>> amy harder, energy and environmental reporter. you can follow her stories at national journal.com. acting irs commissioner reported to congress on the targeting of conservative groups. it follows a review of how applications for tax-exempt status were handled. this hearing is three hours.

[inaudible conversations] [inaudible conversations] [inaudible conversations]

>> the committee will come to order. good morning. it's been six weeks since the irs first revealed they were purposely targeting conservative leaning organizations, and this week additional irs documents revealed that the term "progressive" along with others were also included on the be on the lookout list, or the bolo. no taxpayer, regardless of political affiliation, should be unfairly targeted. it's wrong and this committee is working to ensure it will never

happen again. the committees welcomed all groups to come forward and i urge them to do so. so far the evidence only shows conservatives being systematically targeted by the irs. not just flagged through the bolo but actually targeted. these americans consistently had their applications tee laid for nearly three years or asked intrusive and inappropriates questions, had donor information leaked and threatened by the irs with additional taxes. as i long said we're in the early stages of the investigation, and as we gather the facts, we'll follow the facts wherever they lead. if there are any group that feels they were mistreated. i urge them to come forward and share their story. it's clear the internal revenue service a broken agency that needs to answer to the american people. mr. werfel, in the interests of accountability and the discretion of sect lew, you spearheaded a review of the

practice. the report fails to deliver the accountability the american people deserve. this report does not answer the basic questions: who started the practice, why has it been allowed to continue for so long? how i wouldspread was it? in fact this report suggests you haven't even asked anyone those questions. additionally, the report fails to address some of the most egregious offenses by the irs. i'm specifically talking about the intentional leaking of confidential taxpayer information, and ther is threatening conservative donors with additional taxes. he review notes it's important for the inspector general continue to identify the appropriate actions, but where are the checks to prevent this behavior in the first place? how will the irs learn from these inexcusable actions and provide the american taxpayer

will real proof and evidence it will not happen again? it will be necessary to provide concrete reforms and assurances to begin rebilling the trust this agency lost with the american people. a glaring recommendation in this report is that congress fulfill the agency's budget request of an additional billion dollars. frankly, it's insulting to taxpayers the irs would ask for an additional billion dollars after we fine out their internal revenue service targeting citizens for their employs every they spent million office taxpayer dollars on frivolous functions and paid for expense send items on irs credit cards. until the irs can prove it can responsibly manage it current funds the irs will not see one more dime in taxpayer funding. we need real reforms and they must be immomented so the american people can have a restored faith that they have a government that works with them, not against them. that means instituting long-term

and meaningful changes, to both houston the agency operates and the tax code, and as i've stated before, often here from constituents, in michigan, about their fear of being audited by the irs. that fear used to stem from the fact that tax code was so complicated. nobody really knew what was it in. even when people paid someone else to do their tax i cans, they would seen and it hope the preparer government it right. that's something this committee must and will fix. however, today americans fear an audit, not because the tax code is too complex, but because we have an agency out of control. managers in washington sitting on cases for years, trekking intrusive and inappropriate requests to be asked, and after a month-long internal review, what you tell this committee is that a few people have been removed from their old jobs, but you cannot even assure us they have been removed from the agency. it's my understanding they

either continue to bade or are receiving full retirement benefits. on top of those salaries and benefits to the employees received over a quarter million dollars in bonuses over the last few years, and you have not identified any structural changes within the irs that would prevent these abuse from happening again. if there's anything this report shows, it's how much more work must be done. congress will copying -- coin the investigation and assure that no american is targeted again. with that ex-yield to mr. livein for his opening statements. >> thank you. i'll go over my opening statement in just a moment. i want to urge you -- you heard the opening statement of the chairman. i know you mostly have been kind of a technician all your years in both the bush administration and in this administration.

i hope you will, if i might suggest, respond very vigorously when statements are made. i hope you will actively report on what you have done during your first 30 days. >> where mistakes have been made in the internal revenue service, we on this side have made it very classic when inappropriate criteria were used, we were among the first to say that those who were in charge in the irs should be relieved of their duties. so, i hope you'll respond very actively and vigorously to all the questions. i think we need to get the facts and not innuendos.

