the IRS aft er their applications were ?agged In the cas applicatic with Eme organiza?i have bee] 501(c)(4) On Septe ?alert? f0 reminder guideline E0 Tech applicatii then we i of three of the Emerge groups, it took three years from the ms were denied. Previously, the IRS erroneously approved 1 rge for 501(c)(4) status from 2004 through 2008, including 1 on Emerge America.601 These ?ve Emerge approvals were 1 in error because Emerge groups were found to bene?t the I status was revoked.602 mber 2008, emails show that IRS employee Donna Abner re other incoming Emerge cases because of the ?partisan mad that ??sensitive political issue? cases are subject to mandator and subject to full development. 603 nical staff asked E0 Determinations to transfer the Emerge 1 ms on October 10, 2008, to be held ?until the litigation on t1 will work them.?604 EO Technical instructed E0 Determinat 593 Email 599 Email 600 Email 60' Email Email informatio 503 Email 604 Email etween Steven Bowling and Ronald Bell (Jan. 25, 2012) IRS000001318 hain between Tyler Chumney, Peggy Combs and others (May 24-27, 20 hain betWeen Holly Paz, Cindy Thomas and others (June 1, 2012) hain between Donna Abner, Cindy Thomas and others (Sep. 8, 2008) IR rom Nalee Park to Justin Lowe (Nov. 16, 2011) (Email omitted by Committee staff). hain between Donna Abner, Cindy Thomas and others (Sep. 8, 2008) IR hain between Justin Lowe to Jon Waddell (Oct. 10, 2008) 22 123 7 screeners and held up or forwarded to the E0 Technical of?ce in Washington, DC. time they applied until the five applications af?liated be main umbrella subsequently determined to Democratic Party. Their commended issuing an ire of the cases? as well as a "y review? per IRS VIaine and Emerge Nevada [is issue has concluded and ions to hold any additional i2) IRSR0000013234-48. )00013434-35. 30000012292-93. attachments containing taxpayer SR0000012292-93. 99-300. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance Bipartisan Investigative Report Emerge cases ?pending the outcome of a similar issue in the DLC litig Sensitive Case Report indicates that Emerge Massachusetts applied for August 15, 2008, and was transferred to E0 Technical on April 16, 20 applied on February 9, 2010, and its application was transferred to E0 2010. The IRS did not inform the four Emerge groups, whose cases and then developed at E0 Technical until 2011, that their applications delays of approximately three years for some of the organizations.606 ation.?6?5 A January 2011 tax-exempt status on 09. Emerge Oregon Technical on April 14, ere selected for review had been denied, creating C. ORGANIZATIONS DEEMED TO BE ACORN SUCCESSORS EXP RIENCED DELAYS Organizatiions the IRS determined to be related to the disbanded ACO organizations also experienced signi?cant delays. EO Determinations began receiving CORN-successor organization applications in April 2010.607 On June 8, 2010, the Acti Manager of EO Technical, Steven Grodnitzky, instructed Cindy Thomas not to devel or resolve related cases until they received further instruction.608 5, 2010, Cindy Thomas alerted Robert Choi that EO Determinations received another a 501(c)(4) ACORN- placed the other On July 1 ?potential successor to Acorn? applying for 501(c)(3) status related to successor application received in April 2010.609 Thomas reported tha case in su Cindy Th ACORN- Paz told the same An E0 13 have fom Could We unclear applicatii spense pending guidance from the Washington Of?ce and a ornas emailed Holly Paz on October 24, 2010, with a reques successor cases from E0 Technical. Over a month later, on Cindy Thomas to work with Carter Hull in E0 Technical on eterminations employee contacted Carter Hull on March 4, 2 arrange to discuss these cases with you by phone sometime Ihat guidance Carter Hull provided EO Determinations on th )ns but he informed another EO Determinations employee in "e doing so with this for technical assistance on November?26, 2010, Holly the Acorn-successor cases, employee in charge of developing the Tea Party cases in 201 0 and early 2011. 6? ?011, telling him that ?we exemption applications for organizations that have previously Operated as ACORN. next week??612 It is ACORN-successor 1 July 2011, that ?his Jugh this document is dated at it was mistakenly dated 2010 505 Email 0 606 ?January 1 instead of 2011. 507 Email from Sharon Camarillo to Cindy Thomas and Robert Choi (Apr. 28, 201C 50? Email chain between Steven Grodnitzky, Cindy Thomas, Donna Abner and othe 54956. 609 Email chain between Cindy Thomas, Robert Choi and others (July 15-16, 2010] 610 6? Email hain between Holly Paz, Cindy Thomas and others (Oct. 14, 2010 - Jan. 6'2 Email from John McGee to Carter Hull (Mar. 4, 2011) 124 hain between Deborah Kant, Cindy Wescott and others (Oct. 16, 2008) 1 Division Sensitive Case Report (Jan. 18, 2011) IRSR0000147518. Alth 8, 2010,? it references events in January 201 1. Therefore, we believe th IRS0000458467. rs (June 8,2010) 19, 2011) IRS0000054942-44. This document was obtained and uploaded by the Center for Resaonsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report manager informed him that he should not be doing research for our cases.?613 Hull asked EO Determinations to remove his name ?from the BOLO list as a contact aerson.?6?4 In April 2013, E0 Technical was still developing two ACORN-successor applications, including one of the applications that spurred E0 Determinations managers to alert screeners to flag ACORN-successor cases in October 2010.615 The other case mentioned in the email was transferred :from E0 Determinations to E0 Technical in April 2012.615 ACORN-successor cases were still on hold as of May 2013, according to Cindy Thomas.617 Other left leaning and progressive groups told media outlets their applications were delayed as well. On: left-leaning group, Alliance for a Better Utah, told NPR Morning Edition in a story that aired on June 13, 2013, that it had been waiting almost 600 days for a determination on its applicaticn for 501(c)(3) status to do ?voter-education work.?618 The same group told Politico a month later that the delay was ?causing problems because it can?t apply for foundation and grant money that application to become a charitable organization is in limbo.?619 Progress Texas reported that it took ?1 8 months to get its 501(c)(4) approval.?620 D. INAPPROPRIATE AND BURDENSOME INFORMATION REQUEST U) As described in Section of this report, in January 2012 the IRS Determinations Unit made unnecess my and burdensome requests to some tax-exempt applicants that in some cases included requests for donor information. IRS officials decided the request of the donor information was inappropriate and ordered the donor information destroyed. 62] Some left-leaning/progressive groups received inappropriate development questions regarding donor information while experiencing delays in the application process. At least three of the twenty?seven groups that received donor information requests were left?leaning applicants for tax?exempt status.622 6? Email chain between Melissa Conley, William Agner and others (July 11, 201 1] 614 6'5 Email chain between Holly Paz, Cindy Thomas and others (Apr. 3, 2013) 6 6 - 5? See response submitted by Cindy Thomas, IRS Employee Responses to Written Questions from Finance Committee Staff (Dec. 19, 2013). 5? NPR, Liberal Groups say They Received IRS Scrutiny Too (June 19, 2013). ?9 Politicc IRS Scrutinized Some Liberal Groups (July 22, 2013). 620 5? SFC In .erview ofHolly Paz (July 26, 2013) pp. 146-147. 622 Email chain between Judith Kindell, Holly Paz and Sharon Light (Apr. 25, 2012!) 3868 (email attachment Containing taxpayer information omitted by Committee staff). 125 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) . US. Senate Committee on Finance Bipartisan Investigative Report IX. ADDITIONAL FINDINGS NOT RELATED TO THE DETERMINATIONS PROCESS This section includes findings that are not directly related to the processing of applications for tax-exempt status, but are nonetheless relevant to the IRS ?5 treatment of tax-exempt organizatiOns. We describe how the IRS failed to perform any audits of politica advocacy performed by tax-exempt organizations for more than three years. We i also describe how the failed to produce documents that were responsive to a 2010 01A request seeking information about how the IRS was processing Tea Party applications. Finally, we disc uss TIGTA ?s investigation of several improper disclosures of information related to conservative organizations. i A. THE IRS STRUGGLED To DECIDE How TO REVIEW IONS 0F IMPROPER POLITICAL CAMPAIGN INTERVENTION BY TAX-EXEMPT ORGANIZATIONS, INCLUDING A PARTY GROUPS The ?rst area of supplemental ?ndings concerns the process for examining allegations of impermissible political campaign intervention by tax-exempt organiz ions. The Committee?s investigat on revealed numerous serious problems that rendered the I incapable of resolving allegations regarding the Tea Party and other political advocacy orga 'zations. 1. General Processes for Audits of Tax-Exempt Organizations The Examinations unit, within the Exempt Organizations Division, rn snitors whether Organizatiolns that have been approved for tax-exempt status are operating in accordance with federal tax Iaw.?523 At all times relevant to the Committee?s investigation, Nanette Downing was the Director of E0 Examinations and reported directly to Lois Lerner 624 Unlike most other IRS divisions, which are administered at the IRS headquarters in Washington, DC, E0 Examinations has its head of?ce in Dallas, Texas. IRS of?cials explained that EO Examinations was placed outside of Washington to ensure that other divisions of the IRS in Washington did not improperly influence the tax enforcement decisions for exempt organizations.625 E0 Examinations serves as the repository for allegations that tax?exe'npt organizations are engaged improper conduct (or ?referrals?). All referrals including those that originate in 623 IRS, and Nonpro?t Audits: Exempt Organizations Examinations. 524 SFC Interview of Nanette Downing (Dec. 6, 201353; SFC Interview of Sarah Hall Ingram (Dec. 16, 2013) p. 71. 126 This documlent was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report other divi51 ohs within the IRS, as well as those made by individuals or entities outside of the IRS are all given the same consideration.626 E0 Examinations employees evaluate the referral based on its Content and decide if the IRS will investigate further. 627 Apart from the referral process, EO Examinations employees also use other criteria to determihe if the IRS needs to open a revielw. E0 Examinations performs two kinds of reviews of tax-exempt organizations: 0 Examinations (also known as audits) are reviews of a taxpayer?s books and records to determine tax liability, and may involve the questioning of third parties. For exempt organizations, an examination also determines an organization?s qualification for tax- exerrlipt status. If the IRS determines that an organization is not complying with the tax law, the IRS may impose a tax liability and, in some instances, may also revoke the organization?s tax-exempt status.628 0 Co nipliance checks are less comprehensive reviews used to determine if an organization is following the required recordkeeping and reporting require ents, and whether its actixlrities are consistent with its stated tax-exempt purpose. checks are usually conducted using information already in the possession of the IRS, although the IRS will sometimes request additional information from the taxpayer. If the IRS concludes that the organization might owe a tax liability, it may refer the organization for - - 629 a full examlnatlon. The Review of Operations (R00) is a division within EO Examinations that performs compliance checks on tax-exempt organizations, usually 3-5 years after an organization has been approved for tax-exempt status. Unlike other types of compliance checks, IRS employees are not permitted to contact the taxpayer during ROO compliance checks.630 In addition, because the ROO does not conduct an examination, it is not authorized to review an organization?s books and recor is or ask questions regarding tax liabilities or the organization?s activities?? When the ROO receives a referral, ROO employees review the referral, along with information in the possession of the IRS, to determine if the allegations can be supported. The ROO then recommenc?ls one of the following options: 0 Start an examination; 0 Start a compliance check; or 625 SFC Interview of Nanette Downing (Dec. 6, 2013) pp. 35-37. 627 Id. pp. 26-29. 62? IRS Memlorandum produced to SFC (Sep. 4, 2013) IRS, Charity and Nonpro?t Audits: Closing/Conclusion. 529 IRS Memorandum produced to SFC (Sep. 4, 2013) IRS Publication 4386, Compliance Checks, Rev. 4-2006. 63? IRS Memorandum produced to SFC (Sep. 4, 2013) 63! 127 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senat continues tio evaluate data submitted on Form 990 tax returns to assess engaged in improper political activity. 3. a Committee on Finance Bipa 649 rtisan Investigative Report lf organizations have E0 Determinations Employees Recommended that the R00 Review the Activities of Some Tea Party Organizations, and a Small Brogressive Organizations, for Improper Political Camp aign Intervention er Number of In 2011, as the number of political advocacy applications in E0 Determinations? inventory increased, referred to EC Screening has identified an increase in the number of where organizations are advocating on issues related to govern similar matters. Over 100 cases have been identi?ed so far, (0) L0 This idea other E0 E0 Exam Although started to the future a large nu Roolesz recommei From the the ROO for follow-up compliance checks. As Paz explain alications and the fact that this is not a new issue (just an inc discussed during the July 5, 2011 meeting that Lerner cc employees. Lerner elected not to follow this approach, beca inations had enough employees to handle the increased wor Lerner did not uniformly implement this approach, EO Dete recommend that the ROO review the activities of certain pol mber of applications were recommended for approval subj er managers, including Thomas and Paz, were aware of at idations. 653 end of 2011 through May 2013, E0 Determinations employ I I the IRS considered whether all Tea Party cases should simply be approved and then ed in July 2011: 3) and applications ent spending, taxes, and mix of and 's would like to discuss our planned approach for dealing wiih these cases. We suspect that we will have to approve the majority of the c4 applications aPl issue), we plan to [have] E0 Determinations work the cases. .. organizations to the Review of [O]perations for follow-up in a . Given the volume of rease in frequency of the We will also refer these later year.650 Jnvened with Thomas and ase she did not think that load.651 rminations employees itical advocacy groups in . This happened with greater frequency during the ?bucketing? process in 2012, when to later review by the east some of these ees recommended that the ROO rev1ew 60 political advocacy organizations.654 After the TIGTA report came out, Downing 649 65? Email chain between Holly Paz and Janine Cook (July 18-19, 2011) 11180000420489. 65? SFC Int Bowling ar ?52 Email from Janin informatior ?53 Email erview of Holly Paz (July 26, 2013) p. 139; Email chain between Cindy idiothers (July 5, 2011) iain between Sharon Light, Cindy Thomas and others (Aug. 27-28, 2012 Estes to Hilary Goehausen (July 11, 2012) 1R80000582651 (Email att 1 omitted by Committee staff). hain between Sharon Light, Cindy Thomas and others (Aug. 27-28, 2012 65? IRS Chart produced to SFC (Sep. 4, 2013) a 130 This document was obtained and uploaded by the Center for Res Thomas, Ronald Bell, Steve Email ichment containing taxpayer aonsive Politics (OpenSecrets.org) U.S. Senat learned th the R00.6 wer 3 Committee on Finance these 60 ?Tea Party case referrals? had been ?sitting in a pi ?5 Analysis performed by the Committee staff indicated that a conservative or Tea Party groups, 7 were progressiv Bipartisan Investigative Report le for quite a while? in of these groups, 41 or liberal, and 12 had no obvious political af?liation. After consulting with managers installed by then-Principal Deputy Co further pro Despite su meaningfuil oversight of political advocacy performed by tax?exempt 0 year period. Although management has made recent changes to the ex mmissioner Werfel, Downing returned these referrals to E0 cessin g. bstantial time and effort expended by the IRS, the agency far Determinations for led to perform any rganizations for a three- amination process, concerns persist that the IRS could open examinations for an inappropriate reason. In July 2015, the Government Accountability Of?ce (GAO) issued a report on the criteria and processes used by the IRS some cont those cont designed to select exempt organizations for examination.656 GAO cc rols successfully,? but found ?several areas where con implemented.? Most signi?cantly, GAO stated that: ncluded that has ro'ls in place that are consistent with internal control standards, and has implemented qrols were not well The control de?ciencies GAO found increase the risk that EO could select organizations for edi Although of organiz implemen and impar The secor Informatil In June 2( how the I organizat1 numerous handling few of th: 655 Int 656 GAO, II (July 2015] 657 658 5 U.S.C B. INFORMATION ABOUT ITS HANDLING OF TEA PART )10, a freelance reporter made a FOIA request to the IRS for RS was processing applications for tax-exempt status submit (8 Examination Selection: Internal Controls for Exempt Organization Se examination in an unfair manner?for example, based on a pcational, political, or other views?? the GAO did not consider whether these de?ciencies actuall ations for examination, these ?ndings con?rm that the IRS changes to ensure that examinations are opened only when tial decision. IRS FAILED TO PRODUCE RESPONSIVE DOCUMENTS TO area of supplemental ?ndings concerns the handling an Act (FOIA) request. ons. 658 As described below, by the time of the request, the documents that satis?ed the search criteria and explained ht rview of Nanette Downing (Dec. 6, 2011) pp. 47-48. 552 (2009). 131 This document was obtained and uploaded by the Center for Res organization?s religious, led to improper selection nust continue to warranted, based on a fair A FOIA REQUEST IN 2010 APPLICATIONS of a 2010 Freedom of records that explained ted by Tea Party IRS had generated 3w the agency was Tea Party applications. But the IRS performed a de?cient search that revealed only a :se numerous reSponsive documents in existence at the date 3f the request. Then, the lection Should be Strengthened ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report IRS elected not to produce any of the documents it identi?ed, incorrectly claiming that the agency had ?no responsive documents.? As a result, the reporter did not obtain any of the documents showing how Tea Party cases were handled in 2010. On June 3, 2010, the IRS received a FOLA request from freelance reporter Walsh that sought: Documents relating to any training, memos, letters, policies, etc. that detail how the ?Tax Ex empt/Govemment Entities Division? reviews applications for non-pro?ts, 501 and other not-for-pro?t organizations speci?cally mentioning ?Tea Party,? ?the Tea Patty, tea party,? ?tea parties.?659 33 The IRS determined that Walsh?s letter was a valid request under FOIA and assigned it to Sharon Baker, a Senior Disclosure Specialist in the Washington, DC. Disclosure Of?ce. Baker prepared SCR for the FOIA request, noting that it was ?likely to attract media or Congressi nal attention? and forwarded a search notice to Michael Guiliano in E0 Guidance and Michael to in E0 Technical.660 A copy of the incoming request was also sent to the Of?ce of Chief Co sel and to Media Relations.661 On July 6, 2010, E0 Guidance manager David Fish sent two responsi documents to the disclosure division: the April 19, 2010 and May 24, 2010 SCRs prepa ed by Hull that explained how the Tea Party cases were being handled.662 After that, there were several additional document searches that were done within the E0 Division and the Of cc of Chief Counsel?s through early November 2010.663 Inexplica ly, Baker and her managers in the Disclosure Of?ce dete ned that these two documen were not responsive to Walsh?s FOIA request. Baker excluded the SCRs because she deemed em to be outside of Walsh?s request as they were not ?guide nce,? deSpite Giuliano?s assertion that these documents were indeed responsive. Baker notes in the Case Report that have been back and forth with Matthew and I am tried Tiffalny Eder and others in the Office of Chief Counsel also questioned Baker?s interpretation of the request and suggested that she follow up with Walsh to clarify the scope of the request.665 It appears that the follow up never occurred. 559 FOIA Request Letter from Walsh (June 3, 2010) IRSC003 801. 65? Email chain between Sharon Baker, Valerie Barta and others (June 14, 2010) 661 ?2 Memorandum from David Fish to Manager, Disclosure with Attachments (July 5, 2010) IRSC003 845-49. ?3 Case Notes Report (Jan. 6, 2011) IRSC003756-61. 664 1d 665 Id 132 This? document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senate'Committee on Finance In respons Party Cases Update Memorandum? prepared by Hull on October 18, 2 how Hull was working with Hofacre in E0 Determinations to review and develop explained incoming to one of the searches, a third document was sent to Baker Tea Party applications. Baker excluded the October 2010 Bipartisan Investigative Report a ?Coordinating Tea 010. 666 This document emorandum on grounds that the dc cument was not responsive to the FOIA request ?since it occurred after the FOIA request we Ultimately Manager I journalist is received in our of?ce.? that found no documents speci?cally responsive to your r, the IRS did not produce any documents to Walsh. On Jam vIarie Twarog, formally responded to Walsh?s June 3, 2010 FOIA request, advising the 1ary 6, 2011, Disclosure squest 3,667 The handling of this FOIA request reveals several troubling issues. First, the 5 The IRS though the being pror numerous regarding Second, t] responsiv Although Baker?s the scope IRM: is 11: Walsh?s 1 employee by ruling knowledge of IRS ?les.668 as, including Guiliano and others, were able to locate respon. .earch for responsive documents was de?cient. ailed to search for relevant records in E0 Determinations? :y learned from the SCRs and Hull?s memorandum that the :essed by EC Determinations employees in Cincinnati. The responsive emails generated by Rulings Agreement empl the handling of Tea Party cases, including emails to and fr01 1e narrow reading of Walsh?s FOIA request caused th 3 documents. some IRS employees disagreed with Baker?s interpretation lanagement chain overruled Baker or required her to follow of the request. By excluding these records, the IRS violated isclosure personnel must be careful not to read a request so denied information that the agency knows exists. Some req 3 knowledge of the types of records maintained by the Servic eiquest far exceeded this standard and, in fact, was precise e1 that these records were outside of the request. 6? Fax trar 657 Letter 668 IRM ismission from James Mackay to Sharon Baker (Oct. 26, 2010) IRSCOO: Walsh (Jan. 6, 2011) IRSC003765. ll.3.l3.6.2(2) (Oct. 1, 2007). 133 incinnati of?ce, even Tea Party applications were IRS also failed to locate oyees in Washington Lerner and Paz. agency to exclude pf the request, no one in up with Walsh to clarify its policies as stated in the iarrowly that the requester uesters may have little or :e while others have greater rough that some IRS sive records. The IRS erred 782-84. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Finally, th Bipa 3 IRS also took a narrow view of the time limits of Walsh?s rtisan Investigative Report "equest The IRS regulations implementing OIA state that the agency?s response ?shall include only those reco request by the appropriate disclosure officer.?69 But the allows 5 documents at their discretion, particularly when there are delays in pro In eff del 3P within the of?cial?s possession and control as of the date rare circumstances, a delay 90 days) may be orts are initiated. If this occurs, the case history must be doc of the receipt of the taff to include such cessing: avoidable before search mented to explain the ay and the search period must be extended to the date of se ch. Also, when propriate in terms of good customer service and/or in th spirit of openness in vernment, Disclosure personnel may make a determinati to include records created after the receipt date of the request. This determina 'on is to be made on a ca. In this cas ultimate r: period pre that the initial searches were de?cient, circumstances that meet the cri forth in th chose not responsiv Although motivated states ?thz demonstr. informati purpose instructio responsiv their fina procedure 2010 upd inforrnati treatment public in on had been made public in 2010 pursuant to a lawful FOIA se-by?case basis. 670 e, the IRS asked Walsh for five extensions to respond to he :sponse more than 7 months after the initial request far ou scribed by law.? IRS also conducted multiple searches of IRM. Despite these delays and multiple searches, to extend the search period and instead construed the IRS pc 3 records. there is no reason to believe that the handling of this I by political bias, its treatment was not consistent with the it the public has a right to know what goes on in governmem ate a need or reason??2 The IRS's de?cient response to Wa use of the and emails between Paz, Lerner and ot us about how these cases should be handled. If the IRS had period until November 2010 when EO and Chief Counse searches they could have also produced information abo :s for Tea Party applications given to E0 Determinations ate on the status of Tea Party cases; and the ?rst circulated If of applications received from Tea Party organizations may 2010, far sooner than it was. Shining the light of transparen 669 26 cm 670 IRM 67' 5 U.S.C 672 IRM 1. 601 .702(c)(8)(ii) (2002). 1.3.13.6.3(13) (Oct. 1, 2007) (emphasis added). . 552(a)(6)(A) (2009). 1.3.13.1(3) (Oct. 1, 2007). 134 deprived her of the an that she was entitled to under the law, including information about the her managers containing chosen to extend the ?i eeners; Hull?s October BOLO spreadsheet. If this :rtLletter and provided its ide of the 20 business-day records after ?nding eria of delay? set Baker and other of?cials llicies narrowly to exclude request was urpose of FOIA, which without having to 1 employees performed training on screening request, the have been exposed to the cy on how the IRS was This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) This docume US. Senate Committee on Finance processing Tea Party applications in 2010 may have forced the IRS to applications sooner than it eventually did. Instead, the IRS elected to consequently, these applications were left to fester for years. C. TI TA The ?nal 2 improperlj The Comr high-pro? House anc organizati investigati of the Inte disclose tl the allegec taxpayer i 1. On Augus a newly re made the itself as a GTA REVIEWED SEVERAL ALLEGATIONS 0F IMPROPER DI XPAYER INFORMATION BY THE WHITE HOUSE AND IRS irea of supplemental ?ndings concerns allegations that the IF disclosed taxpayer information. aittee requested that TIGTA provide information about its in Bipartisan Investigative Report have resolved those lease nothing and iS and White House vestigations into four le incidents of alleged disclosure of con?dential taxpayer inf ie results and status of these TIGTA investigations because nformation. Koch Industries, Inc. 527, 2010, White House advisor Austan Goolsbee, during a :leased report from the President?s Economic Recovery Boa] statement that Koch Industries may be avoiding corporate in '1 S?corporation. Mark Holden, senior vice president and ge ormation by the White the IRS. Three of the alleged disclosures involved information about conservative ans that applied for, or received, tax-exempt status. While results of the ons are considered tax return information and are thus con? ential under section 6103 mal Revenue Code, Committee staff believes it is in the pu ic interest to laW?Jlly high?pro?le nature of 1 disclosures raised serious concerns about public of?cials? andling of con?dential briefing to reporters about 'd on corporate tax reform, come taxes by structuring eral counsel of Koch Industries provided The Weekly Standard with a transcript of these re arks: So in this country we have partnerships, we have corps, we ave LLCs, we have a SE g. ates a narrower base because we've literally got something siness income in the US. is going to businesses that don't Holden tc fe )Id The Weekly Standard in the same article: nt ?rms, you know Koch Industries is a multibillion do . They point out [in the report] you could review the bounc n-corporate taxation as a way to broaden the base.673 deral law, tax information, is con?dential and it20, 2010). zidy Standard, Koch Industries Lawyer to White House: How Did You 135 ries of entities that do not pay corporate income tax. So of which are really ar businesses. So that like 50 percent of the 1y any corporate income lary between corporate and not accusing any one of any illegal conduct. But it?s my \iinderstanding that under iisclosed or obtained by iet Our Tax Information? (Sep. nt was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report individuals except under limited circumstances. I don?t know what [the senior administration of?cial] was referring to. I?m not sure what he?s saying. I?m not sure wh at information he has. But if he got this information con?dential tax information un :ler the internal revenue code if he obtained it in a way was inappropriate, that wc uld be unlawful. But I don?t know that that's the case.674 On September 23, 2010, seven Republican members of the Senate Finance Committee wrote a letter to Inspector General Russell George asking that he ?investigate a very serious allegation that Administration employees may have improperly accessed and disclosed con?dential taxpayer information??5 On September 25, 2010, Holden issued a statement supporting an investigation while also stating that the ?senior Obama administration of?cial?s August 27th statement is wrong Koch Industries does pay corporate income taxes and complies with all its tax Inspector General George informed the Senate Finance Committee Republicans on September 28, 2010 that he would initiate a review of the matter.677 The TIGTA investigation concluded in August 2011, but TIGTA refused to release the results of its inquiry to Koch Industries or Senator rassley, citing the same con?dentiality provisions that were allegedly violated.678 In response to inquiries from Senate Finance Committee staff in connection with this investigation, Inspector General George stated in a letter to Chairman Wyden that there was no improper disclosure on the part of Austan Gooslbee. He wrote: ?[t]he allegation was disproved. We developed no evidence that IRS information pertaining to Koch Industries was either accessed for or disclosed to the President?s Economic Recovery Advisory Board.?679 2. National Organization for Marriage On March 30, 2012, The Hu?ington Post and Human Rights Watch published the National Organizakion for Marriage?s (NOM) con?dential Form 990 Schedule that contains donor information.680 The Hu?ngton Post reported that the ?pro-gay rights Human Rights Campaign was sent a private IRS ?ling from NOM via a whistleblower.?68? 674 675 Letter 'om Senate Finance Committee Ranking Member Charles Grassley, et. al. to Inspector General J. Russell George (S 23,2010). 575 Koch Industries Statement (Sep. 25, 2010). 577 Bloomt erg News, White House Advisor Goolsbee?s Comment on Koch Taxes Reviewed by Treasury (Oct. 7, 2010 . 573 Tlie National Review, The Missing Koch Report (Aug. 20, 2013). 579 Letter from Inspector General J. Russell George to Chairman Ron Wyden (May 22, 2014). 63" Human Rights Campaign Blog, One of Top Secret Donors Revealed: Mitt Romney (Mar. 30, 2012); The Hu?ington Post, Mitt Romney?s PAC Funded Anti-Gay Marriage Group Under th: Radar (Mar. 30, 2012). 581 The Hu??ington Post, Mitt Romney?s PAC Funded Anti-Gay Marriage Group Under the Radar (Mar. 30, 2012). 136 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senai Committee on Finance Bipartisan Investigative Report After the con?dential donor information was published, Ranking Merr ber Hatch wrote a letter on May 8, 2012 to IRS Commissioner Shulman asking that the IRS investigate to determine the source of he leak.682 NOM ?led a lawsuit against the IRS on October 3, 2013, alleging that the IRS willfully disclosed the Sched .116 Form. In response to inquiries from Committee staff in connection with this investigation, TIGTA stated in a letter to Chairman Wyden that there was an improper disclc sure of confidential taxpayer formation. TIGTA determined that an IRS employee working in the Return and Income ri?cation Services (RAIVS) unit ?printed unredacted copies of the National Organiza on for Marriage?s IRS Form 990 and the associated Schedule Form and sent them outs de the The RAI unit is responsible for processing Form 4506-A (Request for Public Inspection or Copy of xempt or Political Organization IRS Form) requests for public versions of tax-exempt organizat ons? Form 9908. However, the Schedule of the Form 990 is con?dential and should not be pr vided in response to a Form 4506-A public record request. 684 TIGTA und that the ?disclosure was probably a work error by the IRS employee? and that its investiga 'on ?did not identify any link between [the IRS employee] and the organizations or individu 5! involved in posting or publishing the unredacted forms.? In addition, TIGTA did not ?nd evidence that the diSclosure was motivated by political animus. TIGTA was ?also unable to determine whether the IRS received a valid Form 4506-A for the information at issue bec ause? TIGTA ?became aware of the allegation after the 45-day retention period for the Form 4506-A had passed.?685 On August 10, 2012, TIGTA ?rst referred the matter to the Department of Justice Public Integrity Section but it declined prosecution on September 19, 2012. TIGTA then referred the matter to the IRS ?for administrative action on October 17, 2012. On January 30, 2013, the IRS issued a Closed Without Action? letter with a cautionary statement? .0 the employee involved in the disclosure.686 Previous to investigation, RAIVS unit employees had access to both redacted and unredact 3d copies of the IRS Form 990 and associated Schedule Forms on the Statistics of Income Exempt Organizations Return Image Network A a result of the incident, ?[t]he IRS has now restricted RAIVS unit employees? access to only redacted Forms 990 ?2 Letter rorn Senator Orrin Hatch to IRS Commissioner Shulman (May 8, 2012). ?3 Letter ?mm Inspector General J. Russell George to Chairman Ron Wyden (May 22, 2014). 68? Instructions for Form 4506-A (Rev. Aug. 2014). 685 Letter Inspector General J. Russell George to Chairman Ron Wyden (May 22, 2014). 686 1d. 137 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance On anual for tax-e status? to ProPublz?ca.695 In respon to inquiries from Committee staff in connection with this stated in letter to Chairman Wyden that there was an improper disclc taxpayer nformation. TIGTA determined that an IRS employee impr exempt a plications of nine organizations that were awaiting a determ organizat ons affected were Crossroads GPS, Freec Bip artisan Investigative Report 2, 2013, ProPublica published details about ?ve other pending tax-exempt in an article citing con?dential application materials it ha :1 received from the IRS.694 investigation, TIGTA )sure of con?dential eperly disclosed the tax- .ination from the IRS. The lompath, Citizen Awarene 3 Project, Americans for Responsible Leadership, A Better America Now, America is Not Stup d, YG Network, and Secure America Now. The improper response 0 a November 15, 2012 FOIA request from ProPublica, an organizat on.?6 lsclosure was made in online media TIGTA not ?nd any evidence that the improper disclosure was motivated by political animus, TIGTA ported that March 7, 2013, the IRS issued a ?Letter of employe responsible for the disclosure.?98 Cindy Thomas explaine ProPubli a? had requested over 67 applications ?and the clerical emplc unit was rying to go through these very quickly.? Thomas told the employe responsible was a ?good employee, and it was the ?rst time mistakethis improper disclosure, the IRS now requires that the 3 under OIA be approved at the IRS headquarters level.700 .5 Republican Governors Public Policy Committee On April 4, 2013, the Center for Public Integrity reported that it ?obt: [Republican Governors Association Public Policy Committee?s] Forr 69? ProPut lica, Controversial Dark Money Group Among Five that Told IRS They Then Didr (Jan. 2, 2013). 695 Letter idm Senate Finance Committee Republicans to Inspector General J. Rus 596 Letter om Inspector General J. Russell George to Chairman Ron Wyden (May 6970? Letter 1 terview of Cindy Thomas (July 25, 2013) p. 120. 'rom Inspector General J. Russell George to Chairman Ron Wyden (Ma) 139 referred the matter to the IRS ?for administrative action on January 30, 2013.? 697 Admonishment? to the :1 that the letter from )yee in the correspondence ommittee that the IRS that she had made a release of tax-exempt entity tined a copy of the 990 from a website that Would Stay Out of Politics, sell George (May 16, 2013). 22,2014) 22, 2014). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena ,e Committee on Finance Bipartisan Investigative Report displays tax returns online. The return included one page of the ?Sche :lule list of donors which the IRS does not require to be made public.?701 The RGA spokesman told the Center for Public Integrity that ?donor information is con?dential, and its partial disclosure by the IRS was erroneous and unauthorized. In fact it is a felony to disclose the information.?702 TIGTA investigated the circumstances behind the disclosure. They found that the Schedule information was sent to the website by an employee in the Ogden, Ut IRS office. TIGTA concludec that the disclosure was a workplace error and found no ind' ation this this information was intentionally disclosed. The IRS employee was subsequently disciplined by the IRS.703 Center for Public Integrity, IRS ?Outs? Handful of Donors to Republican Group (Apr. 4, 2013). 702 1d 703 TIGTA rie?ng for SFC Staff (July 10, 2015). 140 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sena Committee on Finance Bipartisan Investigative Report X. CONCLUSION This bipartisan report of the Committee concludes that between 2010 and 2013, the IRS failed to ful?ll its obligation to administer the tax law with ?integrity and fairness to all.?704 The IRS functioned in a politicized atmosphere following the 2010 Citizens Un decision, which put pressure on the IRS to monitor political spending. Division, including Lois Lerner, were aware that the IRS had received 5 from organizations that planned to engage in some level executives, including Lerner, failed to properly manage pol ity and promptness that the applicants deserved. Other em] cases with a proper level of urgency, which was IRS where customer service was not prioritized. of these failings, a number of Tea Party and other political years to receive a decision from the IRS. These delays ne in many ways, including: i?cant time and ?nancial cost to respond to and bi ligibility for grants and other ?nancial support that require 6 empt status; creased donations; and ancial uncertainty about whether the organization will owe determines that it does not meet the criteria for tax-exemption eriencing these problems, numerous organizations withdrew atus and some organizations ceased to exist altogether. After exp exempt 81 The cons equences of the actions in singling out organizations subjectin intrusive con?dent questions are far reaching and troubling. Undoubtedly, thes :e and sow doubt about the impartiality of the IRS. The lack ited Supreme Court Employees in the an increasing number of political advocacy. Yet itical advocacy cases with aloyees in the IRS failed to :ic of the overall culture advocacy groups waited as gatively affected issued a determination 1rdensome IRS questions; documentation of tax- a tax liability if the RS 706 their applications for tax- ased on their name and them to heightened scrutiny, substantial delays, and to burdensome and sometimes 3 events will erode public of candor by management about the circumstances surrounding Lois Lemer?s missing emails may only serve to reinforce those doubts. 70? IRS, Tl'e Agency, Its Mission and Statutory Authority. Some 3 ates require applicants to submit an IRS Determination letter before the status. See, Georgia Department of Revenue, Tax-Exempt Organizations Freq 706 For a discussion of these and other adverse effects of the delayed rulings, 5 Delay? (Feb. 26, 2015). 141 state will confer tax-exempt uently Asked Questions. ee Politico, From IRS: ?Death by This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Bipartisan Investigative Report The IRS exercises an important and powerful role in the lives of every citizen in the country, and it is charged with the responsibility to exercise that power in a fair and impartial way. Sadly, this investigation has uncovered serious shortcomings in how the IRS exercised that authority when it process id applications for tax-exemption from organizations that were engaged in political advocacy shortcomings that raise public doubt about whether the IRS is a neutral administrator of the tax laws. Immediate and meaningful changes, including increased accountability to Congress and strengthened internal controls, are necessary if diminished public con?dence in the IRS is to be restored. 142 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) EXHIBIT Republican Report aw.com 405573072v This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) This document was obtained and uploaded by the Center for Res c' SENATE Session S. T. APPLICATIONS FOR TAX-EXEMPT STATUS COMMITTEE ON FINANCE UNITED STATES SENATE BIPARTISAN INVESTIGATIVE REPORT AS SUBMITTED BY we 75 205 OVcirevacJ do be 3 REVENUE PROCESSING OF AND ORGANIZATIONS FROM 2010-2013 CHAIRMAN HATCH AND RANKING MEMBER WYDEN SUBMITTED minted ponsive Politics (OpenSecretsorg) U.S. Sena Table of LContents I. Exe II. Lois A. Lerner?s Personal Political Views: Lerner Supported the Democratic Party, President Obama, and Other Democratic Politicians .. 155 B. Lerner?s Political Views Relevant to Her IRS Position: Lerner Held Extreme Views on Limiting Campaign Finance Expenditures and Political Speech. .. 158 C. Lerner?s Bias Harmed Conservative Organizations .. 161 1. Lerner and Senior IRS Management Devised Ways to Systernically Constrain Tax? ]Exempt Organizations That Engaged in Political Speech .. 161 2. Lerner Exerted a ?Surprising? Level of Autonomy Over the Tea Party Applications. 163 3. Lerner Created Roadblocks for Tea Party Applications That Applied for Tax-Exempt Status .. 165 4. The IRS Sometimes Responded to Political Inquiries by Quickly Deciding Certain Applications, But Not When the Inquiries Were About Tea Party Organizations .. 167 5. Lois Lerner?s Management of the E0 Examinations Unit Reveals Her Political Bias Against Conservative Organizations .. 171 D. Conclusions Regarding Lerner?s Role and Culpability .. 182 Senior IRS Of?cials Continuously Misled Congress About the Handling of Applications Submitted by Tea Party Organizations .. 183 ., A. Doug Shulman Misled Congress Regarding the Targeting of Te a Party Groups .. 183 B. Steve Miller Withheld Information about Political Targeting From the Congress .. 184 l. Miller?s ReSponse to Senator Hatch?s March 14, 2012 Letter Was Misleading .. 185 2. Miller Became Aware of Important Information Regarding Targeting Within a Week of Issuing his Response to Senator Hatch?s March 14, 2012 Letter, but Failed to Bring That Information to the Attention of Congress .. 186 3. Miller?s Response to the June 18, 2012 Letter From Senator Hatch Regarding the Attempt to Collect Donor Information From Applicants Continued Miller?s Pattern of Obfuscation .. 187 143 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) Lte Committee on Finance ADDITIONAL VIEWS OF SENATOR I PREPARED BY REPUBLICAN STA utive Summary .. LFF .. 147 Lerner?s Personal Political Views Influenced the Processing of Applications for Tax-Exempt Status from Tea Party and Conservative Or ganizations .. 154 US. Senate Committee on Finance Additional Republican Views 4. Miller?s Explanation for Failing to Inform Congress Was a 1am .. 189 C. Lois Lerner Actively Covered Up the Existence of IRS Targeting in her Communications Wi?h!Congress .. 190 1. Lerner Misled Staff of the US. House of Representatives Co mmittee on Oversight and Government Reform .. 190 2. Le?rner?s Testimony Before the House Ways and Means Subcommittee on Oversight was False and Misleading .. 192 IV. The Qbama Administration Signaled the IRS and Other Agencies to Target Conservative Tax-Exempt Organizations ..-. .. 196 A. White House Coordination With the IRS .. 198 B. The DOJ Enlisted the Help in Potential Prosecution of Organizations Engaged in Pol'tical Speech .. 200 1. 2010, the DOJ Enlisted the IRS to Help Examine Political Spending by Tax Exempt rganizations .. 201 2. he FBI Was Investigating Tax-Exempt Organizations in 2010 .. 203 3. he DOJ Again Reached out to the IRS for Assistance and the IRS Worked Together to Target Conservative Organizations .. 205 1. he FEC Used Information Provided by the IRS to Target Four Conservative rganizations .. 206 2. he FEC Enlisted the IRS in Other Efforts to Restrict Political Speech .. 208 D. Tr asury Department Coordination With the IRS .. 209 V. Dis arate Treatment of Conservative and Progressive Applicants for ax-Exempt Status .. 211 A. Applications From the Tea Party and Related Conservative Groups Were Singled Out for Sp sciai Treatment .. 21 1 1. The ?Test Cases? Selected for Development by ED Technical Were Applications From Tea Party Organizations .. 21 1 2. The Initial Process Used to Develop the Tea Party Applicatians Was Highly Unusual213 3. Until July 2011, the Emerging Issues Tab of the BOLO Spreadsheet Speci?cally Targeted the Tea Party .. 214 .Th Until the Tea Party Entry Was Removed From the Emerging From Both Liberal and Conservative Groups That Did Not 1? Were Sent to General Inventory, Assigned, and Decided The IRS Continued to Target the Tea Party After the Emerg in July 2011 to Remove the Entry for the Tea Party .. Did Not Target Progressive Organizations .. 144 Issues Tab, Applications Aeet the Tea Party Criteria ..216 ing Issue Tab Was Revised .. 218 .. 220 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen te Committee on Finance A dditional Republican Views 1. emocratic Allegations ?Progressive? groups were targeted because they appeared on BOLO spreadsheet .. 221 2. emocmric Allegation: Groups af?liated with Association of Community Organizations Reform Now (ACORN) were targeted because they appeared on the BOLO readsheet and were subsequently inappropriately scrutinized .. 224 3. emocraz?ic Allegation: The IRS targeted groups af?liated with ?Occupy Wall Street,? rough a standalone BOLO entry and also by expanding the BOLO entry for political dvocacy groups to capture Occupy groups that might submit applications .. 227 4. emocratic Allegations In 2008, an E0 Determinations manager instructed employees ?be on the lookout for applicants with the word ?Emerge? in their names. It took 3 ears for the IRS to come to a conclusion on some of the Emerge cases .. 229 .5. emocraiic Allegation: audit, which culminated in its report dated May 14, 013, established that IRS employees did not allow their own political beliefs to ?uence the manner in which they processed Tea Party applications .. 231 VI. Tea Party Organizations Were Harmed by IRS Targeting .. 234 A. The: Tea Party and Related Conservative Groups Whose Applications Were Centralized and De ayed Were Generally Small Organizations .. 234 B. Tea Party Organizations Suffered Far Greater Harm Than Progressive Applicants .. 235 C. Tea Party Groups Suffered Substantial Harm as a Result of IRS Delays .. 238 The Albuquerque Tea Party .. 238 2. American Junto .. 240 3 Pass the Balanced Budget Amendment (PBBA) .. 242 4. King Street Patriots and True the Vote .. 244 VILPoi'nieai In?uence Within the IRS .. 24s A. The Lack of Independent Agency Status Fostered the Expression of Political Bias and Has Irrevocably Tainted the Agency?s Credibility .. 248 B. Union Influence Within the IRS Has Created an AtmOSphere ofPolitical Bias .. 250 C. Recent Violations of the Hatch Act Show Pervasive Political Bias Throughout the IRSFully Correct its Problems .. 254 A. Al :hough the IRS Has Addressed Some Problems Identi?ed by TIGTA, There Is Much Wark Left to Do .. 255 Initial IRS Response and Suspension of BOLO .. 255 2. The Expedited Process .. 255 3. Further Updates on TIGTA Recommendations and Other Changes .. 257 . At Ci tempts by the IRS and Others to Suppress Political Speech a tizenry Must Be Rejected .. 145 nd Discourage an Informed ..258 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen 1te Committee on Finance Additional Republican Views 1. Background on 501(c)(4) Exemption .. 258 2. lRS?s Proposed Regulatory Changes .. 259 3. Le gislative Proposals .. 261 4. View of the Majority Committee Members on Legislative and Regulatory Proposals 263 IX. Coniclusion and Recommendations .. 265 146 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance EXECUTIVE SUMMARY The miss America? ion statement of the Internal Revenue Service (IRS) charges responsil: ilities and enforce the law with integrity and fairness to all.? perform code with applied standard. The Maj evidence Additio Views), )rity staff of the Senate Committee on Finance has conduct presented during the course of this investigation. Our ?ndi hich include the following five primary conclusions. First, found that the IRS systemically selected Tea Party and A dditional Republican Views its employees to ?[p]rovide taxpayers top quality service by helping them understand and meet their tax ?1 The IRS believes that ission statement describes our role and the public?s expectation about how we should at role.?2 Indeed, the public has a right to expect that the IRS will administer the tax integrity and fairness in every context. Yet for many conse 3r tax-exempt status during the last five years, the IRS fell woefully short of this rvative organizations that elf a thorough review of the gs are set forth in these Views of Senator Hatch Prepared by Republican Staff (Additional Republican other conservative organiz tions for heightened scrutiny, in a manner wholly different from how the IRS process Our investigation af?rmed the conclusion of the Treasury Inspector Administration (TIGTA) in its May 2013 report that ?[t]he IRS used identifie upon their names or policy positions instead of indications of potenti The inappropriate criteria were initially developed ar in the ncinnati Exempt Organizations Determinations of?ce. Whil arguably outside the scope of normal IRS operating procedure, the h: treatmert and the resulting harm to conservative organizations or were raised to IRS managers in the Washington, DC. headquarters i1 point forward, Lois Lerner and other senior managers directed the co made decisions that directly resulted in increased scrutiny, long dela? inappropriate information. A key finding is that at the time when the IRS developed and emplo1 :1 for review Tea Party and other organizations applying for 1 to proce The init that 53 Tea Party applications, it did not consider how each of the al Sensitive Case Report for Tea Party applications, prepare he various ?tea party? organizations are separately organize I IRS, Th 2 1d. 3 TIGTA, 10?053 3 Agency, Its Mission and Statutory Authority. Inappropriate Criteria Were Used to Identify Tax-Exempt Applications day 14, 2013), Highlights. We commend TIGTA for their thorough and 147 (1 applications submitted by left-leaning and nonpartisan organizations. 3eneral for Tax inappropriate criteria that ax-exempt status based al political campaign ld applied by revenue agents these actions were illmarks of disparate curred after the applications 1 March 2010. From that urse of the applications and 5/5, and requests for - red the inappropriate criteria affected groups operated. in April 2010, indicates d, but appear to be part of a for Review, Audit Report 2013- It and report on this issue. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views olitical movement that may be involved in political activities.?4 Soon thereafter, the dered developing a ?template? questionnaire to send to Tea Party applicants an that had been used successfully in the past when the IRS received numerous us from groups that shared common characteristics. Holly Paz explained why the IRS his approach for the Tea Party applications: national IRS cons approach applicatic rejected using a template or our nilarly situated 'ent answers. Some to get er Hull was saying, the by attorneys and oats organizations. Some re about candidate Generally, you know, in situations where you are talking abo goal is to group things for consistency. You wouldn't want sir organizations that are engaged in similar activities to get differ approved and some to get denied. But here, from what Cart *ganizations were very different. Some were represented ppeared very sophisticated. Some were very small grassr ad talked about educational activities. Others talked mo 0 a a :tivity. So there was a lot of variety.5 This docume Although the IRS knew that the Tea Party applications were too dissi common presence Party,? concerne advocaC] country i had little unifying an under This fac1 nonparti leaning that legit groups I: known exempt template, it continued to segregate them for screening and of certain key words or phrases in the applicants? names or 9/12? and ?Patriots,? as well as indicators of political views with government debt, government spending or taxes, edu I or lobbying ?to make America a better place to live,? or be was being run.6 At the time when the IRS segregated the Te or no ?rsthand knowledge of the organizations? actual or pl factor for how Tea Party applicants were handled was not 3} lying political philosophy. or sets apart the treatment of conservative organizatio san organizations. With one exception that affected just two )rganizations that the Minority alleges were improperly treat imately called their tax?exempt status into question.7 The I ased on their names or ideologies, but instead evaluated the' 3 the IRS activities that, in many cases, properly resulted i1 status. Although some left-leaning organizations that appliet 4 Email fr attachmer 5 SFC Intc 6 Email cl 40. 7 The two discussed I a 3m Richard Daly to Sarah Ingram, Joseph Grant and others (June 6, 2011 ts containing taxpayer information omitted by Committee staff). rview of Holly Paz (July 26, 2013) p. 71 (emphasis added). lain between John Shafer, Cindy Thomas, Steve Bowling, and others (Ju liberal organizations that were improperly handled were af?liated with 1 below in Section the IRS brie?y delayed these applications ba. managers in Cincinnati. The Minority does not allege that these groups were subj senior actions. agement to delay processing, nor do they allege that these groups were 148 nt was obtained and uploaded by the Center for Res milar to be grouped under a rocessing based on the applications like ?Tea that included being :ating the public via mg critical of how the a Party applications, they anned activities. Thus, the Jecific activities, but rather us from left-leaning and organizations, all left- ed participated in activities did not ?target? these actual activities that were 1 denial or revocation of tax- 1 for also (email ne 1-10, 2011) he Occupy movement. As ed On a poor decision by ED act to a concerted effort by IRS actually harmed by the aonsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views experienced delays, we found no evidence that the IRS scrutinized left-leaning organizations in the same Tea Party a culture and other conservative organizations. Instead, those delays within the IRS that does not value customer service. manner, to the same extent, or for the same politically-motiv The majority equipped with an a Party gro exist enti to respond to the tactics of delaying their applications "ely, based at least in part on their failure to secure tax?exe Second, of indivi )ur investigation revealed an environment within the IRS iual employees like Lois Lerner can, and sometimes does Structur ly, the IRS is a bureau within the Treasury Department, Wl?l] being tru independent of the governing administration. We found tl union ex extreme influence on employees in nearly every facet of union its lf favors the Democratic Party and contributes money almo candidat s, which makes it difficult for the agency to remain apolitica borne ou in the number of IRS employees who have violated Federa personal Party and other conservative causes. Lerner orchestrated a process tl applican ensuring unnecess member for as 10 rein to manage applications for tax-exempt status. We fo political views directly resulted in disparate treatment for ap ated reasons as it targeted were merely a of inequitable treatment caused great harm to conservative organizations, the vast 3f which were small, local groups. These groups had limitec funding and were ill- and then buffeting them most innumerable number of requests for information. As a result, many of the Tea ups seeking tax-exemption gave up on the process; and some: of these groups ceased to status. 3 where the political bias in?uence decisions. ch precludes the IRS from tat within the IRS, the their employment. The at exclusively to its 11. These in?uences are laws designed to prevent the job. Exempt Organizations Lois und evidence that Lerner?s plicants af?liated with Tea [at subjected these :s to multiple levels of review by numerous components wit in the IRS, thereby that they would suffer long delays and be required to answ burdensome and ary questions. Lerner showed little concern for conservativ applicants, even when of Congress inquired on their behalf, allowing them to Ian uish in the IRS bureaucracy 1g as two years with little or no action. The IRS began to re olve these applications only after some of the problems became public in 2012. By that time, the damage had been done. Third, of appli Top IRS misrepre organize and defe du?ngt he IRS has shown a pattern of continually misleading cations submitted by Tea Party organizations. management including Doug Shulman, Steve Miller, and sentations to Congress in 2012 and 2013 regarding the ,tions. These three individuals made oral and/or written asse nding the processing of applications for tax exemptior ?llS time period. In reality, that IRS processing included subj 149 ngress about its handling Lerner made numerous mistreatment of Tea Party rtions to Congress justifying 1 from Tea Party groups ecting the organizations to This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance A ditional Republican Views extraordinary delays and causing them to divulge unprecedented amo of highly irrelevant and, in Congress those ap Shulman, Miller and Lerner knew, or had reason to know, any cases, con?dential information. Contrary to their oral a d/or written statements to at the processing of ications was improper and that the demands for infor ation from those groups was unw rranted. Moreover, Shulman, Miller and Lerner concealed formation from Congress regardin the processing of those applications which included the fact that the IRS had singled out Tea arty groups for additional scrutiny based on their political views. The patt of deception engaged in by Shulman, Miller, and Lerner from 2012 to 2013 was designed throw Congress off the scent of IRS wrongdoing so as to place re edial half-measures aimed at addressing the targeting, the lo collectio of highly detailed but irrelevant information from Tea Part} allow the IRS to put into ng delays, and the .1 applicants. By actively misleadi Congress about the mistreatment of Tea Party groups, Shulman, Miller and Lerner the IRS. ectively obstructed Congress in the exercise of its authority Fourth, spending on political speech, the IRS and other executive agencie ioon after the Obama Administration began a concerted conserva tive organizations that had, or sought, tax-exempt status. The Whi United State of te House?s focus on this issue intensi?ed after the Supreme ecision in January 2010, starting with President Obama?s cas he Union address and continuing throughout 2010 until the 1 We foun clear evidence that the IRS and other agencies heeded the] weeks a er the President?s State of the Union address, the IRS made aside all incoming Tea Party applications for special processing a those or anizations to long delays, burdensome questions, and would some of hem. Around that same time, the Department of Justice wa could br ng criminal charges against 501(c)(4) organizations that eng The Fed ral Election Commission had also opened investigations int that aire political ads. The IRS met with both agencies, providing i1 Justice? proposals and information to the Federal Election Commiss were un er investigation. These actions leave little doubt that when legislati to reduce spending on political speech, the administration accomp 'sh the same goal. Regrettably, the Majority staff was not able to determine the full extr and Wh te House involvement in this matter. The Treasury Departm with the Committee?s requests to make witnesses and documents ave a result, the Committee interviewed only three current and former en Department and did not have access to the full scope of relevant doc 150 to oversee the activities of effort to constrain began scrutinizing Court issued its Citizens tigation of the Court in his nid-term elections. Dresident?s call. Just a few the pivotal decision to set ecision that would subject ultimately prove fatal to considering whether it aged in political activity. 0 conservative organizations iput on the Department of ion on organizations that Congress did not pass sought alternative ways to :nt of Treasury Department ent did not fully cooperate lilable to the Committee. As 1ployees of the Treasury uments. Similarly, the This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) This docume U.S. Sena :e Committee on Finance Additional Republican Views Committee did not have suf?cient access to White House records or employees. Together, these gaps in knowledge prevent us from determining when the Obama Administration and the Treasury D?partment first became aware that the IRS was targeting Tea Party groups. They also prevent us from concluding that the Obama Administration and the Treasury Department did not direct, approve of, or allow any aspect of the targeting of Tea Party gr Regardless of whether an explicit directive was given, the President?s the effect individual employees unnecessary. Finally, signi?car from the As discus February from 201 inquiry in laptop co of?cials that serve to attemp ultimatelj advised failed to . into the 1 Congress. In March of increasing scrutiny on conservative organizations, render he IRS harmed the Committee?s investigation by failing itportion of Lois Lerner?s email, resulting in its loss, and Committee for months. sed more completely in Section of the Bipartisan Inves 2014, the IRS determined that it could not locate many of Lt and 2011, a period crucial to the Committee?s investigatio to the matter, the IRS discovered that many of these emails nputer and that the computer suffered a hard drive failure in vere able to determine why many of Lerner?s were missing, backup tapes containing copies of those emails had been 0 I: to recover records from those backup tapes. Based on that concluded in April 2014 that Lerner?s missing emails were 1e Treasury Department, which in turn, notified the White I-I .imultaneously inform the various Congressional committee treatment of Tea Party organizations, choosing instead 2014, this Committee asked the IRS to provide it with a wri ents requested by the Committee and relevant to its investig ittee. Rather than provide the attestation, the IRS submitte those emails no longer existed. The circumstances surrour regarding the lost emails is troubling, as it strongly sugges ittee?s request for an attestation, the IRS may never have r: emails. Dups. use ofhis bully pulpit had ng a direct order to to properly preserve a then concealing that loss tigative Report, in early )is Lerner?s emails dating Upon conducting an liiad been stored on Lemer?s June 2011. While IRS they incorrectly assumed verwritten, and thus failed faulty assumption, the IRS permanently lost and so ouse. However, the IRS 3 conducting investigations to conceal this fact from tten statement attesting that ration had been produced to to the Committee on June the IRS had lost an at backup tapes that once ding the dilatory ts that had it not been for :vealed to it the existence of rted that it had completed its to release its final report on the inve igation. As explained above, in February 2014, IRS of?cials knew that a substantial number Lemer?s emails had been lost as a result of the hard drive le from any other source. Accordingly, it is dif?cult to rec 151 failure, and might not be ancile the IRS officials? nt was obtained and uploaded by the Center for Res aonsive Politics (OpenSecrets.org) US. Sen 6 Committee on Finance Additional Republican Views awarenes of the missing emails in February 2014 with their subsequent assertion to the Committ in March 2014 that the document production was complete and that the Committee should re ase its report. Indeed, in light of this knowledge, it would appear that the assertion was false and intended to hasten the Committee to complete its invest gation, thus foreclosing the possil: ility that it would ever ?nd out about the missing Lerner ils. Furthermi letter and emails. A inaccurate productio )re, IRS staff had numerous interactions with Committee st after the March 19, 2014 before the reluctant admission on June 13, 2014 that had lost many of Lemer?s .t no time during any of those interactions did IRS staff atteii pt to correct the impression created in the March 19, 2014 letter that the IRS had completed its not" requested documents. additio steps to to concealing the loss of Lerner?s emails, IRS of?cials als reserve backup tapes that contained copies of those emails. 