D.C.

Douglas Shulman: Former IRS head testifies

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A lack of political motivation "is almost beyond belief," said Sen. Mike Crapo, R-Idaho.

Former IRS Commissioner Douglas Shulman. AP Photo.

George's report blamed ineffective management for allowing agents to inappropriately target conservative groups for more than 18 months during the 2010 and 2012 elections. Shulman was appointed by President George W. Bush and served from March 2008 until last November.

At a separate hearing, Treasury Secretary Jacob Lew said the IRS's actions against conservative groups were "unacceptable and inexcusable."

Lew told the Senate Banking Committee that he has directed the agency's incoming acting director, Daniel Werfel, to hold people accountable and to fix any flaws in IRS management to make sure there is no recurrence of the problems.

Lew said he first learned about the inspector general's investigation in March but that he was unaware of the findings until they became public this month. Lew became Treasury secretary in February, and was White House chief of staff before that.

Shulman said he first learned that something was happening in the spring of 2012.

He said that at that time, he learned that IRS workers were using a list to help decide which groups seeking tax-exempt status should get special attention and knew the term "tea party" was on that list. But he said he didn't know what other words were on that list or the scope and severity of the activity.

He said he took what he thought were the proper steps - making sure the inspector general was looking into the situation. He said he did not tell Treasury officials about the improper activity.

For more than a year, from 2011 through the 2012 election, members of Congress repeatedly asked Shulman about complaints from tea party groups that they were being harassed by the IRS.

Shulman's responses, usually relayed by a deputy, did not acknowledge that agents had ever targeted tea party groups for special scrutiny. At a congressional hearing March 22, 2012, Shulman was adamant in his denials.

"There's absolutely no targeting. This is the kind of back and forth that happens to people" who apply for tax-exempt status, Shulman said at the House Ways and Means subcommittee hearing.

On Tuesday, Republicans expressed anger that Shulman and Miller didn't reveal the screening of conservative groups to Congress, despite lawmakers' repeated inquiries. Miller learned of the situation in early May 2012.

"Mr. Miller, that's a lie by omission," said Sen. Orrin Hatch of Utah, top Republican on the Finance committee. "There's no question about that in my mind. It's a lie by omission and you kept it from people who have the obligation to oversee this matter."

President Barack Obama has forced Miller to resign, and he is leaving office this week.

Shulman said he didn't later tell lawmakers about the targeting because he didn't have full information about the situation.

"I had a partial set of facts," Shulman said. "Sitting there then, sitting here today, I think I made the right decision" to let George, the inspector general, conduct his audit of the targeting.

Shulman said that when he did finally read about the details of the targeting in the inspector general's report, "I was dismayed and I was saddened."

Hatch and Finance panel chairman Max Baucus, D-Mont., both criticized the agency and said they would investigate how and why the improper screening occurred.

"I intend to get to the bottom of what happened," Baucus said.

The IRS is an independent agency within the Treasury Department. Because of that independent status, the official said Treasury deferred to the IRS in its decision about how to make the targeting public.

George, the Treasury inspector general, says he told Shulman on May 30, 2012, that his office was auditing the way applications for tax-exempt status were being handled, in part because of complaints from conservative groups. However, George said he did not reveal the results of his investigation.

The IRS agents were conducting the screening to determine whether the groups were engaged in political activity. Certain tax-exempt groups are allowed to engage in politics, but politics cannot be their primary mission. It is up to the IRS to make the determination, so agents are supposed to look for clues when reviewing applications for tax-exempt status.

In March 2010, agents starting singling out groups with "Tea Party" or "Patriots" on their applications. By August 2010, it was part of the written criteria for identifying groups that required more scrutiny, according to George's report.

Agents did not flag similar progressive or liberal labels, though some liberal groups received additional scrutiny because their applications were singled out for other reasons, the report said.

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