we're here to learn about the corrective action the irs has taken to address mismanagement in processing of tax exempt applications. so, mr. werfel. welcome to the ways and means committee. i'm not sure how warm it is but you're welcome. i'm glad to see in your 30-day report that you have instituted management changes that span the entire irs management chain as needed. i see from your report these changes reach into the exempt organization division indeed as necessary, and the team responsible for determinations on applications for tax exempt status. we are also interested in your recommendations for obtaining greater effectiveness within the irs with respect to better early warning systems and risk management. we look forward to hearing your testimony on your new enterprise

risk management program, which i understand will improve irs accountability and responsiveness to stake stakeholders, including this congress. as your report makes clear there was clear mismanagement on the part of the irs exempt organizations division. in processing these tax exempt applications. the additional assessment and plan of action appear to be a solid road map to addressing the problem, and we encourage you, as i said at the beginning to actively, to vigorously, to completely pursue this plan. but for our committee, which launched this investigation on a bipartisan basis, the backdrop for today's hearing is the troubling new information that has come to light about the report issued by the treasury

inspector general. this week we learned for the first time that three key items, one, a screening list used by the irs included the tomorrow "progressives." two, progressive groups were among the 298 applications that titta reviewed in their audit and received height 'ed scrutiny. and, three, inspector general did not research the term was added to the screen list or how those cases were handled bay different group of specialists in the irs. the failure of the audit to acknowledge these facts is a fundamental gnaw in the -- flaw in the foundation of the investigation and the public's perception of this issue. i wrote to the it and asked him to explain these omissions. in all committee democrats have asked you, mr. chairman today,

that you ask mr. george to return to the committee to provide the appropriate context for his report, and answer questions under oath regarding all of these matters. our committee, in its oversight role, has an obligation to fully understand the manner which the i.t. conducted this audit and at what direction. deeply troubling is that when asked about the new information that has come tolight. the tressy ig initially said, and i quote, that audit report answered questions it was asked to address. end of quotes. and they house oversight committee chairman darrell issa has specifically requested that investigators, in quote, merely focus on tea party organizations. we asked titta about this in a letter, and it responded in quotes that many of the press

reports are not accurate. if these or some of the reports are accurate, titta as initial explain asia of the scope of -- explanation of the scope of the audit is inconsistent with the description of the audit work in the audit plan, and the stated objective on the first page of the may 14th, 2013 audit report. the stated objective was, and i quote to determine whether allegations were founded that the irs, one, targeted specific groups applying for tax exempt status. two, delayed processing of targeting groups applications. three. requesting unnecessary information from targeted groups. the ig's failure to be forthcoming in the audit, and congressional hearings, even when asked directly if there was a screening list for progressives, and whether progressive groups were included

among the 298 applications reviewed by titta has contributed to the distortion of the entire investigation, including use of innuendo, and totally unsubstantiated assertions of white house involvement. democrats have condemned the singling out of tea party by name. i hope our colleagues on the republican side of the aisle will now join is in condemning the use of the term "progressives" on the screen list and the failure of the ig to be fort coming with this in other committees went have been supportive of letting the facts lead where they may. upi caution my colleagues from jumping to conclusions until we know all the facts. searching for the facts is the only way we are going to get

back on the course that i hope is our mutual goal,, the fixing of the problems, all of the problems at the irs, and restoring the trust of the american people. thank you, mr. chairman. >> thank you, mr. levin, now i'd like to introduce our witness, mr. daniel werfel, thank you, mr. werfel, for being with us today. the commitee has received your report and it will be made part of the formal hearing record. you'll have five minutes your your oral ranks. you're now reask niced. >> chairman camp, ranking member levin and members of the commitee. thank you for the opportunity to appear before you today to discuss the progress we have made thus far in charting a path forward for ther -- ther is and is what we though accomplish. the report describes a number of important findings, aggressive actions and next steps for the irs. the problems with the 501(c)(4) application process that were undercovered by the

inspector general have created significant concerns for taxpayers, and it is incumbent upon us to take swift action to ensure accountable, fix the problems that occur, and thoroughly examine other aspects of other irs operations. over the past month, an ongoing review of the events described in the report has shed further light on the management failures that occurred within ther is and is the causes of those failures. there was insufficient action by irs leaders to identify, prevention address, and disclose, the problems that emerged with the review of applications for tax exempt status. our report outlines management deficiencies and the steps that must be taken to correct them. importantly, the report does not provide a complete and final set of answers. instead, it offers an initial set of conclusions and action steps, along with an explanation of the additional reviews and investigations underway.