3 failed to take adequate Upon concluding in February failed to what app 2014 that many of Lerner?s emails from 2010 and 201 1 wer :onduct a proper search for backup tapes that might contain ears to be an exercise in pure expediency, those of?cials sim missing, IRS of?cials :opies of those emails. In ply concluded that no such tapes eXi: ted because they should have been overwritten by then in accordance with the practice to recycle backup tapes every six months. In truth, in February 2014, the IRS had in its possessio in questic those bac nearly 1,200 backup tapes that could have contained Lerni m. Because the IRS failed to look for, identify and preserve kup tapes were erased by the IRS in March 2014, resulting relevant The acti missing Commi of?cials othe Committee?s investigation. ns taken by IRS of?cials, as well as those they failed to take emer emails, harmed the Committee?s investigation. IRS for as long as possible the fact that Lerner?s emails were 1 isled the Committee into believing that the IRS had compl :r?s emails from the period the backup tapes, 422 of the loss of Lerner emails after discovering the f?cials concealed from the ost. Moreover, those eted its document producti n, when in fact, they knew that many of Lemer?s emails fro interest the Committee were missing. Further, those of?cials faile responsi ility to take adequate steps to preserve thousands of Lerners irrevoca le loss of as many as 24,000 of those emails. These actions Commit of information important to its investigation and caused completion, but also further eroded the Committee?s con?dence that a period of time of great :1 to discharge their emails, resulting in the not only deprived the ubstantial delay in its the IRS has been forthcorr ing in all of its other representations to Congress regarding The C0 harm ca email. from alt: Federal 1 emails mittee undertook a number of measures aimed at mitigating sed by the failure to preserve COpies of the backup ta} or example, in an effort to bridge the gap in the missing em: Election Commission, TIGTA, a private organization, and tr etween their employees and Lerner. In addition, TIGTA un: this investigation. the consequences of the Jes containing Lerner?s the Committee secured :mate sources, including the Treasury Department, the Department of Justice, the White House, copies of iertook extraordinary efforts to recov 3r missing Lerner emails. Within two weeks of commencing its investigation into the 152 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) This docume U.S. SenaTe Committee on Finance lost email sources Committ Committ Lerner? most co In additi findings other seri all, Cc interviev~ Bipartisa record. As a reSL Addition I There is administ A ditional Republican Views 5, TIGTA located 744 backup tapes that the IRS erroneousl determined contained no 11 relevant to the Committee?s investigation. After recover efforts, those 744 tapes sulted in over 300 more Lerner emails. In total, TIGTA wa able to provide the eywith 1,330 Lerner emails that the IRS had been unable to roduce and that the e'had not seen before. Although it was not possible to repr duce a full record of ommunications during 2010 and 2011, we believe that thes efforts have provided the rehensive record that is possible. an to the findings set forth herein, the Majority staff full supports the joint :ontained in the Bipartisan Investigative Report. Those indings reveal several DUS problems at the IRS, including: anagement lacked an appreciation for the sensitivity and v0 atility of the political vocacy applications and allowed employees to use inappro iate screening criteria. ee Sections and of the Bipartisan Investigative eport.) 1e IRS lacked any sense of customer service for organizatio that applied for tax- .empt status. (See Section of the Bipartisan Invest' ative Report.) 1e IRS improperly disclosed taxpayer information of numer us conservative ganizations. (See Section of the Bipartisan Investiga ive Report.) 2010, a freelance reporter made a FOIA request for docum related to the mdling of Tea Party applications. The IRS identi?ed respo sive documents, but elected at to produce them, thereby precluding early public scrutiny its treatment of Tea arty applicants. (See Section of the Bipartisan Investi ative Report.) mmittee staff reviewed more than 1,500,000 pages of documents and conducted 32 's in the course of this investigation. We believe that the ?ndings described in the Investigative Report and in these Additional Republican Views are supported by the it of the practices described in both the Bipartisan Investigative Report and in these al Republican Views, the public?s con?dence in the IRS has been justifiably shaken. much work that needs to be done to restore the public?s trust in the ability to er the tax system in a fair and impartial way. 153 nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se 11. A centr conserx executi serve in federal agencies can and do play a valuable part in the dem person: govern an apol public danger law wi As the with imate responsibility for overseeing all of the employees inv applic tions for tax?exempt status. By virtue of her position, Lerne treme dous power over many taxpayers who sought to exercise the Amids allegations that Lemer?s political views in?uenced IRS act estions. First, what are Lois Lerner?s political views? Second, did she hold any political lly, is there any evidence that ess these questions in turn three views her po below In resc invest] explai reques testim of ove emplo nate Committee on Finance LOIS PERSONAL POLITICAL VIEWS IN Additional Republican Views FLUENCED THE PROCESSING OF APPLICATIONS FOR STATUS FROM TEA PARTY AND CONSERVATIVE ORGANIZATIONS Lois Lerner supported the Democratic Party and President extreme views on campaign ?nance reform. Lerner ?s bias handling of Tea Party applications and these organization actions. Obama, and she held in?uenced the ?3 were harmed by her al aim of the Committee?s investigation was to determine if ative taxpayers were in?uenced by political bias. Assuredly ve branch are entitled to hold personal political views and ll time and resources, and subject to limits the law imposes nent employees. However, the personal political views of a itical position should never in?uence their official actions. :ould question whether the government has acted in a fair an of political bias is particularly acute at the IRS, which has b1 integrity and fairness to all.?3 senior executive in charge of Exempt Organizations (E0), relevant to her specific responsibilities at the And ?na itical views in?uenced of?cial actions of the We addr lving these questions, the Committee sought to interview Le gation. Indeed, because of her position in the IRS, Lerner 1 how conservative applicants were treated by the IRS. Lerr for an interview, citing her Fifth Amendment right to rema any, the Committee has been able to reach conclusions abou 1,500,000 pages of documents and dozens of interviews yees, many of whom worked directly with Lerner. ?3 IRS, Fhe Agency, Its Mission and Statutory Authority. 154 any IRS actions toward employees working in the Indeed, many citizens who ocratic process using such activity by federal employee working in this were to happen, the impartial manner. The :en entrusted to ?enforce the ois Lerner was the person olved who processed had the potential to exert ir right to political speech. ons, our inquiry focused on rner as part of its ould be uniquely able to er declined the Committee?s silent. In the absence of her her role after careful review th IRS and Treasury This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) . toward . Repub US. Senate Committee on Finance Additional Republican Views In respc use to our ?rst question, the Senate Finance Committee?s investigation revealed that Lerner Obama In response to our second question, we found that Lerner favored efforts Citizen this country? and feared would lead to ?the end of ?America. In conserx ative organizations applying for tax-exempt status from earl Under special oversee her;'and directly caused conservative organizations to suffe numerc us rounds Of burdensome questions. Her biases are particul. her ina politic organizations, which imposed even greater burdens and further sti A A prirr politic public Our re contra and su These friend: during her tenure at the IRS. Her communications also sug the views of the Republican Party. and had deep disdain for the Supreme Court?s loosening oft 5? United decision, which she deemed ?by far the worst thing n39 oerner?s leadership, Tea Party organizations were systemical processing. The impact of Lerner?s bias was exacerbated by :tion on Tea Party applications to her quick responses to inq i. PERSONAL POLITICAL VIEWS: LERNER PARTY, PRESIDENT OBAMA, AND OTHER ary focus of our investigation was whether Lerner?s persona il party or the other. Lerner has acknowledged that she is a I stated that she is ?not a political person.?10 was a Democrat who consistently supported Democratic politicians, particularly President gest that she felt animus paign ?nance reform ese restrictions in the that has ever happened to )nse to our third question, we conclude that Lemer?s partisar bias directly harmed 2010 until May 2013. 1y targeted and set aside for 7 her superiors? failure to long delays and endure 1rly evident when comparing .Iiries from Democratic ns. We also found evidence that Lerner?s bias led to audittleOf some conservative their political speech. THE DEMOCRATIC 1 political views favored one egistered Democrat but She view of Lerner?s communications casts doubt on her claim and family uniformly shared her views and sometimes ma licans and the Tea Party to Lerner: celebrate, but it 'sure looks iffy!?11 The next month, Repu defeated Democrat John Kerry in the presidential election. 9Emau '0 Polit Ema ico, Exclusive: Lois Lerner Breaks Silence (Sep. 22, 2014). 155 This document was obtained and uploaded by the Center for Res being ?apolitical.? To the her conversations with family and friends show that Lem followed politics closely pported the Democratic Party and Democratic politicians, rticularly President Obama. conversations all on Lerner?s government email account also Show that Lerner?s disparaging comments about In an October 2004 email conversation with a former colle gue from the Federal Election Commission (FEC), Lerner said, ?[A]fter the election, we? 1 get together hOpefully to ican George W. Bush chain between Lois Lerner and Mark Tomwall (June 1, 2012) 1R80000300024. 1 chain between Lois Lerner and FEC Employee (Oct. 12, 2004) FECSUBP5001079. aonsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance keep the Senate: If it had switched, it would be the same as Romney/Ryan ticket is really scary. How did a creep like governor of Massachusetts, anyway?"12 invitation included a picture of the Democratic Party logo. ?3 ?ngers crossed. And, I did vote!?14 ?[o]nce in a lifetime stuff? and said that ?[people in London 3915 Romney guy is. ?Hurray, Hurray OBAMA for 4 more years.?16 state of bliss? after the election results were announced. ?7 retained control of the U.S. Senate. Lerner responded: ?Wo same conversation, Lerner celebrated Maryland?s legalizati Lerner?s family member commented, think there were 3 party republicans to democrats so that?s exciting!M8 In November 2012, Lerner had the following email exchang Miles: Miles: Well, you should hear the whacko wing of tl too many foreigners sucking the teat; time to hunke and prepare for the end. The right wing radio show 'chain between Lois Lerner and friend (Nov. 4, 2012) 1 chain between Lois Lerner and Michael Miles (Nov. 6, 2012) 1 chain between Lois Lerner and Michael Miles (Nov. 7, 2012) 156 Additional Republican Views [n October 2012, a friend wrote to Lerner about the upcoming election: ?The omney ever get elected to be In November 2012, a friend invited Lerner to an election-night party that she decided to host ?now that Nate Silver has raised Obama?s chance of winning to The party Lerner responded, ?Would have loved to, but am in London.? Lerner passed the invitation along to her'husband and told the host, he?s smart he?ll join you.? Lerner noted that she was ?[k]eeping my On Election Day in 2012, Lemer?s husband told her that it was ?hard to find the socialist- labor candidates on the ballot, so I wrote them in.? Lerner described the election as get that it?s close but they don?t seem to think Obama could really lose. They all want to know who the heck this On November 7, 2012, a family member wrote an email to Lerner with the subject On November 7, 2012, Lerner?s husband described her as being ?in that post-election In a November 2012 email with a family member, Lerner was informed that Democrats oI-Ioo! I[t] was important to a Rep president.? In the an of same?sex marriage. seats that switched from tea ge with her husband, Michael 1e GOP. The US is through; down, buy ammo and food, 5 are scary to listen to. Lerner: Great. Maybe we are through if there are that many assholes. Miles: And I?m talking about the hosts of the shows. The callers are rabid. 1 chain between Lois Lerner and Mark Tornwall (Oct. 11-17, 2012) IRS 300079395 4. 1 from friend to Lois Lerner and others (Nov. 4, 2012) 794247-48. 1 chain between Lois Lerner and family member (Nov. 7, 2012) IR80000794253. 794265. 1 chain between Lois Lerner and family member (Nov. 6-7, 2012) IRSO 300317155-56. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se nate Committee on Finance Additional Republican Views As a whole, these communications establish that Lerner supported President Obama and the suggest ideals. Next, Vl POLITICAL VIEWS RELEVANT TO HER IRS Po EXTREME ON LIMITING CAMPAIGN FINANCE EXP SPEECH Democratic Party and, contrary to her assertions, followed politics closely. The also that Lerner held disdain for those who supported conservative values and Republican SITION: LERNER HELD ENDITURES AND POLITICAL re consider whether Lerner held any political views that were relevant to her position at the IRS. As described below, we conclude that Lerner supported campaign ?nance reform - efforts These Before the FEC in?198l and served in several senior positions during her 2 . of the Enforcement Division and Acting General Counsel.24 A coll known laws as follows: . While threate never: Lerner organi and A1 politic that it Lerner which propo: politic and was generally in favor of restraining political speech by 'iews were directly relevant to her oversight of the E0 Divis joining the IRS in 2001, Lerner spent most of her career in Lerner since 1985, attorney Craig Engle, described Lerner?s Engle describes Lerner as pro-regulation and as somebody of money in politics. The natural companion to those views ?Republicans take the other side? and that conservative gr more rigorous investigations. According to Engle, Lerner conservative groups are intentionally ?outing the law.25 Lerner was head of the Enforcement Division, she wa ned a Republican candidate for the US. Senate, allegedly sa un for office again, and we?ll drop [the pending charges aga ?s expertise in election law certainly shaped her view of the rations in the political process when she joined the IRS in 2C greements. While she was at the IRS, Lerner continued to su a1i speech. In a February 2002 message to a former colleague was ?pretty exciting that the campaign ?nance [reform bill] was referring to the Bipartisan Campaign Reform Act of 20 2? Resu 25 Na-tzLois Lerner (undated) Washington Post, Lois Lerner: The Scowling Face of the State (June 12, nal Review, Lois Lerner at the FEC (May 23, 2013). 1 chain between Lois Lerner and FEC Employee (Feb. 22, 2002) FECSL 158 This document was obtained and uploaded by the Center for Res tax-exempt organizations. Ion at the IRS. lections law. Lerner joined 3-year tenure, including head eague from the FEC who has views of campaign finance eeking to limit the in?uence he says, is her belief that rbors a ?suspicion? that should be subjected to reported to have improperly ying, ?Promise me you will ole of tax-exempt 01 as the Director of Rulings pport spending restrictions on a at the FEC, Lerner stated nay actually go throug O2 (McCain?Feingold Act), became law on March 27, 2002. More recently, Lerner supported the DISCLOSE Act, a :ed law that would require donor disclosure by tax-exempt 01 a1 campaign activities, although she apparently realized it w: 3327 ganizations that engage in Is not likely to pass. When 2013). BP5001236. oonsive Politics (OpenSecrets.org) . . US. Senate Committee on Flnance I Additional Republican Views informed that Democrat Chris Van Hollen introduced the DISCLOSE Act in the House, Lerner said, ?Wouldn?t that be great? And I won?t hold my breath.?28 Given Lerner?s support for the McCain-Feingold Act, it should co disappointed when the Supreme Court struck down parts of the Act surprisihg. Lerner bluntly told a friend: as no surprise that she was in Citizens United v. Federal . Election Commission, 130 S. Ct. 876 (2010). The depth of Lerner?s emotion, however, is Citizens United is by far the worst thing that has ever happened to this country.29 After er: friend agreed that it was a ?total disgrace that the Supreme Court has endorsed this far bey and campaign ?nance rules: We are witnessing the end of ?America.? There has always and in the end, we will all lose out. [I]t?s all tied together money the ?old boys? still win.30 .. concep Lerner expanded on her view of the case to explain why the decision had repercussions been the struggle between the capitalistic ideals and the humanistic ideals. Religion has usually tempered the sel?shness of capitalism, but the rabid, hell?re piece of religion has hijacked the game money can buy the Congress and the Presidency, so in turn, money packs the And the court usually backs the These extreme views would be troubling if held by any government of?cial; but they are partic arly troubling when held by a senior IRS of?cial charged organizations, including those that engage in political speech. While employed at the IRS, Lerner maintained close ties to numerc that sh ared her goal of limiting spending by tax-exempt organizatio groups took advantage of their direct access to Lerner and other set asking the IRS to tighten its control over political spending by tax-t described in Section of the Bipartisan Investigative Report. them in person to discuss their proposals. One group that had particularly close ties to Lerner is the Americar (ACR). ACR describes itself as ?a community of citizens who beli funding [of elections] is the single most critical long-term public pi Lerner?s ties to ACR were strong enough that when ACR was sear they 5 light Lemer?s opinion on Larry Noble, who had been the Ge durin Lemer?s tenure, and thanked Lerner ?for [her] contribution recom ended that ACR hire Noble and told him that she was ith oversight of tax-exempt us outside advocacy groups ns on political speech. These iior IRS of?cials, frequently :xempt organizations as Lerner even met with some of for Campaign Reform eve passionately that public )licy issue our nation faces.?31 :hing for a new CEO in 2012, :neral Counsel at the FEC to this search.?32 Lerner ad I could be a part of their 2? Ema' chain between Lois Lerner, Joseph Urban and others (Feb. 13, 2012) 29 Ema' chain between Lois Lerner and Mark Tomwall (June 1, 2012) 30 1d. 3? Ame icans for Campaign Reform, About Us. 32 Ema chain between Lois Lerner and Larry Noble (Aug. 17, 2012) 159 800024. 83618-20. This docum nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views decision.?33 Lerner and Noble made plans to have lunch, and Lerner asked Noble, ?So, when should job,? a - was re Lerner Wisco} campa ?nance: and the need for increased regulation of political speech.36 a pane speech private Paul bemo I expect your ?rst letter yelling at me about the c4s??34 No gularly in touch with Lerner. also maintained close ties with Kevin Kennedy, the Director isin Government Accountability Board, which administers a gn ?nance and election laws.35 Kennedy shared many of Le discussion for the Council on Government Ethics Laws on 3?37 Lerner spoke at this panel along with Larry Noble (who law FEC Commissioner Ellen Weintraub, and Campa yan.38 Kennedy and Lerner regularly discussed election law ed Wisconsin?s loosening campaign ?nance regulations, sa lole replied, ?That?s Fred?s aparently referring to Fred Wertheimer, President of Democracy 21 another group that and General Counsel of the ad enforces Wisconsin mer?s views on campaign In 2008, Kennedy organized ?regulating political was then practicing at a Lign Legal Center attorney and in 2011 Kennedy ying, ?[T]he legislature has killed ur corporate disclosure rules.?39 Kennedy described Lerner as his ?favorite person? . and, professional friend [he has known] for more than 20 years. Lerne ?3 views on campaign ?nance laws and her close ties to orga of?ci how ls that sought to limit political speech must be taken into cor erner administered the tax law as Director The secret - recall Walker Wisco: (Dec. 2 Wisco: 35 Ema Lois Kenne piece 37 Ema Kenne 38 39 Email chain between Lois Lerner and Kevin Kennedy (July 22, 2011) IRSOO Lois Kenne IRSOO 4? Ema Wisco 1 chain between Lois Lerner and Larry Noble (Aug. 10, 2012) 1 chain between Lois Lerner and Larry Noble (Aug. 10, 2012) Wisconsin Government Accountability Board is reported to have provide ohn Doe investigation of conservative organizations? political activities lections. On July 16, 2015 the Wisconsin Supreme Court ended the Johi ?5 campaign did not violate campaign ?nance laws. See Milwaukee Jou sin?s recent John Doe Investigations (Sep. 10, 2014); Wall Street Journc 1, 2014); Wall Street Journal, Wisconsin?s Friend at the IRS (July 9, 20 [sin Supreme Court ends John Doe probe into Scott Walker?s campaign 4 1 chain between Lois Lerner and Kevin Kennedy (July 22, 2011) IRSOO :rner and Kevin Kennedy (Nov. 1, 2012) Isthmus, Wis 1y is at the center of state's political storm (Nov. 1, 2012). Kennedy char tom the progressive media about himself. il from Kevin Kennedy to Lois Lerner and others (Dec. 10, 2008) ?y to Ellen Weintraub, Lois Lerner and Paul Ryan (Dec. 3, 2008) FECSI erner and Kevin Kennedy (Feb. 6-7, 2013) Email chair :ly (Jan. 28, 2013) Email from Lois Lerner to Kevin Kt )0052989-90. i1 chain between Lois Lerner and Kevin Kennedy (Mar. 7, 2013) nsin?s Friend at the IRS (July 9, 2015). 160 40 nizations and government isideration when evaluating 01074-77. 01105?08. assistance to prosecutors in a during the 2011 and 2012 Wisconsin 1 Doe investigation, ruling that Scott rnal Sentinel, Untangling 11, Wisconsin Targets the Media 15); Milwaukee Journal Sentinel, July 16,2015). )0796497-98; Email chain between :onsin elections director Kevin acterized this piece as a positive Email from Kevin JBP5001 131. 00796497-98; Email chain between between Lois Lerner and Kevin nnedy (Feb. 20, 2013) 10811079; Wall Street Journal, This document was obtained and uploaded by the Center for Res oonsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance Finally We for harm it As des includ curtail Unitea her per manag On the attenti Divisii ?[t]his pressu . BIAS HARMED CONSERVATIVE ORGANIZATIO we consider whether Lerner?s personal political views inflL nd evidence of ?ve ways that Lerner?s bias affected IRS act conservative organizations that came into contact with the 1. LERNER AND SENIOR IRS MANAGEMENT DEVISED WA CONSTRAIN TAX-EXEMPT ORGANIZATIONS THAT ENC cribed in Section IV of the Bipartisan Investigative Report, several of the left-leaning groups noted above pressurer political Spending Of 501(c)(4) organizations in the wake of decision. Perhaps no one was more aware Of this pressure sonal disdain for the ruling. As described below, Lerner enc ement to use the agency?s tools to dampen the effect of the day after the Citizens United decision was announced, Lern an of upper-level management in the Tax Exempt and Gover )n and the Chief Counsel?s Of?ce.42 Lerner recognized the is the danger zone no matter what we say.?43 In October 20 re on the IRS when she Spoke at Duke University?s Sanford The Supreme Court dealt a huge blow [in Citizens United], precedent that said basically corporations could give direct] everyone is up in arms because they don?t like it. The Fedc 4' In ad Com m1 willful Means I ?2 Lem before .wrotei open Miller Comm Sarah ?3 Ema 24. dition to our ?ndings, Lerner?s political bias is further reinforced by find ttee in their April 9, 2014 referral of Lerner to Attorney General Eric HO misconduct by an IRS of?cial and potential violation of criminal statutes Committee pointed to three potential violations of law: Lerner used her position to improperly in?uence agency action against denying those groups due process and equal protection rights under the prejudice toward conservative groups. The letter lays out evidence on organization Crossroads GPS, as well as other right-leaning groups, groups that were similarly organized, such as Priorities USA. Lerner impeded of?cial investigations by providing misleading statem TIGTA. Lerner used her personal email for official business, including con?de investigation could Show that Lerner committed an unauthorized discl the Internal Revenue Code. er's angst over the Supreme Court overturning the corporate ban on poli the actual decision was rendered by the Court on January 21, 2010. Ind: 0 Sarah Hall Ingram in anticipation of such an eventuality, stating that ti numerous pandora?s boxes? for the IRS. She requested that Ingram ?g so we at least know the perameters [Sic] of the box we?re in Lerne issioner also needs to be aware that this is going to get noisey [sic] real i -Iall Ingram (Nov. 17-23, 2009) il chain between Lois Lerner, Nicole Flax, Sarah Hall Ingram, and other I 161 This document was Obtained and uploaded by the Center for Res Additional Republican Views NS lenced her work at the IRS. ions, all of which resulted in during Lerner?s tenure.? as To SYSTEMICALLY AGED IN POLITICAL SPEECH 'arious external forces ithe IRS to monitor and the Supreme Court?s Citizens han Lerner, particularly given :ouraged senior IRS upreme Court?s decision. er brought the decision to the nment Entities ensitivity of the case, stating, 10, Lerner described the School of Public Policy: overturning a lOO-year Old in political campaigns, and :ral Election Commission ings of the House Ways and Means lder at the Department of Justice for . In that letter, the House Ways and only conservative organizations, law. She showed extreme bias and how Lerner targeted conservative Iile turning a blind to liberal ents in response to questions from ntial return information. Further asure in violation of section 6103 of ical contributions commenced long ed, on November 17, 2009, Lerner Court?s overturning the ban ?will eta discussion going with [Steve] also indicated that ?[t]he ast.? Email between Lois Lerner and 5 (Jan. 24-25, 2010) oonsive Politics (OpenSecrets.org) the 'au ors noted: US. Senate Committee on Finance set up to ?x the problem. So everyone is screaming at us the election, can?t you see how much these people are spenc look at their 9903 next year whether they have done more t1? political or not. So I can?t do anything right now.44 Neart ei end of 2012, Lerner and other employees in the E0 divisit it was ossible to quantify the effect that Citizens United had on p0 by tax exempt organizations. In December 2012, Division sent rner his preliminary analysis on sources of data that might Additional Republican Views can?t do anything about it. They want the IRS to ?x the problem. The IRS laws are not right now, ?Fix it now before ling?? I won?t know until I an their primary activity as a )n began considering whether litical campaign intervention employee CristOpher Giosa available. 45 Giosa sugge ed that EO consider enlisting the Of?ce of Complianze Analytics to help with this proj ec .46 By Ap il 2013, E0 and the Of?ce of Compliance Analytics had prepared a detailed presentation on pol tical spending by 501(c)(4) organizations.47 As background misuse of 501(c)(4)s for political campaign activity due to 1 anonymity they can provide to donors.48 information for the report, Since Citizens United (2010) removed the limits on political spending by corporations and unions, concern has arisen in the public sphere and on Capitol Hill about the potential heir tax exempt status and the The at thors then provided a ?problem statement,? which stated that ?[t]he public purpose of 501(c)(4)s may be diluted by political campaign activities as an unintended consequence of Citize is United.?49 In May 2013, E0 and the Of?ce of Compliance Analytics revised the presentation in advance of a May 7 brie?ng for then-Acting Commissioner Miller.50 The reVI sent tc Miller?s of?ce, made the following ?ndings: year 2008 through tax year 2010; and 4? SFC Transcription of Video Available on Youtubecom, Lois Lerner Discuss: (Oct. 19, 20101d. sed presentation, which was 0 The number of 501(c)(4)s reporting political campaign activities almost doubled from tax 5 Political Pressure on IRS in 2010 ?5 Em:[1 from Christopher Giosa to Lois Lerner, Joseph Grant and others (Dec. 6, 2012) 1R80000185323-27. 1 from Justin Abold to Lois Lerner, Holly Paz and others (Apr. 12, 2013) 5? Mill :r?s calendar shows that he organized a meeting to discuss Data Mdtters? with Nikole Flax, Dean Silverman, Eric Schweikert, and Joseph Grant (May 7, 2013) 162 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance The report identi?ed two events that occurred contemporaneously numbe The amount of political campaign activities for large ?lers year 2010.51 Additional Republican Views (de?ned as organizations with total revenue of more than $10 million) almost tripled from tax year 2008 through tax with the drastic rise in the of 501(c)(4) organizations that reported political campaign activities: the Citizens United decision and Congress?s consideration of the Affordable Care Act. 52 Although the report did not conclude that these events caused a rise in political spending, by singling them out, it is clear that the IRS [viewed them as significant, relevant factors. Itisu clear if IRS management considered report when it proposed regulations that would provide guidance on political activities to 501(c)(4) organiz ations on November 29, 2013. Regar less, the regulations would have had the effect of restraining political speech by 501(c)(4) organ' ations, but not by other types of tax-exempt organizations. The IRS received more than 150,0 0 comments on the proposed regulations from people and organizations across all parts of the po itical spectrum, which were overwhelmingly opposed to the regulations. In the face of this 0 position, on May 22, 2014, the IRS stated it planned to re?propose the regulations after a thoro gh review of the submitted comments.53 Altho gh the IRS was unsuccessful in implementing these regulations, the aim was clearly ?.align with Lerner?s belief that the IRS should take measures wit nin its power as the executive branc to restrain spending on political speech, thereby circumventing the effect of the judicial branc The Lerner did not want other IRS of?cials to in?uence the review pro concern about political Spending, she did not inform her managers large discourse, or that 130 was struggling to process these applications. these Repo Lerne mana ?8 Citizens United decision. APPLICATIONS nusual manner in which incoming Tea Party applications we number of applications from Tea Party organizations, some issues is discussed in greater detail in Section of tilt recognized that one of her key duties as E0 Director was 5? Em: .52 53 IRS ilychain between Justin Lowe, Justin Abold and others (May 6, 2013) IR 163 2. LERNER EXERTED A LEVEL OF AUTONOMY OVER THE TEA PARTY re handled suggests that cess. In spite of Lerner?s that the IRS had received a )f which engaged in political Lerner?s failure to elevate Bipartisan Investigative 3 keep upper-level gement informed. As she explained to one of her subordinates: 80000494805-29. Update on the Proposed New Regulation on 501(c)(4) Organizations (May 22, 2014). This decument was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance issues. Ourjob is to report up to our bosses on anything th page ofthe NY Times.54 1 Yet, tl ere was little accountability for executives like Lerner withi Additional Republican Views [W]e ensure that all of our [senior] managers are aware of all highly visible hot button at might end up on the front the Division management chain. From late 2010 through May 2013, Lerner rep orted to Joseph Grant, who was Acting Division Commissioner of Grant told Commi ttee staff that he had ?relatively minimal interaction? with Lerner.55 Grant believed that Lerner ?was enjoying being in charge of E0 that was something that she ran with,? but Lerner?s managerial style required Grant to ?make more effort? to stay aware of what was happening in ED.56 Lerner?s previous imme iiate supervisor, Sarah Hall Ingram, described a similar relationship with Lerner and noted that their main face-to?face interaction was at quarterly meetings.5 7 Thus, the onus was on Lerne" to keep her immediate managers informed of information that Lerner deemed important. Lerne appeared to have had more frequent contact with Steve Miller than Grant or Ingram, despite the fact that Miller was two or three levels above Lerner. Like Lerner, Miller?s background Division, where he served as Director while Lerner served below as Director of Rulings and Agreements in the early 20003. Miller continued to be in Lerner?s management chain when he was promoted to Division Commissioner for then to Deputy Commissioner for Services Enforcement, and ultimately, to Acting Commissioner of the IRS. Throughout their time together at the IRS, Lerner usecl Miller as a sounding board on tax-em empt issues and Miller appears to have given Lerner broad 2 E0. ln his interview with Committee staff, Miller stated, ?Lois ar On the whole, Miller felt that Lerner ?was pretty good about eleva attention. 59 This made Lerner?s decision not to tell him about the particularly vexing for Miller, who stated, ?you know, she was pre Luthority and autonomy within ld I have a good ting things? that required his Tea Party applications :tty good about [elevating issues], so this was a bit of a surprise.?60 In fact, the first time that Miller had any indication that some .hing was amiss was in early 2012, when the IRS started rec: media and Congress about burdensome requests made of Tea Part applicants. By that point, Lerner had been overseeing the process Party organizations for almost two years. Miller was not the only senior executive who Lerner kept in the Section of the Bipartisan Investigative Report, Lerner ale 54 Email chain between Lois Lerner, Nanette Downing and others (May 10-11, 55 SFC Interview of Joseph Grant (Sep. 20, 2013SFC Interview of Sarah Hall Ingram (Dec. 16, 2013) p. 18. 5'3 SFC Interview of Steve Miller (Dec. 12, 2012) p. 242. 59 164 :iving questions from the and other political advocacy ing of applications from Tea ark. As described more fully in 0 failed to inform Division 2011) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Comrr Grant, Comrr also se her dlir Lernel break aware those In the applic applie Grodr had be Party Grodr Throu Party resolv Lerne 201 1, Lerne court to tax and Judy Kindell needed to be involved with these applications an enate Committee on Finance issioner Douglas Shulman about the Tea Party applications. ect supervisor from the end of 201 0 through 2013, was parti In retrospect, of course I wish that had become aware of April or May of 2012]. I would have liked to have known from the norm. Her omission suggests that there were reaso :liscussed in the sections immediately below. FOR TAX-EXEMPT STATUS ations starting at the time when she ?rst became aware that dfor tax-exempt status in 2010. On May 13, 2010, E0 Tecl itzky alerted Lerner to a number of open Sensitive Case Re; :en prepared for the Tea Party applications. Lerner responde applications, and speci?cally, thebasis of their exemption re itzky that ?[a]11 cases on your list should not go out without applications, which noted the growing number of applicatior any of them.? grew more concerned about the Tea Party applications in Michael Seto, the Acting Manager of EO Technical, sent an She responded, ?Tea Party Matter very dangerous This on the issue of whether Citizen?s United overturning the ban exempt rules.?64 Based on these concerns, Lerner decided 6? SFC Interview of Joseph Grant (Sep. 20, 2013from Steven Grodnitzky to Lois Lerner and Robert Choi (May 27, 201 Theod re Lieber to Lois Lerner and others (July 30, 2010) 1R80000807076-80 taxpay information omitted by Committee staff); Email from Steven Grodnit: (Sep. 0, Email from Holly Paz to Lois Lerner and IRSOO 0156478-81. ?34 Em '1 chain betWeen Holly Paz, Lois Lerner, and Michael Seto (Feb. 1-2, 20 chain between Lois Lerner, Rob Choi, Steve Grodnitzky, and others (I 165 issioner for Sarah Hall Ingram, Acting Division Con Assistant Deputy Commissioner for Services Enforcemer emed surprised that Lerner failed to brief them before the pr informed about the challenges and backlogs that facet ?s decision not to brief upper-level management about the of her handling of these applications and did not want other: 3. LERNER CREATED ROADBLOCKS FOR TEA PARTY absence of input from upper IRS management, Lerner exert: Additional Republican Views 1missioner for Joseph 1t Nikole Flax, and IRS Several of those managers oblems became public. Grant, cularly frustrated: Tea Party backlogs before about that and have been 161 ea Party applications was a as she did not want them to be a to become involved such as THAT APPLIED :d control over the Tea Party Pea Party organizations had mical Acting Manager Steven ports, including a new one that by asking about the Tea quests. Lerner instructed a heads up to me please.?62 gh the remainder of 2010, Lerner received at least four updates about the status of Tea IS and the failure to arly 2011. On February 1, updated summary of SCRs to could be the vehicle to go to on corporate spending applies hat the Of?ce of Chief Counsel that they should not be /Iay13-16, 2010) IR80000167872-73. O) Email from 7115 (email attachments containing sky to Lois Lerner and Robert Choi Robert Choi (Nov. 3, 2010) 11) IRS0000159431-33. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views - handled by Cincinnati but instead by employees in Washington, C.65 Lerner must have anticipated that these directives would inevitably delay the processing of Tea Party applications: - Rindell had ?a general reputation of being slow in all work.? Further, ?[s]he had a reputation of having dif?culty with deadlines and taking a period of time on cases.?66 In an email to her manager Ingram, Lerner described Kindell as follows: not real useable (sic) in terms of making things happen.?67 0 Similarly, the Of?ce of Chief Counsel could take ?3 months, 6 months, a year? to provide feedback to E0 and generally ?can take a great deal of time? to respond to E0 requests for help.68 0 Finally, as noted by Paz and others, the E0 of?ce in Washington, DC. had far fewer employees than Cincinnati who could evaluate and develop applications for tax-exempt status. Reviewing all of the Tea Party applications, which by that point exceeded 100, in Washington, DC. would certainly result in delays. Lerner convened a meeting in July 2011 with Paz, Thomas, and others speci?cally to discuss the growing backlog of Tea Party applications. Thomas summarized the outcome of the meeting in a message to her employees in Cincinnati: Lois expressed concern with the ?label? we assigned to these cases [on the Her concern was centered around the fact that these type things can get us in trouble down the road when outsiders request information and accuse us of ?picking on? certain types of organizations . Lois did want everyone to know that we are handling the cases as we should, the Screening Group starts seeing a pattern of cases and is elevating the - 69 issue. In other words, Lerner was concerned about the perception that the IRS might be ?picking on? Tea Party and conservative organizations, but she was not concerr ed about how the applications - - were aetually being handled. Rather than expediting the applications some of which had now been sending for nearly a year and a half Lerner added more layers of review and raised ?hurdl :s for applicants to clear during the July 201 1 meeting: 0 130 Technical would develop and draft a guide sheet for E0 Determinations to use when reviewing 501(c)(3) and 501(c)(4) ?advocacy organization? applications to assist in spotting issues associated with these types of cases. ISO-Determinations would send 15-20 developed cases to 130 Technical for review. 65 Id. I 66 SFC Interview of Holly Paz (July 26, 2013) pp. 128, 166. 67 Ems ilchain between Lois Lerner and Sarah Hall Ingram (April 29, 2010) 1R80000858652-53. 53 SFC Interview of Steven Grodnitzky (Sep. 25, 2013) p. 145. ?59 Ema il chain between Cindy Thomas, Steven Bowling, John Shafer, and others (July 5, 2011) 166 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. These other fully incluc advoc since until 1 Due organization was granted tax-exempt status between February 20C bias a comp Althc this did One FebrI reque unem L. ienate Committee on Finance The IRS would require 501(c)(3) and 501(c)(4) ?advocacy representations regarding compliance with the guide sheet prohibited activities. E0 Determinations would also look to see if these organiz Federal Election Commission and if so, they would ask ad and other measures implemented under Lerner?s watch enSI conservative organizations were subjected to multiple levels 11. Section VI of the Bipartisan Investigative Report. Lerner ling a November 2011 message from Thomas advising that acy applications had grown to more than 161 and that some 2009.71 In spite of these warning signs, Lerner did nothing 1 he problems started becoming public in early 2012. the circuitous process implemented by Lerner, only one co gainst these applicants unquestionably led to these delays, a1 ared to the treatment of other applications, discussed i 4. THE IRS SOMETIMES RESPONDED TO POLITICAL INC DECIDING CERTAIN APPLICATIONS, BUT NOT WHEN TEA PARTY ORGANIZATIONS ugh applications from the Tea Party and conservative organ as not the case for all groups that applied. In cases where ti particularly for other high-pro?le applications that attracted :xample is an application for 501(c)(3) tax-exempt status ?le my 21, 2012, a Democratic U.S. Senator?s of?ce sent a lette sting that the IRS perform an expedited review of the applic slicant ?ts the pro?le Of a ?new markets? district, with its ployment pro?le [and] will acquire, ?nance, construct, re 7? Mei applic 7 Em contai 72 The taxpa} U.S. 73 Em IRSOC norandum from Hilary Goehausen to Michael Seto, Notes from Meeting ations with Lois on July 5 (July 6, 2011) Iil chain between Cindy Thomas, Lois Lerner and others (Nov. 3, 2011) ni'ng taxpayer information omitted by Committee staff). Majority staff has assigned a pseudonym to this taxpayer to protect its i er have also been redacted by the Majority staff to remove identifying iI enator who was involved with this application. Iil chain between Senator?s staff, Floyd Williams, Doug Shulman and ot 00411951-52 (email attachments containing taxpayer information omitt: 167 'won?t politically intervene) in order to pin them down in tl I I I I Additional Republican Views organizations? to make certain and certain issues they re future if they engage in atib'?'s haVe registered with the :litional questions.70 Ired that the Tea Party and of review, as explained more continued to receive updates, he backlog of political of them had been in process 0 expedite these applications nservative political advocacy 9 and May 2012. Lerner?s ?ld is particularly evident when mmediately below. BY QUICKLY THE INQUIRIES WERE ABOUT zations languished at the IRS, 1e IRS wanted to act quickly, it political attention. by Applicant 0n to Commissioner Shulman ation.73 The letter noted that low income and high habilitate and lease a on 03/04 ?advocacy organization? 1R80000162845-46 (email attachment ientity. Documents referring to this Iformation about the taxpayer and the hers (Feb. 21 - Mar. 2, 2012) by Committee staff). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. building for use as a municipal of?ce facility with street level reta for tax?exempt status in October 2011 and had twice requested ex} IRS Comr was a conve "Lerne Thorq posse the IF 2012 A sec for ar be ex Thorr vvoul case days, revie? us L. enate Committee on Finance enied the request. :lvised to tell the Senator that he doesn?t get involved in indi :The latest is that they will get approved today. Cindy [Tho they are comfortable with this one. I?ve asked Holly [Paz] be approved today.77 ss?ion. The case had been ?sitting in full developmen 0nd example occurred in late April 2013 when Lerner instru incoming application from Applicant and to send it to pedited for review by Lerner?s senior advisers.79 receive expedited processing; nonetheless, at Lemer?s diret ,Washington, DC. for expedited processing when it arrivec the IRS had reviewed the application, sent a development le Ned the organization?s responses. The IRS reviewers noted being able to recognize them as a charitable organi: ii'ssioner Shulman was scheduled to talk with the Senator on yito EO why the Senator thought the case should be expeditt for an update on the status of Applicant X. Lerner respond 'us know once it has actually been approved and closed. Th as further noted that the case had been approved based on in .8 received the Senator?s inquiry.78 Applicant X?s applicatic as noted that under normal IRS procedures, Applicant did Additional Republican Views 1.?74 Applicant had applied Jedited review, and twice the March 5, 2012.75 Shulman vidual cases but that he will :d.76 The next day, Flax asked ed: mas] took another look and to tell Cindy [Thomas] to let ere is no ?but? here. [I]t will formation already in the unassigned inventory? until in was approved on March 6, cted Thomas to keep an out ashington, D.C. so that it could not fall into a category that :tion, Thomas forwarded the in late April.80 Within a few tter with questions, and a problem that ?would prevent ration.?81 In the meantime, ActingZCommissioner Miller and Treasury Department Chief of Staff Mark Patterson had spoken 74 75 Shu man told Committee staff that he had no recollection of whether the conversationactually occurred. SFC Interv ew ofDouglas Shulman (Dec. 3, 2013) pp. 116-117. 75 Email chain between Floyd Williams, Doug Shulman and others (Feb. 21 - Mar. 2, 2012) (email attachments containing taxpayer information omitted by Committee staff). 77 Email chain between Lois Lerner, Nikole Flax and others (Mar. 6, 2013) IRES0000429946-47. 78 Ir . 79 Em rill chain between Lois Lerner, Holly Paz and others (Apr. 10-19, 2013) 11R50000012957-60. The Majority staff has assigned a pseudonym to this taxpayer to protect its identity. Documents referring to this taxpayer have also 13 sen redacted by the Majority staff to remove identifying information about the taxpayer and the US Senator who was involved with this application. 8? Id; SFC Interview of Cindy Thomas (July 25, 2013) p. 39. Thomas and other IRS employees noted that the IRS had al 0 expedited past applications received from applicants under similar circumstances. 3' Em ail from Lois Lerner to Nancy Marks (May 6, 2013) 168 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US Senate Committee on Finance with tl received a separate inquiry from a Democratic US. Senator.82 Thereafter, Lerner, Nancy Marks, and other senior EO staff spoke how they could remedy the problems that would preclude the IRS status info what also Appli oubles us about the application? and ?to suggest ways they :ant tax-exempt 501(c)(3) status.86 In a ti ird case, a Democratic U.S. Senator?s of?ce inquired about tax-ex einpt status. Lerner stated, ?Our guys took a real close look an and will be able to get the letter out tomorrow.?87 Finall about [the a montl Lerne y; in January 2013, the IRS received an inquiry from a Demc the status of an application for tax-exempt status. Thomas t< aplication] hasn?t been assigned yet? for review since it had 18331101188 Thereafter, the case was reviewed within the next that it would be approved on merit. Lerner expressed her I?m guessing you know this only makes me a little bit hapl: Congressman about why it takes so long for case[s] to be a told you almost every time I ask them to go back and loo 4 it miraculously gets closed on merit after it has been sit awaiting full development.89 Yet Cong inquii subor etiner?s observation that the IRS usually resolved applicatic "essional inquiry didn?t always prove true. Republican me ed about Tea Party groups were met with a very different re: :linates. ?2 Em '1 chain between Mark Patterson and Steven Miller (May 4, 2013) Mego Lerner and others (Apr. 23, 2013 - May 7, 2013) Patter (Apr. 7, 2014) pp. 59-61. 33 SF Interview of Steven Miller (Dec. 12, 2013) p. 229. 8? Em from Lois Lerner to Nikole Flax and Joseph Grant (May 3, 2013) 35 SF Interview of Steven Miller (Dec. 12, 2013) p. 229. 8" Lett rifrom IRS to Applicant (May 14, 2013). 87 Em il :chain between Lois Lerner, Andy Megosh and others (Dec. 20-21, 201 ?8 Em il ichain between Lois Lerner, Holly Paz, Cindy Thomas, and others (Jan 45. 39 Id. 169 ie staff of the Democratic mayor of the city where Applicant 8? For example, On May 3, 2013, Lerner noti?ed Nikole F12 filed a representative of the applicant that ?our goal was to ass e?sonally met with the organization?s leader.85 On May 14, 2 Additional Republican Views was based, and the IRS with the organization about from granting tax-exempt tx that she had personally ist them in understanding might modify it 3?84 Miller 2013, the IRS granted he status of an applicant for at this and we now think it is >cratic member of Congress )ld Paz that don?t know why seen received by the IRS six few days and Paz informed rustration to Paz: y. I have to talk to the ssigned and worked. As I at a case that has been sitting ting for months and months ans within days of receiving a mbers of Congress who ;ponse from Lerner and her 132185; Email chain between Andy 9-20; and SFC Interview of Mark 1000662208 2) 1R80000185655-56. 30 Feb. 8, This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. criate Committee on Finance Additional Republican Views In November 2011, Thomas told Lerner that she had spoken with representatives from political advocacy organizations who were ?threatening to contact their Congressional of?ces.?0 To ?buy time? so one of the groups ?didn?t contact his Congressional of?ce,? Thomas informed Lerner that she ordered one of her subordinate managers to send a 5 information to the group.? Lerner did not object to this plan. in Ma Depa which routed Lerner told Paz: Ten gettin; of?ce In March 2011, the IRS received two Congressional inquiries abo applic Patrio evenc instea More when SBert ch 2012, Republican Representative Daniel Lungren wrote a ent about an application for tax-exempt status submitted to Lerner, who reviewed a draft response to Mr. Lungren in At this point, we aren?t sending a response [to Mr. Lungren for an end date which is why I was asking [for the] status development letter out and that may be what we say to him questions about whether the org meets requirements and ha flesh out.93 a response [t]he last thing I heard was this was with Nik [sic]'n94 uper?uous request for letter to the Treasury the Mother Lode Tea Party, epresentative Lungren noted had already ?waited 12 The request was April 2012. In August 2012, because we know he will ask I think we need to get the application has raised ve sent them a letter trying to onths after Representative Lungren?s inquiry, the IRS had still not submitted a response. At that point, the employee coordinating the IRS process said, ?1 ve had absolutely no luck in ole Flax in Commissioner?s it the status of Tea Party ants, one of which was submitted by Republican Represent :levated to Lerner?s level; the IRS apparently did not respon d, Thomas and Seto subjected the applications to additional it eventually worked its way to Lerner in July 2012. By that :e made the universal decision that the IRS would reSpond tc 90 Email chain between Cindy Thomas, Lois Lerner and others (Nov. 3, 2011)] contail Erna 95 Ema (Emai 9? Id. ling taxpayer information omitted by Committee staff). il chain between Linda McCarty, Jennifer Vozne and others (Feb. 13?14 i1 chain between Linda McCarty, Jennifer Vozne and others (Feb. 13-14 il chain between Cindy Thomas, Steven Bowling and others (Mar. 29 - attachments containing taxpayer information omitted by Committee sta 3 170 ive Wally Herger about ts Educating Concerned Americans Now Thes Tea Party inquiries were not to Representative Herger and evels of review.96 than a year later, Representative Herger?s request about PECAN was still outstanding point, the Taxpayer Advocate all outstanding inquiries (email attachment 2013) il chain between Lois Lerner, Holly Paz and others (Aug. 10-17, 2012) 2013) 3-38. \pr. 13, 2011) ff). This documc?i nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) . . US. Senate Committee on Finance regardi decisio Lerner languish in the bottomless abyss of IRS administrative review, and outside were a mere annoyance. Indeed, even after Lerner?s handli became public in May 2013, she failed to show any remorse for the 3 the signi?cance of her role. In June 2014, she told a friend: to gras She al. Lerner organi not rendered a determination on the application filed by PECAN, sentative Herger years before. ?01 The difficulty that groups like PECAN faced is particularly stark when compared to the treatment of certain 'Repre from I The ir her inagemen ng political advocacy organizations by telling the taxpayer? ns to be made.?97 Well, that?s a wonderful piece of news!98 5 comment encapsulates her View on the Tea Party applicati additional review. The conservative Republicans were sure and interviews and they still don?t have any evidence of the told that same friend: The Tea Party has decided this is a wonderful fundraising trying to keep it alive. [N]othing corroborating their ver 100 ?3 comments do not accurately re?ect the reality facing hunc zations that applied for tax-exempt status. Indeed, as of Apr )emocratic politicians, and should not be trivialized. POLITICAL BIAS AGAINST CONSERVATIVE ORGANIZA ?uence of Lerner?s personal political views on her of?cial I of the IRS division that reviewed allegations Ema l00 101 Bas chain between Lois Lerner and Mark Tomwall (July 3 Sep. 4, 2013) ed on information provided by IRS to Senate Finance Committee (April I chain between Lois Lerner and Mark Tomwall (June 26, 2014) 00011- 171 5. LOIS MANAGEMENT OF THE E0 EXAMINAT TIONS Additional Republican Views that they had to wait for the Lerner was enthusiastic about this development, telling Paz: ons: it was fine for them to any questions from the 1g of Tea Party applications harm she had caused, or even How?I got involved in this is simply because I was the persdn who announced that the IRS had used organization names (both conservative and literal) to select applications for they had a Watergate on their . hands and went into overdrive to prove it. $50 Million later and hundreds of documents 1r theory . 99 vent for them so they keep sion of the story has come out lreds of conservative i1 15, 2015, the IRS still had espite direct intervention by groups that received attention IONS UNIT REVEALS HER uties is particularly evident in nproper political campaign chain between Lois Lerner, Holly Paz and others (July 27 - Aug. 13, 2012) 1R30000221356-59. l4. 00025-30. 15, 2015). This documc?i nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se interve exami Asare conser was co and the The E) approv alt: to the Committee?s investigation, Nanette Downing was ti relev Exam' Unlike E0 Ex Examinations was placed outside of Washington to ensure that the exem]: Washington.105 Those direct expre: Exam nate Committee on Finance tions as a weapon to intimidate tax-exempt organizations: need to do the same! . it appears .102 1 lative organizations were subject to unwarranted IRS scrutin mpounded by her distrust in the employees who were suppo failure of those employees to report her interference to TIG Lois Lerner Closely Managed the Committee That Was Cre Alleged Improper Political Campaign Intervention :aminations unit, within the E0 Division, monitors whether ed for tax-exempt status are operating in accordance with fe ations and reported directly to Lois Lerner. 104 most IRS divisions, which are administered at the IRS head aminations has its head of?ce in Dallas, Texas. IRS official organizations were not improperly influenced by other div measures did not stop Lerner from closely managing E0 Ex ng E0 Examinations to commence examinations of particul sed her concern about Downing?s management and questior nations staff. ?06 Lerner?s distrust of EO Examinations empl IOZ it?s me (ed Downing, ?Who, in Exam, is reSponsible for oversight of the project lil chain between Lois Lerner, Nanette Downing, and Jason Kall (Nov. 1 Charity and Nonpro?t Audits: Exempt Organizations Examinations. I Interview ofNanette Downing (Dec. 6, 2013) pp. 6, 9, 15. 3. 53; SFC Interview of Sarah Hall Ingram (Dec. 16,2013) p. 71. e. Email chain between Lois Lerner, Nanette Downing, and others (I: that exchange, Lerner stated that E0 Examinations personnel ?have ver} and that doesn?t work.? 172 This document was obtained and uploaded by the Center for Res Additional Republican Views itlion by tax-exempt organizations. Indeed, Lerner showed great zeal for using Just as they got Al Capone on tax evasion instead of drugs, prostitution and murder, we By the way, even if we couldn?t ?get? any of them because of hazards with valuation or comp, that wouldn?t stop me from putting something out thzit says we looked at these and sult of Lerner?s heavy-handed management of the E0 Examiinations unit, numerous y. The effect of Lemer?s bias sed to make audit decisions TA. ated to Evaluate Referrals of organizations that have been deral tax law. ?03 At all times 16 Director of EO quarters in Washington, DC, explained that EO tax enforcement decisions for sions of the IRS in aminations or, in some cases, ar entities. Lerner repeatedly led the competence of E0 oyees and management 4-15, 2012). cc. 12-18, 2012) little ability to apply any judgment? 5? More and more I?m feeling like ponsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance Additional Republican Views 107 resulted in her keeping tight reigns on the operation, thereby circumventing measures designed to handle allegations of improper political campaign intervention. As described more fully in Section of the Bipartisan Investigative Report, one attempt to insulate the IRS from political influence was to create the Political Action Review Committee (PARC). The PARC was a panel of career Federal employees who reviewed allegations of improper political campaign intervention and made the ?nal decision on Whether to open an examir ation of the subject organization. The decisions of the PARC were supposed to be ?nal. Downing explained that attempting to override the PARC would have serious consequences: Q. And can any one person override a PARC decisiononce the PARC makes a decision one way or the other, no one can come would expect I don't think you were in here when I talked about this. I would expect if anybody tried to do that, they would turn that in to TIGTA [for investigation]. We are not allowed to do that.?8 Even with these supposed safeguards, Lerner kept close tabs on the PARC. Shortly after it was created in 2012, Lerner cast doubt on the ?rst set of decis ons in a message to Downing: Do you have any sense why of the 88 referrals reviewed by the PARC they only recommended 33 for Exam? Considering the allegations, that surprises me. Were any others selected for compliance checks or anything?109 Down ng assured Lerner that a ?post review? of the deciSIOns ?will be done.?110 Lerner indicated that she wanted to further review the work: I looked at the names of the orgs selected [for examination] and only one is one that had been in the news. I would like to see the list of the ones not selected [for examination]. 1 1? Concluding the conversation, Lerner noted that she does not ?plan to talk about this with Steve [Miller],? because Miller ?needs to be outside case selection? since he had been elevated to Acting IRS Commissioner. 1 ?2 Lerner apparently saw no problem with her own involvement in '07 The assertion that Lerner maintained tight control of EO Operations is further borne out by Lerner?s own admiss on that she is the ?queen of control.? Email from Lois Lerner to Sarah l-Iall Ingram (Oct. 25, 2010) 11180000770062. ?08 SFC Interview ofNanette Downing (Dec. 6, 2013) p. 36 (emphasis added). Em [11 chain between Lois Lerner and Nanette Downing (Oct. 31 - Nov. 1, 2012) no 12?: "2 Id. 173 This document was obtained and uploaded by the Center for Resoonsive Politics (OpenSecrets.org) U.S. enate Committee on Finance Additional Republican Views the process. Neither did Downing, as she did not refer Lerner to TIGTA following this email exchange. Downing?s permissive management enabled Lerner to inject her personal political bias in b. to the review process of allegations related to political campaign intervention. Lois Lerner Intervened in Audit Decisions Involving Political Organizations Apart ?rem the PARC, Lerner was active the process of referring taxpayers for audits. As Downing explained: time: congressional requests, media requests. And status of something and whether or not we got it. referrals, she would send referrals to us. 1 13 Q. Would Ms. Lerner ever contact you about speci?c taxpayers? A. Yes. Often, she would have requests for I mean, we get that kind of stuff all the she would need to know the ut then, also, if she got Indeed, documents reviewed by the Majority Staff of the Committee show that Lerner often relaye organi - organization. A prin organ Amer Light know Ways Lerne sugge i. Conservative Organizations Pro?led bv ProPubl 1e example of Lerner?s in?uence within the IRS to open aud bllica published an article about ?dark money? groups that zations: Americans for Responsible Leadership; Freedom P2 ca is Not Stupid; and A Better America. 1 ?4 Lerner sent this and requested to meet to discuss the ?status of these applicat what Lerner told Paz, Fish and Light at that meeting, analysr and Means Committee found: [F]our of the ?ve groups were subject to extra-scrutiny; tw the surveillance program, called a ?Review of Operat be put before the which determines whether a gro three of the groups were selected for audit. 1 16 r?s interest in these conservative organizations and their resu that her left-leaning political views may have in?uenced ll} H4 Pro Then I ?5 Email chain between Lois Lerner, Nikole Flax and others (Jan. 2, 2013) IRS :86 Ways and Means Committee, Letter from Chairman Camp to Attomcy General Eric Holder (Apr. 9, 2014) 116 1.101 p.7 (in 3 Interview of Nanette Downing (Dec. 6, 2013) pp. 17-18. )idn?t (Jan. 2, 2013). ternal citations omitted). 174 1 referrals to E0 Examinations particularly when the allegations related to conservative zations and in one case, she may have acted to prevent an audit of a Democratic CG its occurred in January 2013. amed ?ve conservative 1th; article to Paz, David Fish and ions.??5 While we do not 5 performed by the House 0 of the groups were placed in tons,? and two were selected to up will be audited. Ultimately lting treatment by the IRS of?cial IRS actions. Pizblica, Controversial Dark Money Group Among Five That Told IRS They Would Stay Out of Politics, 0000122510. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views ii. Teen Pregnancy Organization Af?liated With Bristol Palin Another example of Lerner?s interest in conservative organizations occurred in 2011, when Lerner considered opening an audit of a group with ties to Bristol Palin. There were reports that Palin received $332,500 in compensation from the Candie?s Foundation, a nonpro?t organization that se :ks to prevent teen pregnancy. Upon receiving an article containing this information, Lerner took the initiative to ask her senior advisors if the IRS should open an audit of the organization: Thoughts on the Bristol Palin issue? I?m curious that a [private foundation] can pay any amount to someone who is not a [disquali?ed person]? It is a [private foundation] right? Even if it were a [public charity] would that be private be 1e?t - what are the consequences? I?m asking because I don?t know whether to send to Exam as a referral. ?7 Lerner?s willingness to act on this particular news article among many that reached her inbox each day shows that she was paying close attention to conservative politicians and organizations. In its review of nearly 1,500,000 pages of documents provided by the IRS, Major ty staff did not ?nd any instances where Lerner referred a progressive organization for audit ased on a news article. Crossroads GPS One 0 )nservative group that particularly interested Lerner was Crossroads GPS, which was founded by Karl Rove and applied for 501(c)(4) tax-exempt status in 2010. Lerner?s handling of this application, in particular, shows her bias against conservative organizations that sought tax- exemt status and her close connections to outside liberal advocacy groups. Of particular note, the 1jority staff?s review of IRS documents did not reveal any interactions between Lerner and representatives from outside conservative groups similar to her interactions with liberal groups described below. In 00 ober 2010, Lerner received complaints about Crossroads GP S?s alleged political activities from ihe Ways and Means Oversight Subcommittee Minority staff, as well as two outside liberal advocacy groups, Democracy 21 and the Campaign Legal Center. ?8 After learning that Cross*oads GPS had ?led an application for tax-exempt status, Lerner suggested that the application should be reviewed in Washington, D.C. instead of Cincinnati, where the application woulc normally be reviewed.119 A month later, on her own initiative, Lerner followed up to ensur that the October letter from Democracy 21 and the Campailgn Legal Center had been sent ?7 Em ail chain between Lois Lerner, David Fish, Judith Kindell, and others (April 8, 2011) ?3 Em ail chain between Lois Lerner, David Fish, Sarah Hall Ingram, Joseph G'ant, and others (Oct. 6, 2010) IRSOO )0453771-72; Email chain between Lois Lerner, Nan Downing and others (Oct. 5 - Nov. 4, 2010) IRSOO )0459877-95. "9 Email chain between Lois Lerner, David Fish, Sarah Hall Ingram, Joseph Grant, and others (Oct. 6, 2010) IRSOO 30453771-72. 175 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views to E0 Examinations as a referral, so that they could decide whether to open an audit based on the allegat ons in the letter. '20 The fol lOwing May, Downing updated Lerner about two referrals t1 at E0 Examinations had received about Crossroads GPS. Paz noted that the Crossroads GPS application for tax? exemp?. status had ?just arrived [in Washington, from Cincy.? meetin Crossr delivered to Paz.125 Democracy 21 and the Campaign Legal Center subsequently submi complaints about Crossroads GPS to the IRS in July and Septembe David Dads GPS.124 A few days after that meeting, the application Fish to send the seCOnd letter to E0 Examinations as a refer: '22 Lerner then set up a with her senior E0 managers, Holly Paz, Michael Seto, Judy Kindell, and David Fish, to discuss ?several moving pieces? involving Crossroads GPS, which [and] applications in Cincy.?123 Lerner also told Downing that she included ?[r]eferrals in Dallas wanted to talk with her about for Crossroads GPS was tted two additional 201 1.126 Lerner directed a1.127 In May 2012, Democracy 21 and the Campaign Legal Center wrote: again to the IRS, this time reques letter, Lerner develc telling that 9903, style: whate A few to Doi ting that it deny Crossroads request for tax?exempt st. Lerner requested a status update on Crossroads applic pment while the other has recommended limited developme Light that ?full development may be the best course uer direction she desired even senior employees like Light. weeks later, on June 20, 2012, Lerner forwarded an article vning and asked for an update about ?referrals on this and 1tus.128 After receiving this ation. Sharon Light told that the case has been reviewed by two reviewers and that one has recommended general it. Lerner responded by Lerner further stated to Light will leave it in your capable hands. Having said that as they say they have been filing you should be looking at those as well.?130 This message Lerner?s management 3n the surface, she left matters in her employees? ?capable ands,? but she nudged them in ritical about Crossroads GPS hat In resporIlse, Downing explained that out of the 16 referrals, 10 were closed after the Political Activ ?20 Email chain between Lois Lerner, Joseph Urban and others (Oct. 5 - Nov. 4, 12? Email chain between Lois Lerner, Nan Downing, Holly Paz and others (May ,?22 1d. ?23 Email chain between Lois Lerner, Nan Downing and others (May 26-27, 20 1 124 '25 Em 111 chain between Cindy Thomas, Holly Paz and others (June 1-10, 2011) ?26 Pet tion for Rulemaking on Campaign Activities by Section 501(c)(4) Orgar IRSOO )0436241-60; Email chain between Lois Lerner, Nikole Flax and others ?27 Em 1i] chain between Lois Lerner, David Fish and others (Sep. 28-30, 2011) "28 Em ail chain between Lois Lerner, Sharon Light and others (May 25, 2012) 129 130 Emiail chain between Lois Lerner, Nan Downing, and others (June 4-20, 201 176 This docume ies Compliance Initiative committee decided not to pursue them, three others were closed 2010) IRS0000459877-95. 26-27, 2011) 1) 11130000196485. .izations (July 27, 2011) Sep. 28, 2011) IR80000511970-93. 1R80000511994-2018. RS0000199184-86. 2). nt was obtained and uploaded by the Center for Resaonsive Politics (OpenSecrets.org) :riate Committee on Finance U.S. Si by E0 of the Classi?cation, and the remaining three would be sent to the ual track program.132 On Ja ary 4, 2013 at 11:00 AM, Lerner met with Democracy 21 a Center to discuss the groups? proposed regulatory changes that wou of 501 organizations. 133 Victoria Judson, Associate Chief Co Madri al, from the Treasury Department?s Office of Tax Policy, wr Short] after the meeting, Lerner asked her technical advisor Thom had 0 ned an audit of Crossroads 6138.135 Miller informed Lerner twice onsidered allegations against Crossroads GPS, and had decii Additional Republican Views Review of Operations as part nd the Campaign Legal ld curtail political activities unsel for and Ruth are also at the meeting. ?34 as Miller if EO Examinations that EO Examinations had ?ed both times not to start an audit.l 6% After learning this information, Lerner questioned EO Examinations? handling of the allega ons in an email to Downing: To get ready for the [January 4, 2013] meeting [with Demo :racy 21 and the Campaign Legal Center], I asked for every document they had sent in over the last several years because Iknew they had sent in several referrals. I reviewed the information last night and thought the allegations in the documents were really damning, so wondered Why we hadn?t done something with the org. The first complaint came in 2010 and there were additional ones in 2011 and 2012. ?k *k 'k I don?t know where we go with this as I?ve told you before I don?t think your guys get it and the way they look at these cases is going to bite us some day. The organization at issue is Crossroads GPS, which is on the top of the list of c4 spenders in the last two elections. It is in the news regularly as an organization that is not really a 04, rather it is Only doing political activity taking in money from large contributors who wish to remain anonymous and funneling it into tight electoral races. Yet - twice we rejected the referrals for somewhat dubious reasons and never followed up once the 990s were filed.137 Lerne' further told Downing that while the organization had recently been referred to E0 Exam nations again, ?this is an org that was a prime candidate for exam when the referrals and 9903 first came in.?138 Lerner also stated, ?I?m not confident Examinations employees] will be able to handle the exam without constant hand holding the issues here are going to be ?32 Id. see Section of the Bipartisan Investigative Report for additional discussion of the Review of Operat ons, as well as other E0 Examinations procedures. '33 Email chain betWeen Lois Lerner, Ruth Madrigal, Victoria Judson, and others (Dec. 14-19, 2012) 0446771-75. '34 Em iil. chain between Lois Lerner, Victoria Judson, Ruth Madrigal, and others (Dec. 14, 2012) 56. . '35 Em til, chain between Thomas Miller, Lois Lerner and Nanette Downing (Jan. 4-7, 2013) 1R80000122549-5 1. '36 Id. ?37 Id. emphasis added). 138 177 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se rate Committee on Finance whether the expenditures they call general advocacy are political int by instr Jcting Downing: At 3:30 that afternoon, Lerner called a meeting with Paz and others GPS application for tax-exempt status. Paz noted that she ?suSpect[ many discussions? about Crossroads. ?41 E0 Determinations agent] workin invited 0 Please keep me apprised of the org?s status in the [Review 01 Jutcome of the referral committee. You should know that .he application, which may solve the problem because we pr exempt. Please make sure all moves regarding the org ar before we do anything.?0 on the Crossroads GPS application for exemption since Jar td the 3:30 meeting. Herr noted in the case log for the Cross Additional Republican Views srvention.?l39 Lerner closed ~Operations] and the are working on a denial of abably will say it isn?t coordinated up here to-discuss the Crossroads ed] this will be the ?rst of oseph Herr, who has been uary 30, 2012, was also roads GPS application that he participated on a conference call with E0 Technical on January 4, 2013, how best to proceec With case.M42 On January 7, 2013, Herr noted, ?Based on conference begin reviewing case information, tax law and draft/template advocacy denial letter, all to think about how to compose the denial letter.?143 These entries re?ect the ?rst time in the log that Herr noted the possibi 2012, which suggests that he received the direction to deny the case conference call that afternoon. On anuary 7, 2013, Downing provided a summary to Lerner of the Crossroads GPS and the decisions of the PARC not to open audits. sons given by the PARC are ?most disturbing.? Lerner further told Downing: the rea If anyt involv beyon referr particr 144 to open an exam. I think yes, but let me cogitate a bit on 1 mere concern that the IRS would reach the correct decision s. Through her heavy-handed management, she ensured the lar attention in Washington, DC. and that the allegations of BQ'hi I40 Ema I42 1431a,. I44 In Herr an by Corr status I45 Ema 145 Id :niphasis added). lifrom Holly Paz to Nancy Marks (Jan. 4, 2013) 846. 0 Case Chronology Record for Crossroads Grassroots Policy Strategies t, the IRS prepared a draft denial in April 2013. See Email chain betwe mittee staff). As of April 2015 54 months a?er Crossroads GPS subm tire IRS had still not rendered a ?nal decision. i1 chain between Thomas Miller, Lois Lerner and Nanette Downing (J an emphasis added). 178 This documient was obtained and uploaded by the Center for Res lity of denying Crossroads application since he was assigned the case in January from Lerner during the referrals made about 45 Lerner told Downing that As I said, we are working on the denial for the 1024, so I need to think about whether itll46 '1ng is ?disturbing? about the handling of Crossroads GPS, it is Lemer?s excessive :ment in all stages of the application and examination process. Lerner?s actions went 5 on the application and the application received improper activity were (undated) en Sharon Light, Holly Paz, Joseph others (April 8 - May 30, 2013) 1R80000529074-75 (attachment contarning taxpayer information omitted itted its application for tax-exempt . 4-7, 2013) IR80000122549-51. ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views considered time and time again culminating in her discussion with Downing about whether they uld open an examination in January 2013 after her subordinates had repeatedly declined to do so. I iv. Stupak for Congress, Inc. In at least one instance, Lerner and other senior IRS of?cials may have acted to stop a planned audit of a Democratic organization. An organization affiliated with Democratic Congressman Bart Stupak was selected for examin ition in April 2010 by the National Research Program (NRP). Division staff identi?ed the organization as an ?extremely sensitive? case, characterizing Stupak as an ?anti- abortio Democrat? who was a ?lightning rod for the Republicans a id anti-abortion crowd? and whose ?Tof?ce was picketed by the Tea Party folks.? ?47 The prOposed audit was elevated to Nan Downir who then asked Lerner if the IRS should continue with the planned audit. Lerner, in turn, as (ed Ingram if the audit should continue. Ingram suggested tiat Lerner should see if the NRP would ?toss them out? of the planned audit because the organization would cease to exist after Stupak left of?ce in January 2011. Lerner indicated that she would follow up with the NRP as Ingram suggested.148 gardless, their actions show vere at stake. :lear if Lerner and Ingram were able to stop the audit. But re gness to manipulate the audit process when political issues It is uni a willin Nan Downing Allowed Lois Lerner to Make Audit Decisions and Did Not Refer Her to :d throughout the discussion above, Downing allowed and in some cases enabled and other senior IRS of?cials to become directly involved ir selecting organizations for ation. Although many of these discussions appear to be prohibited by IRS policy, their ad discussion about referrals for Crossroads GPS, described immediately above, is most 1g. Although Lerner did not overtly direct Downing to open an audit, Lerner?s emails ier belief that the IRS should audit Crossroads GPS. Lerner?s repeated involvement with iservative taxpayer showed her persistence in making sure an audit was, in fact, opened ther evidence her bias against organizations on the right side. of the political spectrum. As not: . Lerner examir extend troubli reveal this co and fui ral employees in E0 'ious repercussions: Downing told Committee staff that interfering with the career Fede Examinations charged with deciding whether to open audits had se You know, as a revenue agent and, you know, even as an IF folks are taught from the very beginning about, you know, . 147 Em I48 0713405-09. 1 chain between Lois Lerner, Sarah Hall Ingram, Nan Downing, and 0th 179 This document was obtained and uploaded by the Center for Res 18 employee, you know, my ;everal things. One is, you ers (Apr. 19-20, 2010) ponsive Politics (OpenSecrets.org) U.S. Se Downing stated that this rule would also apply to Lerner in the even t.15< audi referral Downii Tate Committee on Finance know, no one will tell us who to do an audit on. If they did, fOr investigation]. ?49 Yet Downing did not refer Lerner to TIGTA. ?51 Downing I did not take it that she was telling me what to do. 15 here that there's an application pending. And in our me, it wasn?t Crossroads GPS, it was any of them, tl dual track process, they are to be cognizant if Ruling application. So we?re going to go on and start an ex sure, what if, right before we get ready to start exarr don?t even know what their process is, but what if tl coordinating, making sure that piece is in my proces I49 150 l5] 152 Interview ofNanette Downing (Dec. 6, 2013) p. 18. . 19. . 76. 180 was not necessary because she did not consider Lerner?s em January 7, 2013 to be directing an audit: 1g told Committee staff that she construed Lemer?s message the referral process, and that it did not relate to Crossroads GPS spe aIdditional Republican Views you?d turn that in to TIGTA that she tried to direct an told Committee staff that a ails of January 4, 2013 and Is this Lois Lerner telling you or suggesting that Exa ns open up an audit? No. That?s not the way I took it. The way I took it it; she worried we were not I lawyers, as I said. We were accountants. And whether or not we were correctly if we knew what we were doing. Q. Well, her statement that ?twice we rejected the referrals for somewhat dubious reasons,? doesn't that suggest the negative A That Q. . that the correct decision was not projected? A That is not the way I took it. And maybe it was because of my relationship of her. 2 as a general comment about ci?cally: all moves regarding the nything?? Q. How did you take the statement, ?Please make sure organization are coordinated up here before we do a A. Okay. So this was okay. So this one and I think she mentions somewhere in dual track process - so, to rat the team, as we built the gs and Agreement[s] has an am, but we just want to make is, they issue a denial? And I deny it? So it?s This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance This document was obtained and uploaded by the Center for Res {0 >79 Additional Republican Views I mean, because there?s nothing in this email chain relating to general process, and it?s all No. with respect to one taxpaying group. But I took it So that just doesn?t follow from the Yeah. But that?s how I took it because it?s it?s because of an application pending. So if you took that statement to be a general statement about the process, why 'was your response totally with reSpect to one group? Well, she was originally asking about Well, in the statement she?s asking about one group. She was asking about that referral, so I reSponded to know Lois. You had to know the emails you got. I the rest of it [just made sure that we had this built ir So when she says, ?Please make sure all moves rega up here before we do anything? What I did was what my staf?ng says: Do we have know which ones have applications pending? They that. You know, you had to responded with the facts, and to the process. rding the org are coordinated a process in place that we said yes. But did you feel that you had to apprise her of all moves regarding the org No. with her? No. What I took from that was, in that process, if any of them, GPS, Crossroads GPS, anything else, had an application pending, we built in to the process that if it was decided for the exam, they had a contact to rea :h out with [Rulings and Agreements] to see what the status was. 181 ponsive Politics (OpenSecrets.org) l. \i US. Senate Committee on Finance Additional Republican Views in her referrec to TIGTA as they amounted to an overt attempt by Lerner taxpayer. But even taking Downing?s testimony at face value, whic attitude allowed Lerner to exert improper influence on the examination process. There can be little doubt that Lois Lerner?s personal political views In. spit'eyf Downing?s imaginative interpretation, Lerner was clearly yes, but let me cogitate on it a bit,? that did not, to yo decision whether or not to open up an exam on application. 153 Q. And then her statement, need to think about whether to open an exam. I think u, sound like didn't take it that way. I took it about, what is the process, and when we have any organization that has a potential application, and where is that application and whether, you know and, again, how close is the decision on that referring to Crossroads GPS elssages of January 4, 2013 and January 7, 2013. These exchanges should have been tlo open an audit on a speci?c we do not, her complacent D. REGARDING ROLE AND CULPA BILITY directed the course of IRS interac1 ions with a large number of tax-exempt organizations. The treatment of these organizations was almost universally consistent with Lerner?s persc nal political views this is, suppor.ing Democratic candidates and opposing conservative tax-exempt organizations that engaged in political speech. Conservative organizations that sought to participate in the nation?s political ydiscourse, such as the Tea Party, drew the strongest ire from Lerner. Her in?uence led not only to inde?nite delays in the processing of these groups? applications for tax-exempt status, but als nonprc ?t organizations that were af?liated with progressive causes We co tenure failure Lerner should avoid keep a to exert any meaningful oversight of Lerner?s E0 Division. should not have been allowed to remain in senior positions 153 1d. I 3p. 76-85 (portions omitted). 182 This document was obtained and uploaded by the Center for Res 3 to audits. During that same time, the IRS generally responded quickly and favorably to or politicians. 1clude that Lerner was responsible for harm caused to conservative taxpayers during her at the IRS. But we must hold IRS and Treasury managemert equally responsible for their A biased employee, such as for more than 10 years, and never have been given free reign over such a vast and influential part of the IRS. To BXposing taxpayers to the risk of biased treatment in the future, the IRS and Treasury must closer watch of their employees and ferret out politically-biased behavior. ponsive Politics (OpenSecrets.org) U.S. Se On Ma] Means had bec Congre were re as the backloi waiting the me dunng course Comm late Committee on Finance SENIOR IRS OFFICIALS CONTINUOUSLY MISLED rAdditional Republican Views A CONGRESS ABOUT THE HANDLING OF APPLICATIONS SUBMITTED BY TEA PARTY Senior IRS o??icials including Doug Shulman, Steve Miller, treatment of Tea Party organizations until the release of th Oversight responsibilities. consistently misled Congress about the IRS ?s targeting of advocacy groups that were seeking tax exempt status. Thes covered up IRS wrongdoing, allowed the IRS to escape acc 2013, and materially impeded Congress in the performance and Lois Lerner ea Party and other political misrepresentations auntability for its abusive 2 TIGTA report in May of its Constitutional LGROUPS Subcommittee on Oversight.154 Prior to appearing before th ames of their donors. ?55 Shulman was also aware from thes of applications for tax-exempt status and that many of thes a substantial period of time for a decision from the IRS.156 of the hearing, the following colloquy occurred between Re] Shulman. seen some recent press allegations that the IRS is targeting Can you elaborate on what?s going on with that? Can you Mr. Shulman: Thanks for bringing this up. I think there?s and a lot of moving information, so I appreciate the opportL start by saying, yes, I can give you assurances. 15? Heaning before the Subcommittee on Oversight of the House Committee on 1 Service 155 156 :57 Id. Operations and the 2012 Tax Filing Season? (Mar. 22, 2012). Interview ofDouglas Shulman (Dec. 3, 2013) pp. 58?65. pg 39-40. p. 7071. 183 . SHULMAN MISLED CONGRESS REGARDING THE T1 22, 2012, then-Commissioner Doug Shulman testified be ome aware from press stories, as well as from letters he rece ss, of allegations that Tea Party groups that had ?led applica ceiving intrusive development letters from the IRS that song had been so pervasive that Shulman anticipated that he rr the hearing regarding processing delays and intrusive develc is not targeting particular groups based on political leanings . IRGETING 0F TEA PARTY fore the House Ways and at Subcommittee, Shulman ived from Members of tions for tax-exempt status ht unusual information such sources that there existed a 3 Tea Party groups had been Coverage of these issues in light be asked questions vpment letters. ?57 During the )resentative Boustany and Mr. Boustany: It has come to my attention, I?ve gotten a number of letters, we?ve :ertain Tea Party groups give us assurances that the IRS 9 been a lot of press about this mity to clarify. First, let me Nays and Means, ?Internal Revenue This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance when people apply for 501(c)(4) status. 158 Shulman?s response failed to acknowledge several facts of which he testimo groups, ?the ki ny. For example, he knew that the IRS had issued intrusive in many cases seeking the names of donors, yet he chose to substa There is absolutely no targeting. This is the kind of back of back-and-forth that happens? when the IRS processes a exemp 'on.?59 Moreover, he was aware of the fact that these groups Additional Republican Views -and-forth that happens was aware at the time of his development letters to these depict these interactions as 11 application for tax- were experiencing ial processing delays. ?60 The intrusive questions and delays. were facts that clearly sugges ed that these groups were being treated differently by the IRS, possibly as a result of their politic 1 views. In light of Shulman?s knowledge at the time of his reconc lc his emphatic assurance that the IRS was not improperly conser ative organizations. Indeed, characterizing these circumstar forth at happens when people apply for 501(c)(4) status? was not had th effect of throwing Congress and the public off the scent of In car] May 2012, just ?ve or six weeks after Shulman?s appearan and ans Subcommittee on Oversight, Shulman was informed by of the OLO list and that it contained an entry for the Tea Party. ?61 Gener 1 George apprised Shulman that TIGTA was pursuing an im testimony, it is dif?cult to 'ocessing applications from ICCS as part of the ?back and ing short of misleading and RS wrongdoing. ce before the House Ways Steve Miller of the existence Later that month, Inspector estigation into the use by the IRS inappropriate criteria in the processing of applications for tax exempt status. 162 Thus, by late 2012, Shulman was not only aware that the IRS had been Party roups as a result of their political views, but also knew thatt launch an investigation into the matter. In spite of this knowle improperly focusing on Tea he Inspector General was e, Shulman elected to remain dig silent n?d make no effort whatsoever to correct his recent inaccura testimony before the Subco mittee regarding the absence of targeting. His failures allo conce 1 its mistreatment of Tea Party and other political advocacy until issuance of the TIGTA report in May 2013, and thwarted performance of its oversight responsibilities. B. STEVE MILLER WITHHELD INFORMATION ABOUT CONGRESS Durint afford target not to 2012, Steve Miller, while Deputy Commissioner for Servic 3d a number of opportunities to apprise Congress about the Tea Party and other political advocacy organizations, but ins do so. '53 Hearing before the Subcommittee on Oversight of the House Committee on Service Operations and the 2012 Tax Filing Season? (Mar. 22, 2012) pp. 93-94 ?59 SFC Interview of Douglas Shulman (Dec. 3, 2013) pp. 31-37. ?50 Id. pp. 34-35. Id. 1 p. 40-52. ?52 Id. pp. 76-77. 184 wed the IRS to actively groups for more than a year the Subcommittee in the TARGETING FROM THE es and Enforcement, was se of inappropriate criteria to tead, elected at each instance Ways and Means, ?Internal Revenue (emphasis added). This docum? nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se iate Committee on Finance MISLEADING By lette Memb over injlr tax exe nption under section 501(c)(4). ?63 The letter stated that the ensurin withou1 IRS 301 born of in the dated March 14, 2012, Senator Orrin Hatch together with rbgard to politics of any kind??64 The letter sought inform ame fashion. ?65 'Miller aware exempt knew i] politica old. ?67 questic himsel ?overr: conduc 501(c) grown delays Miller Marks the ca: He was also aware of the press stories focusing on the :aching? by the IRS. ?69 Further, he knew in late March of 2 (5) and (6). ?70 In addition, at the time of his response to alarmed about the press stories and Congressional inquiries experienced by Tea Party groups and of the use of intrusive testi?ed that in March 2012, his concerns over these reports a trusted senior advisor, to visit the Determinations Unit in es were being processed and to report back to him. ?72 of these facts, Miller?s response to Senator Hatch of April In Spit sti?ed the demands from applicant organizations for i andju ofthe nmnes bythe and quali?cations of Speakers and participants at events; an 163 Lett 164 165 166 Let:rfrom Senator Orrin Hatch to Commissioner Douglas Shulman (Mar. 1 3r from Steven T. Miller to Senator Orrin Hatch (Apr. 26, 2012) TIGTA Interview of Steven Miller (Dec. 12, 2013) pp. 102-103. p. 159-160. . 159. 146-147. Email from Richard Daly to Steve Miller and others (Mar. Interview of Steven Miller (Dec. 12, 2013) pp. 123-130. a. 129. 185 gathat ?tax compliance efforts are pursued in a fair, even han particular types of information from applicants and state ?concerns about selective enforcement and the duty to treat 'esponded by letter dated April 26, 2012.166 At the time of 1\ if a number of disturbing facts regarding how the IRS was p1 status received from Tea Party and other political advocacy i February 2012 that many of the applications for tax exemp advocacy groups that were awaiting decision in the Determinations Unit were very us, including questions about the identity of applicant organ ftold Senate Finance Committee investigators that he believ an audit into how the IRS processed applications for tax ex organizations? donors; copies of social media posts, speeche 5e organizations at public gatherings. In his April 26, 2012 Additional Republican Views RESPONSE TO SENATOR MARCH 14 2012 LETTER WAS 1 other Republican of the US. Senate penned a letter to Commissioner Shulman regarding their concern usive IRS inquiries to Tea Party and other conservative org anizations that were seeking Senators were concerned in ded and transparent manner ation about how and why the that the questions were similarly Situated taxpayers? ?Iiller?s response, he was ?ocessing applications for tax? groups. For example, he tion from Tea Party and other a use of highly intrusive zations?- donors. ?68 Miller 3d the questions constituted 12 that TIGTA was going to .emption under sections Senator Hatch, Miller had reporting processing development questions. ?71 caused him to send Nan Cincinnati to investigate how 26, 2012 actually defended formation such as: the names 5, and panel presentations; the :1 written materials distributed esponse, Miller explained 4, 2012) Bates No. 006998-7007. 29, 2012) This document was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) U.S. Se these hi At best IRS wa groups. During letter process applica accurat Dete adequa BOLO selecte Party,? Miller the ex outrag focuse applyi whose iate Committee on Finance circumstances set forth in the particular application??73 2012 LETTER, BUT FAILED TO BRING THAT INFORMAT CONGRESS Miller was briefed by Nan Marks on her ?ndings regarding nt organizations were experiencing, in some cases for better ei ?75 He also learned from Marks that the issuance of intrus inations Unit staff resulted from a failure to properly train te technical support.176 Most importantly, Marks apprised IN list; that ?Tea Party? was on the list; and that applications fc for full development based on the presence of terms in the ?Patriots,? and stence of the BOLO list and felt that it was ?stupid? and ?in 3 Over the existence of the BOLO list stemmed in part from 1 on the names of organizations, rather than on their activitic 1g the tax laws in a partisan way, with regard to the political applications it was considering.179 '73 Lett :r from Steven T. Miller to Senator Orrin Hatch (Apr. 26, 2012) TIGTA 174 175 'Interview of Steven Miller (Dec. 12, 2013) p. 131. p. 133-135. . 134. p; 135-139. 139-141. 186 Additional Republican Views ghly unusual and intrusive requests which he subsequently characterized during his interviewi with Senate Finance Committee staff as ?overreaching? in the following manner: The revenue agent uses sound reasoning based on tax law training and his or her experience to review the application and identify the additional information needed to make a proper determination of the organization?s exempt status. The revenue agent prepares individualized questions and requests for documents based on the facts and Miller?s written response to the Senators was disingenuous, and at worst, it was plainly false andlikely calculated to forestall further Congressional inquiry 5 processing applications for tax exemption from Tea Party and other political advocacy into the matter of how the 2. MILLER BECAME AWARE OF IMPORTANT INFORMATION REGARDING TARGETING WITHIN A WEEK OF ISSUING HIS RESPONSE TO SENATOR MARCH 14, TO THE ATTENTION OF the ?rst week of May 2012 a scant week after issuing his response to Senator Hatch?s how applications were being ed.174 He then learned ?rst-hand that the reports of a backlc and the long delays that than two years, were ve development questions by at staff and to provide it with Tiller ofthe existence of the tax exemption had been applications, such as ?Tea told Committee staff during his interview that he was ?outrziged? when he ?rst learned of ppropriate.?I78 Miller?s "118 concern that such a list that suggested that the IRS was views of the organizations Bates No. 006998-7007. This document was obtained and uploaded by the Center for Resaonsive Politics (OpenSecrets.org) U.S. Se Unfom develop most re given tr fact that the stated intent of Senator Hatch?s letter was his inistering the tax laws in a fair and even way, ?without regs was ad nate Committee on Finance ce?ntly written, and to inform him of Marks?s ?ndings. This Additional Republican Views njately, Miller?s outrage over the use of terms like ?Tea Party? to ?ag applications for full ment did not motivate him to the point of contacting Senatm Hatch, to whom he had 18 particularly troublesome concern whether the IRS 1rd to politics of any kind? the very same concern that Miller formed when he purportedly became ?outraged? over the fact that the IRS had been ?agging applications for full development baa applicant organizations. Not more than a week after writing to Sena to questions raised by their now shared concern whether the IRS wa fairly a nd without regard to the political views of tax payers, Miller ed on the political views of Ltor Hatch to provide answers 5 administering the tax laws was in possession of information directly germane and responsive to that concern. Rather than inform Senator Hatch of Marks?s ?ndings, Miller, once again, elected to remain silent on Of furt Marks uer note, and again re?ective of Miller?s lack of candor with old Miller that the intrusive development questions resulted the matter. the Congress, is the fact that from a failure to adequately train the E0 Determinations Unit staff, as well as a failure to provic that staff with sufficient technical support.180 Accordingly, by the week of May 3, 2012, Mi intrusive development letters that had been issued by EC Determinz certain experience,? as he had asserted in his response to Senator Hatch was content to leave his inaccurate and misleading response stand disinge n?uous act aimed at obfuscating the true state of affairs with 1 Tea Party and other political advocacy applications. were not the product of ?sound reasoning? nor were they 3. RESPONSE TO THE JUNE 18,2012 LETTER ller was fully aware that the Ltions personnel most ?based on tax law training and dated April 26, 2012. Miller vithout revision, yet another :he processing of the ROM SENATOR HATCH REGARDING THE ATTEMPT TO COLLECT DONO INFORMATION FROM APPLICANTS CONTINUED PATTERN OF OBF SCATION On June 18, 2012, Senator Hatch, together with ten other Republic Senators, corresponded again with Commissioner Shulman over the treatment of Te Party organizations.181 This time, donon advoct operat disclo furthe status. proces the Sta he focus of the Senators? attention was on the collection by my organizations seeking tax?exempt status. As explained i sure by the IRS. However, information provided s,I the IRS was, 1n effect, that Information to disc] tutory safeguards designed to protect the privacy of donor in l30 181 .134. :r from Senator Orrin Hatch to Commissioner Douglas Shulman (June 1 187 1011 of law, the identity of donors of tax?exempt organizations IRS of the names of the who made, or were expected to make, a donation to Tea Pa and similar political the June 18, 2012 letter, by is not information subject to an organization in 'ahce of its application can be disclosed to the public once the IRS grants tax?exempt Thus, by asking organizations for the names of their donors. as part of the application osure and thereby nullifying formation. In light ofthis 3, 2012). This docume nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance anomal Miller respons was no entirely, providing a very technical and carefully drawn response to raised, donors Miller?s letter was misleading on an even more basic level. The Se to note IRS management?s own concerns about the attempt to colle concern that prompted Miller to direct on March 8, 2012, some six organi informed that they did not need to provide that information. 184 Mi I w?well aware. However, rather than do so, Miller chose to a that once again justi?ed the collection of information Revenue agents use sound reasoning based on tax law traini review applications and identify the additional information 1 determination of an organization?s exempt . As not information may be needed for the IRS to make a proper de organization?s exempt status. 83 nations that called the IRS to discuss requests for the identity Additional Republican Views 51,] Senator Hatch wrote to Commissioner Shulman, posing speci?c questions about the :quests for donor information. e?sponded to Senator Hatch?s letter three months later on September 11, 2012.182 This provided Miller with an excellent opportunity to inform Congress about the BOLO list and the targeting of Tea Party and similar political advocacy organi? zations, facts of which Miller void the topic of targeting the immediate questions regarding the identity of By doing so, Miller elected to stay the course of obfuscation, relying once again on the IRS no strum that: and their experience to ceded to make a proper ed above donor termination of an ptember 11, 2012 letter failed ct donor information, a months earlier, that applicant of their donors were to be ler also failed to inform Senatcr Hatch that at the request of Lois Lerner, the Of?ce of the IRS Chief Counsel had provided an opinion on May 21, 2012, that the donor information reSpon se to requests received from the IRS could be destroyed. ?85 bmitted by organizations in Similarly, Miller?s response of September 26, 2012 omitted the fact that on June 27, 2012, Holly Paz directed IRS staff to expun the do Miller aware the IR nor information would be destroyed. ?86 S, were false and misleadingfrom Steven Miller to Senator Orrin Hatch (Sep. 11, 2012). til from Nikole Flax to Lois Lerner (Mar. 8, 2012) IRS0000465957. ill chain between Margo Stevens, Lois Lerner and Kristen Witter (May 2. 188 This document was obtained and uploaded by the Center for Res ge donor information from ?les and to send affected applicants a letter advising them that ?s statements to Congress defending the requests for donor information when he was fully that they were inappropriate, constituted ?overreaching? and in fact, had been halted by 1, 2012) 77231. ail from Holly Paz to Sharon Light and Matthew Giuliano (June 25, 2012!) ponsive Politics (OpenSecrets.org) U.S. Se late Committee on Finance At Mill i :rj?s interview with Senate Finance Committee Staff, he was Additional Republican Views EXPLANATION FOR FAILING TO INFORM Con GRESS WAS A SHAM asked why, after learning from Nan Marks about the BOLO list and that applications from Tea Party groups had been flagged Miller took the position that he had no duty to inform Senator Hatcl BOLO to establish ?all the facts.? In Miller?s view, the involvement of responsibility on his part to bring the facts of which he was aware ti The flaw, in Miller?s rationale for failing to inform Congress is evid of Miller?s subsequent actions in April and May of 2013. Miller ha General George on March 27, 2013 about TIGTA ?ndings regardin inappr Hatch? Why didn?t you ask your staff to contact the staff and have them come over and brief them on wh those things were things that could have been done a don?t you think? A. No. I didn?t have all the facts. TIGTA was working list and how it had been used because TIGTA was now inve priate criteria in the processing of applications for tax exem for full development based on the basis of their political views, he did not convey that information to Senator Hatch. Miller?s response was that he did not that TIGTA was conducting a review. have all the facts yet, and Q. Why didn?t you pick the phone up? Why didn?t you write an email to Senator Senate Finance Committee at Ms. Marks had found? All rid should have been done, on the facts .187 I after learning about the stigating the matter in order 3TA obviated any 3 the attention of Congress. cut when viewed in the light been briefed by Inspector the use of pt status.188 Shortly therea er, either in March or April, Miller was also given a discussion draft of the TIGTA report to revi w.189 Even though the TIGTA review was not yet complete Miller lotted with Lois Lerner to disclose the draft ?ndings of that Ameri an Bar Association (ABA) meeting on May 10, 2013, befor in an fort to get out in front of the unfavorable conclusions reach: ingly, while Miller asserted to the Senate Finance Committee investigators that the Accor ongoir applic: A develo constr. furthei investigation relieved him of any responsibility to lthl?lS from Tea Party and other political advocacy groups ha ance of his own interests. 187 SFC maIdIF I139 190 1d. Interview of Steve Miller (Dec. 12, 2013) p. 168. p;210-213. p. 218; SFC Interview ofNikole Flax (Nov. 21, 2013) pp. 190-194. 189 nor the report ?nalized, report to the public at an issuance of the ?nal report, :d by TIGTA.190 inform Congress that been ?agged for full pment based on the political views of the groups in question, apparently, he felt no such iint when it came to leaking the contents of investigation to the public in This docUm int was obtained and uploaded by the Center for Res aonsive Politics (OpenSecrets.org) U.S. Se Tate Committee on Finance In sum, truths, I through I ,was the Nililler?s communications with Congress about IRS targeting misinformation, and downright deception. Unfortunately, thi out 2012 and early 2013, as it kept Congress and the public 1 iwidely suspected as IRS wrongdoing in the treatment of LOIS LERNER ACTIVELY COVERED UP THE EXISTENCE WITH CONGRESS Much tid same as her superiors Shulman and Miller, Lerner also m1 targeting of Tea Party and other political advocacy groups. 1. LERNER MISLED STAFF OF THE US. HOUSE OF REPREE OVERSIGHT AND GOVERNMENT REFORM In 2012 Comm receive brie?nJ the crit House iLerner provided several brie?ngs to staff of the US. Hous ttiee on Oversight and Government Reform (OGR) regardin from Tea Party and other political advocacy groups. on February 24, 2012, she was asked by House Committee eria for evaluating applications for tax-exempt status.192 Lei Committee staff that it had not. 193 This answer was false, as had ch inged in 2010 with the issuance of the BOLO list that identii emerging issue. 194 She was aware that screeners had used the namt organizaltions like ?Tea Party,? ?Patriots,? or 12? as the criteriai development. '95 She also knew that for other organizations whose terms, screeners had used the conservative policies advocated by tl balancmg the budget, limiting government, reducing taxes, etc.) as applications. ?96 Moreover, Lerner herself had ostensibly changed 1 she di cted Cindy Thomas to remove the ?Tea Party? entry from with the; more generic reference ?advocacy orgs.?197 Subse uently, on April 4, 2012, Lerner provided another brie?ng regarding highly intrusive development questions that the IRS had political advocacy organizations, seeking unusual information that US House of Representatives Committee on Oversight and Government Re Service?si Targeting of Conservative Tax?Exempt Applicants: Report of Findin 2014from Justin Lowe to Holly Paz and others (June 27, 2011) I95 196 ?97 Emuill chain between Cindy Thomas, Ronald Bell, Steve Bowling, John Sha 190 1: Additional Republican Views evidenced a pattern of half- 5 conduct served Miller well :?rom con?rming as true what 3a Party organizations. IRS TARGETING IN HER sled Congress about the COMMITTEE ON 3 of Representatives the treatment of applications ring the course of one such staff if the IRS had changed her apparently informed Lerner knew that the criteria ied the Tea Party as an :s of conservative 0 select applications for full names did not include these ese organizations the criteria for selecting their he criteria in July 2011 when he BOLO list and replace it House Committee staff sent to Tea Party and other included, among other things, form, The Internal Revenue 5 for the 113th Congress (Dec. 23, 1165-66. fer and others (July 5, 2011) This document was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) US Senate Committee on Finance dditional Republican Views the narr es of the donors of the applicant organizations. ?98 Lerner sely characterized these request Lerner request Indeed, on May 4, 2012, Lerner provided a 45 page written respons 2012 fr circum March Unfort additio state tl develo was re to stop I terse 27, 2012 letter and repeated the IRS ?go-to?line? that: The revenue agent working a case uses sound reasoning bas or her experience to review the application and identify the to make a proper determination of the organization?s tax ex: information requested would be based on the facts and circL particular application?02 unately, Lerner failed to convey in her response to Chairmar nal information on the matter of the development questions. at on February 29, 2012, she had grown concerned about thI pinent questions (possibly as a result of the bad press and Ct :eiving as a consequence of their use) and apprised Holly Pa using the questions, as follows: 201 1 for information as not being out of the ordinary. ?99 As exp ained more fully below, If had reservations about the information requests mon earlier, information 3 that TIGTA subsequently determined were irrelevant, burdensome and caused delays in the processing of applications.200 3 to a letter dated March 27, om then Chairman Issa requesting additional information regarding the intrusive development questions, such as the names of donors, a list of issues organization, and details about events held by the organization. ;tances under which the IRS would request each piece of information identi?ed in the important to the serner explained the ed on tax law training and his additional information needed :mpt status. Follow?up imstances set forth in the Issa some very important For example, Lerner failed to highly burdensome mgressional inquiries the IRS to direct E0 determinations Have we given Cincy new guidance on how they might re it depends on the facts. What I?ve seen so far though is clarify for me please. Thanks 203 198 US Service 2014) I99 1d 200 TIG 10-053 201 Lett 202 Id. 203 Em TA, Inappropriate Criteria Were Used to Identify Tax-Exempt Applicati en from Lois Lerner to Chairman Darrell Issa (May 4, 2012) TIGTA Bat 111i chain between Lois Lerner, Holly Paz, David Fish, and Cindy Thoma 10209976-77 (emphasis added). ce the burden in the information requests and make it clearer that recipients can ask for extensions? I don?t Want anymore [sic] letters going out on advocacy cases unt the letters have been adjusted. Also, I have been telling folks that not all the tters are the same because identical letters can you House of Representatives Committee on Oversight and Government Reform, The Internal Revenue ?5 Targeting of Conservative Tax-Exempt Applicants: Report of Findin . 55. (May 14, 2013). 191 This docum nt was obtained and uploaded by the Center for Res gs for the 113th Congress (Dec. 23, ons for Review, Audit Report 2013- es No. 007008-007052. 5 (Feb. 24-29, 2012) aonsive Politics (OpenSecrets.org) This docum? U.S. Se Moreo ?create compli develo to idem events 2012 letter as authorized under law and appropriate and necessary proper Accord nate Committee on Finance Additional Republican Views ve'r, on April 24, Holly Paz asked Judith Kindell to review de a, list of what you consider to be the 5-10 most troubling que and prepared a list that she sent to Paz on April 25, 2012.: 05 Among the seven types of merit questions that Kindell identi?ed as ?troubling? were estions asking organizations ify their donors, describe the issues important to them, and rovide details regarding "Held by them.206 These were the very same questions that rner depicted order to velopment letters and to stions .?204 Kindell 1y evaluate applications.207 ingly, Lerner?s May 4, 2012 response to then?Chairman Iss created the false impression that the questions were entirely preper and regular, when in fact, rner had recognized months earlier that they were burdensome and possibly not tailored to the of each application, and had therefore directed that E0 Determinations agents stop using th m. Moreover, among the questic Advisc viewec ns that Lerner justi?ed as appropriate were questions that own Senior Technical r, Judith Kindell, had flagged as ?troubling? just a week ear ier. Indeed, EO not only these questions as ?troublesome,? but also concluded thatt ey were ?unnecessary.?208 Contrary to Lerner?s misleading statements, the questions then, were not based on ?sound reason circum Somet regard Lerner Meetir needec previe Wash' have meetir 9! mg, tax law training and experience? nor were they ?ba: ed on the facts and stances set forth in the particular application.? 2. TESTIMONY BEFORE THE HOUSE WAYS AND MEANS SUBCOMMITTEE ON 1 OVERSIGHT WAS FALSE AND MISLEADING [me in April 2013, Steve Miller and Lerner agreed that she would make a public statement ng the results of the TIGTA review in advance of the releas 3 of the TIGTA report.209 ultimately chose the May 10, 2013 ABA Tax Section?s Exempt Organizations Committee [g as the venue for her public announcement.210 In order to make the plan work, Lerner to be certain that she would be asked a question that would afford her the opportunity to conclusions?? Accordingly, she contacted Celia Roady, an acquaintance and gton D.C. tax attorney who would be attending the ABA rnieeting.212 Lerner arranged to .oady ask her a ?planted? question during the question and answer portion of the ABA g?f?3 The relevant portions of Lerner?s statements at the meeting are as follows: 204 Em 205 Em 206 207 Lett 208 10-053 209 SFC ?o Em: 2? Ema 2'2 U.S Detailsi Plant (May 17, 2013). 213 'l ifrom Holly Paz to Judith Kindell (Apr. 24, 2012) 1R80000512491. il ifrom Judith Kindell to Holly Paz and Sharon Light (Apr. 25, :rffrom Lois Lerner to Chairman Darrell Issa (May 4, 2012) TIGTA Bat: TA, Inappropriate Criteria Were Used to Identify Tax-Exempt Applicati (May 14, 2013). Interview of Steven Miller (Dec. 12, 2013) pp. 218-221. illfrom Lois Lerner to Steven Miller (May 8, 2013) il?from Lois Lerner to Nikole Flax (May 9, 2013) 1R80000209300. News and World Report, Exclusive: Woman Who Asked Lois Le as No. 007008?007052. ans for Review, Audit Report 2013- rner Scandal-Breaking Question 192 nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se sate Committee on Finance Lerner admission that ?line folks? at the IRS had targeted Tea Pal status ondering if you can provide any update on any of that. However, in this case the way they did the centralization was referring to the cases as advocacy cases, they actually used or 1. sed names like Tea Party, or Patriots. They selected cases 5 ad those names in the title. "hat was wrong, that was absolutely incorrect, it was insensi1 That?s not how we go about selecting cases for further reviev neView because they need further review, not because they he The other thing that happened was they also, in some cases, They also sent some letters out that were far too broad; they Ihiese organizations that weren?t really necessary in the type 1ppropriate, it?s not usual .214 for ?further review,? subjected them to delays as well as to Additional Republican Views Ms. Roady: Lois, a few months ago there was some concern about IRS review of 50i1(c)(4) organizations, 501(c)(4) applications by Tea Party (organizations. And I?m just Ms. Lerner: our line folks in Cincinnati that handle the applications did what we call centralization of these cases. They centralized work on these in one particular group not so ?ne. Instead of LSC names on this list. They imply because the application .ive, and it was inappropriate. I. We select them for further ve a particular name. :ases sat around for a while. were asking questions of )f application. 11 some cases you probably read that they asked for contributor names. That?s not ~ty groups seeking tax-exempt nnecessary and burdensome development questions, and her tepid apology for those actions, caTie as a shocking revelation. For ov er a year, Lerner, Shulman and Miller had steadfastly denied in the Lerner appeared before the Subcommittee on Oversight of the Hou Means};15 Lerner was asked by Representative Joseph Crowley ab own in vestigation into 501(c)(4) groups. The exchange between Lerner Was as follows: reatment of Tea Party groups. Indeed, just two days before 2'4 American Bar Association, Transcript of The Exempt Organization Tax Revi Section 5 Exempt Organizations Committee Meeting, Vol. 72, No. 2 pp. 126-127 any wrongdoing by the IRS her admission and apology, se Committee on Ways and out the status of the epresentative Crowley and Mr. Crowley: And ?nally, in the summer of 2012 it was reported that the IRS was going to undertake a similar investigation into the one taken here on colleges and universities ew (May 10, 2013) ABA Tax 2?5 Heal ing Before the Subcommittee on Oversight of the House Committee on Ways and Means, ?Hearing on the Internal Revenue Service?s Colleges and Universities Compliance Project? (May 8, 2013). 193 ?This documr?i nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se Lerner blank pure ception. On May 8, 2013, the date of her appearance before Overs' ht, Lerner was aware of a number of incriminating facts. July 2 ?Patric late Committee on Finance subsidy. This hearing highlights certain compliance problems in the abusing the tax-exempt status. I don?t want to speak for the member, but I know my constituents in Queens do not want to subsidize political campaigns. I suspect neither do any of Silo, Ms. Lerner, if you could comment brie?y on the status these political not-for-pro?ts, I would appreciate that as wel Ms. Lerner: Well, there was a questionnaire that began thi a questionnaire out there, you can look at it on our Web site information from section 501(c)(4), (5), and (6) organizatior questionnaire relates to their political activities. So that is 0 Mr. Crowley: Iappreciate that. Thank you.216 referral to an obscure IRS questionnaire in response to Re] uestion regarding the status of the IRS investigation into ?p1 11 that organizations seeking tax-exempt status that had the its? and ?9/12? had been singled out on the BOLO List and 8 Additional Republican Views political entities that fund political campaign ads that were taking donations anonymously and are tax exempt. These are the folks that put on hundreds of millions of dollars in campaign ads in 2012 elections, all with no accountability and with taxpayer Six-exempt sphere, and I hope the IRS aggressively looks into these political and business leagues to see if they are chairman or for the ranking their tax dollars being used the members on this panel. the IRS investigation into I. discussion and there is also right now, that is seeking 15, and a big piece of that ur beginning. aresentative Crowley?s point- )litical not-for-pro?ts? was the Subcommittee on he knew at least as early as names ?Tea Party,? ubjected to additional scrutiry?.217 Also, nearly a year before her exchange with Represe1J tative Crowley, Lerner becam tax ex knew 1 Holly laware that TIGTA would conduct a review of how the IRS :mpt status under section 501(c)(4) that involved political ad hat the outcome of that review would be condemnatory. Sh P212 and others on June 22, 2012 that: learned this were (sic) off track, we have done what better educate staff and move the cases. So, we wil 216 Em; 218 ilichain between Cindy Thomas to Ronald Bell, Steve Bowling, John Sh 0620735. chain from Lois Lerner to Richard Daly, Sarah Hall Ingram, Holly Pa 00000475251-52 194 processed applications for vocacy issues.218 Lerner 3 told Sarah Hall Ingram, It is what it is. Although the original story isn?t as pretty as we?d like, once we we can to change the process, 1 get dinged, but we took steps afer and others (July 5, 2011) a and others (June 22-25, 2012). This docum int was obtained and uploaded by the Center for Res aonsive Politics (OpenSecrets.org) US. Senate Committee on Finance what it is.219 By Mar of the reading use of but would also ascribeblame to her organization for causing long applications and for using unnecessary and burdensome deveIOpme questions seeking the identity of donors and the amounts of their co by Representative Crowley about the status of the investigation, Le] dissem sling reference to an IRS questionnaire. Lerner? 5 failure to truthfully respond to Representative Crowley?s Subcommittee on Oversight hearing was yet one more act of decep1 series cf such acts intended to either cover up the targeting 01 mitigate the consequences of that targeting. Shulman, Miller, and Lerner engaged in an active pattern 0 communications with Congress regarding the treatme conser Vative groups seeking tax-exempt status. That pattern of dec what e:se individuals told Congress about the treatment of Tea Pa they 'led to tell Congress. It is also apparent in the way that Mill disclo the existence of the targeting through the use of a planted so as diminish the repercussions resulting from soon-tr duplic ty in their communications with Congress allowed the IRS at arm length in 2012 and 2013 while they took whatever steps th addres the targeting. Lerner?s email quoted immediately above cl the tar eting was discovered and ultimately disclosed by TIGTA, long a corrected the problem and had taken the steps necessary active concealing IRS wrongdoing in an effort to avoid Congress interf ence, Shulman, Miller, and Lerner also undermined Congre Const utional authority to oversee the activities of the IRS. In sum written 2I91d. 22? Email chain between Lois Lerner, Troy Patterson, Holly Paz and others (Mai 22? Email chain from Lois Lerner to Richard Daly, Sarah Hall Ingram, Holly Pa: 195 ch 21, 2013, Lerner had read Pre-Discussion Draft ull extent of the ?clinging? that she was about to receive from TIGTA. 220 She knew from that draft that findings would not be limited just to ?nding fault with the names like ?Tea Party,? ?9/12? and ?Patriots? to identify app Additional Republican Views before the ?clinging? to make things better and have written procedures. So, it is Report and thus was aware ications for further review, :lays in the processing of at questions, including ntributions. Yet when asked ner could offer only a uestion during the House ion and obfuscation in a ?Tea Party groups, or fdeception in their oral and nt of Tea Party and other eption is evident not only in 'ty groups, but also in what =r and Lerner conspired to question at an ABA meeting, J-be released ?ndings. The a keep the legislative branch ey felt were necessary to early shows the plan when 1e IRS would claim that it had 0 ?make things better.?221 By ional scrutiny and 35?s exercise of its .21, 2013). and others (June 22-25, 2012). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance IV. The De this iss Additional Republican Views THE OBAMA ADMINISTRATION SIGNALED THE IRS AND OTHER AGENCIES TO TARGET CONSERVATIVE TAX-EXEMPT ORGANIZATIONS tax?exempt organizations. Political pressure from the White House following the Supreme Court ?s Citizens United decision unduly influenced the IRS and other government agencies, most notably the Department of Justice and the Federal Election Commission, to scrutinize political spending by 501(c) organizations. These agencies coordinated with each other on initiatives targeti rig conservative campaigns.? 222 reform ?223 interests.?224 interests on our political institutions. 222 Den 223 Den 224 Den 225 Den ocratic Party Platform of 2000 (Aug. 14, 2000). Iocratic Party Platform of 2004 (July 26, 2004). iocratic Party Platform of 2008 (Aug. 25, 2008). mocratic Party has consistently called for increased controls 1e has been included in their national platforms since 2000: 2004: ?To guarantee the integrity of our elections and to in will seek action to ensure that voting systems are accessible, independently auditable, accurate, and secure. We will support the full funding of pr Finally, it is the priority of the Democratic Party to ful?ll th 2008: ?We support campaign ?nance reform to reduce the interests, including public ?nancing of campaigns combine radio time. We will have the wisdom to put the public inter 2012: ?Our political system is under assault by those who I should be able to buy whatever they want in our society, inl Opponents have applauded the Supreme Court?s decision in welcomed the new ?ow of special interest money with ope believe we must take immediate action to curb the in?uenc 5:225 iocratic National Platform of 2012 (Sep. 3, 2012). 196 on political spending. In fact, 2000: ?We must restore American?s faith in their own democracy by providing real and comprehensive campaign ?nance reform, creating fairer and more open elections, and breaking the link between special interests and political in?uence. The Republicans will have none of this. Instead of limiting the in?uence of the powerful on our politics, they want to raise contribution limits so even more special intere st money can ?ow into :rease voter con?dence, we ograms to realize this goal. promise of election in?uence of moneyed special :lwith free television and est above special )elieve that special interests :luding our government. Our Citizens United and 1 arms. In stark contrast, we a of lobbyists and special This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se Political pressure to curtail political speech reached a crescendo foll 21 2010 Citizens United decision, which struck down parts of the Bipartisan Campaign Act of 2002 (McCain-Feingold Act).226 That same day, President Obama sharply January Reform conderr nate Committee on Finance riled the decision, stating: With its ruling today, the Supreme Court has given a green 1 health insurance companies and the other powerful interests every day in Washington to drown out the voices of everyday Americans. Additional Republican Views owing the Supreme Court?s ight to a new stampede of special interest money in our politics. It is a major victory for big oil, Wall Street banks, that marshal their power 227 A few days later, President Obama used his State of the Union Address as an opportunity to shame During repeate politic: and by certain When lawma corpor money Preside As dis throug for TB 2010c Obam he Court and call for reform: With all due deference to separation of powers, last week th foreign corporations to spend without limit in our election elections should be bankrolled by America?s most powerful foreign entities. They should be decided by the American Democrats and Republicans to pass a bill that helps to corre tl spending by nonpro?ts. The calls were echoed by others i Democrats in Congress, who introduced the DISCLOSB Ac ttions including foreign-controlled ones who are now all :m Obama?s statements did not go unnoticed by the IRS and hout the IRS closely monitored media coverage of the issue. (CC mail to other senior managers, stating that the 1 salvo and today?s Diana Reehm 226 558 227 The 228 The 229 S. 3: 23? The US. 310 (2010). White House, Statement from the President on Today?s Supreme Court I White House, Remarks by the President in the State of the Union Addres .95, 111th Cong. (2010); HR. 5175, 111th Cong. (2010). White House, Statement by the President on the DISCLOSB Act Vote in 23? Em ii gchain between Sarah Hall Ingram, Lois Lerner, Joseph Grant, and othe 76. Th Diane Rehm Show that aired on September 21, 2010 included a segme which atured Democratic Congressman Chris Van Hollen and Sheila Krumho for Res onsive Politics, among other guests. Diane Rehm?s website describes 197 nonpro?ts that engage in political activity to report information about their donors. .he Senate failed to pass the legislation, President Obama castigated Republican kers and stated that the bill?s failure was ?a victory for special interests and US. to fill our airwaves, mailboxes, and phone lines right up until Election Day. 3 Supreme Court reversed a century of law that I believe will open the ?oodgates for special interests including 5. I don?t think American interests, or worse, by eople. And I?d urge at some of these problems.228 the next several months leading up to the 2010 mid?term election, President Obama dly denounced the Citizens United decision and called on Congress to tighten the reins on the Obama Administration t, which would have required 229 owed to spend unlimited 29230 other government agencies. :ussed more fully in Section of the Bipartisan Investigative Report, employees The Division Commissioner GE, Sarah Hall Ingram, even referenced the President?s words directly in a September secret donor theme will continue see )ecision (Jan. 21, 2010). 5 (Jan. 27, 2010). the Senate (Sep. 23,2010). rs (Sep. 21, 2010) it called ?Campaign Spending,? 