while fact-gathering is still ongoing, we have not found evidence of intentional wrongdoing by anyone at the irs or involvement in these matters by anyone outside of the irs. furthermore, there is no current evidence of the use of inappropriate screeners or other types of criteria in other irs operations beyond those discusses in the ig report. we recognize, however, there is public concern regarding the criteria used for applications for tax exempt status and more needs to be done to evaluation our screening criteria and procedures. we'll therefore establish a review process by which procedures across the irs will be periodically assessed to safeguard against any risks of inappropriate criteria. in addition to this important review i also want to briefly mention some of the actions that we have taken and will take to address the problems we have found. first, we have installed new

leadership at all five levels of the irs senior executive managerial chain that had responsibility over the activities identified in the ig report. in addition, we have empanelled an contribut --n't accountability review board. next, immediately upon learning that be on the lookout, or bolo lists, with inappropriate criteria were still in use, we suspended the use of any such list in the application process for tax exempt status. next, we established a new voluntary process for certain taxpayers who have been in our backlog for more than 120 days to gain expedited approval to operate operate as a 501(c)(4) agency. this allows them a streamlined path to tax exempt status if they agree they will pit within defined limits of social and

welfare activities. we'll establish an enterprise, risk management program across the irs to provide a common framework for capturing, reporting and tracing risk. this is intended to ensure that such information is brought to the attention of the irs commissioner and other irs leaders and external stakeholders in a timelier mapper. next, we'll initiate additional external and internal education and outreach about the role of the national taxpayer advocate in assisting taxpayers in resolving problems with ther internal revenue service. i also want to point out our pursuit of broad-based reforms in the irs does not mean we believe the specific challenges and concerns identified in the ig report on 501(c)(4)s are necessarily present in other parts of the organization. in fact, i believe that any comprehensive review of irs operations must recognize that many -- the many critical successes the irs has had in

carrying out its mission over the last several years. the irs is committed to correcting its mistakes, holing individuals accountable, and establishing control elements that will help us mitigate the risks we face. the employees of the irs are committed to our mission and to operating with integrity and fairness to all. the irs serves a vital purpose for this country, and we need to earn and maintain the trust of the american people in order to accomplish our mission. we are firmly moving in that direction. and we will continue to report on our progress on a regular basis as we fulfill our commitments. mr. chairman, ranking member levin, that concludes my statement. i would be happy to answer your questions. >> thank you very much, mr. werfel. for the purposes of preparing your report, did you speak to former commissioner doug schulman? >> i did not. >> did you speak to former acting commissioner steve

miller? >> i did not. >> and did you talk with joseph grant, the former deputy commissioner for tege? >> no, i did not. >> did you talk with chief counsel william will -- wilkins? >> yes. >> what is a basic summary of the conversations. >> as a first matter -- there are three things. first, understand where the wrong-doing was so i can hold people combatable, second, understandy the management mistakes are so we can fix them. and third, broader understanding of irs risks and operations, and i spoke to many people within the irs, in fact my whole senior leadership team engaged in an ongoing series of discussions and bill wilkins is one of the senior leaders in the irs. >> did you talk to sarah hall ingram the former deputy commissioner. >> yes. >> as you prepared the report -- for the purposes of preparing the report, did you speak to

her? >> i'm not sure how to answer that question. i spoke her as part of my overall understanding of the situation on the ground with the irs. so, yes, i guess they are connected. >> did you speech with lois lerner the former director of exempt organizations? >> i did not. >> i would say your initial conclusion that the irs found no evidence of intentional wrongdoing by irs personnel, give the number of key players you did not talk, to it not necessarily an initial conclusion but incomplete that. we know from our league? the summer of 2011. lois lerner directed the cincinnati office to change the words tea party tribal advocacy groups. do you think this was an intentional attempt to -- cover up the targeting and. >> i don't know the answer to that question. more work needs to be done to evaluate the circumstances. >> i find it difficult to make the conclusion that no evidence of intent was --