2, Executive Director of the Center 1e segment as ?Diana and guests This docum nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se As the Indeed the piv the fell set a cc ultimat A majc coordir actions conseri A Due to Investi Comm IRS.232 United White unnece The Committee found evidence that several key employees within contac ?pretty during nate Committee on Finance )tal decision to set aside all incoming Tea Party applications uise for these applicants that subjected them to long delays, eliy proved fatal to some of them. rative tax-exempt organizations. . WHITE HOUSE COORDINATION WITH THE IRS ttee was not provided with a full record of communications decision to determine the White House?s influence on other House?s continuous messaging rendered communication to i sSary. .with the White House. Most notably, Commissioner Shuln regular interactions? and ?went to a whole number of meeti his tenure at the IRS.233 Indeed, the White House visitor log explore 21, 201 232 In Ju 201l,p Section of the Preside 2009 ar emails I Lerner to the After re email Vt Dave Wyden 233 SFC campaign ?nance and the in?uence of secret donors.? The Diane Rehm ne 2014, the IRS informed Congress that Lois Lerner?s computer experi )tentially resulting in emails being lost between January 2009 and May 2 of the Bipartisan Investigative Report. In an effort to Obtain lost enate Finance Committee and then-Chairman Camp of the House Ways it;Obama, requesting all communications between Lerner and White Ho May 2011. Accordingly, the White House conducted a search for Ler Jetween Lerner and White House employees. However, the White Hous and White House employees had received from a third party. On June 1 hairmen?s letters and provided the Committees with these three emails, 1 view, the Committee determined that these emails were not relevant tot as spam and the other two were from an individual requesting tax assist: amp to President Barack Obama (June 16, 2014) and Letter from W. Ne (June 18,2014). Interview of Douglas Shulman (Dec. 3, 2013) p. 19. 198 President repeatedly called for tighter regulation of spending began to target Tea Party organizations that applied 1 just a few weeks after the President?s State of the Union adc focus of the Committee?s investigation was to determine tc ,ated with the Department of Justice (DOJ), the FEC, and the responding to the political pressure from the White House. Our inv 1in these arms of the Obama Administration which had the the documentary limitations discussed more fully in Section gative Report, as well as Lois Lerner?s refusal to cooperate But we need look no further than the President?s repeated Additional Republican Views on political speech, the IRS 'or tax?exempt status. lress in 2010, the IRS made for special processing. In Diving weeks, IRS executives who closely monitored news about the White House would burdensome questions, and what extent the IRS Treasury Department in estigation revealed concerted ffect Of targeting of the Bipartisan vith this investigation, the between the White House and )ublic criticism Of the Citizens executive agencies. Indeed, ndividual employees :he IRS maintained regular ian admitted that he had ngs? with White House staff shows 174 visits from Show, Campaign Spending (Sep. :nced a hard drive crash in May .011, as described more fully in erner emails, then-Chairman Wyden and Means Committee sent letters to use employees between January ier emails but did not find any direct did identify three emails that both 3, 2014, the White House responded otaling 66 pages of documents. 1e Committee?s investigation: one mce. See Letter from Chairman 1 Eggleston to Chairmen Camp and This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) .W. US. Senate Committee on Finance ?Dougl Analys also appear on Shulman?s calendar. When i by the House Ways Means Committee staff shows that 235 Additional Republican Views as Shulman? or ?Doug Shulman? between February 2009 and December 2012.234 at least 17 entries on this log nterviewed by Committee staff, Shulman indicated that his meetings with White House staff concerned implementation of the Affordable Care Act; issues related to the IRS budget; tax provisions in the American Recovery and Reinvestment Act; econo high-1e as the Easter Egg Roll. other rr eetings with White House employees. Shulman described four in-person meetings with President Obama: Shulm with \ll staff bl 236 237 a press conference with the President and Treasury Secretar proposals on May 4, 2009;238 general matters of the tax gap on October 21, 2009;239 a meeting with the President and other heads of agencies ab government on June 6, 2011;240 and Commissioner expired?? il?l denied that the targeting of Tea Party organizations was 'hite House staff or the President.242 Several other IRS emp :tween 2010 and 2013. Like Shulman, those employees den nic roundtables and other we] domestic policy matters involving the and events or en to the general public, such However, Shulman could not recall anything about a number of his Geithner about offshore tax a meeting where Shulman presented the daily economic brie?ng to the President about out how to improve the a photo-op with the President on December 14, 2012 after Shulman?s term as IRS ver discussed at any meeting oyees met with White House led that they discussed the Tea Party applications with anyone in the White House or received any directions about how the applies lthI?lS should be handled. 234 Access all built the Nev 235 calendar, 85 548-49, 85566, 85577, 855 236 Govern (extran 237 SFC 238 239 240 24! 1d. 242 Hea their Pc Interview of Douglas Shulman (Dec. 3, 2013) Interview Exhibit 8, also Records, ings in the White House complex: the White House proper, the Eisenho 7 Executive Of?ce Building. SFC Interview of Douglas Shulman (Dec. 3, 2013) pp. 87-116; and selec 03 85603. Interview of Douglas Shulman (Dec. 3, 2013) pp. 19-22, 87-116; Hearii ment Reform Committee, ?The IRS: Targeting Americans for their Polit rous pages omitted). Interview of Douglas Shulman (Dec. 3, 2013) pp. 90-91, 93-95, 97, 101 . 93. . '96. p. 111-12. . 116. 'ing before the House Oversight and Government Reform Committee, litical Beliefs? (May 22,2013). 199 available at White House Visitor acords. This log includes visits to wer Executive Office Building and ted entries from Douglas Shulman B4, 85604 and 1g before the House Oversight and ical Beliefs? (May 22, 2013) p. 51 ,104,106-107. The IRS: Targeting Americans for This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance We deterrnined that the White House was briefed by Treasury of?c its repo 'tipublicly. Former Treasury Chief of Staff Mark Patterson Additional Republican Views ials before TIGTA released told Committee staff that he spoke with Mark Childress, who at that time was a Deputy Chief of Staff at the White House, twice ir April or May 2013 about the plan to apologize in advance of the forthcoming TIGTA report.243 Childress concurred with Patterson?s view that if the IRS apologized, it should do so 0 11y once.244 Patterson does not know if Childress spoke wit House about this issue.245 Former Treasury Deputy Secretary Neal 1n anyone else at the White Wolin and Patterson indicate that, to their knowledge, the only meetings with the President and other White House staff about the Tea Party targeting occurred shortly after the TIGTA report was released.246 The Committee did not interview any White House employees during the course of the investigation. The Treasury Department and the White House also had advance notice about the loss of infommtion potentially relevant to this investigation caused by Lois Lerner?s hard drive crash. As described more fully in Section of the Bipartisan Investigative Report, the IRS first discovered a gap in Lerner?s emails in early February 2014. The IRS did not inform Congress of this blem which was material to this and several other Congressional investigations until June 13 2014. However, the Treasury Department learned of the problem in April 2014, when a senior advisor noti?ed an attorney in the Treasury?s Of?ce of General Counsel?? Treasury, in turn, informed the White House shortly thereafter.248 Overal it is apparent that it was unnecessary for the President to irect any individual government employee to target the Tea Party and conservative organizations. Instead, the White House?s [frequent public statements condemning political spending ensured that government agencies were acutely aware of the President?s wishes and they responded accordingly. ORGANIZATIONS ENGAGED IN POLITICAL SPEECH E. i THE DOJ ENLISTED THE HELP IN POTENTIAL PROSECUTION OF Preside Obama?s repeated criticism of the Supreme Court?s Citizens United decision and his frequentcalls to curtail political spending quickly infiltrated the ha is of the DOJ. One option that of?cials considered was the feasibility of prosecuting 501(c) organizations for engaging in political speech. The PL blic Integrity Section (PIN) of the Criminal Division combats corruption of public of?cia siand prosecutes election crimes.249 Documents produced to the Committee show that "Lois Ler?ner was the key contact at the IRS, and in this capacity she provided DOJ with critica data and access to IRS officials as she coordinated the 5 response to requests for assistance. Lois Lerner and PIN employees were communicating with each other and 243 Interview of Mark Patterson (Apr. 7, 2014) pp. 33-36. 244 Id- 245 Id ?6 Id. SFC Interview ofNeal Wolin (May 1, 2014) pp. 22-25. TIG Memorandum of Interview or Activity, Personal Interview of Cather ?8 Lettc from Neil Eggleston to Chairman Camp and Chairman Wyden (June 1 249 Public Integrity Section. 200 ne Duval (July 1, 2014). 8,2014). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance discuss discuss Con gre ng the Tea Party as early as July 2010 when staff discussed ssional Candidate Rick Barber?? Emails produced to the co Additional Republican Views ng campaign ?nance options as early as March 2009.250 E0 and DOJ staff were also a campaign ad for Tea Party mmittee document a clear, deliberate, and multi?year effort on the part of DOJ to scrutinize conservative tax-exempt organiz On Sep Princip Electio donatic Smith 1 to disc Smith? ations. 1. IN 2010, THE DOJ ENLISTED THE IRS TO HELP EXAMI EXEMPT ORGANIZATIONS *1 Crimes Branch, about a New York Times story on 501 ns for political spending in order to skirt campaign finance 1 This seems egregious to me could we ever charge a 371 cc the USA for misuse of such non pro?ts [sic] to get around laws limits? I know 5015 are legal but if they are knowinj they are allowed to use them for (and we could prove that f2 hen recommended that PIN meet with Division Corr 133 the feasibility of his idea. The following day, Pilger exp 5 plan and advised him to take an alternate path forward: It would be good to gearup some enforcement, but very oh: the near term unless there is coordination with campaigns. Department?s way in is probably most directly through Tax Nancy been make prosecutable federal case here.?254 Despite the concerns ra decide to press forward with his plan and set up a meeting on Sep Simm Simmons, PIN Senior Counsel, agreed with Pilger?s assessn ns and others to discuss these issues.255 The following wee \lE POLITICAL SPENDING BY tember 21, 2010, Jack Smith, PIN Chief, wrote to his subordinates Raymond Husler, PIN 1eI Deputy Chief, Justin Shur, PIN Deputy Chief, and Richart i Pilger, Director of the )s intentionally using aw: mspiracy to violate laws of xisting campaign ?nance gly using them beyond what Lctually)? 252 missioner Sarah Hall Ingram ?essed skepticism about Illenging as criminal work in Absent coordination, the Division.?3 Tent, stating, ?This area has subject of much debate and press articles over the past, but I don?t see a viable way to ised by his staff, Smith tember 22 with Pilger, k, PIN employees Smith, Shur, Simmons, Pilger, and Husler met again to discuss a ?Possible: 501/Campaign Finance Invest gation.?256 250 Em 251 Em 252 Em noted titled ?l 253 254 255 Ema Pilgert 256 31 51 name, it appears that the DOJ employees were referring to a Septembe )onor Names Remain Secret as Rules Shift.? El calendar invite from Jack Smith (Sep. 22, 2010) SFC IRS 000006. Er il from Jack Smith to Richard Pilger and others (Sep. 30, 2010) SFC IRS 000016. 1 chain between Craig Donsanto, Lois Lerner and others (Mar. 6, 2009) chain between Justin Lowe, Nicole Siegel and others (June 30 - July 1 1 chain between Jack Smith, Richard Pilger and others (Sep. 21 - 22, 20 Nancy Simmons (Sep. 22, 2010) SFC IRS 000007. 201 10) SFC IRS 000004. Although not 21, 2010 New York Times article SFC IRS 000211 2010) SFC IRS 000751. nail calendar invite from Richard This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance On Sep Additional Republican Views tember 29, Pilger reached out to Sarah Hall Ingram?s of?ce tio set up a meeting with the IRS to discuss 501(c)(4) issues. Ingram told her staff, ?we have to do this? but since she was traveling, Ingram asked Lois Lerner to organize the meeting?? The On M0 the call, Lerner and Pilger discussed having the IRS provide the DO ga?tion (FBI) with 501(c)(4) ?ling data and inviting the FBI t3 attend the Friday meeting. Investi On Friday, October 8, the IRS, DOJ and FBI held their ?rst meeting by 501 anything else they are looking for. If they need more than tr td assign carefully to preserve the civil-criminal wall. These 260 :cD(4) organizations. Siri Buller, an employee in E0 Tech IRS planned to: [W]alk through the basic civil law rules within our jurisdiction and ?nd out what if primer then we would need are not tax people so [Lerner] may also take Joe Urban to do clear perimeters abo Jt tax info should they want to do any 6103 ?shing (as opposed to public record 6104 info).258 nday, October 4, Lemer and Pilger spoke in preparation for Friday?s meeting.259 During and the Federal Bureau of to discuss political spending nical, prepared a summary about what was discussed during this meeting that included the follawing points: In a follow-up meeting a few weeks later, Pilger asked for a contac could IRS.26 nature crimin prosec 0 attorneys expressed concern that certain section between DOJ, EC and IRS. definitions and rulings. 26? :"urther discuss ?criminal tax enforcement against tax exempt 257 Ema chain 2? Ema 259 Ema 18. 260 Ema 00003E 000034 26] provid Joseph 262 Em 263 il chain between Richard Pilger, Brown and Sarah Hall Ingram . ,Email chain between Lois Lerner, Richard Pilger, Brian Fitzpatrick, an -3 5 Urban (Oct. 7, 2010) chain between Joseph Urban, Nancy Marks and others (Oct. 19, 2010) 202 This document was obtained and uploaded by the Center for Res 501(c) organizations are actually political committees ?posing? as if they are not subject to FEC law, and therefore may be subject to criminal liability. The attorneys mentioned several possible theories to bring criminal charges under FEC law,? including a partnership Lerner explained the tax law surrounding 501(c)(4)s and challenges to criminally i prosecuting these organizations including confusing tenininology and a lack of clear from the IRS so that PIN organizations? with the 1 Nancy Marks provided Pilger with the requested contact but noted the very unusual of ?5 inquiry and warned that the IRS had not ?seen activity that rises to the level of al investigation.?263 Apparently, the overly zealous attempts to criminally u?lte tax?exempt groups were enough to make even the IRS uncomfortable. Sep. 29, 2010) Email etween Sarah Hall Ingram, Richard Pilger, Lois Lerner, and others (Sep. 29, 2010) IRSC038466. il chain between Sarah Hall Ingram, Richard Pilger, Lois Lerner and others (Sep. 29, 2010) IRSC038466. i1 chain between Richard Pilger, Lois Lerner and Brown (Sep. 29 - Oct. 2, 2010) SFC IRS 000017- il calendar invite from Richard Pilger to Sarah Hall Ingram, Jack Smith and others (Oct. 8, 2010) SFC IRS (1 others (Oct. 6 - 7, 2010) SFC IRS tilt from Siri Buller to Lois Lerner, Judith Kindell and others (Oct. 11, 2010) IRSC038444-46. The IRS also :d the with a series of documents regarding political activity of 501 Email from Siri Buller to IRSCO38471. ponsive Politics (OpenSecrets.org) . . U.S. Senate Committee on Finance Additional Republican Views 2. THE FBI WAS INVESTIGATING TAX-EXEMPT ORGANIZATIONS IN 2010 The FBI is tasked with investigating tax fraud and performing counterterrorism operations as part of issues with the IRS. Cooperation between agencies is common dur and allows law enforcement personnel to take advantage of the exp government agencies. This cooperation between the BI and IRS Vi both before and during the time the IRS was inappropriately targeti ts law enforcement responsibilities, and the FBI routinely cc >ordinates work on these ing law enforcement actions ertise provided by other Ias a common occurrence ng conservative tax-exempt organizations, and the Committee possesses emails documenting numerous instances of cooperation that appears to be appropriate. Nonetheless, one set of interactions between the agencies raises questions of impropriety. On October 5, Lerner informed her staff about request for 501(c political activity on the Lerner engaged in political activity between 2007?2010.265 Over the next staff worked with the DOJ to nail down details about the request as 266 reques through the IRS bureaucracy. On 00 SUperVisory Special Agent Brian Fitzpatrick in Washington DC.26 9903 fled between 2007 and 2010 by 501(c)(4)s that had indicated level political activity. 268 On November 4, Lerner followed up 9903 had been sent to the FBI.269 264 The Lois Le 265 Cher betweei betwee] 266 The 990 for betwee] betwee and Da (Oct. 5 990 and 990 E2 forms are the annual tax return forms filed by 501(c)(4) mer, Cheryl Chasin, Sherry Whitaker, and others (Oct. 5, 2010) [Lois Lerner, Cheryl Chasin, Sherry Whitaker and others (Oct. 5, 2010) provided DOJ only with publically available data and did not produ 11, Email chain between Judith Kindell and Cheryl Chasin (Oct. 5, 2010 I Lois Lerner, Cheryl Chasin, Sherry Whitaker, and others (Oct. 5, 2010? I Lois Lerner and Richard Pilger (Oct. 5-7, 2010) IRSC03 8475-76; Ema (id Hamilton (Oct. 5, 2010) Email chain between Sher 2010) Email chain between Lois Lerner, Richard Pilg (Oct. 5- 7, 2010) SFC IRS 000034-35; Email chain between Lois Lerner, Richar 5-7, 2010) SFC IRS 000036-37. 267 Erna1 il chain between Sherry Whitaker and David Hamilton (Oct. 7?22, 2010 268 Email chain between Lois Lerner, Judith Kindell, Sherry Whitaker and other IRSOOC 0807007-08; Email chain between Judith Kindell and Cheryl Chasin (O 269 Em: il chain between Lois Lerner, Judith Kindell, Sherry Whitaker, and othe IRSOOI 0807007?08. 203 They would like to begin looking at 9905 from last yr interested in the reporting for political and lobbying activity. How quickly could I get disks to them on this? Also would 990 E2 ?lers have information on lobbying and :qber 22, the IRS sent the requested documents, totaling 21 I yl Chasin evaluated if a 501(c)(4) was engaged in political activity base I Lois Lerner, Judith Kindell, Sherry Whitaker and other (Oct. 5 - Nov. 7 filing data: :ar for c4 orgs. They are 3 staff immediately began working on this request, compiling a list of 501(c)(4)s that had ?ouple of days Lerner and her they shepherded of information, to FBI 7 These DVDs contained the they had engaged in some with her staff to verify that the organizations. Email chain between )902548-50 on the Form 990. Email chain Email chain 2010) IR80000807007-08. :e the protected Schedule of the Email chain i Email chain .1 chain between Sherry Whitaker ry Whitaker and David Hamilton er, Sherry Whitaker, and others :1 Pilger, and Sherry Whitaker (Oct. 3 (Oct. 5 - Nov. 7,2010) 5,2010) rs (Oct. 5 - Nov. 7,2010) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) i . . US. Senate Committee on Flnance Additional Republican Views The interest in this information, and the willingness to provide it, raises the question of whether the FBI was used by the administration to target politica The IR throughout 2011 and 2012.270 Serious consideration of prosecuting reemer 3 and DOJ continued to discuss political spending by 501(c) ged just days before news of the Tea Party targeting scandal advocacy organizations. 3. THE DOJ AGAIN REACHED OUT TO THE IRS FOR ASSISTANCE IN 2013 organizations sporadically 501(c) organizations broke. In early 2013, DOJ gave Democratic staff of the Senate Judiciary Committee?s Subcommittee on Crime On Ap a heari prosec campa In an 2 to Leri had be reques and Terrorism a brie?ng on: "i1 9, 2013, the Senate Judiciary Committee?s Subcommittee gn activities: I would urge that the Department and the Service get togeth these two specific areas, which I think bear little resemblan and are in fact very plain?vanilla criminal cases or wheti proceed to put together a criminal case showing a fairly statement or a fairly [straightforward] shell corporation disc 161? for assistance in May 2013 just two days before Lois en targeting conservative groups. Lerner informed her colle t: [sic] idea at the hearing that DOJ could piece together false applicants who ?lied? on their 1024s saying they weren?t activity, and then turning around and making large visible 1 270 In late 2011 and early 2012, the IRS, DOJ, and PEG worked on a report to States 2 Jane LE John Email betwee betwee 271 Emi 2013). 272 Hea Campa gainst Corruption (GRECO), explaining US. campaign ?nance law to to Lois Lerner, Judith Kindell and others (Nov. 18, 2011) FECSUBPS ?andolino, Nancy Simmons, Lois Lerner, Nancy Simmons, and others (J .hain between Jane Ley, Lois Lerner and others (Nov. 19-21, 2011) Jane Ley, Nancy Simmons, Lois Lerner and others (Nov. 19-21, 2011) Lois Lerner and Richard Pilger (Jan. 26, 2011) SFC IRS 0000194-95. Lil chains between DOJ staff and Democratic Staff of the Senate Judiciar ign Finance Law? (April 9, 2013) pp. 13-14 (extraneous pages omitted). 204 The Department of Justice?s approach to and investigation or prosecution of material false statements to the IRS regarding political activity in orc er to obtain and maintain 501(c)(4) status [and] knowing and willful violations ofdisclosure rules. 27] on Crime and Terrorism held 1g entitled ?Current Issues in Campaign Finance Law Enforcement.? Subcommittee Chairman Sheldon Whitehouse questioned IRS and DOJ witnesses as to why they had failed to He 501(c)(4) organizations that appeared to make false statements regarding their political er and rethink whether in :e to traditional tax violations ier the Department could not straightforward false losure violation.272 pparent response to political pressure from Democrats, Richard Pilger again reached out erner revealed that the IRS agues of meeting [Pilger] wanted to know who at IRS the DOJ folks could talk to about Sen. Whitehouse statement cases about planning on doing political )olitical expenditures. DOJ is 1e Council of Europe?s Group of Dreign tax of?cials. See Email from 000052?93; Email chain between in. 26-27, 2012) 000714413-15; Email chain Email chain Committee (Nov. 2012 - Mar. ring before the Subcommittee on Crime and Terrorism of the Senate Judiciary Committee, ?Current Issues in This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se In resp potenti to let Divisic been targeting Tea Party organizations. Even in the midst of the tie from tl is revelation, she continued to assist DOJ in their efforts to the eve meetin Throug and ass herself assista and sh COOl?dl] organi: In resp increas Obamr politic scrutir We fo any pr worke particularly those that she believed were attempting to expand the 1 poh?c onbm apphc nate Committee on Finance feeling like it needs to respond, but want to talk to the right programs.273 OJ invite the FEC, and she also recommended inviting IRS nland their counsel to the meeting.274 On May 10, 2013, Le ning of May 10, Lerner told Pilger that Nancy Marks would ORGANIZATIONS onse to mounting pressure to constrain political spending in ed its scrutiny of political speech. Indeed, some of this pres US administration as part of a broader Democratic push to lir s, as noted above. But following the calls for reform after y' of conservative tax?exempt organizations reached new lev 1nd that the FEC worked with the IRS to investigate conserv ogressive organizations with Lois Lerner?s eager assistancc :liat the FEC and was well known for her aggressive investig 5376 Documents produced to the Committee show that the ader political spending issues, concurrent with the ations for tax-exempt status. 273 Ema 274 275 Richarc 276 Nat: anal Review, Lois Lerner at the FEC (May 23, 2013). ilichain between Lois Lerner, Nikole Flax and others (May 8-9, 2013) II ilgchain between Richard Pilger and Lois Lerner (May 8, 2013) SFC IRS Pilger, Lois Lerner and others (May 8-10, 2013) SFC IRS 000204. 205 there are impediments from our side and what, if any damag )nse to Lerner?s email, Nikole Flax expressed support for 11' of inviting the FEC to also attend the meeting. After some between the IRS and the DOJ. 275 Majority staff does not d, as the IRS prodUced no further records regarding this mee h'out its dealings with DOJ, the IRS provided timely respons istance. Lerner was quick to respond to DOJ staff. On mult available for calls, sometimes within a few minutes after rec ice. Instead of delegating to her subordinates, Lerner person 3 guided them through the IRS bureaucracy. These example rated effort between the IRS and the DOJ to constrain politic cations, pursuant to the President?s public statements and vie 3. THE FEC AND THE IRS WORKED TOGETHER TO TARGE Additional Republican Views folks at IRS to see whether this might do to IRS )J?s idea and asked about the deliberation, Lerner decided Criminal Investigations ?ner revealed that the IRS had rce backlash that resulted arget tax-exempt groups. On work on arranging this if this meeting ever :ting. to requests for information iple occasions Lerner made eiving request for ally handled these requests 3 illustrate a multi?year a1 spending by tax-exempt ws. CONSERVATIVE recent years, the EC sure predated President nit the amount of money in 'tz'zens United, the els. ative organizations but not 3. Lerner had previously ation of conservative groups, nfluence of money in EC also worked with the IRS tematic targeting of Tea Party {80000209398-400. 000201; Email chain between This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance dditional Republican Views 1. THE FEC USED INFORMATION PROVIDED BY THE IRS TARGET FOUR CONSERVATIVE ORGANIZATIONS On November 18, 2013, then?Ranking Member Hatch sent a letter the Chair of the FEC requesting that the FEC provide all documents re?ecting communi ations between FEC employees William Powers and Wade Sovonick and any employee the Treasury Department (includ rig the IRS), from January 2006 to the present. Lisa Steven on, Deputy General Counsel Law, FEC, reSponded to Senator Hatch?s letter via email on Nov ber 26, 2013.277 Ms. Steven .On noted that she had attached a complete set of responsive ocuments the FEC was produc in response to Senator Hatch?s letter. The Committee al 0 made a Similar request to the IRS for communications its employees had with the FEC. On eptember 1 1, 2013, the IRS - inform :d Senator Hatch that it had produced all relevant document .278 Review by the Majority staff cc n?rmed that many of the same documents were produced both agencies and that there were 3 substantive differences or omissions. As a whOle, the documents Show that Lerner was the key co tact at the IRS. In this . . . . . and the IRS helped the FEC w1th enforcement actions against four conservative tax- exemp organizations.279 The ?rst; communication regarding these conservative groups occu ed in July 2008, when FEC Enforcement Division attorney Wade Sovonick contacted Lerner discuss a 501(c)(4) organization that he believed ?recently ?led [for tax-exempt status with the Shortly therea?ter, Sovonick and another Enforcement attorney, William wers, spoke with Lerner and reveale d: that their inquiry related to the tax-exempt status of the A erican Future Fund?? At the timeiof this conversation, the FEC was considering a complain ?led against the American Future Fund by the Minnesota Democratic Farmer Labor Party all ging violations of the Federal Electic Campaign Act related to television advertisements.282 Ac ording to materials cited in the complaint, the American Future Fund describes itself as a ?me hanism to promote conser vative, free market ideas, and to communicate them to the blic.?283 It appears that Lerner provided only limited information to the FEC attorneys dur mg the July 2008 conversation. She explained that section 6103 of the Internal Revenue Code prevented her from sharing further information about an application for tax?exempt status while the application is still pending before the IRS.284 On Se atember 30, 2008, Powers and other FEC attorneys recommended that the FEC Comir issioners find that the American Future Fund violated three provisions of the Federal 277 Ema 1 from Lisa Stevenson to SFC Staff (Nov. 26, 2013). 27? Lettc from Leonard Oursler to Senator Orrin Hatch (Sep. 11, 2013). 279 Email chain between Lois Lerner, William Powers, Wayne Sovonick and others (Feb. 3, 2009) 06. 23? Email ?chain between Wayne Sovonick and Lois Lerner (July 9, 23? FEC, Report of Telecon (July 10, 2008) FECOGC000003-04. ?2 FEC, First General Counsel?s Report (Sep. 30, 2008). 283 1d. 2? FEC, Report of Telecon (July 10, 2008) FECOGC000003-04. 206 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sc n:ate Committee on Finance Additional Republican Views Election Campaign Act.285 The recommendation memorandum did not directly reference the conversation with Lerner, but instead stated, ?The IRS has not yet issued a determination letter regarding [American Future Fund?s] application for exempt status. Based on the information from tl egresponse and the IRS website it is likely that the [American Future Fund?s] application is still under review.?286 Just twoweeks after President Obama was sworn in, Powers contacted Lerner for an update on the Arr erican Future Fund and for information about three additional conservative organizations: the An crican Issues Project, Citizens for the Republic, and Avenger, Inc.287 As Powers noted in his me ssage, American Issues Project was the successor of the other two subjects of his inquiry Citizer sifor the Republic and Avenger. At the time of Powers?s request, the FEC was considering two complaints ?led against American Issues Pioject: one by Obama for America, and another by Democracy 21 a liberal group that Lerner also directly corresponded with regarding complaints against conservative groups lodged with theiIRS, as discussed above in Section American Issues Project described its mission as advocate for and promote the core conservative principles of our founding fathers and Ronald Reagan.?289 FEC records show that at the time of Powers?s inquirydetermine the amount of political spending by the American Issues Project. The FEC had scant information it was only aware of the organization's spending on one advert sement and could not determine the overall percentage of political spending because the organization had not ?filed anything [with] the IRS yet.?290 FEC records also show that the FEC was apparently seeking the opinion about whether political spending constituted the organization?s primary activity. Indeed, this appears to be the purpose of Powers?s message to Lerner ?to see if an IRS determination has been made re exempti Before Lerner responded to Powers?s February 2009 message, the on "291 Commissioners closed the complaint against American Future Funds on a split vote.292 On March 3, 2009, Lerner provided . the rec uested information about all four organizations and Powers ation ?looks as if it will be very useful.?293 Lerner apologiz long.2 4? On March 31, 2009, Michael Seto provided an additional 235 FEC, First General Counsel?s Report (Sep. 30, 2008) p. 15. 286 [d 287 Email .chain between William Powers, Lois Lerner and others (Feb. 3, 2009) thanked her, noting that the ad for the response taking so 150 pages of records about FECOGC000005-06. 238 FEC, Complaint by Obama for America, MUR No. 6081 (Sep. 8, 2008); FEC, Complaint by Democracy 21, MUR No]. 6094 (Oct. 10, 2008) (exhibits omitted). 2?39 FEC, Statement of Reasons of Vice Chairman Donald F. McGahn and Commissioners Caroline C. Hunter and Matthews. Peterson (July 25, 2013) p. 10. 29? FEC Case Activation Meeting Notes (Jan. 21, 2009) FECOGC000195-98. 29] Id- 292 FEC, Amended Certi?cation, MUR. 5988 (Feb. 25, 2009). 193 Ema ilichain between Lois Lerner, William Powers and others (Feb. 3 - Mar. 294 207 6, 2009) FECOGC000008-09. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Americ tax-ext In Jam enate Committee on Finance decisionlin his public statements including his State of the Union a just we including the tax return for 2008, which would show ?nancial in was stiill?considering the two complaints lodged against the organization.296 The next day, Lerner this ti betwe nlthe agencies about any of these organizations. In July 201 e.?297 Neither the IRS nor the FEC produced any records 0 Additional Republican Views Issues Project and American Future Fund to Powers, including the applications for status for both groups and the 2007 Form 990 for the former group.295 ary 2010, following the Citizens United ruling, President 01: ama began condemning the dress. In, February 2010, eks after these events, Powers requested more information a out American Issues Project rmation while the FEC informed Powers that ?we have checked our records and there are no additional ?lings at Fsubsequent communications 3, the FEC Commissioners dismis ed the complaints against American Issues Project, ?nding that the organization was not a politic licommittee subject to FEC regulation. 298 The I Si?s attentive treatment of the FEC requests for information stands in stark contrast to the experi rice of conservative organizations that applied for section 501(c)(3) and 501(c)(4) status. Lerne Was quick to respond to FEC attorneys; rather than having staff employees assist the FEC, Lerne shepherded their requests through the IRS herself, with the assistance of two senior mana rs: Michael Seto (Manager of EO Technical) and Robert Choi (Director of Rulings and Agree tints). Powers noted that Seto in particular was ?extremely the rec uested documents both and professionally. As ear 5 01 Lerne Of?ce 35299 Which division/of?ce of the IRS would be in the best posit the Commission regarding apparent violations of the lav organization which claims tax exempt status under Section to be focused primarily, if not exclusively, on electoral poli registered as a state political committee?301 told Shonkwiler that would that she would forward the repc which handles referrals.302 295 (subsec 296 297Ekn2 298 Matthe 299 Ema 30? Ema 301 1d. 302 Id. Fax transmission cover sheet from Michael Seto to William Powers (1V uent pages omitted by Committee staff). illchain between Lois Lerner, William Powers and others (Feb. 2, 2010) illchain between Lois Lerner, William Powers and others (Feb. 3, 2010) Statement of Reasons of Vice Chairman Donald F. McGahn and Comr wS. Peterson (July 25, 2013) p. 25. ilichain between Lois Lerner, William Powers and others (Apr. 3, 2009) ilibetween Lois Lerner and Mark Shonkwiler (Nov. 3, 2006) FECSUBP 208 ly as 2006, the IRS was working with the FEC on examining (4)5.300 On November 3, 2006, FEC Assistant General Counsel Mark Shonkwiler asked Lois Lerner for assistance: helpful in providing me 2. THE FEC ENLISTED THE IRS IN OTHER EFFORTS TO RESTRICT POLITICAL SPEECH political spending by ion to receive a report from .1 in connection with an 501(c)(4) status, yet appears tics and actually is lf't to the IRS Classi?cation [ar. 31, 2009) FECOGC000069 FECOGC000013. FECOGC000014-15. nissioners Caroline C. Hunter and FECOGC000012. 5000751. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Se In 201( propos request instanc re gulat comme Overal speech both in spendh Based some I nate Committee on Finance Additional Republican Views the FEC took the unusual step of requesting formal written comments from the IRS on 3d regulations for IRS employees noted the precedented nature of this with Catherine Livingston saying ?Mike [Blumenfeld] tell me he is not aware of a prior 3 in which we have sent a formal written comment to the on proposed ons.?304 Nevertheless, the IRS Chief Counsel?s Of?ce wor ed with Lerner to draft on the FEC proposal, per the request.305 the Majority staff ?nds that the IRS and the FEC worked gether to constrain political over a period of several years in direct response to the politi a1 pressure by Democrats, and out of the Obama administration. These efforts resulte in greater scrutiny on 1g of political speech by organizations on the right side of th political spectrum. 1. TREASURY DEPARTMENT COORDINATION WITH THE IR an evidence uncovered by the Majority staff, it appears that op Treasury of?cials had nowledge of the handling of Tea Party applications fore TIGTA publicly released its report. Aspects of Treasury?s overall role in the targeting remai unclear due to a lack of cooper IRS Cc other Tea Pa 2013, IRS emplo The Wolin 2012, claime ommittee interviewed two former Treasury executives: f0 ation with the Committee investigation. >mmissioner Shulman had regular contact with the Deputy ecretary of the Treasury and igh-level Treasury of?cials, but he denied that he spoke wit them about the targeting of rty groups.306 Several other IRS employees met with Treas ry of?cials between 2010 and nicluding Acting Commissioner Miller, Chief of Staff Nikol Flax, and attorneys in the fflce of Chief Counsel, including Chief Counsel William kins. Like Shulman, those yees denied that they discussed the Tea Party applications th anyone in the Treasury, or :d any directions from Treasury about how these applicatio should be handled. Deputy Secretary Neal and former Chief of Staff Mark Patterson. Wolin told Committee investigators that in Inspector General George told him that TIGTA had started an audit; however, Wolin target that, applic he only learned that Tea Party groups were targeted after Lerner apologized for that ng in May 2013.307 Patterson stated that he ?rst learned that TIGTA was doing an audit in early 013, but he did not learn about conclusions until 3 came ut.308 records differ from Patterson?s recollection Com ittee that Inspector General George ?rst briefed Patterson or 3 the best of his recollection, George ?conveyed the general ations from certain political groups for additional scrutiny, i few weeks before its report TIGTA informed the 1 September 14, 2012, and sense that the IRS had selected 1cluding using descriptors 303 Em: 304 Em? 305 Em 306 SFC 307 308 Ill! chain between Eugene Michael Blumenfeld and others (Feb. 1 7-18, 2010) IR80000713335. 2010) 1R80000853254. il chain between Catherine Livingston, Nikole Flax and others (Feb. 26 i1 between Lois Lerner, Michael Blumenfeld and others (July 23, 2010) Interview ofDouglas Shulman (Dec. 3, 2013) pp. 16-19, 77. Interview ofNeal Wolin (May 1, 2014) pp. 25-26, 30. Interview of Mark Patterson (Apr. 7, 2014) pp. 25-29. 209 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. . such as inform Below - the pol numbe these repeat d! requests of the Committee to make her available for an int definit ver determine if Madrigal had any role in, or knowledge ab . dispro As dis ussed above, the Treasury Department and the White House loss of information potentially relevant to this inve ?5 hard drive crash. Indeed, in April 2014, IRS of?cials noti about Lerner that Lc House In view Treasu least 3 made 1 Overa coordi exem}: target enate Committee on Finance tical activities of tax-exempt organizations with Lerner and ion to the subject of the Committee?s investigation, the Tre ortionately affected conservative organizations. is Lerner emails were lost, and in turn, the Treasury Depart In contrast, IRS only notified the Committee of the lost of the limitations noted above, we are not able to determin ry Department?s involvement in this matter. However, we )rhe knowledge of the targeting of conservative organ aublic. l,E we conclude that the White House?s drive to curtail politi nated effort across several executive agencies to increase sc conservative groups engaged in political speech. 309 TIG 310 SFC 30. all TIG 312 See, (regard Lerner, 501(cSummary of Brie?ngs to IRS and Treasury Leadership, Provided to TA Summary of Brie?ngs to IRS and Treasury Leadership, Provided to ng political activities of 501(c)(4), (5) and (6) organizations); email cha Victoria Judson, and others (June 14, 2012) (discus 4) regulations ?off plan?); email chain between Lois Lerner, Ruth Madri 2) 89994-95 (regarding an upcoming meeting between Democ to discuss petition for rulemaking on political activities of 501(c)(4) org ilichain between Ruth Madrigal, Lois Lerner, Victoria Judson and other 210 ?tea party? to identify such applications.?309 Neither Wolin discussing the Tea Party targeting with Secretary Lew until after Le the Committee that it briefed Secretary Lew about the aud the Deputy Secretary?s level, Treasury employees in the Off "Of times between 2010 and 2013. The primary Treasury en 'szcussions was Ruth Madrigal, an attorney in the Of?ce of forwar ipg anarticle about an appellate court?s decision about polit organi ations, Madrigal said that ?I?ve got my radar up? about the i ed potentially addressing them (off-plan) in 2013.?313 In St tprganizations. Furthermore, the IRS played a central role Interview ofNeal Wolin (May 1, 2014) pp. 31-32; SFC Interview ofMa e.ig., email chain between Ruth Madrigal, Judith Kindell and others (Oct Additional Republican Views nor Patterson recalled rner?s apology.310 TIGTA it on March 15, 2013.3? ice of Tax PoliCy discussed other IRS employees a iployee who was involved in ax Policy.312 When ical activity on 501(c)(4) ssue and noted that ?we iite of Madrigal?s clear Lsury Department refused erview. Thus, we could not out, the decisions that 2 also had advance notice stigation caused by Lois led the Treasury Department ent noti?ed the White ails in June 2014. the full scope of the nclude that Treasury had at zations before the matter was a1 speech resulted in a tiny of conservative tax- the various attempts to SFC on May 19, 2014. er Patterson (Apr. 7, 2014) pp. 28- SFC on May 19,2014. . 6, 2010) between Ruth Madrigal, Lois sing the possibility of addressing gal, Victoria Judson and others (Dec. racy 21, Campaign Legal Center and ,anizations). (June 14, 2012) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) I US. Senate Committee on Finance 1 DISPARATE TREATMENT OF CONSERVATIVE AN Additional Republican Views PROGRESSIVE APPLICANTS FOR TAX-EXEMPT STATUS but were processed di?erently than other applications, inc {encountered I lApplications received ?om Tea Party organizations were I fsubmitted by left-leaning organizations. Left-leaning orgai :subjected to the heightened scrutiny that Tea Party organii tot only singled out, luding applications zizations were not zations SINGLED OUT FOR SPECIAL TREATMENT :h'e Minority has attempted to create the impression that app] groups were also singled out by the IRS, the facts recountec tiions received from Tea Party groups were not only singled 11in than other applications. While leaning applica differe 1. THE SELECTED FOR DEVELOPMENT BY APPLICATIONS FROM TEA PARTY ORGANIZATIONS ruary 25, 2010, one of the first applications for tax exemptit I drew the attention of Jack Koester, a screener in E0 Detc since Tea Party was the object of ?recent media attention.?3?5 1 Tea rty application.320 He was subsequently assigned an applica 3?4 Email :chain between Holly Paz, Cindy Thomas, Jack Koester, and others (Fe 1R80000180869-73320 Interview of Carter Hull (July 23, 2013) (not transcribed). 211 . I APPLICATIONS FROM THE TEA PARTY AND RELATED Cc INSERVATIVE GROUPS WERE ications submitted by left- 1 below demonstrate that out, but were processed E0 TECHNICAL WERE )n received by the IRS from a :rminations.314 Koester noted ial to be a ?high-profile? case (oester also noted that the ort political candidates.316 a Party applications to E0 tion was for E0 Technical to ipplications.318 Ultimately, were sent to E0 Technical a Party failed to respond to a lish? and requested another .tion submitted by a b. 25 - Mar. 17, 2010) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) i US. Senate Committee on Finance Additional Republican Views conservative organization applying for 501(c)(3) status called American Junto.32] Steve Grodniltziky, Acting EO Technical Manager at the time Hull was assigned the cases, described the I test cases as follows: I Q. pave->43 [T]he cases that were under review in Cincinnati 2 review in E0 Technical by Mr. Hull, those were a: were they? Were they cases across the whole politic essentially Tea Party cases? md the cases that were under far as you understood, what al spectrum, or were they Well, with I guess with respect to the organizations that I don?t want to sound in my mind, they were Tea Party organizations. They came in, and in their name, Albuquerque Tea Party Uh huh Prescott Tea Party, those had ?Tea Party? in their name. Uh-huh. So I assumed that they were Tea Party organizations. And one of them I think, if you?ll you probably 1 2010, Mr. Hull and I think you actually had indica and it failed to establish, right? That is correct. And Mr. Hull requested another case, and he got am to work; is that correct? That is correct. And actually, if you look at the sensitive case report they will indicate that that replacement case, I think American Junto or Hunto? 'ecall this. At some point in ted that Prescott was a ather case from Cincinnati, a summary charts, but but was American I unto? Junto or Hunto, I don?t know how they pronounce it either. Was your appreciation then that American Junto was either a Tea Party org or related or af?liated with the Tea Party, or perhaps eSpoused the same kind of political views as 21 Tea Party? My understanding of a case that was coming up, American Hunto or Junto, that was to replace the Prescott Tea Party, was that it was connected in some way to the Tea Party. Perhaps it was they had the same Tea Party or the Albuquerque Tea Party organizatiq 32l 3? SFC Interview of Steve Grodnitzky (Sep. 25, 2013) pp. 70-71. 212 eliefs that that the Prescott ns had.322 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) i US. Senate Committee on Finance Additional Republican Views As is evident from this exchange, the intention to scrutinize the Tea Party applications extended down to its selection of ?test cases.? In addi the Tea several Hofacr for his Hull?s instruc was un Detern whethe the exe Hofac to recc HIGHLY UNUSUAL Mr. Hull Yes. Exactly. your experience? examination.324 Hofacre could not release the development approval.325 Moreover, once applicants responded to the development letters, Hull ed Hofacre to send the responses to him for his review. able to act independently and exercise the normal range of discretion that an E0 inations agent would have in determining how an application should be processed, or :suf?cient information existed upon which to base a recommendation to approve or deny mption requestm Hofacre described her experience to Committee staff as follows: 323 I. 326 THE INITIAL PROCESS USED TO DEVELOP THE TEA PARTY APPLICATIONS WAS :icsm to working on the ?test cases,? Hull was assigned to assist Elizabeth Hofacre develop Party applications then pending in E0 Determinations. Iull provided Hofacre with sample development letters to use on the Tea Party applications, but then also required 3 to send to him each draft development letter together with 1 hard copy of the application letters without first securing Jnder this scheme, Hofacre Okay. So this process that you?ve that you?ve out ined where you would get the case and you would review the case and you would would send it to Mr. Hull, and Mr. Hull would send it back to you, and then you would release it, then you would get the response and you?d send the response to draft the letter and then you Is this is this process a usual process, in your experience as an EOD agent in the and the, I think it was almost 11 years that you?d been an EOD agent at the time that this process was put into place? Is that a usual something that was usual in A. I had never seen that in my experience before or since then.328 re! also told Committee staff that she had sufficient information in her possession in 2010 >mmend to her manager a decision on some of the Tea Party applications, but was prevented from doing so under the highly unusual review process imposed by Hull. 323 SFC 324 IRSOOC 325 326 Id 327 328 SFC 0631583-84. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) i Interview of Carter C. Hull (July 23, 2013) (not transcribed). il chain between Carter C. Hull, Steve Grodnitzky, Ronald Shoemaker, and others (May 17, 2010) I:nterview of Elizabeth Hofacre (Sep. 24, 2013) pp. 57-64. Interview of Elizabeth Hofacre (Sep. 24, 2013) p. 65. 213 US. Senate Committee on Finance The ur Determinations was that many Tea Party applications that could ha not. Rather, those Tea Party applications unnecessarily languished 3 :mismanaged its way through a series of failed initiatives dc applications to decision. the IR The 201 O, involv under manag to all 1 spreac Comb Emerg I Additional Republican Views Mr. Hull or perhaps get Mr. Hull?s approval on what the next step was, but for But for the process where you had to submit the the development letter to i 3 that process, could you have decided some of these cases and whether they had i . . been a demal or a grant of the exemption request? A. Yes. Q. Okay. And that would have been in that window of 7822, which would have been May to October of 20 I I .. not positive or adverse. But you were prevented from making that? I had no decision making authority. a Okay. And typically you would have that authority agent, right? 3. UNTIL JULY 2011, THE EMERGING ISSUES TAB OF THE SPECIFICALLY TARGETED THE TEA PARTY 'Sil iteration of the Emerging Issues tab of the Combined Issu cdntained an entry for Tea Party applications.330 The entry I :various local organizations in the Tea Party movement [the 501(c)(3) or While the July 27, 2010 spreads] eirS, subsequently, on August 12, 2010, Elizabeth Hofacre se 30 Determinations employees.332 The Emerging Issues tab sheet contained an entry for ?Tea Party? identical to the entr inled Issue Spreadsheet. The entry Speci?cally targeting the giitg Issues tab of the BOLO spreadsheet until the July 2011 329 33? Ema 33l 332SFC i pl 63-64. illfrom Elizabeth Hofacre to Steve Bowling, John Shafer, and others (J Interview of Elizabeth Hofacre (Sep. 24, 2013) p. 130. 214 fortunate consequence of imposing this highly rigid and unc time that you were in [Group] 10? Right. There was enough information there to make a determination, whether or as an Determinations] Right. Like I said in my interview in May, this particular project and the procedure in this was so peculiar and so odd that I was had no decision making authority. There was no no freedom to do anything 329 rthodox process on E0 ve been decided in 2010 were for several more years, while :signed to bring the BOLO SPREADSHEET es Spreadsheet dated July 27, ead as follows: ?These cases 1t] are applying for exemption Ieet was distributed only to nt the ?rst BOLO spreadsheet 3f the August 12, 2010 BOLO found on the July 27, 2010 Tea Party remained in the revision. At that time, the ly 27, 2010) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. entry 501 Elizab list that applications then pending in E0 Determinations. Hofacre told Corr Ronal 2010, an ent Tea Pa explai the ap were, follow i i . . enate Committee on Flnance as deleted and replaced with one for ?Advocacy Orgs.? whic nizations involved with political, lobbying or advocacy for etli Hofacre, Emerging Issues Coordinator from May 2010 to Carter Hull had prepared on October 18, 2010, re?ecting th i Q. in looking at this list, I think you indicated this be i belabor the point, but these essentially are Tea Party conservative cases. Is that correct? A. Yes, that would be correct. I Q. All right. And there?s no Emerge or Acorn or libera list that you?re aware of, right? No, there are not. Q. Okay. And that?s because the criteria that was being Party, patriots, 9/12, conservative organizations; right? A. Yes, that?s correct.333 Bell assumed responsibility as Emerging Issues Coordinato Ln:d remained in that position for more than a year.334 Bell spreadsheet dated November 16, 2010. The Emerging Issue yifor ?Tea Party? that states that ?[t]hese cases involve varic rtiy movement [that] are applying for exemption under 501(c ed to Committee staff that he used this BOLO entry to perfc ?lications sent to him by screeners, in order to ensure that the nifact, applications from Tea Party organizations. He stated I I I szi Okay. And then you were describing your process were referred to you as Tea Party coordinator. You the BOLO to see if it was actually really a case that Correct. So based on this criteria here [November 16, 2010 I you have kept in your group for processing? -w 333 I: 334 335 91-92. Interview of Ronald Bell (July 30, 2013) (not transcribed). .Q iteration chart (Apr. 30, 2012) 215 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) Additional Republican Views were described as xemption under 501(c)(3) or October 2010, was shown a 3 status of the 40 ?Tea Party? imittee staff the following: fore, and I don?t want to cases, 9/12 cases or or progressive groups in this used focused only on Tea from Hofacre in October as shown a copy of the :5 tab of the spreadsheet has us local organizations in the or Bell urm secondary screening on applications he received to Committee staff as :arlier when cases, new cases would look at the criteria on should stay, is that correct? which cases would US. Senate Committee on Finance The cr related was co Project applicz goverr make 1 When Issue Accor and re Elizat Coorc 336 337 Email! chain between John Shafer, Cindy Thomas, Steve Bowling, and other 40. 338 Id 339 SFC Ones that talked about the Tea Party. A Yes. A Okay. So at the time [November 2010] this was on I that were related to the Tea Party? A. That?s correct.336 nSidered to be received from a ?Tea Party? if it contained th or ?Patriots.?337 If those words were not present it was st \inerica a better place to live,? or that it was critical of how asked about these criteria and their connection to the Tea Pa ab, Holly Paz told Committee staff the following: Q. Just to look at this, kind of, the connection between Yeah, I mean, the language on this be-on-the-looko Party.? So the other names appear to be an extrapo :lingly, until at least July 2011, the IRS screening criteria ex: lated organizations. 21. UNTIL THE TEA PARTY ENTRY WAS REMOVED FROM 3 APPLICATIONS FROM BOTH LIBERAL AND CONSERVA MEET THE TEA PARTY CRITERIA WERE SENT TO ASSIGNED, AND DECIDED eth Hofacre explained to Committee staff that during her ter iriator, applications that contained political advocacy issues Iiiterview of Ronald Bell (July 30, 2013) (not transcribed). i . Interview of Holly Paz (July 26, 2013) p. 84. 216 necessarily pulling any case that had political advoc it and it was given to you by Mr. Shafer and this ref perfect sense, doesn?t it, that the screeners were usii were using if they were looking for cases involved I Additional Republican Views Which cases would I have kept and added to the advocacy inventory? the BOLO, you weren?t icy issues, it was just the ones teria developed by the screeners to identify ?Tea Party? cases clearly illustrates that the IRS was: focused, at least until July 2011, exclusively on applicatio ns received from Tea Party or groups, and notjust on applications containing general advocacy issues. An application 3 words ?Tea Party,? ?9/12 [ll considered a Tea Party lthl?l if the application indicated that the group was concerned with government debt, ment spending or taxes, or that it would educate the public ia advocacy or lobbying ?to the country was being run.338 rty entry on the Emerging the criteria as you understand erence in the BOLO, it makes 1g the kind of criteria they with the Tea Party movement? ut list uses the name ?Tea ation of that.339 zlusively targeted Tea Party THE EMERGING ISSUES TAB, TIVE GROUPS THAT DID NOT JERAL INVENTORY, lure as Emerging Issues but that did not meet the 3 (June 1-10, 2011) [1180000066837- This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. criteria She rec There and delete criteri nate Committee on Finance obnted the following to Committee staff: screening function or task on those applications? the Tea Party criteria. Okay. And what was the Tea Party criteria? Well, a lot of times Tea Party was in their name, 9/1 Bill of Rights, those types of activities. Okay. So if a case had that those indicators in it th you retained and began to develop? That is correct. a the screeners had sent to you, you know, what did Well, if it came from an agent and if it didn?t meet met the Tea Party criteria, and if 1 determined that it inventory. 7 - if they went back in general inventory they we Yes it is. Okay. So they didn?t get hung up or held up in this Correct. 340 ?PS?co? 13> ?o I re, until at least through Hofacre?s tenure as Emerging ISSL olst likely until the July 2011 BOLO change in which the ref applications that raised political advocacy issues but that . . a were sent to general inventory, as31gned and worked. In cc 34o SFC Iiiterview of Elizabeth Hofacre (Sep. 24, 2013) pp. 45?46, 48. 217 This docume for a Tea Party case were handled differently than applicatic Okay. And when you began to receive the applicatic liberal groups or the progressive groups, did you alsc I didn?t start receiving those applications until July that I performed was very limited, to make sure they Some of the activities would be kind of Tea Party-ty applicants would educate I?m sorry, educate the pt So just to draw a contrast now, so in July or in the SI received an application from an organization that we send it back to that particular agent. If it came from Additional Republican Views ns received from Tea Parties. ins from the groups, the perform a secondary 2010]. The only screening either met or did not meet 2 Organizations, or Patriots. pe rallies. A lot ofthe lblic on the Constitution, the en, is that a case you kept, ibsequent months, if you lS liberal or progressive that )u do with that case? he Tea Party criteria, I would a screener and they thought it did not, it went to general "e in the normal pipeline to be worked and for decisions to be made on them. Is that correct? collection of Tea Party cases? es Coordinator, October 2010, :rence to Tea Party was lid not met the ?Tea Party? intrast, applications that did nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. en:ate Committee on Finance Additional Republican Views IRS pr 1dtices related to the processing of political advocacy applications, found that 100 percent of all applications that contained the words ?Tea Party,? 12 Project,? and ?Patriots? were A I selecte delays On Jan 344 :1 lfor full development by the IRS, and consequently experienced significant processing uary 25, 2012, Cindy Thomas and Steve Bowling removed the ?Advocacy Orgs.? Entry from thei Emerging Issues tab of the BOLO Spreadsheet.345 In their place, Thomas and Bowling 7 inserte ?p?oliti the Co Accor - Tea P: cdn?n TheT 1 Emerg Issues signif screer I follov Party While it also looks balanced because you also Government?? A. Yeah. And the same thing on ?educating on the Constituti right? A. Yeah ".347 ue!: tolltarget the Tea Party without mentioning it by name. Las 501(c)(4), 501(c)(5) and 501(c)(6) organiza1 cant amounts of political campaign intervention In AL er in E0 Determinations, told Committee staff he applied th -- .. 34? TIGTA, Inappropriate Criteria Were Used to Identify Tax-Exempt Applicati 345' 346 3013(3) iteration chart (Apr. 30, 2012) 347 Interview of Cindy Thomas (July 25, 2013) p. 95. Interview of Ronald Bell (July 30, 2013) (not transcribed). 219 you mentioned the Tea Party and 9/ 12, Patriots even after the Emerging Issues tab was revised to rer Lrty, the changes made to the Emerging Issues tab in January ea Party applications continued to receive unwarranted scrut ging Issues tab was revised again in June 2012. The revision :1 new entry captioned ?Current Political Issues? that Bowlling described as follows: :ail action type organizations involved in limiting/expanding institution and Bill of Rights, $ocial economic Ronald Bell explained that part of the motivation for this change was to identify actually iusing the name ?Tea Party.? Bell stated the following: Government, educating on the Tea Party without Q. Were you guys just trying to get at Tea Party with the first, you know because the Tea Party guys say they want to limit Government and that gets at the Tea say ?expanding 3n and Bill of Rights,? that that caught in that ?lter, nove direct reference to the 2012 were designed to iny from the IRS even after the rede?ned ?Current Political ions with indicators of gust 2013, Jack Koester, a revised BOLO criteria as ons for Review (May 14, 2013) p. 8. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance In sum, applications for tax-exempt status submitted by Tea Party 2 were I those the left. Beginning in early 2010, the IRS focused singula applic cases} change Thug advoc agend cuUed Q. If you saw I am asking this currently, if today if a was no evidence of political activity, would you pot that something that you would do? leated very differently by the IRS than applications submitte ations and selected several exemplars from among those app =The exclusive focus on the Tea Party extended unbrr from ?Tea Party? to ?Advocacy Org.? in the Emerging Issu Anti] July 201 l, the IRS grappled with the issue of the permi tidy for a section 501(c)(4) organization only within the cont: Additional Republican Views Tea Party case, a group case from a Tea Party group came in to your desk, you reviewed the file and there :ntially approve that case? Is A. At this point I would send it to secondary screening, political advocacy. Q. So you would treat a Tea Party group as a political advocacy case even if there was no evidence of political activity in the application. Is that right? A. Based on my current manager?s direction, uh huh.343 md conservative organizations :1 by other groups, including 1' attention on Tea Party lications to serve as ?test Jken until the July 2011 es tab of the BOLO list. ssible extent of political :xt of the Tea Party?s political a. During that span of time, Tea Party applications were me from the application pool by IRS workers, subjected to a bi process! and eventually left to languish unattended for per' humbled its way through a variety of failed processing initiatives. In con riast, throughout the period culminating with the July 2011 tab, a plications received from other organizations, including thos on the left that involved politi advocacy issues, were assigned, worked and resolved by RS staff, and consequently - suffer no untoward delays in their resolution. Even after the Jul 2011 change in the Emer ing Issues tab as well as the subsequent changes in January nd June of 2012, applications receiv from every Tea Party organization as well as every organ zation with a name that inclu ?971 2 Project? or ?Patriots? automatically drew IRS atte ion and with it, the rigors of full velopment and its associated delays. This was true whether or not the organizations callin themselves ?Tea Party,? ?9/12 Project? or ?Patriots? indic ted in their applications an intent oh to engage in political discourse. In this way, application submitted by Tea Party organ zations and other conservative groups were processed by th IRS in a fashion unlike any other pplications. Thro THE IRS DID NOT TARGET PROGRESSIVE ORGANIZAT ghout the Committee?s investigation, there have been claims. odically and systematically arre and dilatory development ds of time while the IRS hange to the Emerging Issues NS- by the Minority and by others that tl ei IRS targeted progressive groups in the same manner as the Tea Party. This is simply not accurate. 348 Interview ofJack Koester (Aug. 1, 2013) pp. 39?40. 220 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) i U.S. Se niate Committee on Finance Additional Republican Views i Our investigation revealed that there was no plan to systemically capture and delay left-leaning applic ipns at the IRS, as there was for Tea Party and conservative applications. While it is true that so :e liberal groups got caught in the process, most of the groups that were harmed by the re Tea Party and conservative groups, and those were the groups that endured the longest delays ecause they were the ?rst to be set aside. In the dditional-Democratic Staff Views, there are various claims 1n support of the flawed . asserti that the IRS ?targeted? left?leaning groups, too. Each is discussed below in turn.349 DEMOCRA TIC ALLE GA ION: GROUPS WERE TARGETED BECAUSE i THEY APPEARED ON THE BOLO SPREADSHEET epponse: The term ?Progressive? was on a part of the BOLO spreadsheet that was not tively used by IRS employees who screened incoming applications, and did not result in disparate treatment. The Mlinority correctly observes that certain terms identifying left- eaning organizations appeared on the BOLO spreadsheet from August 2010 through April 2013, including the term ?Progressive.? Indeed, during the three years that the BOLO spreadsheet was used, there were dozen: of terms'that appeared on the BOLO spreadsheet in some 0 apacity including other terms, besides the ?Tea Party? entry, that involved conservative organizations or conservative values lMerely appearing on the BOLO Spreadsheet does not indicate that the IRS improperly . targete a particular organization; what matters is how IRS employees applied the BOLO criteria to process applications. 