>> i found there's no evidence in the record to suggest there was an intentional cover up. >> you didn't speak to her. >> each time -- injury mr. werfel, i control the time. my question is, after she directed his change, cincinnati intentionally went back to targeting tea party groups. do you know who is responsible for this? >> die know who is -- well, i challenge -- >> after the change made to advocacy groups, the cincinnati office went back to targeting tea party groups. do you know who was responsible for that activity beginning again? >> we're looking into the facts and circumstances that arose. there's a lot of questions to be asked and answered that haven't been asked and answered yet, and i'm not going reach a definitive conclusion before the investigation is complete. >> if you don't know, that's fine to say you don't know. i think the answer is you don't know. do you know who in washington, dc directed the lawyers at the technical office to hold up the tea party applications? >> i do not know the answer to that question. >> is the irs interviewing

employees who were directly involved with the tea party discrimination at this point? >> right now, irs is relying on the justice department and the inspector general to conduct those interviews. we're working closely with them but it's critical cal because there's an ongoing criminal investigation, they that we do not a step in front of the justice department and the ig. >> is the irs conducting any internal document review outside of complying with the requests that congress has been -- >> we are conducting a virtue rove document review at this time. >> your report also states there's no evidence of the use of inappropriate criteria in other irs business operations. how did you reach that conclusion? are you interviewing employees and requesting information? >> yes. there is -- the major divisions involved in these types of activities, of dealing directly with taxpayer issues, are small business section, our large business section, tege, the

subject of the audit report, and wage and investments. i met with the leaders of those operating divisions. we have talked about the issues, and the ig report that dealt with the exempt organizations unit. i asked them to look internally and do their open assessment of any specific evidence they may have of similar problems or challenges in their areas. they've determined there are not -- there's some good reason for that, and in particular i think it's important to point out that in this area of tax exempt preview, it's one of the very view areas within the irs where the nature of political activity is relevant to any determination that we would make on eligibility or review. and so the other areas of the irs normally don't involve themselves in political activity. all this said, we understand and i'm like all of you, very concerned about what is in in the ig report. it's a very significant concern. we're hearing from taxpayers they're concerned, and that's

why out of an abundance of caution we're going review all of our criteria across the entirer is and is report back to you on our findings. >> i think this leads into the statement that in the report that the irs is digging deeper into the evidence to determine there irinstances of wrong-doing or inappropriate conduct beyond the mismanagement'm in the report. >> absolutely. >> that's beyond the exempt organizations division. in that process, are you reviewing documents requested by congress or there is some other internal review in addition to that? >> i think there's a lot of overlap, mr. chairman. you have asked this committee and other committees have asked for an enormous footprint of documents which is very justifiable and we're in the process of producing them and have produced a lot of documents for this committee and others. we, as park of our efforts, are looking at a very similar footprint of documents to make sure we understand the causes of the circumstances so we can take

the appropriate steps and corrective action. >> i would note we're just beginning to get e-mails. so, it's not as if we have all the document at our disposal yet. i have another line of questioning. you acknowledged and your report acknowledge the irs inappropriately tearinged tea party groups and since then there have been questions raised whether the irs was inappropriately targeting progressive groups, and i like too read you the inspector general's answer, which the minority shared with me. quote. we reviewed all cases they irs identified as potential political cases and did not limit our audit to allegations related to tea party. end quote. they did not limit its audit to just the tea party. and let me read another excerpt from the answer. quote, from our offered did work we did not find evidence that progressives were used by the irs to select potential political cases during the

2010-2012 time frame. we found no indication in any materials that progressives was a term used to refer cases for scrutiny for political campaign intervention. so, we have conducted interviews with some of the key cincinnati irs employees, and they've confirmed that to be true. does any part of your 30-day report contradict that recent letter and fining by the inspector general? >> no. i don't think any part of our report contradicts it. what our report determines is that there is diversity in the types of political organizations that were accounted for in the bolo list and that's install the -- >> the bolo list is a flagging and only the conservative tea party groups were referred to extra scrutiny. , that? >> at this point that's what we know so far. that's. >> that's what the evidence opinions, to but in your opening remarks, you note we're in the early stage of this, and there's

nor investigation that need to be done. >> the inspector general is doing more thorough investigation, but at least in the recent letter he sent us he said he found no evidence to date and your report does not contradict that. i would ask nance consent to place in the record the entire letter received on june 26th june 26th from the inspector general regarding this matter, and thank you. if yield to mr. levin. >> to try to set the stage for some bipartisanship, just quickly, where did you start your government service? >> i started my government service in the office of management and budget. i was at the justice department for some time. but at the time that this administration came, i was a senior leader in omb and serving under president bush.