1 'i From Apgust 2010 until May 2013, the BOLO spreadsheet was distributed to all E0 Determinations employees, who used it as a reference tool when screening and reviewing applications for tax-exempt status. The BOLO spreadsheet was comprised of ?ve ?tabs?:35? 349 Manyiof the same arguments raised by the Minority have already been disproven. See US. House of Representatives Committee on Oversight and Government Reform, Debunking the that the IRS Targeted Progressives: How the IRS and Congressional Democrats Misled America about Disparate Treatment (Apr. 7, 2014). 35? Hei gh'tened Awareness Issues (July 28, 2010) 1R80000557291-308. 221 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) ?5 \l U.S. anate Committee on Finance Additional Republican Views as Potential Abusive) Tab Name Tab Characteristics Purpose Emerging Issues 0 Groups of applications for which there is no established case law or precedent - Issues arising from signi?cant carrent events (excluding disaster relief organizations) I 0 Issues arising from changes to tax law or other signi?cant world events Watch List 0 Applications have not yet been received 0 Issues were the result of signi?cant changes in tax law or world events and would require ?special handling? by the IRS when received. TAG (also referred to Abusive tax avoidance transactions including abusive . . promoters and fake determinant 0 Activities that were fraudulent i i applications that materially misr i ?nances, activities conducted cc Foreign Conduits) i 0 Applicants with potential terror letters nature including: 'epresented operations or mtrary to tax law g. st connections refer TAG Historical (also 0 TAG issues that were no longer "ed to as Potential of historical signi?cance encountered, but that were Abusive Historical) coordinated Processing 0 Multiple applications grouped together to ensure uniform processing 0 Existing precedent or guidance does not exist i While slome terms discussed below that describe left-leaning organizations did appear on the BOLC ?Tea 1 From Histor the sp didn?t It is unclear when, if ever, the ?Progressive? entry was ever releva interv Spreadsheet, it is clear that these BOLO entries did not reSL ?eirty? BOLO entry, which appeared on the Emerging Issues 2b10 through 2013, there was an entry for ?Progressive? org ical tab of the BOLO spreadsheet. As Cindy Thomas explai readsheet were there because ?there were no current cases th iewed by Committee staff knew when, or why, the term was 351 Interview of Cindy Thomas (July 25, 2013) p. 154. 222 in the same treatment as the tab of the BOLO spreadsheet. anizations on the TAG ned, the entries on this part of at they had seen, but they we want to lose track of it, and that?s why it stayed on the Historical tab.?35? nt. Indeed, no employee added to the TAG Historical This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views tab. The: manager of employees who screened all incoming cases, John Shafer, did not recall receivi 1g any ?progressive? applications during the last 10 years: Now, do you recall seeing any during the time, and I?m talking about the whole time that you were the screening manager, all the way back to 10 years, I guess, to 2003, do you recall any cases that came in that met this criteria of progressive? A Not to my knowledge. You said this was TAG History? It was the tab in the Excel document is called TAG Historical. Okay. So do you recall any progressive cases that were sent to Washington for processing? A. I do not.352 Shafer?si testimony is consistent with other IRS employees who do not remember reviewing any ?Progressive? applications in E0 Determinations after 2006353 or ii EO Technical, in Washington, DC, after 2007.354 Hofac1 ei further explained that the TAG Historical tab of the BOLO spreadsheet was not relied on by ED Determinations employees: Okay. Would the E0 [Determinations] agents need to know this information [in the TAG Historical Tab] in order to do their job? A. Based on my opinion, no.355 Other eii'nployees also con?rmed that they did not refer to the TAG Historical tab when reviewiriig incoming applications; instead, they focused on the Emerging Issues tab.356 Thus, the entry for ?Progressive? applications did not affect how the IRS screened incoming applications for ta) -exempt status during the period covered by the Committee 5 investigation. I 352 SFC interview of John Shafer (Sep. 17, 2013) pp. 129-130. ?3 SFC linterview of Elizabeth Hofacre (Sep. 24, 2013) p. 140. 35? SFC. Lnterview of Judith Kindell (July 18, 2013) pp. 107-108. 355 SFC interview of Elizabeth Hofacre (Sep. 24, 2013) p. 136. 356 SFCI Interview of Ronald Bell (July 30, 2013) (not transcribed). 223 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance -From August 2010 until the beginning of January 2012, the BOLO or Successors.? This entry appeared on the Watcl ed to mark issues that had not yet come before the IRS, but would require special handling when they arose.357 The ACORN entry would only be placed on this part of the BOLO sheet if the IRS was not actively receiving applications that met this criteria. - entry - was us if and .. ., spread In fact As the fraud, Organi of the- Crimi- regard follow for me embez af?lia1 registr plundc In Feb ACOI this re follOVs I1 0 INAPPROPRIATELY SCRUTINIZED roups. the IRS had good reason to look for incoming applications Minority acknowledges, ACORN purportedly disbanded in HOuse OGR Committee issued a report entitled ?Is ACORN ing: ACORN failed to report an embezzlement of nearly $1 re than 8 years, and used charitable contributions to recover es and then used those funds to engage in partisan political 2 ation drives that routinely produced fraudulent registrations; 'red employee bene?ts and relieved corporate debts through ruary 2010, Minority staff of the House OGR Committee iss entitled ?Follow the Money: ACORN, SEIU and their Po ing: there was no distinction between ACORN and its af?l 357 Heig 358 Structu 359 Em, 360 US Structu 361 SEIU 2 ghtened Awareness Issues (July 28, 2010) House of Representatives Committee on Oversight and Government Re red As a Criminal Enterprise?? (July 23, 2009). i] from Nancy Todd to Sarah Hall Ingram, Joseph Grant, Lois Lerner, ar 0713482. House of Representatives Committee on Oversight and Government Re red As a Criminal Enterprise?? (July 23, 2009). House of Representatives Committee on Oversight and Government Re nd Their Political Allies? (Feb. 18, 2010) 224 Additional Republican Views 2. DEMOCRA TICALLEGA GROUPS AFFILIATED WITH ASSOCIATION OF COMMUNITY ORGANIZATIONS FOR REFORM 0W (AC ORN) WERE TARGETED BECAUSE THEY APPEARED ON THE BOLO SPREADSHEET AND WERE SUBSEQUENTLY esponse: The IRS had legitimate cause to look for incoming cases from ACORN-related rganizations following the dissolution of ACORN amidst widespread concern about riminal activity, and the BOLO spreadsheet was not used inappropriater to screen these spreadsheet contained an List tab of the BOLO, which from ACORN-related groups. 2010 after accusations Of embezzlement and mismanagement all issues that would directly affect an zation?s ability to maintain or attain tax-exempt status. In July 2009, the Ranking Member Intentionally Structured as a a1 Enterprise??358 This report, which was provided to the raised many allegations ng the Operation of ACORN and its af?liates. Included among those allegations were the million, covered up the crime the losses due to the zlement; it comingled accounts of its federally funded af?liates with its politically active it conducted voter and ACORN illegally prohibited loans.360 ued a second report on litical Allies.?36? Included in port were a number of new ?ndings that shed light on operations including the I es making it impossible to form, ?ls ACORN Intentionally Id others (July 8, 2010) form, ?13 ACORN Intentionally form, ?Follow the Money: ACORN, This document was Obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. :nate Committee on Finance consid liti gati Servic: to advz Paz an :r them as separate organizations; ACORN and its af?liates an to extract concessions, loans and funds from sources; and ane organizing and partisan political goals._ Lois These promp activities.363 The IRS research team completed its review in April for multiple af?liates and staff and members served on the may have improperly used donations as well as employee 1 Machine Tries to Reinvent Itself.?365 The report outlined was disbanding were greatly exaggerated. In fact, many simpl changing their names so as to remove any reference to ACC new tities under new names, but maintaining the same boards, st Identi?cation Numbers as former ACORN af?liates. The report in activity was being orchestrated by the parent ACORN organizatio leadership.3?56 This report was provided to the IRS on June 3, 201 1? >efore OGR Minority staff provided a copy of its report to th tories and other reports began to surface about at news stories most likely contributed to the awareness were attempting to reorganize and regain tax-exempt status ~erence ACORN. These groups often had close ties to forme Even 1 news 5 These group not rel - 362 Ema IRSOOC 363 364 365 US Politic: 366 367 Le? 368 Fox Housin i] from Joseph Urban to Lois Lerner, Robert Choi, Holly Paz, Nanette 0791013. Memorandum on Investigative Research Findings (June 21, 2010) IRSC ACORN Research Activities Summary Report (April 28, 2010) House of Representatives, Committee on Oversight and Government R: 1 Machine Tries to Reinvent Itself? (June 3, 2010) 3r from Ranking Member Darrell Issa to IRS Commissioner Douglas Sh 0742756-57. News, ACORN Branches Rebrand After Video Scandal (Mar. 15, 2010] Boom (Mar. 2, 2010). 225 Employees International Union (SEIU), received money-?t :1 others received a copy of this report on February 19, 2010. accusations, together with those from other Congressional sc :the IRS to establish its own research team in November 2009 to look into I funds. The research team concluded that these ?ndings, tog loose governance and a lack of respect for the corporate 51 Additional Republican Views .lSCd coercion and threats of ACORN controlled the )m it and used its employees Lerner, Robert Choi, Holly 362 urces, were serious enough to 2010, ?nding evidence that: had covered up an embezzlement committed by a board member; ACORN employees Board of Directors, thereby red money among ?nancial transactions; and pension and health care gether with .ructure, warranted that the :s af?liates.364 how stories in the press that )f the ACORN af?liates were or re?incorporating as aff and Employer dicated that this ?rebranding? 1 and its national senior 357 6 IRS in June 2010, several tempts to rebrand itself.368 that some local ACORN under other names that did or current ACORN owning and others (Feb. 19, 2010) 000713488. 0713483-87. :forrn, Staff Report, rlman (June 3, 2010) The American Spectator, ACORN This document was obtained and uploaded by the Center for Responsive Politics (OpenSecretsorg) U.S. organi Group memb Midwe st.?369 Indeed Thus, 1 aetivit that IRS er :n'ate Committee on Finance c'r.of the board, and the principal was a high ranking of?cial is found to have engaged in criminal wrongdoing. other words, did they go to a group and then A. Based on my recollection, no. Q. Did they go into general inventory or they go to the the TAG Group, right? A. Based on my recollection, no, they were just in gen may have made it to that, but based on my job as a times they are just sent to whoever gets them. Q. Okay. And regarding the development of those cas don?t know if you are competent to say if you knovs cases, were development letters created? A. Yes, they were. Q. Do you know if they were sent to E0 Technical for coordinated effort that was engaged in with the Tea 369 Em 370 ACOR rill chain between Steven Grodnitzky, Brenda Melahn and others (June 8 .0 Spreadsheet (Feb. 2, 2011). Other versions of the BOLO spreadshee N'Successors, but conveyed the same information. 226 Additional Republican Views nations. Steven Grodnitzky found that in the case of one applicant, the Ballot Initiative of Missouri, is a member of the organization, con:ributes money, appoints a with ACORN in the ,the BOLO spreadsheet entry for Successors? indicates that the IRS was concerned with precisely those types of issues: Local chapters of the former ACORN organization have reformed under new names and are requesting exemption under section 501(c)(3). Successmn indicators include ACORN and Communities for Change in the name and/or throughout the application.370 he issue with ACORN applications wasn?t necessarily the existence or amount of political ,I,:but rather whether these applicants were af?liated with a former non-pro?t organization iployees interviewed by Committee staff recalled seeing a few incoming applications from ACORN-related groups. As Hofacre explained, those applications IRS pr were processed using normal ocedures and were not subject to the specialized process or scrutiny that the Tea Party cases received: Q. And were the ACORN type cases treated the same as the Tea Party cases? In TAG I guess they went to eral inventory. I mean, some reviewer right now, a lot of es, if you know this, and I I, in those particular ACORN a review out ofthe same Party cases? 2010) thad different entries for This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance AlthOL The January 25, 2012 BOLO spreadsheet included two entries rela mover politic As ex slained more fully in Section of the Bipartisan Inve occurred after Paz, Thomas, and other managers expressed concen entry that.371 OCCUPY GROUPS THAT MIGHT SUBMIT APPLICATIONS Response: Although these changes to the BOLO were misgu are no indications that the affected groups suffered harm. Issue: Current Political Issues Case Assignment Guide (CAG) do not meet these criter involved in activities described above. Disposition Of Emerging Issue: Forward to Group 7822. coordinator.372 37? SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 146-147. 3? BOLO Iteration Chart (Apr. 30, 2012) (emphasis in original). 227 Issue Description: Political action type organizations invc government, educating on the constitution and bill of rights reform/movement. Note: typical advocacy type issues th Additional Republican Views A. Based on - I only reviewed a couple Of them. And 1here was no processing like gh some ACORN-related organizations did receive heighter ed scrutiny from the IRS, they were not targeted for their political beliefs and their treatment Tea Party and conservative organizations. was in no way comparable to 3. TICALLEGA TION: THE IRS TARGETED GROUPS AFFILIATED WITH WALL THROUGH A STANDALONE BOLO ENTRY AND ALSO BY EXPANDING THE BOLO ENTRY FOR POLITICAL ADVOCACY GROUPS To CAPTURE ded, they alerted the IRS to my two applications submitted by organizations affiliated with the ?Occupy? movement. Those applications were sent to the ?bucketing? process for evaluation and there ted to the Occupy Wall Street nent. The ?rst reference to Occupy organizations appeared in the entry for ?current a] issues? on the Emerging Issues tab of the BOLO Spreadsh eet: lved in limiting/expanding . $ocial economic at are currently listed on the ia unless they are also Stephen Seok is the stigative Report, this change I that the previous BOLO was overly broad. In response to this concern, Steve Bowling originally suggested modifying the BOLO to once again reference ?Tea Party? organiz: Thom informed him that Lerner had discontinued this practice. organ zations without using the words ?Tea Party,? Bowling draftc Itions; but his manager To capture the same :d new criteria that described This document was Obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US Senate Committee on Finance views and bi A secc groups 1 'of rights.373 Additional Republican Views of the Tea Party organizations: limiting the government, and educating on the constitution ndary aim of Bowling was also to capture any applications that might be submitted by af?liated with Occupy Wall Street. To achieve this goal, he inserted the phrase ?$ocial economic reform/movement,? which was ?code? for the Occupy or ganizations.374 Bowling believ thems Bowli narrov Succe BOLC this or It is without doubt that Bowling?s revisions to the BOLO spreadsh as not :d that this phrase would also apply to other groups besides Occupy that may present elves in the future and would advocate for similar positions.3 1g also created a separate BOLO entry, titled ??Occupy? Organizations,? that applied more 11y to organizations af?liated with the Occupy Wall Street movement. Like the ;sors? entry, the ??Occupy? Organizations? entry appeared on the Watch List tab of the spreadsheet, which indicates that the IRS had not yet received any applications meeting . iteria. The ??Occupy? Organizations? entry appeared only on the January 2012 version of the BOLO spreadsheet. eet were misguided. Indeed, :d in Section of the Bipartisan Investigative Report, Bowling had already committed several substantial errors that resulted in applications from Tea Party and 001186] the Bi 2012, resulted in an uproar in the media and in Congress. Unlik Janua and criter' inste The organ had tl applic them partisan Investigative Report, Bowling also mismanaged the thereby allowing it to issue burdensome and improper devel 3 some previous changes to the BOLO spreadsheet, the chan ?y 2012 were not approved by Paz, Lerner, or any upper-leve arner became aware of the changes in May 2012, they quick] be changed and removed all references to ?Occupy,? inclu 'use neutral language that would apply to all political advoc inority correctly states that in May 2012, the IRS received zations that the IRS deemed to be part of the Occupy mover word ?Occupy? in its name).377 EO Determinations emplc directly to the bucketing process, where they were evaluated 373 hi I 374 Em I 3751i 377 Em ail chain between Tyler Chumney, Stephen Seek and others (May 24-27 228 vative organizations being neglected for more than a year. As noted in Section of Advocacy Team in early 3pment letters that predictably ges made by Bowling in 1 EO managers. When Paz ordered that the BOLO :ling the ?code? reference, and :acy organizations?? wo applications from nent (although neither group )yees decided that these ations met the criteria for the ??Occupy? Organizations? Watch List BOLO entry, and sent along with applications from ailchain between Ronald Bell and Steve Bowling (Jan. 25, 2012) 1R80000013187. 376 Email chain between Holly Paz, Cindy Thomas and others (June 1, 2012) 1Jr80000013434-35. 2012) IR80000013234-48. This docUment was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. other I: olitical advocacy groups. were Meanv to_ ?00 ?centralize? 46 applications from Tea Party or conservative groups applications were still pending resolution as of September 2014, In su whic :nate Committee on Finance 378 harmed by the IRS. WORD IN THEIR NAMES. IT TOOK 3 YEARS CONCLUSION ON SOME OF THE EMERGE CASES Response: The IRS approved a number of Emerge applicatio crganizations, which were state chapters of the same organiz training Democratic Party candidates. The IRS subsequently activities conferred a private bene?t on the Democratic Party ermissible activities. for a 501(c)(4) organization. When the ctivities, it decided to revoke tax-exempt status from the org= pproved and deny tax?exempt status for pending application iSposition was delayed by several factors, including ongoing pport of this claim, the Minority cites an email conversation discusses several applications submitted by Emerge af?liate Additional Republican Views The Minority does not allege that the two ?Occupy? groups while, Majority staff analysis reveals that during that six-month period when the references cupy? appeared on the BOLO, IRS employees used the same: BOLO criteria to . A number Of those 46 are than two years later. 4. DEMOCRA TICALLEGA TION: IN 2008, AN E0 DETERMINATIONS MANAGER INSTRUCTED EMPLOYEES TO BE ON THE LOCKOUT FOE APPLICANTS WITH THE FOR THE IRS TO COME To A ns before realizing that these Ition, were recruiting and determined that these and, thus, were not IRS learned about these ranizations that had been S. The ultimate litigation. ated September 8, 2008, 5.379 In the initial email, an employee noted that a total Of eight Emerge organizations, each re presenting a different state, had f1 other simila Speak of the recorr with The re Assur ed applications and that the IRS could therefore expect mor: states. The employee then noted that ?[t]he purpose of the train ?Democratic? party candidates in areas such as cam] ng, press relations, and leadership skills.? Continuing, the a partisan nature of the cases? further guidance is pending. Ir mended that all incoming applications from Emerge affiliate ection 7.205 of the Internal Revenue Manual (IRM). :ferenced IRM section speci?es certain types of cases that sl ance division for further review, including: mid. vSubsec ?buck: 379'Em .. IRSOO applications from affiliates in rganizations appear [Sic] to be aaigning, fundraising, public mployee noted that ?[b]ecause the meantime, the employee :s be handled in accordance Iould be sent to the Quality Emails from Tyler Chumney and Peggy Combs indicate that the applic 229 ions will be sent to the ?bickerers.? uent email conversation between Chumney and Combs (not included th this report) indicates that the word tars? had been automatically changed by the email program to ?bickere . ail chain between Donna Abner, Sharon Camarillo, Joseph Herr and oth 30011492-94. 1, rs (Sep. 8-24, 2008) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) M). M), i 'Finall determination (although others were approved very quickly by the explained by several IRS employees, the issue presented by Emerg presence or amount of political campaign intervention, but rathert U.S. anate Committee on Finance Based based IRS an decisi information about the actual or planned activities of the organizatii whi .courts to resolve a I?similar issue? that was being litigated?? This the re activities: 0 Voter registration 0 Inaugural and convention host committees assuming the elected position) 0 Voter guides 0 Voter polling 0 Voter education of?ce.380 on actual knowledge of the organization?s activities, which an to set aside Tea Party applications in early 2010, which 51,; the Minority notes that some of the Emerge applicants wa :h is a distinct legal issue.?' As the Minority notes, the IRS I believe coordinated [the Emerge applications] with the ones that we were aware of and worked them together. "were fairly similar so that once we had developed them 3801M 381 382 Email chain between Deborah Kant, Cindy Westcott and others (Oct. 10-16 7.20.5 (Aug. 14, 2007). 3 Interview of Judith Kindell (July 18, 2013) pp. 111-113. 230 Additional Republican Views Applications that present sensitive political issues, includin I the following types of i 0 Post-election transition teams (to assist the elected cf?cial prior to of?cially - Other activities that may appear to support or oppose candidates for public on information about previous Emerge organizations cited in the September 8, 2008 email, the decision to invoke this provision in the IRM see 5 reasonable. It was made ad been self-reported to the suggested the possibility of private bene?t. This lies in stark contrast to the as based on very little ans. ted three years to get a ?nal initial screeners). As ge organizations was not the he inurement of private bene?t was also waiting for the required the IRS to coordinate view of Emerge applications with the Chief Counsel Of?ce, as Judith Kindell explained: Counsel and that we ultimately denied the cases, that there had been some that had been approved so we had centralized We developed them. They were able to apply it across the board because they basically had, they were basically doing the same thing. We were aware of some that had been approved prior to us noticing the issue, and there was at least one that even after we had noticed the is sue and told Cincinnati that we 2008) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecretSorg) US. Senate Committee on Finance 1 The Emerge applications were all eventually denied when the IRS organ - these tax?e very ,advoc Short - convened a hearing to further probe into the use of inapprop applic ationS? for tax?exempt status. During the course of that heari occurred between Senator Crapo and Inspector General George.38 until the legal issues had been resolved before taking the status. Clearly, the type of activities performed by the OWN POLITICAL BELIEFS TO INFLUENCE THE MANNER TEA PARTY APPLICATIONS Response: Minority staff has sought to advance the propos ?nding, based on its audit work, that the actions of IRS em motivated. Contrary to the assertions of the Minority staff, investigators. In contrast to the self-serving statements rel staff investigators uncovered a compelling trail of evidence Lerner?s political views affected not only the performance the way the IRS treated conservative tax-exempt organizat after the release of May 14, 2013 audit report, th You know, there?s been a lot of discussion when they knew it. And, one of the big que for you, Mr. George is it seems that there that there was no political motivation in the Mr. Crapo: IS that a conclusion that you have reached? 333 SFC Interview of Judith Kindell (July 18, 2013) pp. 111?112. 384 Id. Additional Republican Views needed to bring them all in and work them together there was at least one that was approved on screening at the same time that we were developing the denials.383 concluded that the izations ?were providing private benefit to the Democratic pa rty.?384 The disposition Of applications supports the measured approach in developing the applications and waitin )nsequential action of denying Emerge organizations was fferent from those of most Tea Party groups, which were concerned chiefly with issue Icy an activity that is permissible under tax law for 501(c)(4) organizations. 5. DEMOCRA TICALLEGA TION: AUDIT, WHICH CULMINATED IN ITS REPORT DATED MAY 14, 2013, ESTABLISHED THAT IRS EMPLOYEES DID NOT ALLOW THEIR IN WHICH THEY PROCESSED ition that TIGTA made a ployees were not politically TIGTA made no ??ndings? regarding the absence of political motivation, but rather merely concluded, based on statements collected from IRS employees including Lois Lerner, that there was no evidence that political motivation influenced of?cial action. With regard to the issue Of the existence of political in?uences within the IRS, TIGTA arrived at its conclusion without the bene?t Of a record as substantial as the record developed by Majority staff ed upon by TIGTA, Majority that demonstrates that Lois of her duties, but also shaped ions. Senate Finance Committee riate criteria to process ng, the following exchange 5 about who knew What and stions I have this is probably is an argument being made se actions. 385 While Minority staff quoted a portion of this exchange in the Additional Democratic Views, it omitted the most signi? 231 cant part of InSpector General George?s testimony, the portion emphasized in bolded text here. This documdnt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. At a TIGT betwe Mr. Crapo: Mr. Crapo: Mr. Crapo: Mr. Crapo: enate Committee on Finance Mr. George: Mr. George: Mr. George: Mr. George: - .That is correct, sir. Mr. George: iter point in the hearing, InSpector General George had a fur A made no ?ndings regarding the absence of political motiv en Senator Portman and Inspector General George reinforce Mr. Portman: So, on page seven of your report, you statec In the review that we conducted thus far, Se] that we have reached. And how do you reach that kind of conclusir In this instance, it was as a result of the inter the people who were most directly involved And so you take it one step by another and whether or not there was direction from peo those who were directly related to the detern indications to us now I have to note that th this was again an audit and not an investigat us they did not receive direction from peOpl When you say people beyond the IRS, that of the Additional Republican Views iator, that is the conclusion 3n? views that were conducted of in the overall matter. ve directly inquired as to ale in Washington beyond iinations unit. And their is was not done under oath, ion but they did indicate to 3 beyond the IRS. ould be anyone up the chain In theory it could be, but we have no evidence thus far that it was beyond the people in the determinations unit. So, in other words, you have simply the statement of those engaging in the conduct saying they were not political And based on that, and statements not ur conclusion that there was no political mo reached the conclusion that there was n01 it? It?s the latter, that we have not found any, sir. ly motivated? ider oath, you reached the tivation? Now, have you re or that you haven?t found 386 ther opportunity to clarify that ition. The following colloquy 3 this very signi?cant point. that Mr. Miller and subordinate employees, quote ?stated that the inappropriate criteria was not in?uenced by any individual or organization outside of the That?s on page seven of your report. And that?s been used by the administration to say that there was no no Let me be clear. Is that a finding ofyour in?uence. report? Or is that simply a restatement of what IRS employees told you? 3? Hes Applic ring before the Senate Finance Committee, Review of Criteria Used ations for Greater Scrutiny? (May 21, 2013) (emphasis added). 232 by the IRS to Identify 501(c)(4) This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Mr. George: It is a restatement of the information that employees, Senator.387 Accor ingly, TIGTA made no ?ndings regarding the absence of p( proces such i respor Regar ?perfor nearly within comp] Howe Major includ course (1,50( TIGT had 0: well a during to est: effort that tax-e) enate Committee on Finance sing of applications for tax?exempt status. Rather, it simply sible for the processing of those applications. mance of of?cial duties, it is important to point out that TIG a year to complete, involved a review of a fairly confined n1 the IRS. It is without doubt that TIGTA should be commer eteness of its audit into the processing of applications ver, in contrast, and building on the excellent work TIGTA I ity staff spent more than two years conducting its own inves ing examining the issue of possible political motivation by I of that investigation, Majority staff reviewed a substantially ,000 pages) from numerous sources including some outside Aizauditors never saw. Unlike TIGTA, Majority staff intervic :cupied high?level IRS management positions including a fo 5 jofficials from the Treasury Department. Based upon distu the course of its more exhaustive investigation, Majority st tblishing the actions and the motivations of Lois Lerner, si gr by TIGTA. As a consequence, the Majority staff was able erner?s political biases in?uenced the manner in which the empt organizations, evidence that TIGTA did not ?nd. 3S7 emphasis added). 233 existed in the self-serving statements that it collecte Additional Republican Views we received from IRS >litical influence in the concluded that no evidence of from the very employees sling the existence of Lois Lerner?s political bias, and how that bias affected the audit work, which took imber of emails (5,500) from ded on the quality and for tax-exempt status. ad already performed, :igation into the matter, RS employees. During the larger universe of documents of the IRS, documents that :wed former IRS of?cials who 'mer IRS Commissioner, as 'bing information uncovered 1ff devoted particular emphasis i?cantly eclipsing any similar 3 uncover substantial evidence 0 Division interacted with This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance Additional Republican Views VI. TEA PARTY ORGANIZATIONS WERE HARMED BY IRS TARGETING The Tea Party groups that were scrutinized by the IRS were generally small and were harmed significantly more than progressive organizations. The committee highlights four examples of groups that were ha ?med by the IRS targeting. Al THE TEA PARTY AND RELATED CONSERVATIVE GROUPS WHOSE APPLICATIONS WERE CENTRALIZED AND DELAYED WERE GENERALLY SMALL ORGANIZATIONS Starting in 2009, Tea Party groups began to organize in virtually all parts of the country-7?88 The Tea arty movement is a grassroots movement of both local and ational groups??89 There is no central Organization that controls the various Tea Parties.390 While each Tea Party organization exercises autonomy in deciding the subjects that it will advance, most Tea Party organizations share certain core beliefs, such as the elimination of excessive taxes, ending the national debt, reducing the size of government, and terminating deficit spending 39? As partiof its investigation, Majority Committee staff spoke to a nimber of individuals who organ zed various Tea Parties that applied for tax exemption and whose applications were delayed by the IRS. All of these individuals shared the same abid ng sense of purpose: that the . Unitezl States needs to belplaced on a course to ensure a ?scally responsible government that taxeswith restraint and spends within its means. The political left has sought to depict all Tea Party groups as well- funded organizations patro ized by wealthy, anonymous donors.?2 In actuality, a vast majority of Tea Parties and relate?ij conservative organizations that sought tax?exempt status from the IRS during the period 2010 to 2013 were small operations. Majority staff reviewed a random sample of 40 applications subm tted for exemption under 501(c)(4) by organizations with ?Tea Party,? or ?Patriots? in theirinames. Our review of these 40 sample organizations reve 116d very limited funding:393 33? Tea Barty Platform, Tea Party Movement. 389 i 390 [d 39] 392 SOL reewatchorg, Tea Party. 3?93 Ba ed on information contained in applications and other documents provided by IRS. 234 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views Filed for Tax-Exempt Status Between 2010 and 2013: Average annual revenue: $21,329 Median annual revenue: $9,755 SFC Majority Staff Sample of 40 Randomly Selected Tea Party Organizations that Indeed, one organization?s annual revenue was a mere $1,500. Th and re status convic The Minority has asserted that left-leaning political advocacy grou under conse receiving decisions on their applications for exemption, it is clear 1 applic group exem] '2010 points . decisi from presenting potential political advocacy issues. The remaining app divide to be 13. TEA PARTY ORGANIZATIONS SUFFERED FAR GREATER Were predominantly low budget operations, created by peop APPLICANTS 501(c)(4) experienced delays at the hands of the IRS just as ?vative groups did. While some left-leaning groups may hav ations that were delayed by the IRS were submitted by Tea 1 5.. Based on information provided to the Committee by the I )tion involving potential political activity were identi?ed by :hrough 2014.394 The IRS ?centralized? the 547 applications in time, to the Emerging Issues Group in E0 Determination on. Of those 547 applications, analysis by the Majority Staf Tea Party or other conservative groups. This represents 65.6 either right or left-leaning 394 at advocz has pri charts applic: investigation. ncipally focused on the treatment of applications centralized from tion that government growth, spending, and taxation need tc and keep, America strong. 5 data con?rms that Tea Party lated conservative groups that applied to the IRS between 2C 10 and 2013 for tax?exempt with a deep sense of be checked in order to make, HARM THAN PROGRESSIVE ps that applied for exemption the Tea Party and other encountered delays in :hat the majority of >arties and other right-leaning RS, 547 applications for the IRS during the time period by sending them, at various 5 for development and Ishows that 359 were received 3% of all applications lications were almost equally between liberal organizations (19.20%) and non-aligned organizations that do not appear 3 provided to the Committee by the IRS re?ect that 25 ofthe 547 applications involving possible political cy were centralized between May 21, 2013 and April 28, 2014. Even though the Committee?s investigation January 1, 2010 to May 20, 2013, the and analysis in this section include the 25 applications Centralized after May 20, 2013. Since these Lti'ons involved possible political advocacy issues, their treatment by the 235 was relevant to the Committee?s This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) \ll ll .3 _Tt?iil US. Senate Committee on Finance Additional Republican Views 1 Kyrgentralized Applications by - Affiliation Moreover, Tea Party and other conservative groups whose applica:ions were centralized waited longer, on average, for a decision on their applications for tax-exempt status. These groups, in total, waited 621 years for the IRS to make a decision on their app ications for tax exempt status. In cor trast, left leaning groups waited a combined total of 152 years and non-aligned groups waited 119 years. In addition, Tea Party and other conservative groups waited nearly 100 days longei than left-leaning and non?aligned groups to receive decisions on their applications for tax- exempt status. Total Years All Organizations Waited for an IRS Determination 700 600 . 500 Non-aligned . 4 . Tea Party/Conservative Left-leaning Tea Party and conservative organizations were ?centralized? beginning in February 2010, when Jack Koester first noticed an application from the Albuquerque Tea Party. In October 2010, some two months after issuance of the ?rst BOLO spreadsheet co itaining an entry for ?local organizations in the Tea Party movement,? there were 40 applications involving political 236 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. advoce percen were and as issuing ether Succee and ot] had be numb Furthe cause :Iiate Committee on Finance 031 awaiting decision in E0 Determinations.395 Every one agresult, their applications were not delayed as long. By the ding chart, by January of 2012, the IRS had centralized 236 ier conservative organizations. In contrast, only 38 applicat Seeking Tax-Exempt Status 400 350 300 250 200 150 100 33 51 .17. 2011 18 Oct. 31, 2010 July. 31, -.?Tea Party/Conservative won-Lett-leaning rmore, the application process, coupled with burden some conservative applicants like American Junto to stop 1: t)iwas from a Tea Party or a related conservative organizatio ot captured by the BOLO Emerging Issues criteria until later decisions on political advocacy applications in June 2012, opservative groups had already been waiting nearly two and en centralized by that time. Indeed, by January 2012, the IR :of applications from non-aligned groups (3 8) than from lefft-leaning groups. Centralized Applications from Organiz . 3 n. 31, 2012 May. 31,2012 Jan. 31 Additional Republican Views fthose applications (100 n.396 Left-leaning groups mostly in 2012 and 2013 time that the IRS began ome of the Tea Party and a half years. As shown in the applications from Tea Party ons from left-leaning groups had centralized the same 1 ations '34'6? 101 . .77 . .80. 2013 May. 31, 2013 Non-aligned some requests for information, iursuing tax-exempt status. Data reduced by the IRS con?rms that substantially more Tea Party and conservative organ zations than left-leaning groups withdrew their applications cease applic applic withd only 1 responding to burdensome IRS requests, which resulted in ations for ?failure to establish.? Between 2010 and 2014, 1C ations after being ?centralized.?397 Majority staff analysis re "eiw or that had their applications closed for FTE, 77 were Te were liberal or progressive. The remaining 12 had no polii 395 Em 396 SFC 397 These 101 organizations include those that formally withdrew their applicat] those rill chain between Carter Hull to Ronald Shoemaker (Oct 18, 2010) IRSO Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 91-92. 1at withdrew informally by failing to respond to IRS requests for inform 237 for tax-exempt status, or the IRS closing their 14 organizations withdrew their :vealed that of the groups that :a Party or conservative, while ical affiliation. Thus, for 000165172-76. on by notifying the IRS as well as ation. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. every Senate Committee on Finance Additional Republican Views liberal group Whose application was either withdrawn or closed for FTE, over 5 conservative groups suffered the same fate in their quest for tax-exempt status. All 0 were Centralized Applications Withdra Closed for Failure to Establis fir'jsli. 20 . 10 .. Tea Party/ Conservative Left-leaning more severely harmed than left-leaning groups. wn or I 12 hon-aligned If the above data con?rm that Tea Party and conservative organizations waited longer and TEA PARTY GROUPS SUFFERED SUBSTANTIAL HARM AS A RESULT OF IRS DELAYS Majority Committee staff interviewed principals from a number of Tea Party and related conservative organizations whose applications for exemption were, and in some cases continue to be bordi Reco grou] The i 2009 Albu atten advo percc publ gathi delayed. These individuals all recounted similar stories of :ring on the Orwellian, and of adverse impact on the operatic uhted below are several representative stories told to Majori 3s. 1. THE ALBUQUERQUE TEA PARTY Albuquerque Tea Party ?rst ?led its application for exemptic . EEO Determinations received the application on January 4, querque Tea Party indicated that it intended to: sponsor educ dees about current political issues (40 percent of the organiz cacy training to empower people to become more active in tl :nt of its activities); hold candidate forums allowing non-par C: of?ce (20 percent of its activities); and organize event rall stings open to the general public for the purposeof educating 398 En nail chain between Hilary Goehausen, Michael Seto and others (Feb. 28, 238 long delays, intrusive inquiries ms of their organizations. ty staff by these conservative )n under 501(c)(4) in December 2010.398 In its application, the :ational forums informing ations? activities); provide 1e political process (30-40 tisan access to candidates for ies that are non-partisan and motivating (10 percent of 2012) . This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance its aci spend perso Party perce nt of its budget would be set aside for such purposes.400 on February 25, 2010, Jack Koester, a screener in E0 Determina a pos Koes1er?s managers agreed with his assessment and eventually, Techr Hull 1 Hull? Repu Rick Hull? hoste Harbaugh, the President of the Albuquerque Tea Party, told extension of time to respond, the Albuquerque Tea Party sent the There when Hillal than 1 Party be in1 2012 Tea replie disclc 2013 of its Harb undel in November 2011, it received a second development letter application.404 399 IRSO 400 Id. 401 402 403 Wa 404 preclu 00180869-73. 3 Interview of Carter Hull (July 23, 2013) (not transcribed). de the IRS from coming to a ?nal determination on a litigant?s pending 239 This docume 1ical and assigned to Carter (Chip) Hull to work as one of th ;ent'the organization a development letter in April 2010. Included among the questions in 3 development letter was a query asking the Albuquerque Te :ction to ?Marianne Chiffelle?s Breakfasts,? a breakfast gath blican Party organized by Marianne Chiffelle, a then?83 year old great-grandmother.403 5 question about ?Marianne Chiffelle?s Breakfasts? to be pec :l a breakfast club and offered a prayer before each breakfast after, the Albuquerque Tea Party heard nothing from the IR 'yl Goehausen. Goehausen?s development letter asked for su ?Iull?s had, such as copies of every newsletter and publicatio Harbaugh stated that he considered Goehausen?s development letter of November 2011 to rusive and burdensome. The Albuquerque Tea Party sent it: Having heard nothing from the IRS for more than a year, i1 arty retained counsel who made inquiry as to the status of it by stating that she had prepared a recommended determin >se it to the Albuquerque Tea Party and that it was pending the Albuquerque Tea Party has not heard anything more fro ail chain between Holly Paz, Cindy Thomas, Jack Koester, and others (I shington Examiner, IRS Went After 89-year-old Tea Party Granny (Ma: 3 Albuquerque Tea Party is currently involved in litigation against the IR Additional Republican Views ivities).399 Question 15 of the application asks if the organization has spent, or intends to funds attempting to in?uence the selection, nomination, election, or appointment of any to public of?ce or to of?ce in a political organization. In response, the Albuquerque Tea stated that while no monies had yet been spent on these activities, that approximately 20 'ons, ?agged this application as sible ?high-pro?le? case because of media attention surroun ing the Tea Party.401 application was sent to E0 3 two Tea Party ?test cases.?402 a Party to describe its Bring of the Bernalillo County Majority staff that he found uliar, as Chiffelle simply . After the IRS granted a brief IRS a reply in June 2010. for nearly a year and a half, from Tax Law Specialist bstantially more information of the Albuquerque Tea response to the IRS in January 1 March 2013, the Albuquerque sapplication. Goehausen ation but that she could not vith her reviewer. Since April the IRS regarding the status augh spoke to Majority staff in February 2014. He stated that it was dif?cult for him to 'stand why his organization was still awaiting a decision on 1 ts application after 50 months, ?eb. 25 - Mar. 17, 2010) 20, 2013). .8. Generally, litigation does not application for tax-exempt status. ht was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) 11.8. while Obarr montl never small target audit: occas Harb: negat determination letter from the IRS approving tax-exempt status aff to ma an en the la group to the deter] must the II preve other deter] In 20 sever taking, and with the sense that a growing number of Americans process. They wanted to do something to help others restore that Little Benji inten fact, pro?1 educ: In 20 enCOl Senate Committee on Finance the Barack H. Obama Foundation, a charitable organization ia?s brother, received its approval to operate as a 501(c)(3) fr 1 after it ?led its application.405 Harbaugh indicated that the endorsed a political candidate, but rather has expended mos government. Harbaugh also expressed concern about wheth for the IRS and other government agencies as a result of his :dby the IRS in 2010 and 2011 and was approached by the 1 ions during that time and asked to answer ?supplemental que Lugh indicated that his ordeal in attempting to secure tax-exe ively affected the operation of the Albuquerque Tea Party. I ke contributions. He expressed his belief that donors are les ck of a determination letter negatively impacts his ability to s, as people are afraid that they may also be ?oppressed? by Albuquerque Tea Party. Lastly, Harbaugh told Majority sta nination letter has caused him to Operate very cautiously fro keep a portion of the group?s revenue on hand in the event 0 LS, as such a determination would result in a retroactive tax 1 nted the Albuquerque Tea Party from engaging in the full ra ise have undertaken. As of April 2015, the Albuquerque lilination from the IRS, more than ?ve years after they applie 2. AMERICAN JUNTO 08, American Junto was formed by Chris Littleton, a self-de al of his friends who had become increasingly concerned wi1 imin Franklin hosted in his home to discuss issues advocacy organization or to engage in political community-centered, education organization that would pr itional events aimed at encouraging people to involve thems 09, Littleton decided that American Junto would best be able iraging citizen participation in the political process by becon 405 2013) This docume a Daily Caller, IRS Of?cial Lerner Speedily Approved Exemption for 0 Barack H. Obama Foundation, 240 Additional Republican Views operated by President om Lois Lerner within a Albuquerque Tea Party had of its effort in advocating for er he had become a personal Tea Party activities, as he was 1.3. Census Bureau on two :stions.? status from the IRS has Ie stated that the absence of a acts the willingness of donors 5 inclined to make donations to tity whose tax-exempt status has not yet been con?rmed by the IRS. He also indicated that secure af?liations from other the IRS if they lend their name ff that the absence of a a ?scal per5pective, as he If an adverse determination by iability. This factor has nge of activities that it would ea Party was still waiting for a ,d for tax-exempt status. scribed conservative, and the direction the country was ere losing faith in the political lost faith. This motivated ton and his friends to create American Junto, an organization named after meetings that . American unto was never campaign intervention, and in id not engage in these activities. Littleton?s plan was to make American Junto a non- ovide scholarships and host elves in the political process. a to accomplish its goal of 1ing a charitable organization bama Brother?s ?Charity? (June 4, nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views I under 501(c)(3). As a 501(c)(3) organization, donations made to American I unto would be tax- deductible. Littleton, without legal assistance, prepared an application for tax-exempt status under 501(c)(3), and submitted it to the IRS in or about February 2010. Thereafter, Littleton incorporated American Junto, opened a bank account for it and began operating American Junto like a 501(c)(3) organization. American unto sponsored a conference that dealt with liberty issues, hosted a conference on climate change, and raised hundreds of dollars for scholarships. American Junto received a development letter from Carter Hull in July 2010. The letter inquired about American Junto?s connection to the Tea Party, as well as to Ohio Liberty Council, a -- 501(c)(4) organization that Littleton had recently formed to take positions on political issues. Littleton felt that the questions asked by Hull were invasive and that the time and effort required to respond to the letter would be substantial. Nevertheless, he answered the development letter since he understood that American Junto?s ability to raise funds through sustained donations was directly linked to its receiving approval from the IRS to operate as a 501(c)(3) organization. Sometime after reSponding to the deveIOpmen?t letter, one of the co-founders of American Junto called Hull to inquire as to the status of the application. The call to Hull was motivated by the need to get IRS approval so that the organization could raise in nest the money it required to fund [is planned activities. Hull responded by stating that the app ication was ?under review.? While American Junto?s application was ?under review? by Hull nd his IRS colleagues in Washington DC, Littleton began to involve himself more with activities of Ohio Liberty Council. Then, nearly 10 months after responding to Hull?s ?rst evelopment letter, in April of 2011 he received a second development letter from Hull. The ap lication for exemption was now [4 months old and Littleton began to lose heart that it would ever be approved. Littleton weighed the possibility of simply shutting down American Junto and moving on with Ohio Liberty Council. After consulting with his co-founders, Littleton decided to submit a response to Hull's development letter and did so in May 2011. In November 2011, American unto received yet a third development letter requesting more information, this one from Hillary Goehausen. This letter sounded the curtain call for American Junto. After waiting nearly 22 months and enduring several rounds of detailed and intrusive development letters, Littleton felt that no matter how he answered the development letter, Ame?ican unto would never be approved as a 501(c)(3) by the IRS. In December 2011, Goeh ausen called Littleton to inquire if American Junto was going to provide the information requested in the November development letter. Littleton informed Goehausen that American untc would not respond and that the organization would be dissolved. Goehausen subsequently sent Littleton a letter advising him that the application was closedl.406 LittletOn explained to Majority staff how the handling of the American Junto application had a profoundly negative effect on American Junto?s ability to operate as a 501(c)(3) entity. is one example of an application that the IRS closed for ?failure to est 1blish.? 241 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecretsorg) k. U.S. enate Committee on Finance First, effect Littleton recounted how one donor offered American Junto severa event, but withdrew the offer after learning that American I unto tax-ex empt organization. Second, Littleton indicated that the leng was pending and the string of burdensome development letters co the process. In essence, the glacial pace in developing the consu 'ing nature of its interactions with Littleton simply wore do appli ation process. Third, Littleton feared that his activities with his pr ?le with the IRS and other government agencies, a fear he .when he was audited by the IRS. While there is no direct proof th activi ies with American Junto, Littleton was quick to point out th is act? with the Cincinnati Tea Party was also audited by the IRS Little on?s suspicions about the motivations in auditing him from deep-rooted lack of con?dence in the impartiality of the IR many of the groups with whom Majority staff spoke. 3. PASS THE BALANCED BUDGET AMENDMENT (PBBA) This rganization was started by Charles Warren and several of hi belie that the government must eliminate unnecessary spending a In vember 2010, PBBA ?led with the IRS an application for ta 501( (4). In its application for exemption, PBBA indicated that educ tion, research, lobbying and media efforts aimed at securing budg amendment to the Constitution. PBBA stated to the IRS tl gs, social media, speeches, rallies, and printed media to requirement for exemption that. it be primarily engaged in izenry, PBBA asserted in its application that its activities i?ng in a more robust economy, limiting federal spending, an in response to question 15 of the application which asks if the org influence the selection, nomination, election, or appointment of a1 of?ce. within a political organization, PBBA answered Indc appli :ation and the supporting documents submitted to the IRS, it and activities were dedicated exclusively to stimulating the electo of a alanced budget amendment. that docu appli partis here was no indication of direct political activities in the app nents. However, the screener characterized PBBA as an ?ac cation to the advocacy inventory. While PBBA was not a Tr an in its message nor its educational activities, it did promot 242 the absence of an approval letter from the IRS prevented Arr Vely, since donations would not be tax?deductible until the 1 Additional Republican Views ierican Junto from fund raising RS granted tax?exempt status. I thousand dollars to fund an id not yet been approved as a th of time that the application tributed to his decision to quit plication and the time wn his resolve to complete the American Junto had elevated nelieves was realized in 2010 at the audit resulted from his at an acquaintance of his who 3 at about the same time. and his acquaintance stem .8, a conviction shared by friends'who share a common nd balance the federal budget. x?exempt status under section ts activities included the passage of a balanced iat it would use town hall vmote its message. In support romoting the common good of ould benefit the public by :i reducing in?ation. Notably, anization will attempt to 1y person to public of?ce or :ed from a review of is clear that purpose rate into supporting the passage A?s application was screened in E0 Determinations in January 2011. The screener noted lication and supporting lvocacy group? and sent its :a Party and was neither a common theme advanced This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance by Te The a] 'first 12, 2C status appro classi? The a questi the IR :1 Parties the elimination of the national debt and of de?cit we the application in September 2011. However, she then re a hardCOpy printout of entire website; a hardcopy printout of its social media outlets; planned to be conducted by PBBA, including: the content of all speeches delivered or planned to and the identities of the speakers and their credentials; copies of all communications distributed by PBBA regardi legislation; copies of all radio, television or internet advertisements re and copies of all written communications with members of leg 407 408 Le ail chain between Holly. Paz, John Shafer, Cindy Thomas and others (Jul er from Joseph Herr to PBBA (Feb. 7, 2012) (emph 243 pplication was initially assigned to an E0 Determinations ag evelopment letter to PBBA on March 31, 2011, and a seconc 11. After PBBA had responded to the development letters and resolved an issue about its as a ?for-profit? corporation under state law, the E0 Determ ?ed as an ?advocacy group? and was therefore required to se Emerging Issues Group in Cincinnati. splication was assigned to an E0 Determinations agent in Ci The agent sent PBBA an extremely detailed development letter co ons. A number of the questions asked for information that S: in its responses to the prior two development letters. How asked for highly specific information: copies of all handouts and workshop materials for all publi Additional Republican Views spending. Indeed, one of the ing criteria relied upon by E0 Determinations to identify ?Tea Party? cases was the preser cc of statements in the application related to ?Governments 334 pending, Government debt . 7! If the screener applied the ?Tea Party? screening criteria when reviewing the application, it is highly probable that his decision to send inventory was based on the conclusion that PBBA met the criteria any event, the decision to send the case to the advocacy inventory PBBA, as explained below. application to the advocacy for a Tea party application. In proved a fateful one for ent in California. She sent the development letter on May inations agent was prepared to alized that PBBA was nd the application to the ncinnati in February 2012. ntaining, with subparts, 48 BBA had already provided to ever, many of the questions 0 events conducted or be delivered at those events; ng the outcome of speci?c ating to lobbying activities; islative bodies.408 16 1-10, 2011) asis added). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. enate Committee on Finance Additional Republican Views Shortl after receipt of the third development letter, PBBA secure the services of an attorney who en submitted a response to the IRS. On May 25, 2012, PB A received a determination letter rom the IRS approving its application for tax exemption un er 501(c)(4). Even o, PBBA was adversely impacted by the mishandlin of its application. First, the appli tion and supporting documents clearly demonstrated that BA, while undoubtedly espou ing a conservative message, was not a Tea Party or an advo acy group. The decision to chara terize PBBA as an advocacy group delayed the decisi to approve appli tion for exemption. Had the application been assigned to neral inventory and devel ped in January 2011, it is likely that it would have been app oved shortly thereafter. Aside from peculation, it is clear from the case history that the E0 Dete minations agent in California was epared to approve the application in September 2011. How ver, because PBBA had been chara terized as an advocacy group, its application was sent to Ci cinnati where its approval was furth delayed by 8 months. In addition, PBBA was required to spond to three rounds of devel pment questions, and in particular, extremely onerous and urdensome questions that were hardl justi?ed in light of the information already provided to the RS. That information bore stark itness to the fact that PBBA was not a partisan political or anization engaged in camp ign intervention. Finally, after receiving a third developme letter in 14 months, PBBA deem it prudent to-secure legal counsel at substantial cost to it, ofthe application process. 3 a hedge against the vagaries 4. KING STREET PATRIOTS AND TRUE THE VOTE Cath ine Engelbrecht founded King Street Patriots (KSP) and Tr the Vote (TTV) in 2009? 2010 fter witnessing voter fraud and related abuses while servin as a volunteer poll watcher in a Tex 5 election. Her experiences as a poll watcher convinced he that more needed to be done to en ure the ?sanctity of the vote.? Accordingly, she formed KS as a non-partisan, non-pro?t orga zation dedicated to addressing some of the problems at the 0115 that she had personally experienced. activities included enlisting volunteers to wo at the polls, training those workers, leading voter registration drives, and hosting events to courage voter turnout. In May 2010, Engelbrecht ?led with the IRS, on behalf of KSP, an application for tax exemption under 501(c)(4). In September 2010, Engelbrecht submitted to the IRS an application for exemption under 501(c)(3) for TTV. Engelbrecht described activities as centering on the recruitment and traini 1g of volunteers to work inside polling places. Among other things, TTV was formed to aggressively pursue voter fraud allegations to ensure prosecutions where appropriate, to provide a sup sort system to assist poll watchers carry out their duties, and to engage in efforts aimed at validating existing voter registration lists. The IRS issued its ?rst deve10pment letter to KSP in February 2012, some 21 months after application was ?led. The development letter contained 95 questions and requests for 244 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views documents, including subparts. In a now all too familiar pattern, tie deveIOpment letter sought from KSP responded to the development letter in May 2012 with 300 pages. The next development letter was sent to KSP ei 2012. copies of every page of webpage; minutes of every board meeting; copies of every fundraising solicitation; a list of all issues important to KSP and position on the criteria KSP used when determining whether to endors of?ce; copies of all training materials; [copies of all materials distributed at educational events; copies of all materials distributed at candidate forums; and copies of all materials distributed during voter registration (SP an enormous amount of highly detailed information of dubious probative value: each issue; 3 a candidate for political drives. a submission totaling nearly months later in October KSP responded in November 2012 with the requested information. Almost a year later, in December 2013, after waiting nearly 3 and a half years, KSP received a determination letter from the IRS approving its application for exemption under 501(c)(4). Deve follov quest opment and resolution of application for tax-exempt ons speci?cally aimed at eliciting information about status under 501(c)(3) ved much the same course as that of TTV received its first development letter in Febru ary 2011, ?ve months after ?ling its application. The letter asked a reasonable number of activities, information clearly sary for the IRS to be able to determine if activities were consistent with tax-exempt purpc ses. The next development letter that TTV received, a year so ree later in February 2012, was not sonable. The number of requests for information and the demands for documents actually exceeded that of the February 2012 letter sent to KSP, topping the prodigious sum of 120.409 Moreover, many of these oppressive and burdensome requests were identical to those contained in the inforration provided to many of these requests would possibly assist the IRS reach a conclusion on the ir KSP development letter. It is indeed dif?cult to understand relevance of most of these requests: ,the percentage of people trained as election administration trained as election observers; the names and credentials of the election law experts used materials and to staff its voter integrity center; 409 L61 ter from Janine Estes to True the Vote (Feb. 8, 2012) IR80000084012-2 245 how the answers and ether TTV should be granted tax?exempt status. The following examples give a ?avor of workers versus the percentage by TTV to review This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) ,1 US. Senate Committee on Finance Additional Republican Views 0 the number of individuals trained to perform voter registration integrity activities as well as the number who are currently in training; 0 the number of jurisdictions in which TTV conducted voter registration integrity activity; 0 the name of the owner of the intellectual property rights to the software used by TTV to review lists of registered voters; and i the name of any person or organization that provided educational services to TTV, together with a full description of the services and the political af?liation of the person or organization. Notw thstanding the enormity of the effort required to respond to these largely superfluous and invas ve requests, TTV did, in fact, respond in March 2012. Thereafter, TTV heard nothing from the IRS as another year passed. Then in March 2013, TTV was required to respond to yet another request for information from the IRS. Ultimately, after waiting three years, and respo iding to at least four different requests for additional information, TTV received its determination letter from the IRS granting it status as a 501(c)(3) tax-exempt organization. Enge recht explained to Majority Staff that the delays experienced by both KSP and TTV adve ely impacted the operations of these organizations. She recounted that the long delays and multi le rounds of development letters caused these entities to incur substantial legal fees, as assist nce of counsel was required at nearly every juncture of the application process. She also indic ted that KSP and TTV suffered the ?stigma? of not having alpproved tax-exempt status Whil attempting to operate as tax-exempt entities, since the lack of IRS approval created the perce tion to some that the organizations lacked legitimacy. She also expressed frustration over inability to apply for foundation grants while it waited the three years required by the IRS to ap rove the application. Engelbrecht told Majority staff of one instance in which TTV had been awarded a grant with the condition that the funds could not be expended unless TTV was approved as a 501(c)(3) organization by the end of the year. When IRS approval was not forthcoming within that time, TTV was required to return the funds. Engelbrecht also noted that since KSP and TTV were both approved tax-exempt status, donations have increased, which lead her tc the reasonable conclusion that the delays that both organizations endured from 2010 to 2013 negatively affected their ability to raise funds in those years. Perhaps the most disconcerting aspect of Engelbrecht?s saga is the heightened interest that several. agencies of the US. Government took in her personally fr 3m 2010 through 2013, as well as in the operations of KSP, TTV and in Engelbrecht Manufacturing, the business that she and her husband operate. In January 2011, the IRS audited the tax returns of her business for tax years 2008 and 2009 and then in June of 2011, audited her personal returns for those same tax years Throughout 2011, she was contacted by the FBI six times (four phone calls and two personal visits) regarding the general activities of KSP and about a particular individual who attended a KSP function. In 2012, a new round of government inquiry into her business affairs commenced with two audits of Engelbrecht Manufacturing by the Bureau of Alcohol, Tobacco, 246 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S.S hate Committee on Finance Additional Republican Views Firearms, and Explosives as well as an audit by the Occupational Safety and Health Administration. Engelbrecht indicated that between the years 1994, when she and her husband started their small business, and 2010, when she ?rst ?led the applications for tax exemption, the extent of her contact with the government had been limited to the filing of annual tax returns. However, this changed dramatically after she submitted applications to the IRS in 2010 seeking tax-ex e'mpt status for KSP and TTV. It is unclear whether this increased scrutiny into the business of Catherine Engelbrecht and her husband was simply serendipitous, or was the product of an Jr'chestrated campaign by the government to harass her. It may also have resulted from the decen ralized actions of like-minded bureaucrats in various agencies who were executing an unsta ii directive to intimidate the political opponents of the administration, or perhaps was a comb nlation of some or all of the above. Whatever the cause, Engelbrecht believes with "unshakable conviction that she has been personally targeted by the, government and that the actions directed against her, as recounted above, re?ect the ?weaponizing of ?0 Town/val], True the Vote President Catherine Engelbrecht Slams IRS Abuse Weaponizing of Government (Feb. 7, 2014). 247 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) 1 )ti {it In . 3' hi'. ?it It US. Senate Committee on Finance VII. One 0 be an neces close] Many forme agenc Presic press practi that? the'IF POLITICAL INFLUENCE WITHIN THE IRS Additional Republican Views Recent events have demonstrated that the organizational is fundamentally flawed, resulting in an environment rife structure of the IRS with political bias. independent agency. To fully appreciate the politicized env conference. Speci?cally, he stated, ?If, in fact, IRS personn ces that had been reported on and were intentionally targeti con?dence that they?re applying it in a non-partisan way applyi 5 way. Despite these claims from the Administration and the mispercepti the IF bure Govail respo Code The I Senate. However, the IRS Commissioner does not report to the indep Treas remai ?2 .S is indeed an independent agency, the reality is that it is mment.413 According to the IRS website, the agency was ?0 nsibilities of the Secretary of the Treasury under section 5:414 RS Commissioner is a political appointee nominated by the] endent agency would; instead, the IRS Commissioner report ury via the Deputy Secretary of the Treasury.415 This report ns within Treasury?s purview. 411Wh 4 2 Wh Confe 413 414 415 ite House, Press Brie?ng by Press Secretary Jay Carney (May 10, 2013) ite House, Remarks by President Obama and Prime Minister Cameron 0 'ence (May 13,2013). . Department of Treasury, About Bureaus. The Agency, its Mission and Statutory Authority (emphasis added). . Department of Treasury, About Treasury Order 101-05. 248 LACK OF INDEPENDENT AGENCY STATUS FOSTERED THE EXPRESSION OF POLITICAL BIAS AND HAS IRREVOCABLY TAINTED THE CREDIBILITY the critical lessons learned from the Committee?s investigation is the need for the IRS to ronment of the IRS, it is sary to understand the role as a bureau of the Treasury Department an entity that is y,controlled by the President to implement his economic anc ?nancial initiatives. errantly believe that the IRS already is an independent entity. Indeed, Jay Carney, the White House press secretary, mistakenly called the IRS ?an independent enforcement with only two political appointees,? during a press brie?ng on May 10, 2013.?1 ent Obama also claimed that the IRS was an ?independent aigency,? during a May 13, 2013 el engaged in the kind of conservative groups, then outrageous and there?s no place for it. And they have to be eld fully accountable, because .8 as an independent agency requires absolute integrity, and eople have to have the laws in a non-partisan an of many in the public that )St de?nitely not. The IRS is a within the Treasury Department, which is an executive branch agency within the Federal rganized to carry out the 7801 of the Internal Revenue ?resident and con?rmed by the "esident, as the head of an to the Secretary of the ing line ensures that the IRS the United Kingdom in Joint Press This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Eehate Committee on Finance Additional Republican Views The law further states that the IRS Commissioner can be removed from the position ?at the will of the President??6 That action cannot be taken against the heads of some other ?independent? agenc es without a reason. For example, the Chairman of the National Labor Relations Board can ?t removed by the President, upon notice and hearing, for neglect of duty or malfeasance in of?ce but for no other Likewise, Members of the Fede'al Reserve Board, another independent agency, can only be removed ?for cause.?418 These of?cials presumably have less conce ?n that their judgment could result in removal if the Administration does not ?nd it . agreeable unlike the IRS Commissioner, who can essentially be ?red at will. Indeeifresident Obama may have indirectly exercised his authority to remove the IRS Com issioner on May 15, 2013, when he stated that he had directed Treasury Secretary Jack Lew t3 review ?ndings. Soon after the President?s directive, Lew requested and accepSEd the resignation of then-Acting IRS Commissioner, Steve Miller.419 At that time, it had been ported that Miller was aware of the agency?s targeting of conservative political groups 0 and 036 not to disclose it to members of Congress.42 One way that federal law attempts to remove partisanship from the IRS is through the use of ?ve-year terms for its Commissioner that overlap the four-year presidential election cycles. The only other political appointee in the agency besides the Commissioner is the IRS Chief Counsel, who ?provides legal guidance and interpretive advice to the IRS, Treasury and to taxpayers.?42? Anotr elr safeguard is that the law prohibits the President, Vice President and members of their execu ive of?ce staff from requesting, ?directly or indirectly, any )f?cer or employee of the Internal Revenue Service to conduct or terminate an audit or other investigation of any particular taxpaj er with respect to the tax liability of such taxpayer.?422 The Treasury Department is supposed to keep an arms-length relationship with the IRS on matte 's of tax administration, enforcement and ?process,? which essentially means that it doesn?t ask the IRS for information about taxpayers. However, on matters of tax policy and regulations, the Treasury Department works closely with the IRS. This dichotomy is a dif?cult one to balance and is made even more challenging because the IRS Chief Counsel is actually orgamzationally housed in the Treasury Department and is not a part of the IRS. Instead, the Of?ce of Chief Counsel and the Chief Counsel reports through Treasury Department?s chain of comrr and, thereby adding an even greater appearance of politicization. 4'6 26 U.S.C. 7803 (2008). "7 29 153 (1982). 418 12 U.S.C. 242 (2010). 4?9 Wh te House, Statement by the President (May 15, 2013). 42? Wa. hington Post, IRS Of?cials in Washington Were Involved in Targeting of Conservative Groups (May 13, 2013). 42? 1.1.5.1(5) (Oct. 28, 2008). 26 U.S.C. 7217 (1998). 249 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) . US. Senate Committee on Finance Additional Republican Views This close working relationship between IRS and the Treasury Department creates the appearance, if not the actuality, of an inherent con?ict of interest that allows exactly the type of political bias that occurred when conservative groups applied for t' x-exempt status between . 20.10 and 2013. If the IRS is to fulfill its mission to act in a fair a impartial manner while carrying out its very unique function, then it needs to be treated 'quely. Making the IRS an independent agency, like the Social Security Administration, would minimize the political in?uence of the Treasury Department, while at the same time allowing the Commissioner to be an independent voice for tax administration. Ln order for the American public to ever have its faith in the IRS restored, it is essential that the IRS be taken out of the political realm and put squarely where it needs to be as an independent enforcement agency that is free from all real and perceived political in?uence and bias. B. UNION INFLUENCE WITHIN THE IRS HAS CREATED AN BIAS It is v' ually impossible for the IRS to maintain the reality, much neutr ity and fairness to all taxpayers, when a substantial number mem The gove ATMOSPHERE OF POLITICAL ess the appearance, of of IRS employees are rs of the highly partisan and left?leaning National Treasury Employees Union (NTEU). EU is one of the largest and most powerful federal employee unions in the federal ment. Currently the union represents about 150,000 employees in 31 government agenc es, including the IRS.423 At the IRS alone there are approximately 48,972 dues-paying union employees, representing 65.5% of the bargaining unit emplc yees at the IRS.424 Politic ally, the NTEU is extremely active and twice endorsed Mr. Obama for President, ?rst in 2008 and again in 2012. current president, Colleen Kelley, was a 14-year IRS revenue agent and is now both union president and an Obama administration appointee to the Federal Salary Council, whose function is to recommend raises for IRS and other federal employees.425 Durin the 2010 election cycle, when the IRS targeting of Tea Party groups began, the NTEU raised $613,633 through its political action committee (PAC), donating approximately 98% of that amount to Democrats. In 2012, $729,708 or 94% anti-Tea Party Democrats.426 PAC contributions went to Of further note is that as of 201 1, at least 201 IRS employees worked full time on union issues. . 'For that year, 625,704 hours of of?cial employee time within Treasury Department (including the IRS) was spent. on union duties. These union activities cost taxpayers an estimated $27 million. ?3 NTEU, Who We Are. ?24 IRS Brie?ng for Majority staff (May 30, 2014). ?25 Brezrbart, Obama Met with IRS Union Boss Day Before Tea Party Targetin ?25 The Arnerz'can Spectator, Obama and the IRS: The Smoking Gun? (May 20, 250 gBegan (May 20, 2013). 2013). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Senate Committee on Finance Additional Republican Views Although IRS employees are career civil servants, many of them are political partisans. For exam about $474,000 in political donations by individuals listing as their employer.427 This money heavily favors Democrats: $247 employees also gave $67,000 to the NTEU political action commilit le, in the past three election cycles, the Center for Responsiv Politics?s database shows or ?Internal Revenue Service? 000 to $145,000.428 IRS ee, which in turn gave more than 95 percent of its contributions to Democrats. When NTEU political action committee contributions are added to the donations by individual IRS employ Demo :rats 2 to 1.429 The IRS of?ce in Cincinnati involved in the targeting of Tea Party partise than the IRS as a whole, judging by FEC ?lings. More th contributions from that of?ce in the past three elections went to De ees, those contributions favor applications is even more in 75 percent of the campaign :mocrats. In 2012, every donation traceable to employees at that of?ce went to either President Obama or a particular Democratic Senator.430 These ?gures indicate that IRS employees are primarily paying for Reput lican candidates, both through their union membership and Morec ver, IRS employees are beholden to the NTEU, as it has neg agreements with the IRS on their behalf that affect virtually every ?alternative work schedules, flexi-place, transit subsidies, perform more.?431 These labor agreements also make it more dif?cult for I and terminate employees who are failing to perform theirjobs. In addition to the leanings towards the Democratic Party anti-IRS views are well documented.432 These factors together cre foster an outright bias against Tea Party groups by IRS employees duties, or, at least one that may color their perspective to a degree administer the tax laws unfairly to the detriment of the Tea Party. Under current law, most federal employees are permitted represem exception to this rule is Federal employees who work in national where the nature of their work requires them to be completely apo Management Relations Statute provides that employees at the folk to uni on representation: Government Accountability Of?ce, Feder Central Intelligence Agency, National Security Agency, Tennesset 427 Center for Responsive Politics, data available at 428 ?29 Nat onal Review?, A Partisan Union at the IRS (May 20, 2013). 43? Wmhington Examiner, Tim Carney: The IRS is Deeply Political and Very 43? NTEU, The Voice of Federal Employees. ?32 Wall Street Journal, Tea Party Protesters Rally Against IRS, Government (J 251 efforts to elect anti- )y their direct contributions. otiated favorable labor aspect of work life, such as ance awards and much RS management to discipline 5 the fact that the Tea Party?s ate an atmosphere that may in the performance of their that could cause them to tation by a union. The major ecurity or other agencies litical. The Federal Labor- )wing agencies are not entitled a1 Bureau of Investigation, 3 Valley Authority, Federal emocratic (May 15, 2013). me 19,2013). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Labo Senate Committee on Finance Secret Servrce Uniformed D1v1510n.433 The I Additional Republican Views 1 Relations Authority, Federal Service Impasses Panel, and U.S. Secret Service and U.S. RS is currently not one of the exempted entities, but the issues and facts brought forth by this investigation make a compelling case of why they should be exempted. The charge administer the tax law in a fair and impartial manner. It prohi aited. THROUGHOUT THE IRS The Hatch Act was enacted in 1939 following widespread allegat amen partis issue exerting improper political in?uence in the course of their 0 advisory opinions about alleged violations of the Hatch Act Gove mment.434 Feder politi these thoug incidents occur when a reasonable person may have made a inve31 igations into the activities of IRS employees. In tot employees from ?scal year 2010 through ?scal year 2013.435 Of lodge withi surro IRS employees8.0 7103(a)(3) (2004). In at least one case, subsequent legislation bah exempted by the Federal Labor-Management Relations Statute. See 31 zing a labor-management relations program for the Government Accour tability Of?ce. agency author 43? U.S. Of?ce of Special Counsel, Request an Advisory Opinion. 435 OSC Summary of Alleged Violations of Hatch Act, Produced to SFC Majority Staff (May 23, 2014). 436 This docume 252 at to occur when the union presence is so pervasive. The on piearance of any bias is to add the IRS to the list of agencies where union membership is is dif?cult, if not impossible, way to completely eliminate C. RECENT VIOLATIONS OF THE HATCH ACT SHOW PERV ASIVE POLITICAL BIAS ions that Federal employees f?cial duties. The Act has been :led several times since its enactment and prevents Federal employees from engaging in an political activity while on duty. The Of?ce of Special Counsel (OSC) is authorized to throughout the Federal al employees are routinely warned about the consequences of participating in prohibited :al activity. Still, in every election cycle, there are violation; of the Hatch Act. Some of mistake in judgment. Often, h, the incidents are blatant violations, such as those described below in recent 11, OSC received 38 allegations of Hatch Act violations committed by Treasury Department 1hose 38 allegations, 95% were against IRS employees (the remaining 5% comprised employees from all other bureaus the Treasury Department). In ?scal year 2013 alone whi 3h included the months nding the 2012 election there were 22 allegations of Hatch Act violations ?led against issued a press release on April 9, 2014, announcing its inves :igation of several cases against mployees and of?ces suspected of illegal political activity in llow Democrats in 2012.436 In the press release, OSC stated that it has evidence that an niployee used his authority and in?uence as a customer serVICe representative for a political support of President Obama allowed union representatibn at an U.S.C. 732(c)(2) (2008), . Of?ce of Special Counsel, OSC Enforces Hatch Act in a Series of IRS Cases (Apr. 9, 2014). ht was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance purpo emplo based agreec and in at work.?38 In ano politic Additional Republican Views When ?elding taxpayer?s questions from an IRS customer service help line, the yee urged taxpayers to reelect President Obama in 2012 by repeatedly reciting a chant op the spelling of his last name. In June 2014, OSC announced that the employee had to serve a IOU-day unpaid suspension and ?acknowledged that he had used his authority fluence as an IRS customer service representative for a polit cal purpose and did so while ther recent IRS case, OSC found that an employee in Kentucky promoted her partisan al views to a taxpayer she was assisting during the 2012 Presidential election season.439 The employee in question had previously been warned about violating the Hatch Act. A record she w: they? said, poorer ?If you vote for a Republican, the rich are going to get riche ed conversation between the employee and a taxpayer revealed the employee saying that lS ?for? the Democrats because ?Republicans already [sic] trying to cap my pension and a going to take women back 40 years.? The employee explained that her mother always 1- and the poor are going to get And I went, ?You?re right.? I found that out.? The employee then told the taxpayer, ?I?m 0t supposed to voice my opinion, so you didn?t hear me say ng tha ollov agreei Hatch authority or in?uence to affect the result of an election. Finall California violated the Hatch Act while on of?cial travel to Las Imanag Presid attend activity during of?cial time. OSC referred its ?ndings to the IRS, misconduct charges against the manager.?0 In vie ving investigation, the employee entered into a settlement agreement in April 2014, rig to serve a 14-day suspension. In the agreement, the employee admitted to violating the Act?s restrictions against engaging in political activity while on duty and using her of?cial OSC recently completed an investigation of allegations th at an IRS manager in egas in November 2012. The ger allegedly canceled a meeting in Las Vegas to meet her in. sband at the site of a rally for ent Obama?s 2012 reelection campaign. OSC concluded that the manager?s likely ance of the Obama rally violated the Hatch Act?s restriction. on engaging in political which is considering of the targeting of conservative groups, the actions of these employees have re- focused attention on whether the IRS may have been used to bene?t one political viewpoint or candk image supposed to be impartial in wielding this influence. 437 438 US 439 US Of?ce of Special Counsel, OSC Enforces Hatch Act in a Series of IRS 44? osc: Brie?ng for Staff(July 9, 2015). This docume 253 late over another. Incidents such as these are unfortunate, as of an agency that has been given tremendous in?uence over they denigrate the public the lives of Americans and is Of?ce of Special Counsel, OSC Obtains Disciplinary Action in Two itch Act Cases (July 10, 2014). Cases (Apr. 9, 2014). nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. Sehate Committee on Finance Additional Republican Views THE IRS HAS YET TO FULLY CORRECT ITS PROBLEMS i The IRS has failed to correct many of the fundamental problems that led to i the inappropriate targeting of Tea Party groups. Soon 1fter being installed as Principal Deputy Commissioner, Da importaince of addressing the problems identi?ed in rep Werfel recognized the I assure you, we?re doing everything we can to re-look at is process to make sure that it moves more quickly and swiftly. It?s too slow right now, absolutely agree. But the reforms that we put in place, and I?m happy to send more me with you and your staff detailing exactly how we?re looking at the reengineering ese processes to make these improvements. We?re going to do everything in our powe to make sure that they take effect and take effect quickly.4?? Commissmner Kosklnen af?rrned h1s commItment to ?xmg these roblems and to working with n? Committee during his con?rmation hearing before the ommittee: iTaxpayer services need to be improved, particularly in the reas of tax-exempt organization ?lings and operations. There are several inv tigations ongoing into the delays encountered by many of those seeking to establish emselves as 501(c)(4) social welfare organizations. And I look forward to Working wit this committee as it concludes its investigation of that matter.442 Although there have been some changes at the IRS since May 2013, neither Mr. Werfel nor Mr. Koskinen has enacted the type of structural changes that are necessary to correct the serious problems identi?ed by TIGTA and by this Committee. Moreover the IRS unsuccessfully attem sted to modify the regulations to constrain free speech of 501(c)(4) organizations, which woulc have institutionalized the type of targeting that TIGTA found to be problematic. Testimony of Danny Werfel, House Ways and Means Subcommittee on Oversight Holds Hearing on Oversight of the Exempt Organizations Division After the Treasury Inspector General for Tax Administration?s Audit (Sep. 13,! 2013). ?42 Testimony of John Koskinen, Senate Finance Committee Con?rmation Hearing on the Nomination of John Koskinen to be IRS Commissioner (December 10, 2013). 254 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. There in Ma enate Committee on Finance ALTHOUGH THE IRS HAS ADDRESSED SOME PROBLEM THERE Is MUCH WORK LEFT To DO 1. INITIAL IRS RESPONSE AND SUSPENSION OF BOL Deputy? Commissioner Werfel released a 30-day update. Among repor1 and jL respo administrative leave by the IRS. She eventually retired in Scptem inves Notat 1y, before report was released, Lerner had been co Octot er 1, 2013 exactly one week after her actual retirement dat These initial actions did not immediately cease all of the practices probl :matic. As discussed in Section of the Bipartisan Inve that everal months after TIGTA released its report, employees lac from Party? for separate processing. Since the Committee conducted t1 sectic n: of the report, the IRS has issued additional guidance to err procedures for reviewing tax-exempt applications.446 We have me recent guidance has affected the screening procedures appli tax-exempt status or whether the IRS continues to subject Tea Par of scrutiny named on their names or political affiliation. tigation found that she was guilty of ?neglect of duties? and 1 management and possibly continued to pull out applications 2. THE EXPEDITED PROCESS Additional Republican Views 5 IDENTIFIED BY TIGTA, was a ?urry of activity after the IRS targeting of conservative organizations became public y12013. The ?rst glimpse inside the agency came on June 24, 2013, when the Principal key steps noted in that were the results of the internal investigation, which und ?significant management d'gment failuresg? replacement of four levels in the manage ent chain that had isibility for the activities identi?ed in the TIGTA report; an the suspension of use of the :spreadsheet.443 At the time of the 30?day update report, rner had been placed on paid er 2013 after an internal 'ecommended her removal.444 ntemplating retiring on 6.445 that TIGTA found to be :stigative Report, it appears :ked appropriate instructions containing the words ?Tea ie interviews referenced in that ployees implementing new knowledge of whether the ed to incoming applications for ty applicants to improper levels In June 2013, the IRS also announced a ?new voluntary process? for political advocacy orgar izations with applications for 501(c)(4) tax-exempt status that had been pending for more ?43 IRE Charting a Path Forward at the IRS: Initial Assessment and Plan of Action (June 24, 2013). Appendix is a memorandum from Karen Schiller titled Interim Guidance on the Suspension List Usage (June 20,2013). The memorandum instructed employees to immediately stop using the BOLO spreadsheet, including the Emerging Issues 2013) Err all from Richard Klein to Lois Lerner (January 28, 2013) 1R800002026 Majority staff). tab and the Watch List tab. However, employees were permitted to continue using other lists to identify and prever Waste, fraud and abuse. 44? Washington Times, Lois Lerner, IRS Of?cial in Tea Party Scandal, Forced Out for ?Neglect of Duties? (Sep. 23, 5 (email attachment omitted by 446 IRS, Memorandum from Kenneth Corbin, Expansion Of Optional Expedited Process for Certain Exemption Appli Proce sing Guidelines for All Cases (Feb. 28, 2014). 255 :ations Under Section 501(c)(4) (Dec. 23, 2013); IRS, Memorandum fro 11 Stephen Martin, Streamlined This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) t) . US. Senate Committee on Finance than 1 organ zjation ?satis?es, and will continue to satisfy, set percentag its soc applicants were required to certify that during each past year that during As of were that promote the social welfare; and ;opposition to) any candidate for public office.448 Additional Republican Views 20 days.447 The IRS would grant tax-exempt status to applicants that certi?ed that the as with reSpect to the level of ial welfare activities and political campaign intervention Speci?cally, organization has existed, gthe current year, and during all future years in which the or anization will rely on the determination of tax-exempt status: ;The organization has spent, or will Spend, 60% or more of both the organization?s total expenditures and its total time (measured by employee an volunteer hours) on activities ;The organization has spent, or will spend, less than 40% 0 both the organization?s total expenditures and its total time (measured by employee an volunteer hours) on direct or indirect participation or intervention in any political camp ign on behalf of (or in April 2015, the IRS reported that 145 political advocacy or anizations in the ?backlog? affered expedited treatment; of those, 43 elected to participa in the expedited process and granted tax-exempt status.449 The low participation rate le than a third of eligible organizations indicates that the expedited process was a deeply awed proposition. First and forerr found in any statute or regulation. Rather than asking applicants with the existing law, the IRS created new standards. -A sec perfo Likewise, by attesting to these requirements, an organization wou ever ngage in the amount of political campaign intervention allox thereby restraining its speech. Final under penalty of perjury. The IRS frequently requires all types of under penalty of perjury. But in this area of tax law where the I own statues and regulations, and then invented new standards just perju calcuiation of all past, current, and future activities. med a legally?acceptable amount of political campaign inter the expedited process required applicants to certify that tr seems like a risky proposition, particularly when the organ IRE Charting a Path Forward at the IRS: Initial Assessment and Plan of Ac 448 449 IRE Brie?ng for Staff (April 15, 2015). (emphasis in original). 256 ost, the standards were based on an arbitrary measure of or nizational activity that is not certify that they will comply end and related problem is that the invented standards are, i fact, more stringent than the existing law. The expedited option was not available to an organi zation that had, in the past, vention that exceeded 40%. be forfeiting its ability to vable under the current law, submission was accurate taxpayers to sign submissions RS had dif?culty applying its for this process risking 1ization must perform a precise tion, Appendix (June 24, 2013). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views Indeed,;many organizations that were eligible for the expedited process elected to proceed with the IR spoke Sl?s standard process rather than submit to these onerous demands. The Majority staff with attorneys who together represent a large number of Tea Party organizations, and they advised their clients not to participate in the expedited process. Some of those attorn activi 1ies, a charge that the IRS has denied. eys believed that the IRS then drew adverse inferences about their clients? level of political Despite these concerns, the IRS later broadened the expedited opt'on to ?include all applicants for 501(c)(4) status (as opposed to only those with applications pe as of political] campaign intervention or in providing private bene?t to a Overall, as of March 26, 2014, 117 applicants that were ?centraliz waitir for a ?nal determination - more than one-?fth of the total Tellin gly, all of those organizations preferred to stick with the IRS process, which by that point had resulted in delays of more than th As of Since Marc are reflected in the IRM and internal IRS operational procedures. May 28, 2013) whose applications indicate the organization 1 ation.45] FURTHER UPDATES ON TIGTA RECOMMENDATIONS 1 2015 report, the IRS has also made a number of other cha _450 IRE Memorandum from Kenneth Corbin, Expansion of Optional Expedited Applicants Under 501(c)(4) (Dec. 23, 2013). 45' IRE Brie?ng for s1=c Staff (April 15,2015). ?52 IRE Exempt Organizations Recommended Actions Ending May 23, 2014. 453 TIGTA, Status of Actions Taken to Improve the Processing of Tax-Exempt iign Intervention, TIGTA Audit Report 2015?10-025 (Mar. 27, 2015) p. 2. Camp 4541ti pp. 11,16. 257 nding for more than 120 days :ould potentially be engaged in political ed? by the IRS were still number that were delayed. ?5 normal determination ree years for some applicants. April 2015, 10 of those applicants were still waiting for a final determination of their tax- AND OTHER CHANGES May 2013, the IRS has continued to update the Committee about its progress in implementing recommendations and other changes to its exempt status. As of January 31, 2014, the IRS reported that it ha recommendations.452 TIGTA concurred, writing in a March 2015 taken signi?cant actions to address the nine recommendations ma In that report, TIGTA made two additional recommendations: one and a second suggestion that if the expedited process becomes per - to ?additional organizations with similar political campaign interventions??54 review of applications for tax- implemented all of report that ?[t]he IRS has :le in our prior audit report. related to employee training, manent, it should be available 59453 We note that in addition to its implementation of the recommendjtions outlined in ges to the E0 division, which Process for Certain Exemption Applications Involving Political This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) This docume U.S. enate Committee on Finance 1. B. ATTEMPTS BY THE IRS AND OTHERS T0 SUPPRESS POL Follow ming and disa'gt execu rules, ided, the larger underlying problem lies in law and regulatio ee. As described throughout this document, the fault in this tives in Washington, DC. who purposefully misapplied and thereby interfering with the work of E0 ?eld of?ces. In res woulc withd prop ed regulations were roundly rejected by citizens, regardless af?li tion. Legis ative proposals that would require near-universal disclosure adva ced by the Minority Staff, should also be rejected. These pr indif rence to harassment of individuals that follows from the pul conc that was raised by the American Civil Liberties Union (A prop sed regulations on political speech. As the ACLU and other noted there is a dark side to disclosure. 1. BACKGROUND 0N 501(c)(4) EXEMPTION Secti 501(c)(4) provides a tax exemption for civic leagues or or pro? but Operated exclusively for the promotion of social welfare eami gs of which inures to the bene?t of any private shareholder DISCOURAGE AN INFORMED CITIZENRY MUST BE REJ ving the release of the TIGTA report, some argued that althc f?cult to apply. Indeed, this theory is advanced in the Addii aonse to these concerns, the IRS proposed regulatory change have constrained political speech by 501(c)(4) organization ew the regulations, the proposal should be recognized for suppr ss dialogue that leads to informed debate. Based on these a Additional Republican Views SPEECH AND CTED ugh the actions were ns that are vague, outdated, ional Democratic Views. We matter lies squarely with IRS manipulated well-established in November 2013 that 3. Although the IRS later hat it was: an attempt to nd other concerns, the of their personal political of donors, such as those aposals show a troubling :ilication of donor identities a CLU) in response to the of all political af?liation have ganizations not organized for and no part of the net or individual. Treasury regul tions provide that an organization is operated exclusively for the promotion of social welf if it is engaged primarily in promoting in some way the cc of the people of a community or bringing about civic vements.455 Contributions to 501(c)(4) organizations are no welf imprc Treas indire ury regulations provide that the promotion of social welfare as).45 candidate for public of?ce? (?political campaign intervention 455 26 i" of socia memb for pr: 456 26 457 26 ll welfare if its primary activity is operating a social club for the bene?t ers, or is carrying on a business with the general public in a manner simi fit. 26 CPR. (1990). U.S.C. 170 (2014). By contrast, contributions to 501(c)(3) organizatio C.F.R. (1990). 258 ct participation or intervention in political campaigns on bel .FR. and (1990). An organization is not 0 mmon good and general :rments and social tax deductible.?6 does not include ?direct or lalf of or in opposition to any 7 However, social welfare perated primarily for the promotion pleasure, or recreation of its ar to organizations that are operated ns are deductible. nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. orga orga Unde camp rules electi O. orga 501 (c outlir Sect and Simil engag hortic How: camp are p1 The limit: On propc orgar May' circu Senate Committee on Finance Ti zations are permitted to engage in political campaign interv zation is primarily engaged in activities that promote social current Treasury regulations, the determination of whether aign intervention depends on all the facts and circumstances concerning political campaign intervention apply only to act .ln organizations are allowed to hold candidate forums and ing candidates? positions on issues important, in the view 0 Hi 501(c)(4) organizations also are allowed to conduct nonp oter registration drives.460 it ar rules apply for determining whether other types of sectio ged in political campaign intervention, including charities (s uiltural organizations (section and business leag :v;er, while section 501(c)(4), (5) and (6) organizations may aign intervention without jeopardizing exempt status, sectio ohibited by statute from engaging in any political campaign obbying and advocacy activities of a section 501(c)(4) organ provided the activities are in furtherance of the organizati 2. PROPOSED REGULATORY CHANGES ovember 29, 2013, the Internal Revenue Service and the Tre regulations regarding the political campaign activities 0 izations.462 The proposed regulations, which were eventual 2014 in the face of ?erce public opposition, sought to replac nstances test used in determining whether a section 501(c)(? 458 Re 459 Re sectio (refer: consti 460 not co 461 462 NO Politi< I.Rul. 81-95, 1981-1 CB. 332. 1. RM. 2007-41, 2007-25 I.R.B. 1421 (June 18, 2007) (analyzing 21 dif? 1 501(c)(3) charitable organizations for political campaign intervention); nbing section 501(c)(3) standards in determining whether activities of a ute political campaign intervention). 3 proposed section 5 01(c)(4) regulations, discussed infra, categorize all ns'istent with the promotion of social welfare. U.S.C. 501(c)(3) (2014). tice of Proposed Rulemaking, Guidance for Tax?Exempt Social Welfare ?alActivities REG-134417-13, 78 Fed. Reg. 71535 (Nov. 29, 2013); incc and 259 ve public of?ce; the rules do not apply to activities involving ted, such as executive branch of?cials and judges. Similarl izations may engage in activities that educate the public on i Additional Republican Views ention so long as the welfare.458 an activity constitutes political of the particular case.459 The ivities involving candidates for of?cials who are selected or y, section 501(c)(4) portant issues. Thus, section distribute voter guides the organization, to the public. rtisan get-out-the-vote drives 501(c) organizations have ction labor and ngage in some political 501(c)(3) organizations alone intervention.46? ization generally are not on?s exempt purpose. asury Department published section 501(c)(4) withdrawn by the IRS in the present-law facts-and- -) organization has engaged in :rent factual scenarios involving Rev. Rul. 81-95, 1981-1 CB. 332 section 501(c)(4) organization if these activities as political activity Organizations on Candidate-Related irporating Prop. Treas. Reg. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Republican Views political campaign intervention with an enumerated list of activities that constitute political I I campzugn act1v1t1es.463 The pr0posed regulations were intended to replace the political campaign intervention referenced in the existing section 501(c)(4) regulations ?direct or indirect participation or intervention in pol tical campaigns on behalf of or in opposition to any candidate for public of?ce?) with a new defined term, ?candidate-related political activity.?464 Candidate-related political activity is de?ne d; in the proposed regulations as: (1) communications that express a view on, whether for or against, the selection, nomination, election, or appointment of one or more clearly identified candi com unications (as defined) within 30 days of a primary election ates (often referred to as express advocacy communications); (2) certain public or 60 days of a general electi that refer to one or more clearly identi?ed candidates, or in the case of a general election one more political parties; (3) communications the expenditures for which are reported to the 4) contributions (including gifts, grants, subscriptions, loan 5, advances, or deposits) of mone or anything of value to or the solicitation of contributions on behalf of a candidate, a secti 527 political organization, or a section 501(c) organizatior that engages in candidate- relate political activity; (5) conduct of a voter registration drive or ?get-out-the-vote? drive; (6) distri ution of any material prepared by or on behalf of a candida orga zation; (7) preparation or distribution of a voter guide that identi led candidates, or in the case of a general election to one or or by a section 527 political efers to one or more clearly more political parties; and (8) hostir or conducting a forum for candidates within 30 days of a primary election or 60 days of a general election.465 For eroses of candidate-related political activity, the proposed regulations de?ne the term selec ?cantlidate? to mean ?an individual who publicly offers himself, or is proposed by another, for 'on, nomination, election, or appointment to any federal, state, or local public of?ce or of?ce in a political organization, or to be a Presidential or Vice-Presidential elector, whether or not SL ch individual is ultimately selected, nominated, elected, or appointed,? including 466 of?ceholders who are the subject of a recall election; this inclu executive branch appointments. des certain judicial and The proposed regulations would have applied only to section 501(c)(4) organizations.467 Other secticn: 501(c) organizations (including section 501(c)(3) charitab le organizations, section 501(c)(5) labor and horticultural organizations, and section 501(c: (6) business leagues) would continue to use present-law rules concerning political campaign intervention. The regulations 463 Notice of Proposed Rulemaking, Guidance for Tax-Exempt Social Welfare PoliticalActz'vities, REG-13441743, 78 Fed. Reg. 71535 (NOV. 29, 2013) p. 7 ?64 Prop. Treas. Reg. and ?65 Prop. Treas. Reg. Prop. Treas. Reg. 467 No ice of Proposed Rulemaking, Guidance for Tax-Exempt Social Welfare PoliticalActz?vities REG-134417-13, 78 Fed. Reg. 71535 (Nov. 29, 2013) p. 71 260 Qrganizations on Candidate-Related 53 6. Organizations on Candidate-Related 5 37. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) - guida '106 revenue rulings, etc.) to restrict 501(c)(4) political U.S. enate Committee on Finance Additional Republican Views were rbposed to be effective on the date they were published in the Federal Register as ?nal Lative social welfare organizations the types of organizations targeted by the IRS weig in strongly against the regulations. But it was not just conservative groups that subm' ed comments critical of the proposed regulations. Left-leaning and progressive groups also vx ere highly critical. The ACLU, for example, submitted a comment letter arguing that the proposed regulations would ?produce the same structural issues at inappropriate criteria in the selection of various charitable and soc the IRS that led to the use of al welfare groups for undue scrutiny.? The ACLU argued that social welfare groups should be free to participate in the politic al process because that kind of participation ?is at the heart of our representative democracy. To the extent it influences voting, it does so by promoting an informed citizenry.?469 In all, the IRS received more than 150,000 comments on the propc sed regulation before the comment period closed on February 27, 2014 by far the most comments ever submitted in response to a proposed IRS regulation.470 On May 22, 2014, the IRS gave public notice that it view of the comments it received, it would make changes to the proposed regulation, issue a revised proposed regulation, and then hold a public hearing on tha IRS has not indicated when the revised proposed regulation will 3. LEGISLATIVE PROPOSALS trevised regulation.471 The 3 published. The legislative response to the proposed regulations that has garnered the most support from Republicans in the Senate is the Stop Targeting of Political Belief by the IRS Act of 2015 (S. 283), introduced on January 28, 2015, by Senator Jeff Flake The bill would prohibit the Score ary of the Treasury from finalizing the proposed regulation, that the standards and de?nitions in effect on January 1, 2010, wh whetl er an organization is operated exclusively for the promotion or from issuing other forms of activity. The bill also provides ch are used to determine of social welfare for purposes of section 501(c)(4), shall apply for determining the tax-exempt status of organizations under The provisions in the bill would sunset after Fe Pro 3. :Treas. Reg. In the notice of proposed rulemaking, the pul lie on a number of issues, including: (1) whether the existing regulation operatcd'exclusively for social welfare if it is engaged primarily in promoting i genera welfare of the people of a community should be modified; and (2) whe1 proposed regulations should be extended to other section 501(c) organizations organi rations. Notice of Proposed Rulemaking, Guidance for Tax-Exempt Soc CandiJa'te-Related Political Activities REG-134417-13, 78 Fed. Reg. 71535 469 Public comment letter from ACLU to IRS Commissioner John A. Koskinen bruary 28, 2017. the IRS requested comments from that provides that an organization is some way the common good and her the rules included in the to section 527 political ial Welfare Organizations on ov. 29, 2013) p. 71537. (Feb. 4, 2014). 47" Pre Jared Remarks of Commissioner of Internal Revenue Service John Koshinen Before the National Press Club, (Apr. 2 2014). 47? IRS, IRS Update on the Proposed New Regulation on 501(c)(4) Organizatio 261 ns (May 22, 2014). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. The intro Mon elect feder in?u was the This Limi tribe Not later than January 1, 2015, the bill required the FEC to make contr the contr recei infor The activ curre bea Wha value pull gove anon ?nan liara. Asd well parti The such Cons Ca cont senate Committee on Finance legislative solution suggested by former Chairman Wyden iuced on April 23, 2013, co-sponsored by Senator Lisa Murl :y Act of 2013 (S. 791). The bill required comprehensive di on-related activity both the money coming in and the mon al election-related activity involved an expenditure made by :ncing the selection, nomination or election of any individua ade by a person or entity independent of the candidate and andidate. The full universe of independent political spenders included independent spending by individuals, unincorporat< s. 501(0) organizations of all types and 527 groups. ibution disclosure system to its regulated community. Once ibutions to certain politically active 501(c)(4) organizations, at and, in some cases, just 48 hours after receipt. The FEC vs mation to the general public upon receipt. ty, but in many cases it would have required disclosure of 5 ntly protected as confidential by the Internal Revenue Code. hing of the past for many 501(0) organizations. supporters of- donor disclosure fail to fully appreciate are th that would be impaired by their proposals. Just as we sh01 Jack the curtain of privacy that surrounds the voting booth, rnment to use donor identi?cation information to suppress fr ymous political association, including when those rights are cial support for the causes of one?s choice. This country has sment that follow government disclosure of the identity of 16 ACLU observed in its letter commenting on the proposed and long established that forced donor disclosure for any 001 san groups is unconstitutional??2 ACLU was not making a frivolous argument. It was referrin as McIntyre v. Ohio Elections Commission, 514 U.S. 334 (1 titutional right to distribute anonymous campaign literature; aign Committee, 459 U.S. 87 (1982), which required exem] if. 472 Pu This docume blic comment letter from ACLU to IRS Commissioner John A. Koskine 262 Additional Republican Views as the enactment of a bill he :owski (R-AK), the Follow the sclosure of independent federal ey going out. Independent any person for the purpose of to any federal of?ce which which was not coordinated with i was covered by this regime. :d organizations, partnerships, .e'd Liability Companies, corporations, trade associations, labor unions, SuperPACs, Indian available a real-time this system was implemented, :gulated community would be required to report contributions, including covered not more than 10 days after rould immediately disclose this >ill did not address the question of how much 501(c)(4) organizations can spend on political 31(c)(4) donor information Thus, donor anonymity would important Constitutional 11d not allow the government to ve also should not allow ee speech or impair the right to expressed in the form of . a long history of reprisals and onors to controversial groups. 501(c)(4) regulations: ?It is itroversial group even to U.S. Supreme Court cases 995), which recognized a Brown v. Socialist Workers ?74 stion from donor disclosure for versial groups subject to reprisal or harassment, and National Association for the 1 (Feb. 4, 2014). nt was obtained and uploaded by the Center for Resp onsive Politics (OpenSecrets.org) US. Senate Committee on Finance Adva ecemem? ofColored People v. Alabama, 357 US. 449 (1958 Alab ama from requiring donor disclosure as a condition for in-st point 3d out, the NAACP Court expressly recognized that imposin as directly prohibiting an activity pose equally severe First Amen The pattern is well known. First, a governmental entity compels donor identities. Next, private actors, armed with information re ona campaign of reprisals and harassment. This is precisely the Suprc me Court in the NAACP case: citizens that associate with their phys' man to th earli inti dentities disclosed, will be subjected to ?economic reprisal, al coercion, and other manifestations of public hostility.?47 of the taxpayer privacy protections in the Internal Revenue common practice of both Democrat and Republican Admi of using the Internal Revenue Service and the government date political Opponents.?4 Additional Republican Views which prohibited the State of lte operation. As the ACLU taxes upon an activity as well ment concerns. permits the disclosure of arding donor identities, embark cenario that concerned the rticular groups, having had loss of employment, threat of Nor should we forget that ode were added in response strations in the 19703 and taxing power to harass and Cont ary to the suggestion in the Additional Democratic Views, the Committee?s Republican Me when orgar forth and, In th Trea the 2014 comr and 4. VIEW OF THE MAJORITY COMMITTEE MEMBERS ON REGULATORY PROPOSALS 473 35 a poli April 462. For a recent example of the economic reprisal ical donor?s identity, see the following post on The Mozilla Blog, dated ers do not assert a Constitutional right to a charitable tax deduction or insist on a tax break exercising one?s free speech rights. As previously noted, contributions to 501(c)(4) lizations are not tax deductible. But the identity of the 501(c)(4) donors is protected. As set above, anonymity in one?s political associations is an American value worth preserving is] even progressive groups like the ACLU have observed, has Constitutional implications. LEGISLATIVE AND view of the Committee?s Republican Members, it would have been a grave mistake for the :ury Department to ?nalize the proposed 501(c)(4) regulations and thereby institutionalize ery type of IRS targeting of grassroots organizations that came to light in 2013. On April 2, Commissioner Koskinen said, ?It?s going to take us a while nents [received by the hold a public hearing, possibly Ie-propose a draft regulation at more public comments.?475 Subsequently, the IRS announced that it will publish a to sort through all [of the] that can accompany the disclosure of April 5, 2014 (emphasis added): ?On 3, 2014 Brendan Eich voluntarily stepped down as CEO of Mozilla. It has been well documented that past political donations led to boycotts, protests, and intense public scrutiny. Upon his resignation, Bren effect ve leader.? The intense pressure from the press and social media ma job a 474 F0 incluc Enem 475 Pr (Apr. This docume a CEO and effectively run Mozilla.? es List Part 11, (July 19, 2012). pared Remarks of Commissioner of Internal Revenue Service John Kos 2, 2014). 263 stated: ?Our mission is bigger than any one of us, and under the present circumstances, I cannot be an 12 it dif?cult for Brendan to do his a recent example of the harassment political donors can experience from agencies Of the US. Government, ing the Internal Revenue Service, when their identities are disclosed, see Wall Street Journal, Obama?s kinen Before the National Press Club, nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) 1 3.. This document was obtained and uploaded by the Center for Resp U.S. notio that there was confusion at the IRS regarding the de?nitior impr cision in the term ?primarily? to advance the argument that 501( are necessary. But the facts don?t bear out the need for, legis ation. First, testimony received by the Committee?s investig law ecialists in Cincinnati knew full well that ?primarily? mean distir cliion between social welfare activity and political activity hi track record of interpretation by the IRS. For example, nonpartisz education, voter registration and get-out-the-vote drives have long 501(c organizations. It is the 2014 proposed regulation that h. not the well-worn 1959 regulation. ?75 IRS, Update on the PrOposed New Regulations on 501(c)(4) Organizations ?77 SFC Interview of Elizabeth Hofacre (Sep. 23, 2013) pp. 22?24. 264 Additional Republican Views .8 to carefully review all all sides of the political wed proposed regulation. .hat requires or allows the 501(c)(4) organizations, or Minority relies heavily on the of ?political activity? and egislative changes to section much less the wisdom of, new ators reveals that the E0 tax 5 51%.477 Second, the is a 55 year administrative activities like voter been acceptable activities for is sown confusion in this area, (May 22, 2014). onsive Politics (OpenSecretsorg) 3m? -. U.S. IX. The whic . View Natic Thos unde those contr Achi Cong laws Ach politi of th grou] mult exerr from full activ by th leani targe Lois recei caus: diffe langt disin of gr b60211 In 2C reme time smal deve This docume Senate Committee on Finance CONCLUSION AND RECOMMENDATIONS Zommittee?s investigation uncovered serious organizational 1 are detailed both in the Bipartisan Investigative Report and s. The IRS has received recommendations from TIGTA anc nal Taxpayer Advocate, and has been receptive to implemer measures are a step in the right direction, but they are not 3 Flying problems uncovered by our investigation. We believe problems, if it is to be successful, must immunize the IRS fi 015 the Executive Branch, whether that party is the Democra :Ving this goal will not only require legislative changes, but ress and the public to ensure that the IRS stays true to its mi fairly and without regard to politics of any kind. ef ?nding of the Majority staff is that the organizational stru cal bias of individual employees like Lois Lerner to ?ourish bias, the IRS uniformly targeted applications from Tea Par iple rounds of burdensome development questions. Unlike 0 pt status including those on the left side of the political spec Tea Party and other conservative groups were identi?ed, co evelopment based on the political philosophy of the groups, ties. Accordingly, these Tea party and other conservative IRS based on their political views. We found no evidence Additional Republican Views problems throughout the IRS, in these Additional Republican from others, such as the [ting at least some of them. uf?cient to correct the that any attempt to address ?om the whims of the party that tic or the Republican Party. also constant vigilance by both ssion and administers the tax cture of the IRS enabled the Indeed, at least partly because ty and other conservative as for extra scrutiny, which resulted in their experiencing delays and in many cases, ther organizations seeking tax? trum, applications received lected and then subjected to rather than on their planned pups were, in fact, ?targeted? that the IRS scrutinized left- ng organizations in the same manner, or for the same politic ted Tea Party and other conservative organizations. ?ent components within the IRS, virtually guaranteeing that [1811 through the political campaign cycles of 2010 and 2012. terest in the plight of these organizations as they sought tax? Dwing Congressional interest in claims that they were being 186 of their political views. 12 Congressional interest finally prompted management abc dial measures to reduce the backlog of applications that she irreparable damage had been done to many of these Tea Par 1, grass-roots entities, unable to withstand the withering barr. opment questions punctuated by year-long stretches of silen 265 lly motivated reasons, as it Lerner?s personal political biases directly affected how the I processed applications ved from Tea Party and other conservative organizations. rner managed a process that :d applications received from these organizations to undergo multiple levels of review by ese applications would Lerner showed complete exempt status, even in the .face treated unfairly by the IRS ve Lerner to intercede and take had allowed to grow. By that ty organizations. Most were age of intrusive IRS ce from the IRS. As a ht was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) This document was obtained and uploaded by the Center for Resp US. Senate Committee on Finance consequence, many of these Tea Party organizations simply withc process. Without IRS approval of their tax-exempt status, those dif?cult to raise funds to carry out their stated purposes, which ge the political process. Many were forced to secure legal help in fei considerable expense to their ?edging budgets, and with a corresp ability to exercise political speech. Majority staff also found that top IRS of?cials, including Doug Sl Lerner, continuously misled Congress throughout 2012 and 2013 mistreatment of Tea Party and other conservative groups. They a Congress the existence of the political targeting of the Tea grout with names that included ?9/12 Project? or ?Patriots,? ther scrutiny for that conduct until Lois Lerner made her fateful admis targeting at an ABA Conference meeting, just days before TIGTIA ded that the IRS had used ?inappropriate criteria? when tion. The lack of candor by these three individuals in their ith the release of the TIGTA report in May 2013. The IRS ,e backup tapes containing Lois Lerner?s email and made 3 Additional Republican Views rew from the application 1at stayed the course found it nerally included engagement in 1ding off the IRS at onding adverse impact on their lulman, Steve Miller and Lois regarding the so actively concealed from Party and other conservative eby allowing the IRS to escape sion regarding political released its report in which it icessing applications for tax communications with Congress (ercise of congressional 1tive groups. lealings with Congress did not was derelict in its duty to ubsequent false statements to Furthermore, IRS of?cials misr presented to Committee staff in March 2014 that the documents that had been provided to mmittee by that date completed its production of document als knew at that time that many of Lemer?s emails from 201 the 0 going Congressional investigations, were missing. In April 5. In truth, some senior IRS 0 and 2011, a period critical to 2014, the IRS concluded that the rr issing Lerner emails were not recoverable, and so noti?ed the Treasury Department of their loss. Unfortunately, the IRS failed to also notify the Congression investigations of the IRS of their loss, choosing instead to concea al committees conducting I that fact, ostensibly in the hope that the loss might never be discovered by Congress. Only when this Committee demanded a written statement from the IRS Commissioner attesting to the completeness of the docu nent productions did the IRS reluctantly reveal the loss of Lerner?s emails. This pattern of shoddy conduct by IRS officials in their dealings with Congress is deeply disappointing and confirms that a ?culture of concealment? remains at the agency. In addition, Majority staff concluded that the Obama Administration?s efforts to limit spending on pc litical Speech directly or indirectly in?uenced the treatment of conservative organizations by Executive Branch agencies. The IRS served as the fer Administration activities agair st conservative organizations. Not only did it engage in pol tical targeting of Tea Party and other conservative groups, but it also actively assisted both the DJ and the FEC in the pursuit of 266 onsive Politics (OpenSecretsorg) U.S. vario Indee orgar tax-c unde Even the rr envir omni To for a p?n doub tax?e recor 1? OJ LII Senate Committee on Finance us initiatives aimed at chilling the political speech rights of d, the IRS provided advice to the DOJ on various proposals izations that engaged in political activity in excess of that st status, and offered FEC information regarding speci? 1 if the IRS is able to root out all of the speci?c causes of prol ost significant of which are mentioned above, it will still Opt onment by virtue of its position as a bureau within the Trea31 present IRS union wields considerable in?uence. Jable the IRS to meet its mission of administering the tax coc the following changes are needed: The IRS must be removed from the authority of the Treasr as an independent stand-alone agency. The Federal Service Labor-Management Relations Statute the IRS as an agency that is exempt from labor organizatic requirements. Congress should amend section 7428 of the Internal Revel for tax-exempt status under 501(c)(4), (5), and (6) to seek IRS has not rendered a decision on whether or not it will a i 270 days. Doing so would afford these organizations the available only to 501(c)(3) organizations, thereby advanci A key finding of this report is that many small organizatio overwhelmed by unduly burdensome IRS demands. We establish a streamlined application process for small orgar. exemption under 501(c)(3) and 501(c)(4) that enables the: administrative burdens, provided that appropriate conditio Any further attempt by the IRS to promulgate regulations determining whether section 501(c)(4) organizations have I intervention must not chill the free exercise of political sp nor disprOportionately affect organizations on either side Majority staff is confident in the soundness of the ?ndings tthat its investigation into the treatment of political ad xempt status was hampered, if not harmed, by the fail] ds belonging to Lois Lerner, the central ?gure in this sordid 478 politic effect status This docume note that the expedited process for applicants is currently limited al advocacy. As discussed in these Additional Republican Views, we dc vc way to handle these applications, nor do we endorse extending that 267 investigation by the FEC for airing political advertisements. Additional Republican Views onservative organizations. to criminally punish ated in their applications for 3 conservative organizations alems noted in this report, only :rate in a politicized er Department, where the le ?with integrity and fairness try Department and established must be amended to designate and collective bargaining 1ue Code to enable applicants a declaratory judgment if the pprove an application within same remedy currently ng parity among nonpro?ts. ns with limited resources were ecommend that the IRS .izations applying for tax to avoid unnecessary ns are satisfied.478 revising the standard for engaged in political campaign eech by those organizations, )f the political spectrum. expressed herein, there is no vocacy organizations seeking ire to preserve electronic story of how Tea Party and to organizations that engage in not believe that this process is an "ocess to all applicants for tax?exempt ht was obtained and uploaded by the Center for Resp onsive Politics (OpenSecrets.org) -. indoor 3 wood.? 3 N, US Senate Committee on Finance Additional Republican Views other nservative groups were targeted by the IRS because of the ir political views. Extras dinary efforts were made by TIGTA to locate and restore some of Lerner?s lost email, and eed, those efforts yielded positive results, with the recovery of over 1,300 emails not previo ?sly produced by the IRS. Moreover, Majority staff secure 1 from sources, including the Treasury Department and the White House, copies of emails between their employees and Lerner in an effort to bridge the gap in the missing emails. Together with the nearly 1,500,000 pages of documents produced by the IRS, these documents reveal a disturbing pattern of mismanagement and po itically motivated misconduct by IRS employees at all levels within the agency. This docume it was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) 268 EXHIBIT Democratic Report 40557307211 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) 114th Congress SEssion SENATE i 2 I A 1f(C)(4) APPLICATIONS FOR TAX-EXEMPT STATUS SUBMITTED ORGANIZATIONS FR OM 2010-2013 REVENUE PROCESSING OF AND COMMITTEE ON FINANCE UNITED STATES SENATE I BIPARTISAN INVESTIGATIVE REPORT 1 AS SUBMITTED BY CHAIRMAN HATCH AND RANKING MEMBER WYDEN we '5 2015 - Oifoievea' be prif'f'?'ecf This document was obtained and uploaded by the Center for ReSponsive Politics (OpenSecretsorg) US. Sen ite Committee on Finance ADDITIONAL VIEWS OF SENATOR WYJDEN PREPARED BY DEMOCRATIC Table of Contents I. Executive Summary .. 