>> your report states, we have found -- not found involvement in these matters -- talking about the criteria -- by anyone out of the irs. , that? >> , that. >> and you stand by that. >> yeah. i stand by it. i mean, think the statement in the report is appropriately caveated with the point that there are ongoing reviews and investigations that are necessary. but at this time, taxpayers and the public have questions, and the answer to the question, have you found any evidence of intentional wrongdoing, our answer is, no, we have not. >> your report also says let me just ask you in terms of involvement outside of the irs. have you found any involvement by anybody in the white house? >> no, we have not.

>> there's been reference here to the ig's investigation, and i want everybody to understand in the letter that was sent, there was use -- there was a bolo that had the word "progressives" on it. is that correct? >> yes, that. which and you have asked that bolo and all others not be used. >> that's correct. we suspended the universe all -- use of all bolo lists. >> this was indicated for the first time that there was a number of groups, progressives, involved in the bolo that was sent to a different group within the irs, and the ig did not talk

with anybody regarding what happened to those. so, the notion that the selecting out was only as to tea party and was not as to progressives, is simply incorrect. and when the ig was sitting in your chair, he failed to indicate who the others were, and when asked specifically if it included progressive groups, in another committee or subcommittee hearing, he wasn't forthright. so i think he should come back and talk to us and have him asked questions, because in terms of the selecting process, clearly it involved progressive groups as well as tea party groups. that was clear from the pie

chart in his report. but he never delineated who the others were, even as later asked, and if he had come forth with that information, i think it would have undercut a lot of the loud innuendos that talks about a white house enemies list or a coverup. so we want him back. i hope, mr. chairman, you will have him come back, and mr. we are ferrell, i know you will encourage the digging out of owl facts -- all of the facts. >> i do give you that pledge. >> thank you. >> actually, mr. chairman, there's a question i answered from you that i think warrants further clarification if that's okay. i want to make sure i get out

early in this hearing so we have a basis of information to guide the questions. where we are right now in our fact-gathering -- we have evidence of diversity of labels in the bolo list. we have another example of -- this week we're sending out letters to taxpayers that have been in our backlog for more than 120 days, offer them this fast-track option. there's the diversity of political labels and the groups getting this letter and also it's our understanding as we review the facts can the do is verity of political labels in those organizations that were put in through process for further review, the challenge i 1/2 going deeper than that is that -- is as follows to go deeper into those facts could end up with sensitive taxpayer information enough 61.03. the other challenge is that in

looking at the diversity of groups, it's not always clear where they stand on the political spectrum, and, frankly, i don't want to know. i want ther is is to be -- the irs to be in the business of just protecting the extent of political activity, not knowing the type of politics. but going back to your earlier question i didn't want to leave the impression we were not seeing diversity of political labels. what i'm suggesting is significant more analysis is needed before we reach conclusions about what that means in terms of an irs failure or irs issue. >> that's why i find it perplexing you could conclude there's no evidence of intentional wrongdoing by the irs when the inspector general says he reviewed not only just tea party cases but others, and in his letter dated june 26th june 26th says, that only tea party cases at this point were

flagged and sent to another review. there were no progressive cases sent to another review. >> to a different review. >> please don't interrupt me, mr. levin. >> different review. >> i think that's an important point and that's why we need full inspector general letter in the record and i think that you might have called these initial conclusions, and i think initial -- probably should be emphasized. i would call them incomplete given we have more information. with that i recognize mr. johnson. >> thank you, mr. chairman. mr. werfel, the american people want, need and deserve to know the truth, and i hope we get it. mr. werfel, back in my district it appears the allen area patriot hey been a target of the irs. the bottom line that the irs has been used as a political weapon and that's just outrageous. instead of targeting americans because of their belief why don't ther is target fraud and

abuse that is costing american taxpayers billions of dollars. mr. werfel i'd like to play a short video clip on an issue i've been working on for some time now. the clip is from a wthrt-tv investigative report. >> this isn't a single case. >> his office has been flooded by illegal workers who figure out a loophole. it allows them to use their numbers to get huge refunds from the irs. the loophole is called, the additional child tax credit. it's meant to help working families who have children living at home, but 13 investigate has found many undocumented workers claiming the tax credit for kids who live in mexico, and we're talking lots of kids. >> we have seen 10, 12 dependents, the more you put on there, the more you get back. >> he has thousands of examples.