271 II. Evidence of Political Motivation by IRS Employees .. 274 Evidence of Pressure from Obama Administration Political Appointees to I rease Scrutiny of Politically Active Nonprofits .. 276 IV. elays in Processing of Nonprofit Applications .. 278 V. ck of Clarity in Standards for Political Activity by 501(c)(4) Nonprofits .. 279 VI. There Was an Increase in Applications from Right-Leaning Nonpro?ts .. 280 VII. 1e List .. 282 Liberal and Progressive Groups Were Scrutinized by the IRS .. 284 A. IRS Determinations Screened Left-Leaning Groups for Review .. 284 1. ACORN .. 285 2. Watch For ?Occupy? Groups .. 287 3. Liberal and Progressive Organizations Experienced Three-Year Delays .. 288 B. In appropriate and Burdensome Information Requests to Left-L caning Groups .. 290 IX. What Could Have Been .. 293 X. Vlhat Was .. 294 XI. Response to Additional Republican Views .. 299 A. No Evidence of Political Bias in 501(c)(4) Determinations .. 299 1. No Evidence of Lois Lerner Political Bias .. 299 2. No Double Standard for Members of Congress .. 300 3. No Evidence to Validate Charge of Union Bias .. 302 4. No Evidence Individual Employee Views In?uenced Deci?ions for Political Purposes .. 302 5. No Evidence White House or Treasury Of?cials In?uenced Tea Party Applications. 302 B. IRS Failure to Preserve Lerner?s Emails .. 303 C. Misleading Congress .. 304 D. IRS Independence .. 304 269 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) XIIXIV. XV. Tl ate Committee on Finance A Inappropriate FEC Interaction .. to ?Suppress? Political Speech .. ys And Means Referral Letter .. Response to the TIGTA Report .. 30 Day Report .. ditional IRS Response .. e11 for Reform of the Tax Code Treatment of Political Ac 3 ution of 501(c)(4) Nonpro?ts into Political Entities Create .. itory Changes are Needed .. The Follow the Money Act .. Rletum to the Pre-195 9 Standard .. R?eform of 501(c)(5) and 501(c)(6) Organizations; .. clusion .. meline of Key Events .. 270 dditional Democratic Views .. 304 .. 305 .. 305 .. 307 .. 307 .. 307 :tivity by Nonprofits 309 a Need for More .. 310 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Democratic Views i 1. i EXECUTIVE SUMMARY The Con has conducted signi?cant investigations into the actii ities of nonpro?ts in recent years. Tie Finance Committee Democratic staff investigated Jack Al: ramoff?s use of nonpro?ts such as Americans for Tax Reform and Citizens Against Government Waste to lobby Congress, summarized in a 2006 Finance Committee staff report.1 Senator Grassley, when he was chairman or ranking member of the Committee, closely scrutinized tliie nonpro?t sector, investigating religious organizations and nonpro?t hospitals, among athers. Together, Chairman Grassley and Senator Baucus investigated the Nature Conservancy, a 501(c)(3), in 2005.2 On May 10, 2013, the Director of IRS Exempt Organizations Lois Lerner disclosed that IRS employees selected tax exempt applications for further review with ?names like Tea Party and Patriots and they selected cases simply because the applications had :hose names in the title.? ~Lerner described this process of selecting cases for review because of a ?particular name? as ?wrong, insensitive, and inappropriate.?3 _In addition, Lerner described how the IRS improperly handled the ta x-exempt applications that were set aside for further review, subjecting them to delays and over broad and unnecessary requests for information.4 Accordiig to Lerner, IRS employees? inappropriate scrutiny of applications was not ?because of any political bias.? Rather, the employees were trying to streamline and centralize cases but ?they didn?t have the appropriate level of sensitivity about how this might appear to others and it was just Wrong.? On May 14, 2013, the Treasury Inspector General for Tax Administration (TIGTA) released a report finding that the IRS ?used inappropriate criteria that identi?ed for review Tea Party and other organizations applying for tax-exempt status based on their names or policy positions instead of indications of potential political campaign intervention.?6 At the me of the disclosures from the IRS and TIGTA, there was speculation and concern express :d that singling out conservative organizations by name may have been a consequence of politica bias or motivation on the part of IRS employees, possibly at the direction of political appointees at the IRS, Treasury Department or the White House. The C0 nmittee began an in-depth bipartisan investigation to determine the facts surrounding the controversy due to the serious nature of allegations that political considerations may have driven Senate 2inance Committee, Minority Staff Report: Investigation of Jack Abramoff?s Use of Tax-Exempt Organizations (Oct. 2007). 2 Washington Post, Senators Question Conservancy?s Practices (June 8, 2005). 3 American Bar Association, Transcript of The Exempt Organization Tax Review (May 10, 2013) ABA Tax Section?s Exempt Organizations Committee Meeting, Vol. 72, No. 2 pp. 126-127. 4 Id. 5 Id. 6 TIGTA, ?ilnappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review,? Audit Report #2013-1 14,2013). 271 This docum int was obtained and uploaded by the Center for Resaonsive Politics (OpenSecrets.org) This documie US. Sen the status. On May - documer Key Democratic Staff Findings: "Is I I a "l Staff im with IRE The bip: Tea Part "number time. There a1 ~are rece influenc . religio'u interver primary in politi Becaus necess includ federal Some anony Counse ate Committee on Finance ictions by IRS personnel were not politically motivated. Applications presenting political advocacy issues. Jnder federal tax law the scrutiny of tax-exempt applic ctivity was completely justi?ed. management, and unwarranted delay. 5 employees. 1rtisan narrative describes key events in the years 2010, 201 and conservative-leaning applications were set aside for of politically left-leaning applications were also subject to ived by the IRS. Nonpro?t organizations spent hundreds of the 2010 and 2012 election cycles. A 501(c)(3) organizati s, charitable, or educational purposes, and these organizatior in any political campaign activity.8 A 501(c)(4) organiza?ion must be organized for the cal campaign activity only if the organization is determined engaged? in campaign activity.9 iTg those associated with the Tea Party. There is only a right tax law if standards for that status are met by the applicant. to 1 William Wilkins explained that case law indicates ?the pro A ts relating to the targeting controversy.7 olitical appointees did not in?uence the enhanced scrutiny 0 he process of examining applications was plagued by inef? eStigators received over 1.5 million pages of documents and currently 1.5 million nonpro?ts in the US and 70,000 non 1 activity of promoting ?general welfare of the people of the federal law does not allow unlimited political activity by 5 for the IRS to scrutinize the applications of organizations gue that there is a Constitutional First Amendment right to us donations to 501(c)(3) and 501(c)(4) organizations. Co dditional Democratic Views heightened scrutiny of conservative leaning organizations applying for tax-exempt 20, 2013, the Committee requested that IRS answer questions and turn over internal 501(c)(3) and 501(c)(4) ations showing political :iency, badjudgment, bad conducted 32 interviews and 2012 during which )ecial analysis. A smaller aecial scrutiny during that pro?t applications per year millions of dollars to on must be organized for 3 cannot participate or ommunity? and may engage not to be ?primarily nonpro?ts, it was seeking favored tax status, to 501(c)(4) status under free speech through ntrary to this view, IRS Chief hibition on political activity 7 Letter from Chairman Baucus and Ranking Member Hatch to the Acting Comniissioner Steven Miller (May 20, 2013501(c)(3) (2014). R. (1990). 272 nt was obtained and uploaded by the Center for Res pensive Politics (OpenSecrets.org) ?l ?l 1 ,Us. Sen by 501(c to?. procee --Amendrr nonpro? Section . The tax IRS recc Once no thorough, but evenhanded way. Nonpro?t status can be terminated i activity is the primary activity of the nonpro?t (see Section of the Bipartisan political '4 Investig What is no evide the best quickly New IR 501 who fai that don?t generate charitable deductions for the donor anc npro?t status is granted, the IRS can investigate the political for discussion of the law governing 501(0)). as possible using the fairest possible standards. management has moved aggressively to address the broken proced These tiions will help ensure that mistakes made by the IRS in 201 repeate . ed to properly manage the processing of these applicationsNotes '3 Based "iterview of IRS Chief Counsel William Wilkins (Nov. 7, 2013) p. 28. 508(a) (2006). of Steven Miller (undated) 1R80000505538-42. on data provided to the SFC by the IRS (April 8, 2015). 273 This docum )(l3)s is not a prohibition on free speech because there are otlr ghition of their status, although most organizations apply for an IRS determination. ate Committee on Finance Additional Democratic Views er avenues for the speech that there is not a First lent right to a charitable deduction??0 This same standard applies to 501(c)(4) ts. 501(c)(3) organizations must apply to the IRS to be recognized for tax-exempt status.? aw allows section 501(c)(4) organizations to operate as tax-exempt without applying for 12 activity of nonpro?ts in a fit is determined that not defensible is the appearance the IRS gave of ?targeting? the Tea Party, even though nce exists that it was based on political beliefs or orders from political appointees. And way to avoid that appearance would have been to process th 3 Tea Party applications as system of processing L) applications with political advocacy issues by (I) removing key employees in the IRS (2) establishing new es to help process nonpro?t applications quickly, and (3) processing nearly all the delayed applications. '3 0, 2011 and 2012 are not =nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen ate Committee on Finance Additional Democratic Views II. NO EVIDENCE OF POLITICAL MOTIVATION BY IRS EMPLOYEES This investigation, based on staff interviews with 32 IRS employees and a review of 1.5 million IRS documents, found no evidence of political motivation driving the heightened scrutiny of Tea Party and conservative groups and the subsequent delays in processing their tax-exempt applications. Furthermore, whose report highlighting the inappropriate criteria used to identify .ax-exempt applications for review was the impetus of this iilivestigation, made no ?nding that political motivation was behind the inappropriate activity. 14 During interviews with Committee staff, IRS employees did not cite political motivation as a factor for heightened scrutiny of Tea Party applications. Attached are questions and answers from each of the interviewees denying that politics was involved. 15 While should be lauded for exposing the ?awed review process used by the IRS in scream-1% tax exempt applications for political activity, the narrow scope of its report and its omissior of key information contributed to a misimpression that the controversy was politically motivated. documents released months after the report was published show that its investigative staff, based on a review of 5,500 emails, concluded three weeks prior to the release of the audit report that there was no political motivation on the part of IRS empl Jyees. An email from Timothy Camus, the Deputy Inspector General for Investigations at TIGTA, concludes: Review of these emails revealed that there was a lot of discussion between the employees on how to process the Tea Party and other political organization applications. There was a Be On the Lookout (BOLO) list speci?cally naming these groups; however, the e-mails indicated the organizations needed to be pulled because the IRS employees were not sure how to process them, not because they wanted to stall or hinder the application. There was no indication that pulling these selected applications was oliticallv motivated. The e-mail traf?c indicated there were unclear processing directions and the group wanted to make sure they had guidance on processing the applications so they pulled them. This is a very important nuance. ?5 Despite this ?nding of no political motivation by IRS employees in selecting Tea Party groups for add tional scrutiny, in a glaring omission, failed to mention this investigative ?nding by the Deputy IG in its audit report. TIGTA Chief Counsel Michael McCarthy also concluded that had no evidence that IRS employees had political motivations. After McCarthy reviewed a dlaft of the TIGTA 501(c)(4) '4 Inappropriate Criteria Were Used to Identify Tax-Exempt Applicatior for Review (May 14, 2013) TIGTA Lltudit Report #2013-10-053. ?5 IRS Employee Responses to Written Questions from Finance Committee Staff (Dec. 19, 2013). - ?5 Email from TIGTA Deputy Inspector General for Investigations Timothy Camus to staff (May 3, 2013) (emphasis added). 274 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) U.S. ?Seniate Committee on Finance Additional Democratic Views audit repoit in late February 2013, he suggested that the TIGTA auditors had overreached in writing that IRS of?cials ?targeted? the Tea Party. He wrote: As an initial concern, ?targeted? has a connotation of improper motivation that does not seem to be supported by the information presented in the aud report. I think ?selected? or even ?singled out? would be more accurate.17 The same icounsel commented on the criteria used in the BOLO list (discussed in the following section '11he BOLO List?). It was not until a Congressional hearing held three days after the TIGTA report was released, in the-midst of a media frenzy that Inspector General Russell George con?rmed, in response to questioning from House Ways and Means Committee Ranking Member Sander Levin, that his of?ce didmot ?nd any evidence of political motivation on the part employees.18 LEVIN: Did you ?nd any evidence of political motivation in the selection of the tax exiemption applications? GEORGE: We did not, sir. ?9 Additio rally, the public did not learn about review of IRS staff emails and its conclus on about the nonpolitical nature of this controversy until House Oversight Committee Democrats and House Ways and Means Democrats released the internal TIGTA email describing the revi aw in July 2013.20 TIGTA failed to include critical information about the nonpolitical nature Cfithe IRS mismanagement of the Tea Party applications that would have provided crucial context to a sensitive issue. ?7 Email from TIGTA Chief Counsel Michael McCarthy (Feb. 28, 2013) TIGTADO8002. '3 House Ways and Means Committee Hearing, Hearing on Internal Revenue Service Targeting of Conservative . Groups May 17, 2013). '9 1d. 1 2? Committee on Oversight and Government Reform, ?Cummings Asks Issa to Recall 16 for Testimony at Upcomi 1g IRS Hearing,? Democratic Press Release (July 12, 2013) 275 This documint was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) us. Sen 111. There is ate Committee on Finance POLITICAL APPOINTEES TO INCREASE SCRUT ACTIVE NONPROFITS no evidence of Presidential appointees at the IRS, the Treas A NO EVIDENCE OF PRESSURE FROM OBAMA AD dditional Democratic Views MINISTRATION OF POLITICALLY ry Department or the White ?Heuse pressing IRS personnel to target nonpro?ts engaging in politi al activity. All of th Obamaz issues, . In a Sen question The TI Comm I indicate to us that they did not receive direction from people 6 IRS personnel interviewed were asked directly whether?p idministration had in?uenced the processing of the applicati ed TIGTA IG Russell George on this issue. Senator Crapo: You know there has been a lot of discussion conclusion that you have reached? Mr. George: In the review that we conducted thus far, Senat iave reached. Senator Crapo: And how do you reach that kind of a conclu Mr. George: In this instance it was as a result of the interviei people who were most directly involved in the overall matte another and we directly inquired as to whether or not there Washington beyond those who are directly related to the De Senator Crapo: Whey you say ?people beyond the the chain of the Mr. George: It in theory could be, but we have no evidence again, the people in the Determinations Unit.22 GTA of?ce reiterated this point in an answer to questions pc ittee: communication with any IRS of?cial employed in the Tax 1 Government Entities Division between January 20, 2009 an 2' IRS 22 Senate Finance Committee Hearing, Review of Criteria Used by the IRS 1] Greater This documi mployee Responses to Written Questions from Finance Committee Staf Scrutiny? (May 21, 2013them identi?ed any pressure from the political ate Finance Committee hearing on the TIGTA report in May when they knew it. One of the big questions I have, Mr. Gec an argument being made that there was no political motivatic itical appointees in the ans with political activity ranks.? of 2013, Senator Crapo about who knew what and rge, is it seems that there is in these actions. Is that a or that is the conclusion we sion? NS that were conducted of the r, so you take it one step by was direction from people in terminations Unit they did beyond the IRS. It could be anyone up the thus far that it was beyond, sed by the Finance Did any of?cial from the office of the president or the Whitie House have any form of Exempt and the present? f(Dec. 19,2013). 3 Identify 501(c)(4) Applications for ent was obtained and uploaded by the Center for Res ponsive Politics (OpenSecrets.org) US. Sen ate Committee on Finance Additional Democratic Views List the days any communications occurred and the form it to 3k phone, email, in erson, etc) - responded: We have no knowledge of any communications between the White House and any enployee in the Tax Exempt and Government Entities Divisi 3n.23 And the question was asked again with a focus on the Treasury Department: Did any employee of the Treasury Department (excluding the IRS) who was appointed .. by'the President have any form of contact with any employee of the Tax Exempt and Govemment Entities Division between January 1, 2010 and May 1, 2013? I .ist the days any communications occurred and the form it took phone, email, in erson, etc.) TIGTA "esponded: We have no knowledge of any communication between Presidential appointees at the Department of Treasury and any employees in the Tax Exempt and Government Entities Division.24 23 Senate Finance Committee Hearing Questions for the Record, Review of Criteria Used by the IRS to Identify 501(c)(4) Applications for Greater Scrutiny? (May 21, 2013) p. 107. 24 1d. p. 108. 277 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) 11.8. Senate Committee on Finance Additional Democratic Views IV. DELAYS IN PROCESSING OF NONPROFIT APPLICATIONS The key failure in this matter was the delay in processing the Tea Paity and other conservative leaning applications for 501(c)(4) status. The IRS took over two yeggs to process what were a handful of applications. In February of 2010 the ?rst Tea Party applications were "received by the Cincinnati of?ce. In March 2012 TIGTA began their audit. Making a decision on one application a day during this period would have avoided most of the delay in processing the applications. Senior leadership at the Exempt Organizations office should have stepped in much earlier in the process and demanded expedited consideration of these politically sensitive applications. They failed to take charge. The applications piled up, complaints from Cc ngress and the applicants intensi?ed, and a crisis developed. Eventually TIGTA stepped in to investigate. The demsion in 2010 to allow the applications to pile up while a confusing and inef?cient process for analyzing them was developed over the next two year period is inexplicable and inexcusable. The IRS prides itself on being nonpolitical. However, in this case a more politically astute leadersl? ip team would have never let this problem develop. 278 This docum ~nt was obtained and uploaded by the Center for Resoonsive Politics (OpenSecrets.org) US Sen .V. While it activity - 501(c)(4 social not the The prir the Tax is logica organize number about ar activity. Second, ?gwhat ?p standarc - the sight of hundreds of applications exhibiting evidence of political .. This lac Organiz Focusec D.C. co manage delay.? ate Committee on Finance LACK OF CLARITY IN STANDARDS FOR dditional Democratic Views ICAL ACTIVITY BY 501( C18) NONPROFITS is not an excuse for the delays in processing, it is a fact that 3y 501(c)(4)s are extremely hard to understand. are intended to be organized exclusively for the promotion elfare organizations are permitted to engage in political cam rganization?s primary activity.25 iary activity standard (discussed in the following section enti Code Related to Political Activity of Nonprofits?) is confusi to assign a percentage to determine whether political camp rtion?s primary activity, 51%, 60Without a percentage standard to apply, it is extremely 1 application from a 501(c)(4) nonprofit which shows an inte ?political activity? is not well de?ned. The law provides vi olitical activity? means. This lack of clarity in the law, both 1 and on what constitutes political activity, partially explains of clarity should have been well known to senior members ations team the law and the regulatory structure had been i and aggressive assistance to the Cincinnati of?ce by senior uld have overcome the confusion surrounding the rules for 5 ment plus an uncertain legal and regulatory situation led to 25 Joint Suggesti 26 The A knew ful Treas. 'isource circumst test is to its ob) United 8 formativ (6th Cir Standarc exempt organize ans for Reform Submitted to the Tax Reform Working Groups? (May 6, dditional Republican Views are dismissive of the difficulty in determinir 1 well that ?primarily? means 51%. While some IRS staff members adm such a test is not supported by regulations or caselaw. The IRS points to a numb eg. 1.501 (No percentage test established), Rev. Rul. 68 fincome does not determine an organization?s primary activity under 5 ances are considered). Haswell v. United States, 500 F.2d 1133, 1142, 1 activities or purposes in any of its published guidance, thought three rev: ommittee onTaxation, ?Report to the House Committee on Ways and I not appropriate. ?Such a test obscures the complexity of balancing the ectives and circumstances in the context of the totality of the organizatic tates, 488 F.2d 684, 686 (2d Cir. 1973) (multiple factors relevant in app history, stated purposes, and actual operations). Seasongood v. Comm 1955) (expenditures, employees, and organization?s time and effort con Under 501(c)(4), prepared by IRS at 14, (?The has not published tion?s activities must be considered and that there is no pure expenditure 279 This document was obtained and uploaded by the Center for Res the rules for political of social welfare, however, oaign activity so long as it is itled ?Need for Reform of ng and imprecise. While it aign activity is an [lations do not set such a if?cult to make judgments nt to engage in political rtually no guidance at all on on the primary activity why IRS personnel froze at activity. of the Exempt 3n the books since 1959. management in Washington 01 nonprofits. Inept wo years of confusion and teams on Present Law and 2013) p. 35. this standard, stating that stuff itted to using a percentage test, er of sources in this regard, see, e.g. 45, 1968-1 CB. 259 (Principal 01 all facts and 147 (CI. CI. 1974) percentage rganization?s activities in relation ying this standard, including issioner, 227 F.2d 907, 909, 912 sidered). See also, Exclusively Contracting Plumbers v. a precise method of measuring nue rulings have state that all of the test?). ponsive Politics (OpenSecrets.org) ?inundated? with Tea Party application issues in 2010.27 This trend 1en Holly Paz observed Screening has identi?ed an increase in the number of 201 1, an spending a greater establ isl spectrun One exp and rela in?uenc But this organize There is fund the Scott Rt -- . Center 1 because A Wall Cincinnati of?ce found itself in 2010 looking at dozens of right lean non-pro movem protesti control of the House of Representatives in the 2010 elections. applications where organizations are advocating on number of Tea Party applications being scrutinized. This 0 an unproven narrative. of bias against nonpro?ts on the con 1. lanation is the increase in the amount of political activity en :ed organizations. The health care reform struggle resulted i the political system in 2009 and 2010. doesinot explain the intense interest by hundreds of groups i Ltions. some evidence that conservative groups were competing f0] ir activities, donations from a number of very wealthy conse :ed, a Republican lobbyist and the Chamber of Commerce?s 'or Public Integrity in an interview that ?50105 are the keys they allow anonymity.?29 Street Journal article published on August 28, 2013 provide ?t status under the Internal Revenue Code. The political act ent, which was born in the summer of 2009 as citizens partic ng efforts by Congress to reform the health care systemEmail terview of Liz Hofacre (Sept 24, 2013) pp 61-64. taxes, and similar matters.?28 The greater number of Teal US. Sen ate Committee on Finance Additional Democratic Views VI. THERE WAS AN INCREASE IN APPLICATIONS FROM RIGHT-LEANING NONPROFITS The IRS was scrutinizing progressive non-pro?ts with political activ ty in addition to Tea Party- related applications, as described below in the section entitled ?Liberal/Progressive Groups Were Scrutiniz ed by the Howeve evidence suggests that applications from conservative-leaning groups substantially - outnumber applications from left-leaning groups. In fact, EO staff tc 1d the Committee they were :ontinued at least through issues related to government ?arty applications resulted in utcome was used to servative side of the political gaged in by the Tea Party r1 many groups mobilizing to becoming 501(c)(4) anonymous donations to rvative donors. In 2010, political strategist, told the 3 the political kingdom 5 some clues about why the ing organizations seeking ivity of the Tea Party ipated in town hall meetings ed the Republican Party take Z9489. chain between Holly Paz and Janine Cook (July 18-19, 2011) for Public Integrity, Campaign Cash: The Independent Fundraising Golc )ctober 4, 2010). treet Journal, ?Anger at IRS Powers Tea-Party Comeback? (Oct. 10, 20 29Center 1 Rush since ?Citizens United? Ruling (t 30 Wall 5 13). 280 This documdnt was obtained and uploaded by the Center for Ressonsive Politics (OpenSecrets.org) l' Senate Committee on Finance A :lditional Democratic Views The Journal article focuses on the Tea Party Patriots group, explaining that it applied for nonpro?t status in late 2010. The Journal article stated that the Tea person donor base, a $24 million a year budget and its director made arty Patriots had a 400,000 1$250,000 a year.? The article explained: ?One problem dogged the group: The Patriots didn?t have tax exempt status, a disincentive to some potential donors. The group applied such status in late 2010 but says I had heard nothing from the IRS during all of Nonprof ts do not need to publically disclose who has donated funds, disclose how much an individual or corporation has contributed. The Wall Street Journal article con?rms a widely held belief that pol disguisei? by cycling them through nonpro?ts. Again, no dollar amor revealed to the public. This same incentive for obtaining nonpro?t tax status is identified in Jenny Beth Martin, executive director of the Tea Party Patriots: ke nor do they need to itical contributions are int from any individual is the article in a quote from pt telling everyone - including the big donors who wouldn?t give to us without our nonprofit status that the IRS appeared to be targeting tea-party groups.? The influx of 501(c)(4) applications to the IRS may have been the re ?big dor ors? who would not give to right leaning groups ?without .. Finally, many point to the Citizens United decision as the reason pol the years in question. sult of a desire to attract .. nonpro?t status.?33 itical spending soared during Acting Commissioner Steven Miller told the Finance Committee thalt the number of 501(c)(4) applications doubled since ?Citizens United released this wave of ca headed .owards c(4) organizations. That?s proven out by FEC data and IRS dataSenate Finance Committee Hearing, Review of Criteria Used by the IRS to Greater Scrutiny? (May 21, 2013) p. 23. 281 This document was obtained and uploaded by the Center for Res sh? and ?some of that cash n34 Identify 501(c)(4) Applications for ponsive Politics (OpenSecrets.org) US. Sen VII. ate Committee on Finance THE LIST A dditional Democratic Views Evidence: suggests that the number of conservative?leaning tax-exempt organizations active in this time political campaig Politics, sponsore attract more than 80% of the political funds spent in the 2012 elect by conservative This amount of spending, a ge donors, partially explains why most of the nonpro?t app advocac issues were from conservative-leaning organizations durin IRS was not targeting these groups, rather it was facing the reality th conserv tive groups than left-leaning groups were sending in applica Organiz tions of?ce in Cincinnati. period outnumbered liberal organizations.35 The number of 501(c)(4)s reporting campaign activities almost doubled from tax year 2008 1 activity for large ?lers almost tripled.36 According to the igh 2010, and the amount of Senter for Responsive ons by nonpro?ts were ong with the desire to lications with political g2010, 2011 and 2012. The at more politically active tions to the IRS Exempt A great eal of attention has been focused on the ?Be On The Lookout? (BOLO) list which designa cl the Tea Party as a term for IRS employees to watch for for non}: re?t status. There is no question that the use of the BOLO and the terms used th unattractive picture of an IRS focus on Tea Party groups seeking no Lerner of right- While should I af?liatic Washin the Tea an ef?c applicat applica1 The process applica approv Suppor meBO screen: leaning groups on the BOLO list was inappropriate. 3e noted. The charge is that Cincinnati ?targeted? the Tea But once the IRS had selected the two Tea Party applica gton DC. of?ce it can be argued that it was logical to develc Party applications that continued to surface in Cincinnati. ient procedure to use to make sure personnel in Cincinnati ic ,iOns to set aside while Washington DC. determined the best .ions. Applications by left-leaning groups were also collecte 3 receives 70,000 applications a year for nonpro?t status. the placement of terms on a BOLO list was one way to gath tions in one place while the experts in Washington DC. deli ng or disapproving the applications. ting this perspective, Chief Counsel expressed con LO list terms Tea Party, 9/12 and Patriots as ?inappropri rs centralize political cases. He wrote in an email: 35 The II necessar 35 Email 37USA '1 38 Email receives 70,000 applications for nonpro?t status each year. The Corn] to determine the total number of conservative and liberal organization. chain between Justin Lowe, Justin Abold, and others (May 6, 2013) IRS ?oday, Dark Money of Non-pro?t Political Groups Targeted (June 11, 2( chain between Cindy Thomas, Steve Bowling, John Shafer and others 282 This documlent was obtained and uploaded by the Center for Res hen reviewing applications :rein presents a very pro?t status. Even Lois relieved it was wrong to place the term ?Tea Party? on the LO list.38 Placing names ot endorsed by the Democratic staff, another point of View 11 how the IRS operated because of its political tions for review in the )p a method of collecting all he BOLO list can be seen as lenti?ed the right way to deal with these in this manner. ith so many applications to er all of the relevant vered to Cincinnati a plan for cern about TIGTA describing ate? because it did help IRS nittee did not have the resources 5 applying during this time period. 0000494805-29. 13). Iuly 5, 2011) ponsive Politics (OpenSecrets.org) US. Sen ate Committee on Finance A It is because speci?c names associated with political activity criteria? That would seem to make it difficult for the IRS to i applications for referral to the specialized unit. If this is the footnote 11, that the use of organization names occurs in non- seems like it needs more attention, since it suggests both that iotivated in this case, and that our recommendations might :l ri'teria included only certain types of groups seen as conserv olitical groups with different policies should have also been ationale, do we have evidence that similarly situated groups political spectrum should have been included by name in the ater sections of the report seem to suggest this, but it is not Chief Counsel makes two critical points: 1) Using names in the BOLO list simply helped the IRS applications for referral to a specialized unit.? The names list because of political bias. Use of names in the BOLO list identifying left?leaning Following section) is evidence that the IRS was evenhanded arocessing of 501(c)(4) applications. 39 Email This document was obtained and uploaded by the Center for Res 283 Additional Democratic Views 150, it is not clear why exactly we ?nd the criteria used were ?inappropriate.? ;houldn?t be used as dentify potential political ationale, the information in political cases as well, the IRS was not politically eed to be broader. )r are we saying it was inappropriate because the use of names was one-sided, i.e. name ative, and names of other included? If that is the from the left side of the criteria, but were not? The lear.39 dentify potential political ere not placed on the BOLO groups (as reviewed in its administrative from TIGTA Chief Counsel Michael McCarthy (Feb 28, 2013) TIGTACIRO 8002. ponsive Politics (OpenSecrets.org) 1 I 1 US. Sen ate Committee on Finance A LIBERAL AND PROGRESSIVE GROUPS WERE IRE dditional Democratic Views IRUTINIZED BY THE The treatment of liberal, Democratic, and progressive organizations applying for tax- exempt status was similar to its treatment of Tea Party applicants. A intentionally limited the scope of its report to ?narrowly focus on Tee request of the Chairman of the House Committee on Oversight and of ?ndings with respect to the treatment of Tea Party though TIGTA 1 Party organizations? at the rovernment Reform,40 many groups also apply to the treatment of left-leaning organizations before and concurrent with the screening of Tea Party groups. A. IRS DETERMINATIONS SCREENED LEFT-LEANING GROUPS FOR REVIEW TIGTA characterized the IRS Determinations Unit?s use of ?speci?c names (Patriots and 9/12) or policy positions? to identify cases to be reviewed for political activity as inappropriate.? However, audit did not focus on similar methods used by tae IRS to identify, and select left-leaning applicants for review.42 A Powe: Point presentation and notes from a July 28, 2010 screening that IRS employees were instructed to look for applications with the workshop meeting show terms progressive and Emerge (an organization that sought to train female Democratic political candidates) in addition to Tea Party groups.43 The notes from the meeting state that Gary Muthert indicated that the ?follong names and/or titles were of interest and should be ?agged for review: 0 12 Project, 0 ?Emerge, 0 ?Progressive 0 ?We The People, 0 ?Rally Patriots, and ?Pink-Slip Program??14 - Similarly, the PowerPoint presentation from this screening workshop has a slide that reads, ?Politics? with a picture of an elephant and a donkey. The slide states ?Look for names like? preceding additional slides with the words ?Tea Party Patriots Progressive. the People? under the heading ?Current Activitie 9/12 Project Emerge .. 3945 5. 4? The Hill, IG: Audit of IRS Actions Limited to Tea Party Groups at GOP Request (June 26, 2013). 4' TIGTA, ?Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review,? Audit Report (May 14, 2013). ?2 It should also be noted that the term ?Patriot? does not even necessarily indicate the organization is conservative leaning. According to Center for Responsive Politics, a group called Patriot Majority was the most active left- leaning group in 2012 election cycle, and the 14?h most politically active of all 501(c)(4)s. 43 Screening Workshop Notes (July 28, 2010) Screening Works hop PowerPoint (July 28, 2010) IRSROOU 0169695. 44 Screening Workshop Notes (July 28, 2010) 11130000012315. ?5 Screening Workshop PowerPoint (July 28, 2010) IRSR0000169695. 284 This document was obtained and uploaded by the Center for Res aonsive Politics (OpenSecrets.org) US Senate Committee on Finance Additional Democratic Views Numero iterations of the BOLO spreadsheet included the term ?progressive? on the Historiczil? tab. For example, a BOLO list dated August 12, 2010 instructed screeners to ?ag applications for the word ?progressive.? The BOLO list entry for ?progressive? further instructed screeners that the: Common thread is the word ?progressive.? Activities appear to lean towards a new political party. Activities are partisan and appear as anti-Rep blican. You see references to ?blue? as being ?progressive.??46 Accordir to IRS agent Ron Bell, who was responsible for the BOLO list, screening terms were placed on the ?Tag Historical? tab after IRS employees were not seeing the cases as frequently.? While the organizations with the name ?progressive? in their name were not applying for tax- exempt status as frequently as conservative or Tea Party organizatior s, the IRS was still instructing its employees to screen and set aside cases because of potential political activity based on the word ?Progressive.? The Emerge applications that screeners were instructed to ?ag at the screening workshop were not spec ?cally listed on the BOLO, but an IRS Determinations manpger alerted screeners via email on September 24, 2008 to look for applicants with ?Emerge? in their name along with other ?p )litically sensitive? cases.48 ACORN Another PowerPoint presentation presented at training events in June and July of 2010 titled ?Height :ned Awareness Issues,? listed ?Successor to Acorn? as a ?Watch For Issue? specifying that ?[s]pecial handling is [r]equired when [a]pplications are [r]eceiv ed.?49 ACORN (Association of Community Organizations for Reform Now) was a ational ?community organization group? with local chapters that ?fought for liberal causes like raising the minimum wage, registering the poor to vote, stopping predatory lending and expanding affordable housing ?50 In addition, ACORN assisted lower income families with tax return preparation.? The nat onal organization declared bankruptcy in the wake of accusations of fraud, embezz ement, and mismanagement but several local organizations decided to regroup under new names.52 46 Email from Liz Hofacre to IRS Staff (July 27, 2010) 47 SFC Ir terview ofRon Bell (July 30, 2013). 48 Email from Joseph Herr to IRS EO screeners (Sep. 24, 2008) 1492. ?9 Heightened Awareness Issues PowerPoint, Email between EC) Employees (May 18, 2010) IRSROOC 0195587. 50New Yc rk Times, on Brink of Bankruptcy, Of?cials Say? (May 19, 20114). 51 s2 53: 285 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. ?Sen ate Committee on Finance Additional Democratic Views An entry for successors? appears on copies of the BOLO 1 st examined by the Committiee from 2010 until it was removed by ED Director of Rulings and Agreements Holly Paz in JL ne 2012.53 'On March 22, 2010, E0 Determinations Director Cindy Thomas noti?ed E0 Technical that descendants of ACORN were reorganizing citing three Speci?c cases .54 In April 2010, Sharon Camaril two ACORN-successor cases. The August 2010 BOLO lists Successors? as an ?Issue lowing the breakup of ACORN, local chapters have been reforming under new names bmitting applications.? Screeners are instructed to send these cases ?to the TAG 6 that and res Group.? An Octc ber 7, 2010 email from Jon Waddell alerted Steven Bowling URN-related cases. Waddell recommended sending an alert to screeners ?to be on the for the following name [and] application factors associated with ACORN related ?57 In addition he suggested adding the following ?factors to The Watch Issue Description two AC lookout cases. section Sharon lookou1 for these cases.?59 John Shafer forwarded Camarillo?s em group.6 55 for this category: Change. for the poor. Camarillo forwarded the alert to John Shafer instructing tha: Educating Public Policy Makers Politicians) on the above subjects. lo emailed Cindy Thomas and Robert Choi telling them that EO Determinations received The description states and Sharon Camarillo to Thelname(s) Neighborhoods for Social Justice or Communities Organizing for Activities that mention Voter Mobilization of the Low-Ir come/Disenfranchised. Advocating for Legislation to Provide for Economic, He athcare, and Housing Justice :3 58 his screeners ?be on the to IRS screeners in his The Fe aruary 2, 2011 BOLO instructs IRS screeners to look for the words or ?Communities for Change in the name and/or throughout the application.? It reads: 53 Email chain between Holly Paz, Cindy Thomas and others (June 1, 2012) IRS )000013434-35. 5? Email from Cindy Thomas to Steven Grodnitzky (Mar. 22, 2010) 55 Email from Sharon Camarillo to Cindy Thomas and Robert Choi (Apr. 28, 20 IR80000458467. 56 of Combined Spreadsheet TAG 8 12 10. (Aug. 12, 2010). 57 Email from Jon Waddell to Steven Bowling and Sharon Camarillo (Oct. 7-8, 2010) 53 Id. 59 Emai 6? 1d. This documJent was obtained and uploaded by the Center for Res 1 chain between EO Employees (Oct. 7-8, 2010) 286 ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Democratic Views Local chapters of the former ACORN organization have reformed under new names and are requesting exemption under section 501(c)(3). Succession indicators include ACORN and Communities for Change in the name and/or throughout the application.61 ACORN cases continued to be screened in 2012. Ron Bell wrote an email to Carter Hull on May 13, 2012 stating: ?I?ve got a case that I believe is an acorn successor org. I googled the name of the org and that is where several websites (such as the capital research center) indicate that it is an acorn successor. The BOLO list states to contact Please advise how you want to process his case.?62 [sic] WATCH FOR GROUPS In anua 2012, the IRS Determinations of?ce began screening organizations with the term ?Occup in its name on the ?Watch For? list on the BOLO. After a news article was distributed within IRS that suggested some organizations af?liated with the Occupy movement were seeking tax exempt status, Cindy Thomas told Steven Bowling, the manager of the IRS Determinations group that handles political advocacy cases, that the Occupy cases should be referred to his group so they can be worked ?with the advocacy cases.?63 E0 Determinations Group Manager Steven Bowling told Cindy Thomas that the BOLO list would need to be modi?ed in order to properly ?ag the Occupy cases but expressed frustration that the IRS does not want to use the words ?Tea Party? or ?Occupy? in screening.64 Thomas replied: w]e can?t refer to ?tea party" cases because it would appear as though we?re singling 1hem out and not looking at other Republican groups or Democratic How about a compromise What do you think about changing the description for advocacy arganizations on the Emerging Issues tab to that which you?ve included under scenario Et1; then, you could include the Occupy description from scenario #2 on the Watch For tab specifying that these cases should be referred-to your group? We could still have the same grade 13 agents working the advocacy and Occupy cases.65 After receiving this instruction from Thomas, Bowling adds ?Social economic reform movement? to the BOLO entry for advocacy cases. In addition, Bowling added ?Occupy orgs? to the OLO watch list. Ronald Bell wrote an email to Bowling questioning the need for a I separate entry for ?Occupy orgs? on the watch list since he thought ?Social economic reform 6' BOLC Spreadsheet (Feb. 2, 2011) 52 Email from Ronald Bell to Carter Hull (May 13, 2012) IRSR0000054963. 53 Email chain between E0 Employees, (Jan. 20, 2012) IRSR0000013418-19. ?54 Id. 65 Email chain between EO Employees, (Jan. 20, 2012) Emai from Steven Bowling to Ronald Bell, (Jan. 25, 2012) IRSR0000013181. 287 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen ate Committee on Finance Additional Democratic Views was our code word? for the occupy organizations.? Bowling replied, think we can leave it in. Some of the orgs are pushing that other than occupy groups.?66 Emails written in May 2012 show that at least two Occupy cases were flagged by IRS screeners after the term was added to the BOLO list.67 By the next month, Holly Paz had Cindy Thomas revise the BOLO list to ?remove the references to ACORN and 0001. py from the ?Watch List?? and replaced the ?Emerging Issue? description of ideological positions of conservative and liberal g'oups with neutral language.68 3. LIBERAL AND PROGRESSIVE ORGANIZATIONS EXPERIENCED THREE-YEAR DELAYS ?nding that ?[o]rganizations that applied for tax-exempt status and had their applicat ons forwarded to the team of Specialists experienced substantial delays?69 applies to left- leaning 1pplicant organizations in addition to Tea Party and conservative groups. The Committee investigation and press reports Show that applicants af?liated with Emerge, ACORN - successor groups, and others also waited years for a determination from the IRS after their applicat ons were flagged as potentially political by screeners and forwarded to the E0 Technical of?ce in Washington, DC. Emerge In the case of three of the Emerge groups, it took three years from the time they applied until the applications were denied. Previously the IRS erroneously approved ?ve applications af?liated with erge for 501(c)(4) status from 2004 through 2008, including the main umbrella organization Emerge America.70 These approvals were subsequently determined to have been in error because Emerge groups were found to bene?t the Democratic Party.71 On September 2008, emails Show that IRS employee Donna Abner recommended issuing an ?alert? for other incoming Emerge cases because of the ?partisan nature of the cases? as well as a reminder that ??sensitive political issue? cases are subject to mandatory review? per IRS guidelines and subject to full development. 72 E0 Technical staff as Red EO Determinations to transfer the Emerge Maine and Emerge Nevada applications on October 10, 2008 to be held ?until the litigation on this issue and concluded and then we will we rk them.?3 EO Technical instructed'EO Determinations to hold any additional Emerge cases ?pending the outcome of a 56 Emails between Steven Bowling and Ronald Bell (Jan. 25, 2012) IRS0000013 87. 67 Email chain between EO Employees (May 24- 27, 2012) IR80000013234. 6? Email from Holly Paz to Cindy Thomas (June 1, 2012) 1R30000013434. 59 TIGTA, ?Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review,? Audit Report #2013-13-053 (May 14,2013). 70 Email from Donna Abner to Cindy Wescott, Sharon Camarillo, and Brenda :lahn (Sep. 8, 2008) 7? Email from Park Nalee to Vasu Nair (October 21, 2011) 72 Email from Donna Abner to Cindy Wescott, Sharon Camarillo, and Brenda Melahn (Sep. 8, 2008) IRSROO 0012292. 73 Email from Justin Lowe to Jon Waddell (Oct. 10, 2008) 1R80000012299. 288 This documient was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) I 77 Email U.S.*Senate Committee on Finance A similar i ;sue in the DLC litigation.?74 However, a January 18, 2010 dditional Democratic Views Sensitive Case Report indicates that Emerge Massachusetts applied for tax-exempt status 011: August 15, 2008 and was transferred to E0 Technical on April 16, 2009. Additionally, Emerg February 9, 2010 and its application was transferred to E0 Technical not inform the four Emerge groups, whose cases were selected for review and then developed at E0 Technical until 2011, that their applications had bee approximately three years for some of the organizations. IRS did ACORN Organiz experier ced delays of nearly three years. BO Determinations began successor organizations in April 2010.77 On June letter investig Technic related On July ?potent ACORI other ca case.? 8] Emails Cindy Thomas emailed Holly Paz on October 24, 2010 with a reque Paz told Cindy Thomas to work with Carter Hull in E0 Technical 0 cases, the same employee in charge of developing the Tea Party cas 76 3, 2010, Ranking Member Darrell Issa on the House Overs' ation into ACORN and its use of federal funds. I ask that yo J?s rebranded affiliates.?78 In response, on June 8, 2010 the :ases until they receive further instruction.79 J-successor application received in April 2010.80 Thomas re \I-successor cases from E0 Technical. Over a month later, 6 7? Email 75 Division Sensitive Case Report (Apr. I 75 Email 78 Letter 79 Emai 8? Email 8' Id. 82 Email 83 Holly from Deborah Kant to Cindy Westcott (Oct. 16, 2008) 11180000012304. from Holly Paz to Cindy Thomas (July 21, 2011) from Steven Grodnitzky to Cindy Thomas and Donna Abner (June 8, 2C from Cindy Thomas to Robert Choi (July 15, 2010) 11130000054948. Paz email to Cindy Thomas (Nov. 26, 2010) 1R80000054942. 289 This document was obtained and uploaded by the Center for Res 3 Oregon applied on on April 14, 2010.75 The denied, creating delays of ations the IRS determined to be related to the disbanded ACORN organization also receiving ACORN- l-successor organizations were the subject of congressional interest at this time as well. Committee submitted a th an attached report to Commissioner Doug Shulman urging him not to ?stop your maintain oversight over Acting Manager of E0 al Steven Grodnitzky instructed Cindy Thomas not to develop or resolve ACORN- 15, 2010, Cindy Thomas alerted Robert Choi that E0 Determinations received another a1 successor to ACOR applying for 501(c)(3) status that is related to a 501(c)(4) ported that placed the se in suspense pending guidance from the Washington Of?ce and are doing so with this show that additional ACORN-successor organizations were flagged in October 2010.82 st for technical assistance on 11 November 26, 2010, Holly the ACORN-successor es 83 from Sharon Camarillo to Cindy Thomas and Robert Choi (Apr. 28, 2010) IRS0000458467. from House Oversight and Government Reform Committee Ranking ember Darrell Issa to IRS Commifioner Doug Shulman (June 3, 2010) 10) IRS0000054956. from Jon Waddell to Steven Bowling and Sharon Camarillo (Oct. 7-8, 2010) ponsive Politics (OpenSecrets.org) US. Senate Committee on Finance An EO Determinations employee contacted Carter Hull on March 4, Additional Democratic Views 2011, telling him that ?we have four exemption applications for organizations that have previously operated as ACORN. Could what gui dance Carter Hull provided EO Determinations on the ACO arrange to discuss these cases with you by phone sometime next week??84 It is unclear RN-successor applications but he told another EO Determinations employee in July 2011 that ?his manager informed him that he 5 his name ?from the BOLO list as a contact person. 'In April one of ti 3:86 re applications that spurred EO Determinations managers to hould not be doing research for our cases.?85 Hull asked EO Determinations to remove 2013, E0 Technical was still developing two ACORN-successor applications including alert screeners to flag -successor cases in October 2010.87 The other case mentior ed in the email was transferr were stil Other 1 ed from E0 Determinations to E0 Technical in April 2012. on hold as Of May 2013, according to Cindy Thomas.89 eft-Leaning Groups Also Experienced Delays 38 ACORN-successor cases Other liberal and progressive groups told media outlets their applications were delayed as well. One left aired on applicat month 1 money i reportec B. As sum June 13, 2013 that it had been waiting almost 600 days for 2 ion for 501(c)(3) status to do ?voter-education work.?90 The ater that the delay was ?causing problems because it can?t ap vhile that application to become a charitable organization is that it took ?18 months to get its 501(c)(4) approval.?92 INAPPROPRIATE AND BURDENSOME INFORMATION REQU GROUPS marized by the TIGTA report and described in the bipartisan January 2012, the IRS Determinations Unit made unnecessary and 1: number Of tax-exempt applicants that in some cases included reques Many grOups that received these questions saw the inquiry about do intrusion.94 Ultimately, IRS of?cials decided the request of the don 8" Email 35 Email 36 Id. 87 Email 33 Id. ?9 IRS Employee Responses to Written Questions from Finance Committee Staff 9? Liberal Groups Say They Received IRS Scrutiny Too? (June 19, 2013). 9' Politico, Scrutinized Some Liberal Groups? (July 22, 2013). 92 Id. 93 TIGTA, ?Inappropriate Criteria Were Used to Identify Tax-Exempt Applicatio #2013-13-053 (May 14,2013). 9? 501(c] entities are required to submit to the IRS a list of persons who have don basis. This information generally is not made public. from John McGee to Carter Hull (Mar. 4, 2011) from Melissa Conley to William Agner (July 11, 2011) from Cindy Thomas to Steven Bowling and Jon Waddell (Apr. 3, 2013) 290 -leaning group, Alliance for a Better Utah, told NPR Mornir Edition in a story that determination on its same group told Politico a ply for foundation and grant in limbo.?91 Progress Texas ESTS TO LEFT-LEANING narrative of this report, in urdensome requests to a ts for donor information. nors as an unwarranted or information was 93 (Dec. 19, 2013) pp. 27-28. us for Review,? Audit Report ated $5,000 or more on an annual This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US Sen inapprop also rece experien ate Committee on Finance A riate and ordered the donor information destroyed.95 Left-le :ing delays in the application process, similar to Tea dditional Democratic Views aning/progressive groups ived inappropriate development questions regarding donor information while Party groups. Although TIGTA points out in its report that thirteen of the 27 organizations that received requests reviewin documents that the IRS was not acting on a partisan basis. for donor information had ?Tea Party, Patriots, or 9/ 12 in :ir names,?96 it is clear from Liberal and progressive groups were subject to burdensome requests for information from the IRS, similar to the requests made of requests inapprop This ind conservative groups. At least three of the groups that receiv were left-leaning applicants for tax?exempt status.97 This riate whether directed at conservative or left-leaning groups cates that the donor list requests were not a concerted politic ed donor information :atment was unfair and al effort within the IRS to harass or discriminate against conservative groups. While more conservative groups were subject applying In additi Speciali organiza question to provi< (emphas charitab provide Herring voter re} employc 1 I These questions are from one of my letters. I don?t know ho burdensome development letters, there were simply more for tax-exempt status during this period. on to asking liberal organizations about their donors, IRS EX st Grant Herring asked burdensome questions to at least one tion.98 The letter asked the organization to respond to appro s/requests for information within twenty days. Two of the re 1e ?recruitment materials, training materials and manuals yo: is added) for the purposes of voter registration activities and le organizations.99 These questions indicate the IRS was ask documents that may not have existed at the time it was apply provided the questionnaire as an example to another IRS em gistration organization?s application for tax-exempt status. I he wrote: What worries me about the big ones is that they concentrate iistorically support one of the two parties, and this is their ur ather than increasing civic participation or voter education. )rganization is. If it is big and ambitious all these questions we need at least to put them on record that in their voter con? 95 SFC In 96 TIGTA. 97 Email 9? IRS Le 99 Id. with attachment from Judith Kindell to Holly Paz and Sharon Light (Apr tter to a Voter Registration Organization (Nov. 29, 2010) terview of Holly Paz, July 26, 2013 pp. 130-132. ?Inappropriate Criteria Were Used to Identify Tax-Exempt Applicatior -053, (May 14, 2013) footnote 43. 291 ,onservative groups empt Organizations voter registration ximately 82 different :quests asked the applicant 4 will create and employ? assistance to other ing the organization to ring for tax-exempt status. ployee who was reviewing a ?1 his email to the IRS )n turning out voters that [acknowledged purpose, complicated your may come in handy. I think acts their conduct will be as Is for Review,? Audit Report 25, 2012) 3868. This docum? nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) After EC 2010, He exempt 1 ate Committee on Finance A ure as the driven snow, because I do not think we will ever a .ampaign Academy rationale to these organizations, as we 81 (3?0 it is getting a lot of [private foundation] money and seem tc 1 isn?t an ACORN successor. '00 hi: i Determinations employees began receiving ACORN-succe :rring flagged a ?get-out-the-vote? organization that had alre )ut ?many internet sources allege is an ACORN affiliate or for an ac voter reg purpose. vance 4945(f) ruling. A 4945(f) ruling is an IRS determinat On May 18, 2010, Herring wrote: Grant The cas voter re summai question whether the applicant quali?es for exemption. 501 artisan voter registration, of course, but what is the basis of heir exclusive or primary activity, as in this case (no voter e: rg?s activities are nonpartisan in effect: they don?t say ?Rep hey'target their Lreas where traditional Democrat constituencies are concentr 9e dif?cult for EOT to revoke the approval letter. I erring reported his activities related to developing this case i letter was sent on 7/15, with reSponse due 8/4. I asked veri iow they are conducting their voter registration activities, to wing conducted in a non-partisan manner. I do not think the argeted demographics will vote overwhelmingly for Democ he unstated purpose of the organization to turn out the vote nut I don?t think the request can be denied on that basis, alth sure of that before I issue a favorable letter. However, I thOL applicant like this one should be made to demonstrate that it and parties even-handedly in its contacts with unregistered Repass in Technical about this case and a different voter reg A 1 1 was sent to E0 Technical as a result of Herring ?raising cc gistration and a possible link to according to an 'izing the case a year later. As of May 2011, there was a dec 4945 another ruling with a referral to the Review of Operations Division layer of review by EO Quality Assurance. 103 '00 Email Email ?02 Email '03 Email This documd nt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) from Grant Herring to Susan Maloney (Nov. 29, 2011) from Donald Herring to Joseph Herr (May 18, 2010) from Peggy Combs to Brenda Melahn (July 27, 2010) from Gerardo Fierro to Donna Abner (May 15, 2011) 292 dditional Democratic Views pply the American iould. i lean to the left, make sure ssor applications in April ady been approved as tax- ront? and had asked the IRS ion that the organization?s gistration activities satisfy legal requirements to receive private foundation grants for that c3s can engage in non? their exemption if that is Also, I don?t think this ublican? or ?Democrat?, but 'oter registration activities to ated. I don?t think it would July 2010: detailed questions about make sure that they are re is any doubt that the ratio candidates, and that it is for ?progressive? candidates; Dugh I am going to make that a politically biased treats all political candidates oters. I am talking to Mike [stration organization.102 [sic] ncems? because ?it involved 0 Determinations manager lsion to grant a favorable out the case was awaiting US. Sen IX. Another month ate Committee on Finance WHAT COULD HAVE BEEN Additional Democratic Views useful perspective on the inef?ciency and mismanagement zit the IRS is a focus on the hen the Tea Party applications ?rst arrived in Cincinnati and a two week period when the IRS ?rst acted decisively on the Tea Party and right?leaning applications. I As discu technica experts i ?Results Washington DC. Come 26 Months Later . ssed in the bipartisan narrative of this report, the ?rst Tea Pa February of 2010. Cindy Thomas contacted Washington DC and a . Holly Paz, in Washington D.C., agrees that the applications should be reviewed by rty application arrived in sked for guidance from E0 In May/l une of 2012, the IRS ?nally ?nds a process and personnel who make decisions relativel; February ,1 ef?ciently about the about 200 applications that have been I of 2010.104 This was referred to as a ?triage? effort by IRS piling up starting in personnel. A team of ?ve Washington DC. based staff, led by Sharon Light, was sent to Cincinnati. There they meet up with a team from the Determinations unit. The two teams conducted a workshop to establish a Teams applicat I 0 Using ti applicat lfthis applicat avoided. Another Acting apphca made, a discussr The team can also agree to deny the application. Again, no IiTSOmmissioner Danny Werfel in the aftermath of the TIGTA two one from Washington DC. and the other from Cinci ons to review. They were allowed to reach one of these cor they both agree an application should be approved it is app nultiple IRS personnel in Washington DC. follow. The dec :inally the two teams can agree to gather more information a [is process the Sharon Light led team approved 65 applicatio [0115 were set aside for more information gathering. 105 rocess had been used in the summer of 201 0, a few months a ions were received, much of the delay in processing the app] possible way to address large volumes of political advocacy ts to declare that over 60% of their activities are non?politic favorable determination on the application is issued day response in these views). '04 Email 105 IRS, from Holly Paz to Winonna Holton (June 7, 2012) Sharting a Path Forward at the IRS: Initial Assessment and Plan of Actio 293 understanding of the rules for political activity and 501(c)(4) nonpro?ts. nati were given 1clusions: roved no further appeals to ision of the team is ?nal. inal review is necessary. bout the applications. ns and denied 30, about 100 fter the ?rst Tea Party ications could have been cases was devised by report. This process allows al. If this declaration is RS within 2 weeks.106 (see n, Appendix (June 24, 2013). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Democratic Views X. WHAT WAS Between February of 201 0 and the ?triage? effort in June of 2012, the Finance Committee investigatiOn found a continuing series of missteps, bad management, inefficiency, confusion and incompetence. A quick .ummary of what transpired for two years in the Washington DC. office is contained in an email from Steve Grodnitzky. EOT here is the Exempt Organization Technical of?ce which had the lead in analyzing political advocacy issues related to 501(c)4 VJ .- OT is working on the Tea Party applications in coordination with Cincy. We are developing a few applications here in DC and providing copies of our development utters with the agent to use as examples in the development their cases. Chip Hull is Iorking these cases in EOT and working with the agent in Cincy, so any communication hould include him as well. Because the Tea Party applications are the subject of an CR, we cannot resolve any of the cases without coordinating with [Robert Choi, the Director of Rulings and Agreements].107 Eng?- In short, Tea Party cases piled up in Cincinnati for two years while Washington DC. unsuccessfully tried to develop a way to process them, i.e. approve deny them. For some time the focus was on two of the applications, but even that focus was loZi?toward the end of the two year per od and the E0 team became completely disorganized in its effort to make decisions on the appl cations. On April 28, 2010 Grodnitzky emailed Lerner and Choi a summary chart of sensitive case reports (SCRs) being handled by ED Technical that included Tea Pairty applications. ?08 He Wrote: Of note, we added one new SCR concerning 2 Tea Party cas es that are being worked here DC. Currently, there are 13 Tea Party cases out in E0 Determinations and we are :oordinating with them to provide direction as to how to develop those cases based on our development of the ones in D0109 The SCR dated April 19, 2010 describing the two Tea Party cases shows that the cases were flagged because they were determined to be ?Likely to attract media or Congressional attention?? 