>> over the years the ig has sounded the alarm about fraud and abuse with the refundable child tax credit. do you believe this is a problem, yes or no. >> i certainly agree. >> that's good. isn't it crew that one of the rules to claim the tax credit, the child has to live with the tax filer for more than half of the year, yes or no? >> that's difficult to confirm that eligible point. i agree. >> why, then, isn't the irs enforcing the residency rule? i hope you will work with us to address that. i have a bill that would put a stop to this and stave save -- save taxpayers $24 billion. i want to ask about another irs scandal. why doesn't the irs target fraud and abuse instead of americans for their beliefs? last summer the ig issued a damning report in which it found that irs management discouraged

irs workers from detecting fraudulent applications. the ig's report led me to call on the then-commissioner schulman to resign. on the screen, i've got figure 6 from the 2012ig report, showing most frequently used addresses for i-10 tax refunds. as you can see, nearly 24,000 tax refunds totaling $46.4 million, were issued to the same address in atlanta, georgia. bottom line, these times, itins are costing taxpayers dearly because they can be used to fraudulently get tax refunds and the ig issued another report that makes i clear the irs could be doing a better job protecting taxpayer dollars. over 1,000iti ns were issued to individuals using the same

address in atlanta, georgia, there is still a problem? >> yes. >> also, the ig found the irs workers handling the itin applications remain concerned that leadership with make them rubber stamp rather than ensuring that qualified individual receive. can you assure is that the irs management will not do that anymore. >> on its found it sounds like something that is inappropriate -- >> let me stay sai in closing your own report says the tax code is nearly impossible to administer because it's so complex, and based on the billions of improper credits being made, i'll just say your agency is proving you right every day, and it's time for the irs to stop targeting americans and start targeting fraud. i yield back. >> all right.

mr. rangel. >> you said this diversity in the bolo list, and you admit that conservative groups were on the bolo list? why is it that we don't know whether or not there were progressive groups on the bolo list? >> well, we do know that there the order word "progressive" appeared on a bolo list. when i talked about diversity i was trying to capture the types of organizations on the bolo list are wide-ranging. >> we seem to know what a conservative is. but how come progressive now becomes diversity instead of

what it is? it's groups that are considered to be liberal as opposed to the tea party that is considered to be conservative. is that correct? >> i think it's fair. >> okay. as long as it's fair, why are you have problem with the chairman -- couldn't you say that in determining whether there was abuse of the provisions of the internal revenue internal revenue code, the staff were looking for signals for organizations, whether they were liberal or whether they were conservative? and the methods they used were not appropriate. is that a fair statement? >> i don't want to jump to a particular conclusion. i want -- >> what part of that statement gives you a problem? >> well, because we are where we are right now in our review. we understand that these political labels of varying

types one the bolo lists -- >> tea party is a type, right? >> yes. >> can you give me a type of name that would describe a progressive democratic, liberal organization? >> that's where -- the word -- this is where i reached my conclusion that there's broad range or diversity in the political groups because there are some that more obvious -- >> the thing that there are that you can say are progressive -- >> there's one that are clearly on the conservative end of the spend truck, some clearly on the liberal end of the spectrum, and then the groups where it's difficult to determine on the facts where they would land on that spectrum. maybe they don't land anywhere. maybe they're in the middle. >> that makes so much sense, and so far, even though you don't

like to -- you don't find that it was any deliberate political attacks made. it was just that they were trying, based on what you know now, they were trying to do their jobs, and do it in the right way. >> my position is that the way in which this should be structured, it should not use labels that point towards particular political persuasions because that is inconsistent with the irs mission. >> do you think it's possible the white house would be supporting a targeting of progressive organizations that supported his candidacy? >> i don't even want to speculate on that. from my short time at the irs i have seen no interaction between the white house and irs that would expend to that level. i have had no contact with the irs other than to been report to the president.