10 On May 13, 2010, in response to an inquiry from Lerner about the basis for E0 Technical?s examination of Tea Party cases, Grodnitzky replied that: ?07 Emai from Steven Grodnitzky to Cindy Thomas and Sharon Camarillo (July 5, 2010) '03 Emai from Steven Grodnitzky to Lois Lerner and Robert Choi (Apr. 28, 201C) l09 ?0 TEGE Sensitive Case Report Tea Party (Apr. 19, 2010) 294 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Democratic Views The [Tea Party] organizations are arguing education, but the big issue for us is whether hey are engaged in political campaign activity. 1? By November 3, 2010, the number of applications on hold in E0 Determinations increased to 40 as Cincinnati continued to wait for development of the two Tea Party test cases in E0 Technical. 1 12 Robert Choi told Committee investigators that he inferred the Tea Party cases were likely on their way to being resolved because a November 2010 summary of the sensitive case reports indicated that E0 Technical (Carter Hull) was drafting a favorable determinations letter for one of the Tea Party test cases. ?3 This was; not the case the confusion and bureaucratic buck passing continued until the triage effort, 1 9 months later, in June of 2012, well after the TIGTA investigation had begun, sounding alarm bells at the IRS. The bulk of the responsibility for managing the processing of these applications falls on Lerner as manager of the nonpro?t tax division of the IRS. She refused to testify in open session before the House Government Affairs Committee, pleading the Fifth Amendment. 1 14 She has refused to talk to Finance Committee and Ways and Means investigators. Consequently, her side of the story will not be completely told in this report. Perhaps the best summary of her perspective comes from a TIGTA ilnterview with her conducted on May 22, 2012. Lerner describes the initial process used to collect the applications containing political advocacy issues: It has been customary for the applications group in Cincinnati to document emerging ssues through emails. However, we received complaints at a CPE that employees were receiving too much information via e-mail and there was no consolidated place where employees could go for this information. As a result, Cinci nati began consolidating information into what is called a BOLO (Be On the Lookoultg. In the spring of 2010, the applications group began seeing a surge in applications that were very up front about political work the organizations would be conducting. It is riot unusual for us to send cases to a specific group when we see an uptick of applications with the same issues. We like to have a speci?c group or set of people work the applications so that we are consistent in our determinations. ?5 A She coitinued in the interview to summarize her decision to order a change in the Tea Party designation in the BOLO list: When I heard the criterion being used, I immediately asked that the criterion be changed. While I don?t believe our folks in Cincinnati meant any mal ce, I was disappointed with This docum Emai ?2 Emai chain between Steven Grodnitzky and Lois Lerner and Robert Choi (M from Holly Paz to Lois Lerner and Robert Choi (Nov. 3, 2010) ?3 SFC nterview ofRobert Choi (Sep. 19, 2013) p. 67. "4 New York Times, IRS Suspends Of?cial at Center of Story (May 23, 2013). ?5 Memorandum of Discussion between Lois Lerner and Troy Patterson (May 2? 295 =nt was obtained and uploaded by the Center for Res ay13, 0156478. a, 2012). ponsive Politics (OpenSecrets.org) US. Sen ate Committee on Finance Additional Democratic Views tie language used to describe the emerging issue. I would agree that the language should he more about the issues in the applications and not about particular groups that are applying for tax exemption. I believe that Cincinnati was just using shorthand to describe the cases and was not thinking about the impact of describing the cases in a particular manner. Our work is much more out in the public and, while I believe the Cincinnati employees were just trying to ?nd an easy way to describe the applications, our employees need to be cognizant of the fact that we need to make it clear that we do not select cases for additional determinations or examination work based on political af?liation. It should not enter into the conversation.1 ?6 Holly Paz, a key E0 ?gure and by all accounts a conscientious work er, shifted jobs frequently and was often designated as ?acting? while ?lling a position. She was not able, perhaps understandably, to take charge and move the Exempt Organization team towards a quick resolution of the Tea Party applications piling up in Cincinnati. Paz between March of 2010 and May of 2012, went through four different position changes. This constant changing of jobs, and the mul1iple times she was placed in an acting position, whether as a manager or director, probably contributed to her inability to take charge and resolve the challenge of dealing with the dozens of 501(c)(4) applicants who were intending to become involved in political campaigns.H7 She did not feel able, apparently, to confront Lerner about the endless process of review and delay that was inevitably leading to the TIGTA investigation, and the eventual explosion of the issue in Congress and in the US. media.118 Months and months went by with the IRS personnel developing ?guidesheets,? constructing a ?bucket? system for analyzing the cases, drafting development letters, and training personnel on the 501(c)(4) political advocacy issues. ?Triage? was attempted in the fall of 2011 (reviewing all the app ications and attempting to make a quick decision on denial or approval), meetings occurred, various of?ces refused to take charge and resolve the pending applications. No evidence was uncovered that political motivations fed this bureaucratic nightmare, but that does not make it acceptable. Once the TIGTA investigation began it was too late to undo the damage. Two email chains providing an example of the endless, confused and disorganized process is included in the appendix of this report. In one, two months are squandered in an email exchange that is almost incomprehensible. This occurs, incredibly, 18 months after the ?rst Tea Party emails were received in Cincinnati, and 10 months after the Tea Party had been partially credited with taking back the House of Representatives for the Republican Party, an event that produced a massive amount of media exposure and national attention.119 In an other email the reader can see a narrative of buck passing and confusion that squandered three months, from June 8, 2012 to Septerr ber 12, 2012. Incredibly this email covers a period after the TIGTA investigation had begun. '20 H6 ?7 SFC interview of Holly Paz (July 26, 2013) pp. 14-17. ?8 SFC Interview of Holly Paz (July 26, 2013) pp. 50-51. "9 Email chain between E0 Employees (Sep 15, 2011 Nov. 15, 2011) '20 Email chain between 130 Employees (June 8, 2012 Sep. 12, 2012) IRSROOCO441141. 296 This docum int was obtained and uploaded by the Center for Res oonsive Politics (OpenSecrets.org) US. Senate Committee on Finance Additional Democratic Views Three opportunities to expedite the processing of the conservative leaning applications were missed pm the summer of 2010 to the summer of 2011. Carter Hull was given the job of analyzing two Tea Party applications (a 501(c)(3) and a 501(c)(4)) in April of 2010. As one of the E0 Technical employees with the most experience with nonpro?t political activity he was in a position to develop a de?nitive test for the applications waiting to be resolved. He took until January of 2011 to recommend that one of these applications be approved. Had he been aged better and ?nished his analysis in September or October of 2010 the standards he set coulc have been used to test the dozens of applications sitting in Cincinnati. Another opportunity was wasted when Hull recommended approving the application in January. A better management team would have seized this moment and used his analysis to immediately resolve the Tea Party applications pending in Cincinnati. A ?triage? team similar to the one formed in June of 2012 could have made short work of the applications using the standards set by Hull in recommending approval of the two applications selected by the Washington DC. of?ce for special analysis. Instead of using the Hull decision on the 501(c)(4) application to kick off a ?nal review of the pending applications his decision was reviewed by Senior Technical Advisory Judy Kindell. Kindell recommended the application be reviewed by Chief Counse ?3 of?ce because the issue of private sene?t, namely whether the Tea Party groups were operating; for the bene?t of the Republican Party, was not eXplored by Carter Hull in his examinatic n.121 This may have been a good idea if a two week deadline for that effort had been enforced. But the meeting with Don Spellman of the Of?ce of Chief Counsel did not occur until August seven months after Hull had belatedly made a ?nal decision on the two applications. No cle 501(c)(4) political activity guidance was ever given by the Counsel?s of?ce so this step in the process was a complete waste of time. A ?nal missed opportunity was the failure to follow up on the July 2011 meeting between Lerner and her senior team with a plan to approve or disapprove the applications. Lerner does get credit for ordering a change to problematic BOLO erms that speci?cally mentio 16d the Tea Party and conservative groups. ?22 But at the sa meeting (June 29, 2011) at which the ordered the offending language removed she did nothing to get her team to expedite the processing of Tea Party applications. ?23 One hundred applications had piled up in Cincinnati at this point. 12" SFC interview of Judith Kindell (July 18, 2013) pp. 53-55. '22 Emails from Cindy Thomas to Steven Bowling and John Shafer (July 5, 2011) 123 Id. ?24 TIGTA, ?Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review? (May 14, 2013) See Ap}: endix VII, ?Over 100 applications were identified by this time. It was decided to develop a guide sheet for processing these cases." 297 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) It at ii '1 ?1 HS. Sen ate Committee on Finance Additional Democratic Views This turned out to the last chance for the IRS to resolve the pending applications before the TIGTA investigation was initiated. From the June 29 meeting on, the IRS tax?exempt of?ce continuezl drifting on the political advocacy cases. With no decisive action by Lerner or Paz, the IRS bureaucracy stumbled forward without establishing a competent and ef?cient plan for processing the applications. Without a resolution of the applications in the fall of 2011 the frustraiion of the applicants increase?l. In early 2012 press reports and congressional inquiries triggered the TIGTA investigation. 298 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen ate Committee on Finance Additional Democratic Views XI. RESPONSE TO ADDITIONAL REPUBLICAN VIEWS A. No EVIDENCE OF POLITICAL BIAS IN 501(c)(4) DETERMINATIONS 1. No EVIDENCE OF LOIS LERNER POLITICAL BIAS Federal employees are allowed to have political affiliations. The question is whether they let those af?liations affect their professional duties. There is no evidence that Lois Lerner allowed her political beliefs affect how she carried out her duties as manager of the Exempt Organizations, merely anecdotal evidence that she was a Democrat. Even though the decision came too late, Lois Lerner was responsible for removing from the BOLO 11812 the terms Tea Party, 9/12 and Patriots out of a concern that these terms gave the appeara cc of ?targeting? the groups. ?25 In addition, a September 15, 2010 email chain shows that Lerner?s of?ce was concerned about the potential abuse of 501(c)(4) status by organizations from across he political spectrum. ?26 After Le rner expressed concern about ?a perception out there that? 501(c)(4) organizations were set up speci?cally for political activity, her colleague Cheryl Chasin emailed her and wrote the abuse was ?definitely happening.?127 In this email she listed ?a few organizations that sure sound like they are engaging in political activity: Faulkner County Tea Party Paradise Republican Womens Club Culver PAC Taxpayersadvocate Org State PAC Escondido Republican Women Federated Folsom Republican Women Federated Alice Toklas Lesbian Gay Democratic Club Obama Democratic Club Of Silicon Valley National Breast Cancer Coalition Political Action Committee.? 128 Lerner?s response was, guys; We need to have a plan. We need to be cautious so it isn?t a per se political project. More a (c)4 project that will look at levels of lobbying and pol. activity along with exempt activity.? ?29 The email shows that employees in the Exempt Organizations division were concerned about abuse of the tax code no matter what political views represented. Lerner?s weakness in managing her of?ce?s processing of tax-exempt applicants affected both left anc right-leaning organizations. Both types of groups faced delays in the processing of their '25 Email chain between Cindy Thomas, Steve Bowling, John Shafer and others (July 5, 2011) '25 Email chain between Lois Lerner, Cheryl Chasin, Judith Kindell, Nannette Downing and others (September 15- 16, 201( 127 Id 123 1d. 129 299 This document was obtained and uploaded by the Center for Redponsive Politics (OpenSecrets.org) This document was obtained and uploaded by the Center for Res US. Sen ate Committee on Finance Additional Democratic Views applications for nonpro?t status. There is no evidence Lerner treated left and right-leaning groups differently. There are no facts demonstrating that Lerner told her employees to qus in an unfair way on right-1e ing applications. As the report states, left-leaning groups were also placed on the BOLO 1 st, were asked extensive questions about their activities as part of the nonpro?t approval or disap roval process and waited years for their applications to be processed. Lerner? concern with the Citizens United decision was appropriate given her role at the IRS. If the Sup eme Court decision led to more political advocacy activity by nonpro?ts then the case was cen ral to the Exempt Organizations team that Lerner led. Making reference to it in convers tions or in speeches is not surprising; to ignore the decision It is sim larly appropriate for Lerner to take notice of Congressional ?nance hrough the DISCLOSE Act. The bill, which would require disclos the names of contributors who gave more than $10,000 for would have been odd. efforts to reform campaign independent groups to use in political campaigns, ponsors, while the House import to many Americans. Eighty ?ve percent of Americans believe we should either ?rebuil or make ?fundamental changes? to our campaign ?nance system. 130 In addition, 75% every deral government of?ce. There is no evidence that Lerner orderin a delay in the processing of 501(c)(4) applications. No DOUBLE STANDARD FOR MEMBERS OF CONGRESS The A ditional Republican Views cite three cases in which they sa} interve ed to request that the review of applications for tax?exempt . It appears that the three applications were for 501(c)(3) not allc wed to engage in any political activity, not for the 501(c)(4) this re}: ort. Further, there is nothing to indicate that the three applic dif?cult or controversial. The one exception appears to be a reques ?30 New York Times, ?American?s Views on Money in Politics? (June 2, 2015). Id.; Washington Post, ?Poll: Large Majority Opposes Supreme Court?s Decis 17, 201( - 300 igns should be required to disclose their donors, and 8 in 10 Americans oppose Citizens United. ?31 mom on a daily basis in eacted to these contacts by I that Democratic Senators status be expedited, and ouble standard, contrasting ?liS report, in the cases of ps. inference of a double tatus, organizations that are status which is the focus of ations were particularly for the expeditious on on Campaign Financing? (Feb. oonsive Politics (OpenSecretsorg) US Sen ate Committee on Finance A dditional Democratic Views consideration of an application for tax-exempt status by the One Boston Foundation, in order to - facilitate in that ca could ge on were groups? . similar treatmerit of non'controversial 501(c)(3) applications) were handled. As the applicati inappror well as fundraising and assistance to the victims of the Boston Mar: se, it appears that the IRS did in fact cut through some red t' up and running quickly. ?32 The three cases that the Additid not cases where Democratic of?ceholders sought to expedite ipplications for 501(c)(4) status. Further, we have not looke equests from Republican Senators and Representatives [partisan narrative makes clear, the IRS took far too long to 1 ons from Tea Party and other advocacy groups, and subjecte riate review; the IRS was insuf?ciently responsive to reques nembers of Congress, for information and for better conside '32 Boston Journal d: In the wa Governor April 16, of the On brought 0 As the Or expedited up to eigl' limitation disaster General] suf?cien Publicati because resource without The One met the Bar Journal, Disaster Relief: The One Fund Boston Model (April 1, 201 scribed the efforts to get 501(c)(3) status for the ?One Fund?: re of the Boston Marathon bombings on April 15, 2013, Boston Mayor 1? 1thon attacks in April, 2013; tpe so that the organization nal Republican Views rely the approval of progressive carefully to consider how requests for expeditious eview 501(c)(4) many of the groups to ts, from those groups as 'ation. But the fact that the 4). (An article in the Boston Bar denim and Massachusetts of those killed in the attack. On Patrick proposed creating a charity to bene?t the survivors and families Mayor Menino reached out to local businesses Hill Holliday and John 1e Fund?s attorneys, we at Goodwin Procter had to seek quick incorpora [teen months to process, and in addition, obtaining the necessary approv: on the types of distributions that charitable organizations can make to elief. to qualify for tax-exempt status, an organization must show that it will ly indefinite charitable class so that it is providing a public rather than a 3833, the IRS takes the position that an organization cannot distribute ey are victims ofa disaster, but generally must determine that a recipie of his or her own. The IRS therefore had questions about the One Fund nancial needs testing. und team worked closely with the IRS to overcome these issues and to ncock to assist with the creation 3 Fund Boston. Later that day, before the fund was even incorporated a before Ken Feinberg was as administrator, the One Fund received its ?rst $1 million commitme from John Hancock. on of the fund and apply on an basis for 501(c)(3) tax-exempt status with the IRS. However, applications for 501(c)(3) status often take 11 was challenging, due to IRS ndividuals in the context of assist a large enough or private bene?t. In addition, in IRS funds to individuals merely it lacks adequate ?nancial ?5 plans to make distributions show that the One Fund instead iteria for a 501(c)(3) tax-exempt charitable organization as an organization that lessens the burdens of governm nt, focusing on the organization?s relationship with the City of Boston and the City?s role in approving distributi organiza to the f0 goals for On May statusfunds by the bc continue ns. ?Lessening the burdens of government? is an alternative method of ion. As far as we know, this method has not been used before in the dis mation of a relief organization allowed the One Fund Boston to accomp distributions. 14, just one month after the bombings, the IRS granted the One Fund Bd be One Fund?s attorneys were able to use procedures for expedited appr atain this unusually quick and favorable result. Fund has been a huge success and an important contribution to Boston?: donated to the One Fund Boston through June 26, 2013 were distributed >mbings, in accordance with a protocol developed by Mr. Feinberg. In a to provide support for those affected and has announced that it will mak 301 This document was obtained and uploaded by the Center for Res qualifying as a 501(c)(3) aster relief context. This approach ish its immediate and ongoing ston 501(c)(3) tax-exempt val and effective dialogue with the recovery. All of the $60 million to those who were most affected ddition, the One Fund Boston will a second distribution. ponsive PolitiCs (OpenSecrets.org) This docum us. Sen IRS was standard Union membership in and of itself does not mean political bias. The Views e5; not, was advocac Again, processi ate Committee on Finance 3. 4. is no evidence Of political bias on the part of IRS person ng of the 501(c)(4) applications with political advocacy issu able to handle a few very different cases reasonably well do Additional Democratic Views es not show a double In this regard, the Additional Republican Views are comparing apples and oranges. NO EVIDENCE TO VALIDATE CHARGE OF UNION BIAS tablish no factual evidence that any IRS employee, whether Additional Republican they belonged to a union or politically biased in their actions related to the 501 applications with political NO EVIDENCE INDIVIDUAL EMPLOYEE VIEWS POLITICAL PURPOSES issues. Moreover, Lerner, as a senior manager, was not eligible for union membership. ZED DECISIONS FOR inel involved in the es. The Committee has received signed statements from each of the IRS employees in interviewed asserting that politics was not bias on 1 ?Of the 8 engaged the IRS There is . 501(c)(t Treasur Tea Par only un process Twohig chief of 7 3 served Her int< Republ Democ decisio did not Organi: involved in the decision making process. ?33 TIGTA also f0 he part of IRS personnel involved in processing of 501(c)(4) applications. 5,000 employees at the IRS, the Additional Republican VieI Of?ces processing the 501(c)(4) applications. ~50 staff to the Secretary, and Neal Wolin, former Deputy Secrc was requested by the Republican staff to appear for an interview, RI is a policy expert on 501(c)(4) law at main Treasury. :rview transcript with the Oversight and Government Reforn can staff was made available, and after reviewing the transc in political activity during company time in violation of the NO EVIDENCE WHITE HOUSE OR TREASURY OFFICIALS APPLICATIONS no evidence of Treasury or White House of?cials participai applications or influencing how they were processed. The ranking Treasury Of?cials were intefviewed by the Comrr ratic staff was satis?ed that Madrigal had not even a remote '15 made by the E0 of?ce regarding the applications with po participate in any way in the management of those applicati :ations office. Nor did she consult with upper level manage] ?33 IRS mployee Responses to Written Questions from Finance Committee Staf 302 int was obtained and uploaded by the Center for Res I a nd no evidence of political vs highlight three who Hatch Act. None work in INFLUENCED TEA PARTY ing in the processing of re is no evidence that any or White House employee directed or in?uenced the actions of the IRS with regard to ty or other political advocacy applications. The Additional 1 founded speculation about the involvement of Treasury and ng of advocacy applications. {epublican Views provide White House Of?cials in the littee, Mark Patterson, former tary. One other employee 1th Madrigal. Madrigal i/Ways and Means ript of the interview the connection to the key itical advocacy issues. She ans by the IRS Exempt nent of the IRS on how to f(Dec. 19, 2013). oonsive Politics (OpenSecrets.org) .S. S'en ate Committee on Finance Additional Democratic Views respond to the delay in processing of those applications once the mismanagement was uncovered. . B. IRS FAILURE TO PRESERVE EMAILS On June 23, 2014, then-Chairman Wyden and then?Ranking Member Hatch asked Inspector General George to investigate the circumstances surrounding a June 2011 hard drive crash suffered by Lois Lerner, and to determine whether any additional do euments belonging to Lerner could be recovered. 134 The hard drive crash predated any investigat?ons of Lerner by nearly two years. resulting investigation found no evidence that any liRS employee intentionally destroyed records to hide information from Congress. TIGTA invested a significant amount of time and resources to activate available disaster recovery backup tapes used by the IRS. This effort resulted in the production of 1,007 emails that had not been previously produced as part of the 1,500,000 documents produced to the Committee. 135 Very few of these documents were germane to the Committee?s investigation. investigation also uncovered a second batch of backup tap es dating back to May 201 1 that were erased by IRS employees in May 2014. TIGTA ?did not anover evidence that the IRS and its employees purposely erased the tapes and order to conceal responsive e-mails from the Congress, the DOJ and The IRS reasonably, but erroneously, assumed that these backup tapes, which sat in storage in an IRS warehouse for years, had been destroyed long ago. - Disaster recovery backup tapes do not store information in an easily accessible format and are rarely utilized in litigation.?137 However, given the extraordinary int :rest in this matter, the IRS I 'should "lave exercised greater care and diligence in determining whether meaningful information IcO?uld be recovered from disaster recovery tapes. The Additional Republican Views take great issue with the amount of time that elapsed between when t1 IRS learned of Lois Lerner?s hard drive crash, February 2014, and when it disclosed that inf armation to Congress, June 2014. There is bipartisan agreement that the IRS showed a lack of candor in this matter. However, the Additional Republican Views characterize statements made by the IRS to the Committee on March 19, 2014 as. ?false? and ?intended to hasten the Committee to complete its investigation.? While the Democratic staff respects the Republican staff and their view about the veracity of these statements, we do not reach the same conclusions. On March 27, 2014, Committee staff asked the IRS for a statement attesting to the completeness of the IRS production. When the statement arrived on June 13, 2014, Lerner?s hard drive crash was clearly disclosed. 138 ?34 Letter from Chairman Wyden and Ranking Member Hatch to J. Russell George (June 23, 2014). '35 A, Exempt Organizations Data Loss, Report of Investigation 54-1406-0 )8?1 (June 30, 2014) p. 15. '36 Id. p. 13. ?37 See, Fed. R. Civ. P. Zubulake v. UBS Warburg LLC, 220 RD. 212 (S.D.N.Y. 2003) 133Letter from Leonard Oursler to Senator Wyden and Senator Hatch (June 13, 2014) Enclosure 3, p. 7. 303 This document was obtained and uploaded by the Center for Resoonsive Politics (OpenSecrets.org) ?almost ii .US. Sen C. The Add Congress meeting ate Committee on Finance MISLEADING CONGRESS itional Republican Views charge that senior IRS officials co citing hearings before various Congressional committees A dditional Democratic Views ntinuously mislead subcommittees, a with Finance Committee staff, and responses to letters from enator Hatch and other Republican Senators. The veracity of these IRS of?cials? testimony nd statements has not been a subject of our bipartisan staff investigation. While we have partic ar respect for Chairman Hatch? take con CD. The IRS .- element views about the veracity and completeness of responses to siderably more bipartisan work to reach conclusions about such serious charges. IRS INDEPENDENCE of government and clear lines of authority and management m, it would, in our view, is organized under the Treasury Department because the tax function is a critical need to be established. This "report demonstrates how important accountability and the power to act quickly are when mismanagement has occurred. Treasury Secretary Jack Lew was able to ?re the head of the IRS tru1y ind continue While there are clear lines of authority, this is balanced by the nonpc demons1 nomin Chief with its existing management for some period of time. rated by the fact that unlike other agencies, only two execut Junsel, every. other employee at the IRS is nonpartisan, ensu nmediately after revelations about the alleged Tea Party targeting were unveiled. A ependent agency, with burdensome process for removing executives, could have litical nature of the IRS, ves are political appointees ated by the President and con?rmed by Congress; Except or the Commissioner and the ing that the IRS acts in a nonpolitical fashion. Furthermore, it is important to note that Commissioner Shulman, the Commie appointe Most ag . I political E. 501(c)(4 clear from the investigation that the IRS tries to determine levels of process sioner during the relevant time of this investigation, was a e. encies and departments have dozens of political appointees, focus by the managers of the department. NO INAPPROPRIATE FEC INTERACTION nonpro?ts report their campaign spending to the Federal IE ng of 501(c)(4) applications with political advocacy. The spendi activiti s/spending between the FEC and the IRS. Agencies in the existin under the umbrella of the executive branch, are encouraged I that inf rrnation will assist them in carrying out their responsibilitie inform tion shared in this case between the FEC and the IRS consti betwee even more directly. Essentially there is overlappingjurisd two agencies in the executive branch. 304 ieorge W. Bush resulting in a much greater Election Commission. It is political spending in their deals with political iction over campaign federal government, all to share information when 5 to the taxpayer. The :utes proper cooperation This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. "Sen ate Committee on Finance Additional Democratic Views F. ATTEMPTS TO POLITICAL SPEECH Efforts to change the law governing nonpro?t political advocacy are addressed in the following section entitled ?Evolution of 501(c)(4) Nonpro?ts into Political Entities Creates a Need for More Transparency.? The IRS withdrew proposed regulations governing political activity by 501(c)(4) nonpro?ts on May 22, 2014. G. WAYS AND MEANS REFERRAL LETTER - On Apri 9, 2014, the Ways and Means Committee voted to send a letter to the Attorney General asking to' investigate Lois Lerner to determine whether she violated ?multiple federal criminal The primary charge in the letter is that Lerner focused intensively on the 501(c)(4) application from Crossroads GPS and turned a blind to liberal groups. The letter - attempts to make the case that Lerner relied on her own political party af?liation to investigate the group?s activities, eventually seeking to cancel their 501(c)(4) status. ?40 The issues raised in the Ways and Means referral letter have not been the focus of the investigation conducted by the Democratic and Republican Finance Committee staff summarized in this report. There has not been enough development of the facts in the current investigation to reach an addition Lerner?s Howeve HoUse may exp political focus or The IRS oppositi organize A Feder informed conclusion about the legality of Lerner?s actions it is properly the role of the Justice Department to determin actions highlighted by the Ways and Means Committee. r, the public should also be aware of signi?cant facts about Jays and Means Chairman omitted from his letter to the Just lain why the Lois Lerner, the IRS of?cial primarily responst campaign organizations are not masquerading as social well Crossroads GPS. permits 501(c)(4) organizations to ?engage in political cam on to candidates for public of?ce provided that such interver ition?s primary activity.? al Election Commission First General Counsel?s Report ?le< regarding Crossroads. In the legality of Lois Zrossroads GPS that the ice Department. These facts ble for ensuring that ?are organizations, would paigns on behalf or in ition does not constitute the i in November of 2012 ed that Crossroads GPS Spent 53% of its budget on federal in Baucus?s letter to the IRS in 2010 was partially based on 1 of money being spent on political activity by Crossroads an OpenSecrets.org concluded that in the 2010 and 2012 election cycle $90 million on independent expenditures (ads that advocate the elec candidates). Consequentially it is not surprising that Lois Lerner ex Crossroads as Director of the Exempt Organizations team. Her job i ampaign activity in 2010. Dublic reports of the vast left-leaning groups.?1 5 Crossroads spent almost :ion or defeat of speci?c amined the activities of was to make sure that conclud Chairm. amount '39 Letter 140 Letter from the Ways and Means Committee to Attorney General Eric Holder (April 9, 2014). from Chairman Baucus the Commissioner Doug Shulman (Sept. 28, 20 0). 305 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen ate Committee on Finance Additional Democratic Views 501(c)(4) nonpro?ts obey the law and are not engaged primarily in alitical activities. Without a full investigation it is unfair to criticize her for doing her job on this matter. Whether Lerner was evenhanded in doing herjob is certainly a legitimate question for any full investigation._ As pointed out in these views, left-leaning nonpro?ts were subject to delay, applications for nonpro?t status were denied and withdrawn. Applications from left-leaning .7 organizations were subject to full development. The BOLO list contained terms identifying left- leaning nonprofits. A new investigation would have to examine the total number of left- eaning nonprofits conduct political activity and how Lerner dealt with each of them Large left-leaning nonprof' involved in political activity such as Priorities USA and rganizing for America would 3 part of this inquiry. Only after a complete investigation examining Lerner?s actions regarding both right and left-leaning applicants could a ?nal determination of bias be established. 306 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) In testir .U.S. Ser XII. A. on June investig nonprof The IRE Letter 5 The org by spec Groups time an their po 2014 IF TIGTA ate Committee on Finance IRS RESPONSE TO THE TIGTA REPORT IRS 30 DAY REPORT 24, 2013 a report was released by the IRS describing their ition. team appointed by Danny Werfel, Acting Commissioner 0 if intentional wrongdoing by IRS personnel, or ?involvemen )utside the ?ersonnel were replaced in the four levels of the managerial ?or the activities identi?ed in the TIGTA report. The following personnel were removed from or left their ma] atoting IRS Commissioner Steve Miller, Commissioner for Entities Joseph Grant, Lois Lerner (Lerner was put on paid it 'etired from federal service in September of 2013), and H011: 3OLO (Be On the Lookout) lists were suspended. These are erm Tea Party and that identi?ed left-leaning organizations. it status. The new procedures are available to applicants th involved in political campaign activities or issue advocacy, 2 Have had applications pending for more than 120 days as of 228, ?Application Noti?cation of Expedited 50104 Option.? anization is allowed to self-certify by signing and returning ial rules for obtaining tax exempt status. are granted 501(c)(4) status within two weeks if they certify :1 expenses are devoted to activities promoting ?social welfai litical campaign intervention involves less than 40% of their ADDITIONAL IRS RESPONSE nony before the House Oversight and Government Reform report: Establishing a new process for documenting the reasons whi further review; 307 tdditional Democratic Views :sponse to the TIGTA fthe IRS, found no evidence in these matters by anyone chain that had responsibility iagement positions: the IRS: ax Exempt and Government :ave on May 23, 2013 and zPaz. the lists that contained the :lay plan also established a method of expediting the process'ng of applications for are: ind May 28,2013. i mailed letters to a licants caught in the enhanced scru in rocess. The received PP :he letter if it agrees to abide that 60% or more of their They must also certify spending and time. Zommittee on March 26, .8 Commissioner John Koskinen summarized additional changes made following the 1 applications are chosen for This document was obtained and uploaded by the Center for Responsive Politics (OpenSecretsorg) US. Sen atie Committee on Finance Additional Democratic Views Deiveloping new training and workshOps on a number of critical issues, including the difference between issue advocacy and political campaign intervention, and the proper way to identify applications that require review of political campaign intervention a ctiivities; siablishing guidelines for IRS E0 specialists on how to process requests for tax-exempt :aitus involving potentially signi?cant political campaign intervention; and . . . treating a formal, documented process for E0 determinations personnel to request . ssistance from technical experts. 308 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen The Joi organ'izblt Section 501(c)(3) organizations are required to apply for exempt stat organiz tions are tax deductible. The oi Tax Committee description of the law relating to 501(c)(4 ate Committee on Finance NEED FOR REFORM OF THE TAX CODE TREAT ACTIVITY BY NONPROFITS Tax Committee summarizes the law addressing political ad ions as follows: U]nder present law 501(c)(3) charitable organizations may atervene in (including the publishing or distributing of stater ampaign on behalf of (or in opposition to) any candidate for rohibition on such political campaign activity is absolute an ctivities such as making contributions to a candidate?s politi a candidate, lending employees to work in a political camp or use by a candidate. Many other activities may constitute lepending on the facts and circumstances. The sanction for 3 loss of the organization?s tax-exempt status. - hv?h?m?n i I ?or organizations that engage in prohibited political campai ree penalties that may be applied either as alternatives to re addition to loss of tax-exempt status: an excise tax on polii rmination assessment of all taxes due, and an injunction ag xpenditures. ?42 The promotion of social welfare does not include direct or in ntervention in political campaigns on behalf of or in opposit public of?ce; however, social welfare organizations are per campaign activity so long as it is not the organization?s prim Social welfare organizations need not, but may, seek formal status, whereas charitable organizations are required to ?le a of exemption. ?44 Along with section 501(c)(4) organizations (social welfare), and organizations (trade associations) may participate in son that act vity is not the organization?s primary activity. 145 142 Joint Committee on Taxation, ?Report to the House Committee on Ways and 1 Suggestions for Reform Submitted to the Tax Reform Working Groups? (May 39. 145 309 ainst further political dditional Democratic Views MENT OF POLITICAL vocacy by 501(c)(3) ot participate in, or nents), any political public of?ce. The in general, includes cal campaign, endorsements uaign, or providing facilities political campaign activity, a Violation of the prohibition activity, the Code provides vocation of tax exemption or ical expenditures, us.143 Contributions to these organizations is as follows: direct participation or ion to any candidate for itted to engage in political ary activity. IRS recognition of exempt application for recognition organizations (labor unions) 1e political activity as long as vIeans on Present Law and 2013) p. 35. This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) USContribL Section activitie organiza person, 1 A. Much h. to tax e) adminis to mean Whethe determi events given th 1959. It also i For this Views, current propose revisior activity perpetu from gr continu Better was als We alsc the und guidance on how to measure what is the ?primary activity? 0 recommended by the May 2013 TIGTA audit report. erlying questions in this case is why there was such an appa ate Committee on Finance *termined the primary purpose of the 501(c)(4) organization 146 itions to 501 organizations are not deductible. ?47 3. At formation, these groups must give notice to the IRS oer calendar year. ?48 FOR MORE TRANSPARENCY trative rule opening the door to 501(c)(4) political activity that groups had to be ?primarily? engaged in social welfare or not this was a valid interpretation of the statute, ?49 iing what level and type of activities constitute ?primarily 1) groups in recent years. The story told in this report is not regulations are part of the problem. Granted,'the revisions d'in 2013 generated a huge public response, and there were lty. Organizations seeking tax-exempt status, as well as the "eater clarity in this area, and we believe that the IRS and the to seek improvements to the current regulations, with appr are surprised by the Republican views? broad opposition to ng the identity of contributors to groups engaging in extensi 146 147 1d ?48 IRS, '49 See fc Section 527 Political Organizations Tax Filing Requirements. >otnote 102 in the Bipartisan Investigative Report. 310 527 organizations are political organizations and may en gag it put escribed in this report illustrate the dif?culty of such an exe vagueness of the existing regulations, which have not been signi?cantly modi?ed since A lot has changed since then, including the apparent surge 501(c)(t Additional Democratic Views is political activity that 70 90 percent of the money goes to political activity then that organization could lose its tax exempt status. in unlimited political thin 24 hours. These tions are required to make public donors making contributions of more than $200 per EVOLUTION OF 501(c)(4) NONPROFITS INTO POLITICAL ENTITIES CREATES A NEED is changed since the Tariff Act of 1894, which contained the earliest statutory reference :emptions for nonpro?ts. A critical change was made in 195 9 when the IRS issued an interpreting ?exclusively? and helping the community the IRS in the position of alitical? activities. The rcise. This is especially true fpolitical activity by just about mismanagement. about vague regulations that are inherently dif?cult to apply and have become outdated. reason, Democratic staff are surprised by the implication, in the Additional Republican that the 1959 regulations never should be revised in any way. This goes too far. The 1at the Treasury Secretary places where the proposed 3 clearly went overboard, such as with respect to voter registration and get-out?the-vote But that is not a suf?cient argument for maintaining the 1959 regulations into IRS itself, would bene?t Treasury Department should opriate public input. social welfare organizations transparency with respect to ve political activities. One of ?ent surge in applications for This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen ate Committee on Finance A tax-exerr pt status under section 501(c)(4), thereby necessitating the I applicant?s primary activities would be political. As it now stands, g1 I status and engage in as much political campaign activity as they want i only primarily political but exclusively political. They simply have tc status suant to section 527 rather than section 501(c)(4); section 5 disclosure, including of the identity of those who contribute $200 or 1 increase in applications may have been designed to avoid disclosure 1 According to the Center for Responsive Politics, in 2012 nonpro?t St I over $200 million on political activity. 150 By electing to use 501(c)(c the organizations behind this $200 million effort were required to rev ve pointed to the Citizens United case as the reason political i exponentially. In Citizens United v. FEC (2010) the Supre ns on independent political campaign expenditures by corpc ons. Some ha increasei restrictic labor un RS Commissioner Steven Miller said at the Senate Finance "eport in May of 2013 that: Acting I TIGTA 1 that some of that cash headed towards 4 organizations. and IRS data. That does put pressure on us to take a look. ?51 time where campaign spending is soaring and the Supreme cal Spending it is critical that as much transparency as possil )n and law. During a on politi regulati< Committee Chairman Max Baucus wrote a letter to IRS Co 361? of 2010 encouraging the IRS to investigate the ?ood of organizations. He asked this question: ?Is the tax code beini ency in the funding of our elections elections that are the icy?? '52 Finance Septeml welfare transpar ?democrz The Ad for polii citing ti :litional Republican Views sharply criticize proposals to incr ical campaign contributions, arguing that such proposals wo 16 Supreme Court?s decision in NAACP v. Alabama. This sh This documg the pos' oversta that org justi?ce es the constitutional point. The NAACP v. Alabama decisi01 tion from the government that outweighs the implicated Firs ive role that transparency plays in our political process, and nizations cannot be required to disclose membership lists Vi '50 Cente Senat for Great '52 Letter I I er Scrutiny? (May 21, 2013) p. 23. for Responsive Politics, 2012 Outside Spending by Group. Finance Committee Hearing, Review of Criteria Used by the IRS tc from Chairman Baucus to Commissioner Doug Shulman (Sept. 28, 201 311 dditional Democratic Views RS review of whether an 'oups can obtain tax-exempt their activities can be not obtain their tax-exempt 27 requires, in turn, greater nore. To some extent, the ?equirements. organizations Spent i)s instead of 5275, none of eal their donors. spending by nonpro?ts has Court invalidated rations, associations and Zommittee hearing on the ?here is no doubt that since 2010 when Citizens United sort of released this wave of cash 5 is proven out by FEC data Court is loosening controls )le is required by federal missioner Shulman in olitical spending by social used to eliminate onstitutional bedrock of our ease disclosure requirements uld violate free speech, ows a lack of con?dence in it also dramatically 1 stands for the proposition ithout a suf?cient Amendment and privacy Identify 501(c)(4) Applications 3). (Sep. 23, 2010). nt was obtained and uploaded by the Center for Res oonsive Politics (OpenSecrets.org) US. Sen ate Committee on Finance Additional Democratic Views rights. ?53 In contrast, the Supreme Court has repeatedly upheld reasonable political campaign disclosure requirements. Most notably, in Buckley v. Valeo, the Supreme Court considered NAACP v. Alabama when deciding the constitutionality of campaign ?nance disclosure rules enacted i the Federal Election Campaign Act of 1971.154 The disclosure provisions required ?candidat and political committees to ?le quarterly reports containing detailed information about do ors who contributed over $100.155 While the Court decided that, as a result of NAACP v. Alaba a, campaign ?nance disclosure rules should be subject to strict scrutiny, it ultimately decided hat the govemment?s interest can prevail in matters where the ??free functioning of our . . national nstitutions? is involved??56 The Court found that the disclo sure requirements were a ?reason 1e and minimally restrictive method of furthering First Am :ndment values by opening the basic processes of our federal election system to public view??57 The Supreme Court cited three justi?cations for upholding campaign ?nance disclosure: (1) campaign ?nance disclosure laws provide voters with information about candidates, (2) the rules ?deter actual corruption and avoid the appearance of corruption,? and (3) recordkeeping is required to detect violations of disclosu'e limitations.158 Similarly, in McConnell v. FEC, the Supreme Court upheld the expanded campaign ?nance disclosure provisions of McCain Feingold, including a provision requiring the disclosure of contributors to political campaigns. ?59 Most recently, in McCutcheon v. FEC, Justice Roberts cited campaign ?nance disclosure laws as part of the Court?s justi?caion for striking down aggregate limits on campaign contributions to candidates. '60 He argued tnat ?disclosure of contributions minimizes the potential for abuse of the campaign ?nance system.?161 In addition, disclosure laws are more effective against corruption now as opposed to when Buckley was decided. 162 Justice Scalia summed the point up well in in a 2010 case (Doe v. Reed): Requiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed. For my part, I do not look forward to a society which, thanks to the Supreme Court, campaigns anonymously and even exercises the direct democracy of initiative and referendum hidden from public scrutiny and protected from the accountability of criticism. This does not resemble the Home of the Brave. I Chief Justice John Roberts observed in the McCutcheon v. Federal Election Commission case: ?53 NAACP v. Alabama, 357 U.S. 449 (1958). l? Buckley v. Valeo, 424 U.S. (1976(quoting Communist Party v. Subversive Activities Control Bd., 367 U.S. 1, 97 (1961)). ?57 Id. at '58 1d. pp 66-68. '59 McConnell v. FEC, 540 U.S. 93. The Court le? the door open to a challenge to disclosure laws in the case where a ?group can show a ?reasonable probability? that disclosing its contributors? names would subject them to threats, harassment or reprisals from either Government of?cials or private parties.? Citizens United v. FEC, 55 8 U.S. 310, 367 (2010) (citing 540 U.S. 93, 198). '60 v. FEC, No. 12-536, slip op. (U.S April 2,201436. 312 This document was obtained and uploaded by the Center for Resoonsive Politics (OpenSecrets.org) .S. S?en ate Committee on Finance A With modern technology, disclosure now offers a particularly the voting public with information. Our political system will bene?t from more transparency, not less. dditional Democratic Views effective means of arming An argument for why transparency matters was set forth in a New York Times article on March of 2014. 501(c)(4 loan co the Attm that the mask hu defense I The sect demonst The goa political B. Democr followir (3) A report from a special investigative committee in the Utah organization set up solely to fund a candidate for Attorney panies he would advocate for their policy interests. ?63 Aft: ney General resigned amid allegations of corruption a year :ampaign ?exploited a web of vaguely named nonpro?t org ndreds of thousands of dollars in campaign contributions fro 1g to the New York Times, the Attorney General knew that of payday lenders as unsavory: was important to ?not make this a payday race,? he (the ca iide the payday money behind a string of PACs and nonpro race donations from payday lenders to Mr. Swallow?s camp ion in the bipartisan views on flaws in the response to rates the need for transparency in the operations of govern of greater transparency is the basis for many proposals to re advocacy by nonpro?ts. STATUTORY CHANGES ARE NEEDED atic staff believes further changes in the 501(c)(4) law are ne 1g be considered by the Senate Finance Committee. Require and (6)3 to ?le notice of formation witl Create a bright-line test on political activity (lobbying and ca limitation of 10% of expenditures during the calendar year Penalty: Apply Section 4955 penalty to excise tax expenditures. state legislature described a General who told payday :r winning election in 2012 ter. ?54 The article states izations in several states to payday lenders.? 165 public would view his idate) wrote. The solution: ts, making it dif?cult to ign. 166 a FOIA request also :form the law governing :cessary and recommend the tin 24 hours (same as 5275) mpaigning) for example, a in excess political 501(c)(4)s who engage in ch is the threshold in the Require the disclosure of donors who contribute over $200 political activity (same as 527 organizations), or $1,000, wh Wyden-Murkowski bill. (4) 153 New (Mar. 18, 2014). 164 165 166 Id. ?ork Times, Campaign Inquiry in Utah is the Watchdogs? Worst Case 313 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen (5) (6) A Possible The Fol] that all i disclose real-tim way pol ate Committee on Finance A .equire FEC ?lings to be attached to 9903. _equire electronic ?ling of 9903 (included in the Senate Fina] idministration Discussion Draft). ?67 Alternative Proposals - Require disclosure similar to 527 organizations (or by exempt organizations that do any ?electioneering com under FEC rules; Require tax exempt organizations that wish to fund e1 communications to fund these operations through a se contributions would be subject to disclosure; or Require these organizations be reclassi?ed as 527 org I THE FOLLOW THE MONEY ACT ow the Money Act introduced by Chairman Wyden and Se ndividuals and entities engaged in independent political spe the names of donors that contribute over $1,000 per year. disclosure of signi?cant independent political expenditures itical candidates report spending to the FEC. This legislatim processing burden on the Exempt Organizations of?ce because eliminat funnel A A ?nal 1959 to hundred canceUe - The De 501(c)( those n< views. the incentive for organizations to apply for tax-exempt 50 arge anonymous donations into federal elections. RETURN TO THE PRE-1959 STANDARD ?ption which would not require changes in law envisions the is of millions of dollars of political spending by ?social welf ,d by another regulatory decision setting the same standards 3. REFORM OF 501(c)(5) AND 501(c)(6) ORGANIZATIONS mocratic staff recommends that additional work be done to 5) and 501(c)(6) organizations are needed. Because the TIC )npro?t categories, the Democratic staff does not include a ?57 Senat 3 Finance Committee, Summary of Staff Discussion Draft: Tax Adminis 314 dditional Democratic Views ice Committee?s Tax cross reference) for tax munications? as de?ned ectioneerin gregated 527 account, thus, anizations Ttor Murkowski requires ding, including 501(c)(4)s, he legislation also requires by 501(c)(4)s similar to the ?1 would lessen the its disclosure regime will status as a means to reversing its decision in interpret ?exclusively? as meaning ?primarily.? The regulatory decision that has led to are? organizations could be that applied before 1959. etermine what reforms to report did not involve iscussion of them in these tration (Nov. 20, 2013). This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Sen ate Committee on Finance Additional Democratic Views XIV. CONCLUSION :Hundreds of thousands of federal government employees work hard every day to perform their duties, from the CIA personnel that tracked Osama Bin Laden to Abl: attobad, Pakistan to the NIH researcher who makes it possible to take steps toward stopping cancer, from border patrol agents preventing human traf?cking to weather forecasters tracking lurricanes. Sadly, in this case IRS 501(c)(4 no evide pressure personnel fell short. They took exactly the wrong approac applications, in particular the flood of politically right-lean rice-IRS personnel had any political bias, nor did they receiv from political appointees in the IRS, at Treasury or in the to evaluating many mg organizations. There is 3 outside interference or hite House, but their actions created the appearance of political bias and discrimination. This was The dire blame. 1 staff to a consequence of bad management and bad judgment. ctor of the Exempt Organizations of?ce, Lois Lerner, deserves the largest share of the was her job to manage and lead the E0 division. In this case she failed to organize her uickly review and either approve or deny the 501(c)(4) applications. missioner Steven Miller said Mr. Miller also took a failure to resolve the right- viewed on this matter, we In a generous summary of her performance, former Acting IRS Com that Ler er ?undermanaged? the in?ux of Tea Party applications. ?63 "personn 1 action against Ms. Lerner, showing his frustration with the leaning pplications.169 Because Lerner refused to testify or be inter were no able to establish her side of the story. my of the IRS actions to be be uninterested in politics or oncludes that there was ?no This in stigation, as well as the TIGTA investigation, did not ?nd 2 politica motivated. Interviews of IRS personnel showed them to politica na'fve. The following email from a TIGTA investigator indication of? political motivation. Review of these emails revealed that there was a lot of discu: on how to process the Tea Party and other political organizat 21 Be On the Lookout (BOLO) list speci?cally naming these indicated the organizations needed to be pulled because the how to process them, not because they wanted to stall or him was no indication that pulling these selected applications wa 3-mail traf?c indicated there were unclear processing directi nake sure they had guidance on processing the applications a very important nuance. ?70 ssion between the employees ion applications. There was groups; however, the e-mails employees were not sure ier the application. There 3 politically motivated. The ans and the group wanted to so they pulled them. This is Russell George con?rmed in a question from House Ways and Means Committee Member Sander Levin that no political motivation was found: Again, 1 Ranking ?63 SFC I l69 '70 Email nterview of Steven Miller (Dec. 12, 2014) pp. 164-165. from TIGTA Deputy Inspector General for Investigations Timothy Carr us to TIGTA staff (May 3, 2013). 315 This docum =nt was obtained and uploaded by the Center for Resoonsive Politics (OpenSecrets.org) US Senate Committee on Finance Additional Democratic Views EVIN: Did you ?nd any evidence of political motivation in the selection of the tax xemption applications? 0 GEORGE: We did not, sinm IRS employees involved in processing and overseeing the processing of Tea Party applications were each asked if their actions were politically motivated. None of them answered af?nnatively. No evidence was found linking political appointees at the IRS, Treasury or the White House to this delay and mismanagement. No IRS employees identi?ed pressure from political appointees as the cause of the delayed scrutiny of right leaning applications. This was. a case of gross mismanagement, rather than an attempt to exert political in?uence. While the numbers of left leaning 501(c)(4) applications were not as great as the right-leaning 501(c)(4) applications, the IRS did use the BOLO list to select left?leaning cases. IRS personnel subjected them to a review, approving some applications and denying others. The IRS employees set aside Tea Party applications, waiting on a review in Washington DC, and placed the term on a BOLO list when the applications should have been treated like any other 501(c)(4) seeking nonpro?t status and processed accordingly. To compound the error, various IRS personnel in the Washington C. of?ce allowed month after month to go by as they analyzed a handful of the applications. One application was approved on January 11, 2011 by one of the most experienced 501(c)(4) political activity experts, Carter Hull, but his superiors decided even more review was warranted. At the same time this was taking place efforts were underway to develop a guidesheet to help Cincinnati process the applications. Months were wasted on this project. In the end no guidesh set was ever agreed to. A key meeting in July of 2011 between Lois Lerner and her team di scussed the idea of processing the applications expeditiously, but there was no follow through the E0 team stumbled along in the remaining months of 2011 until the TIGTA investigation began in early 2012. While these disorganized efforts to process the applications continued, the Tea Party was attracting massive amounts of media coverage multiple in-depth articles appeared in the New York Times, the Washington Post, the Wall Street Journal and other publications across the country Many political commentators credited the Tea Party with shifting cc ntrol of the House of Representatives to the Republican Party. '71 House Ways and Means Committee Hearing on IRS Tax?Exempt Investigation (May 17, 2013). ?72 IRS Employee Responses to Written Questions from Finance Committee Stafi?(Dec. 19, 2013). 316 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance .dditional Democratic Views Yet no alarm bells went off at the IRS after the mid-term elections in November of 2010. More than a year and a half went by after this historic election without any ef?cient or aggressive action on the 501(c)(4) right-leaning applications. IRS personnel were completely oblivious to the harsh consequences waiting for them because they ignored a new wave of activism in the American political system. No plan to process the applications quickly was organized until June of 2012 - after the TIGTA investigation was begun. By that time it was too late to avoid damage to the reputation of the IRS. Commentators have complained that any attempt to review an application for 501(c)(4) status, investigate how that nonpro?t operates, or for the IRS to propose clarifying the political advocacy rules, is somehow a violation of the Constitution?s First Amendment protection of free Speech. This demonstrates a misunderstanding of the tax laws of the United States and the Constitution. Any American or group of Americans have freedom of speech in political matters. What they don?t have is a Constitutional right to a tax break for engaging in political activity. IRS personnel have the responsibility to scrutinize applications for 501(c)(4) status in an evenhanded, thorough way. And after approving an application the can investigate that nonprof t?s activities to determine if the 501(c)(4) law is being followed. Under the law the tax status ofnonpro?ts is determined by the IRS. If the participants in the nonpro?t feel their freedom of speech is being limited they are free to engage in political activity outside the tax advantaged status of a 501(c)(4) nonprofit. I Management at the IRS has moved aggressively to address the broken system of processing 501(c)(4) applications with policy advocacy issues. Four key employees in the IRS who failed to manage properly have been removed from their jobs. A new process for quickly approving 501(c)(4) applications with political advocacy issues has been put in place. Finally, the Democratic staff believes the law governing political activity by nonpro?ts must be strengthened further to prevent abuses. The Finance Committee staff will continue to monitor the IRS to ensure these mistakes are not repeated. 317 This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) Cincinn U.S. Sen 2010 ate Committee on Finance TIMELINE OF KEY EVENTS A dditional Democratic Views February 25: Tea Party case arrives in Cincinnati Determinations Unit. Because of recent media attention, the case is determined to be ?high profile? and sent, along with two other Tea Party applicati March/A test case" ons, to Washington DC. for analysis. 3. pril: Tea Party applications are held in Cincinnati while the DC. office examines the 3 April: Tax Law Specialist Carter Hull is assigned two of the three Tea Party test cases to review. .. Hull prepares development letters to send to the organizations. July: EO Determinations holds a screening workshop in Cincinnati. look for names like Tea Party, Patriots, 9/12 Project, Emerge, Progressive, We the staff to 5 People. August: "added to ?Emerging Issues? Tab. Spreadsheet also identi?es ?Progr Successor? on other tabs. October cases he October manner Novemt Decemb 2011 January Recomr March: develop April: develop of?ce ft July 5: July 5: August applications that had been sent for review. 3! 18: Hull sends a memo to his manager summarizing the rel is developing and apprising him of his progress. 26: Determinations Director Cindy Thomas expresses cone: and pace with which Tea Party cases are being worked. aer: Burdensome development questions sent to left-leaning er: Cindy Thomas inquires about status of Tea Party test cas Carter Hull recommends approval of Tea Party test case a; nendation sent to senior staff for review. Cindy Thomas is still concerned with pace of Tea Party app ing a speci?c plan of action to resolve cases. -lull?s recommendation is reviewed by a senior staff membei ment of the test cases is needed. The case is sent to personn 3r review. Lois Lerner meets with staff on BOLO list issue (at this poin ati waiting for decisions). BOLO terminology changed to remove Tea Party, per instri Meeting with Don Spellman of Chief Counsel?s of?ce to 318 A presentation instructs Be On the Lookout or spreadsheet distributed with Tea Party designation essive? and evant issues of the Tea Party am to her superior about the voter registration applicant. es in Washington DC. >plications. ications. Recommends who decides more el in the Chief Counsel?s 100 Tea Party cases were in lctions from Lerner. scuss the two Tea Party test This document was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org) US. Senate Committee on Finance Septembe First attempt at application ?triage.? 3 Additional Democratic Views November: Guidesheet for evaluating Tea Party applications sent to Cincinnati; IRS personnel did not find it helpful. 2012 January: BOLO terminology changed again, modi?ed to capture conservative and left-leaning groups. i . . . January: Extenswe development letters are sent to Tea Party and a few left-leaning applicants. February: Beginning of press attention regarding failure of IRS to approve or deny 501(c)(4) applications with political activity issues. Lerner attempts to disseminate new guidance to staff on how to reduce burdensome deve10pment requests. March: TIGTA audit begins. May: Commissioner Doug Shulman and Deputy Commissioner Steven Miller briefed on audit. May: Workshop conducted on bucketing exercise to expedite Tea Party applications. May 17: BOLO is changed again to eliminate current advocacy orgailiization language that is capturing; conservative and liberal groups. June: Bucketing exercise begins in Cincinnati. June 4: Acting General Counsel of Treasury Christopher Meade brie :"ed by Russell George. End of 2012: Commissioner Shulman leaves IRS, Steve Miller becomes Acting Commissioner. 2013. May: TI GTA report issued. 319 This documJ-Jnt was obtained and uploaded by the Center for Responsive Politics (OpenSecrets.org)