>> can you russ give us the names on the bolo list so we can determine whether they're from the left or right? >> that has been provided to the chairman, given the taxpayer sensitive nature of the information -- >> you say the chairman has list of organizations that were considered to be progressive that were targeted. >> what i'm saying is the chairman has been delivered the unredacted version of the bolo list. >> and that list that is not redacted -- >> it includes taxpayer information. >> the chairman knows or should know that the targeting concerns liberal and conservative organizations. >> that's not a question i feel appropriate. >> that information is -- was delivered to the chairman. >> we have delivered the both redacted and unredacted version of all the bolo lists to the

committee. >> the unredacted includes progressive organizations. >> it does because it's on both the redacted and unredacted. >> thank you. my time is expired. >> mr. rangel, i do want to note for the record that information is provided to the finance chairman and have delegated 6103 status to mr. levin. so any 6103 information i have, mr. levin also has. ...

>> led justice department. you will make the point* i have not personally interviewed and i and a stand that. i have not but if it is helpful to explain the structure. >> let's go to the key points. you don't know who initiated the targeting of donors of conservative organizations of a gift tax to the donors? >> began the types of questions raised to donors. >> who do you know, ?

>> i am just taking issue with the targeting of donors i want to make sure there is no supposition. >> please. the you honestly don't know? correct? that is fine. >> not interviewed but the investigation is ongoing. >> who leaked private taxpayer information including donors to the huffington posted in the human rights? do you know, ? >> i do not have that information. >> who leaked private taxpayer information for 31 conservative groups to the media do you know, ? >> i do not have that information but the ig review those circumstances to find those not intentional with. >> you don't know? >> who leaked the tax information? >> i would have to learn more about the circumstances of each view are identifying

>> who was involved the targeting and intimidation to be on the lookout? >> that i can answer some of the questions. i will say this. i am not aware anyone at the white house at the treasury department and all the evidence that we have points to the involvement of individuals within the irs. i am happy to talk through that with you. >> let's do that. in regard to the targeting of the tea party, who at the irs such as the fbi and atf? >> i believe that with that question on the specific taxpayer i cannot answer that. >> group was involved to cover up the pattern of abusing concealing it from the public and congress? >> again, i don't know if i would be comfortable with

the characterization of the question but i can walk through the managerial chain >> my point* is you don't know answers to the key questions but yet in your report you declare there is no evidence of wrongdoing or misconduct on the part of irs personnel. no evidence of intentional wrongdoing. mr. werfel, this report is a sham if it would be called a white wash but it is not even a substantial enough to meet that description. might point* to you is you don't work for the ira's. you work for the american people. your job is not to cover up the open up the agency because we see the pattern of abuse, intimidation, the only goal is to silence the the voice of the people you don't like so it is critical. so my question is, i'm told

you're a decent person is or you serious about getting to the truth? >> absolutely. >> are you serious about keeping up the integrity of the irs? >> i am serious about with in the rule of law and procedure in getting to the truth. many criticisms and your questions in order for me to overcome those in many cases our have to violate. >> let's do this, since you are serious we commit to return in 30 days of more complete answers? >> absolutely. as they become available i am ready to submit them that it is very important to understand that gathering these answers we have to follow the rule of law and procedures. >> would it have been great. >> mr. brady controls the time. >> let him answer.

>> is up to mr. brady to conduct his questioning as he sees fit. >> would it be great when targeting these groups in donors leaking private taxpayer information concealing from the public than to mislead congress? you need to understand. the committee will get to the truth good or bad. we will not stop until we learn but we will reveal who initiated these abuses who participated, encourage them and who conceal them and we will hold them accountable, including you if you can do this investigation. then we will make sure the irs never does this again. i yield back. >> mr. mcdermott is recognized. >> thank you, mr. chairman. mr. werfel thomas thank you for being willing to be the director of the ira's.

-- irs with the last set of questions you have been at the center of a firestorm has has been the whole agency and the irs has made attempts to address the criticisms and meet the challenges but police said the four but it bears repeating the irs has a thankless job it is the easiest to dislike and easiest to throw under the bus and did you go back to the bible who they pick on? tax collectors. of the people at the bottom of the society and that is where we are treating the irs people and i don't believe it is fair. your hard working and dedicated civil servants to do your very best to a minister the law. now i will stop what i will say except to say one thing.

i don't think it should all be thrown out. so the first officer leaves the cockpit and goes down with the list be on the lookout for a lot of things you use it to organize your thinking. the american college of surgeons has just adopted the bolo list and there is a hold on a checklist of things that they looked at in anticipation before they put you under anesthesia. me think that is the way you organize your thinking and it is clear to me that the on the lookout list is a good idea then rigo to get

your driver's license then you have a long line of people because they're not organized taking it one at a time. and don't organize your thinking it doesn't make sense. but i would like you to take the rest of my time to answer the questions that mr. brady kept interrupting. >> i appreciate that. the point* of is trying to make was there are certain procedures that need to be followed to get the answer is that this committee is working -- looking for and as an example, clearly the employees need to be interviewed and i am hoping to make sure they are interviewed. the issue is i have announced by the justice department and the inspector general to ask all the questions because if that is

a prosecutorial action that needs to be taken it will be clean and the evidence chain will be clean. so the notion that no witnesses are being interviewed is not accurate. and sitting across a table from interviewing i would do but it will follow the process of the law in one of the constraints i have is i have to get professional investigators do the interviewing. that is the constrained i am willing to live with because i trust they could get to the bottom of it. when mark point* but with the vacation is the accountability and still getting a paycheck but to take action toward

discipline against a civil servant there are rules of procedure that need to be followed and if i cut those off and fired people and suspended them without pay i would firstly be violating those rules of laws and procedures put in place for a reason. in the event an employee is done fairly selected they have an opportunity to defend themselves so when we see things that bother us with the irs for people to be held accountable we need to make sure we follow a diligent and expedient process and that is what we're doing right now now, pursuing that correct set of disciplinary actions consistent with laws and regulations. >> time is expired. >> secretary lew ask you to

put this report together to make sure nothing like this happens again. i look at page number 35 a and i see a case made for a budget increase. your budget asks for over a billion dollars of more spending free-agency and you ask us to hire another 4,500 employees. money to pay what we have learned in two months. in just two months, we have a conference in atlanta that the celebrity chef -- jeff cater to buy 4 million and a conference in anaheim california, a four point* $1 million, a conference in philadelphia, a 2. 2.$9 million, a conference in san diego four point* $1,000,000.135 thousand that is about $9,000 per speaker. the irs paid the deputy this

day in the presidential suite at the hilton andy page $17,000 for speakers to create paintings of abraham lincoln in michael jordan and others. we hear of a report of crony contracts between the improper relationship between iris contractor and a person whose business had less than $250,000 in income the prior year but then awarded a $500 million contract? between 2012 and -- 2010 and 2012 you had 225 conference's costing $49 million. let me see if i can put this into perspective. i represent a town in wisconsin zero little less than 7,000 people the

village is blue-collar people work at the tractor factory, s.c. johnson factory surrounded by cornyn bean fields and small businesses. it took more than one henderson of the federal taxes by the working families of this town to pay for the 225 conference's you spent at the irs in 2012. that is the way you need to think of this. people working hard, living paycheck to paycheck paying taxes and this is what you are spending their taxpayer dollars on? and now you come here asking us for of billion dollars of the 10% increase? hire another 4500 people? that is my home. the population in all working families in the

county there taxes would not even cover the $1 billion increase you're asking for. you are here representing the budget asking for the increase i know you are new to the irs, you come from the office of management and budget and have a great representation -- reputation so how on earth did you thank you have the moral authority to ask? why would we representing the taxpayers give you this extra money were asking for if this is what the irs is doing? we see justin two months, a waste fraud and abuse and you say give us another billion dollars? why should we? >> congressman you're asking important questions and i love the opportunity to address that. first, i agree the cost you are referring to is

excessive and inappropriate and should not have happened for self of the reports of better coming down occurred to her three years ago and my concern would be greater if i saw those patterns of spending are continuing through today and in many cases they are not. for looking at a 68% cut of trading travel and other travel and cut the printing by 30% and professional and technical services. >> there are deep cuts going on. >> let's have them take place then come back a year or two to see if you run it will then we will consider a budget increase. >> that is a fair point* but there is more cuts to be made and in this report is section three in subsequent testimony i will furnish so

they go every deeper. >> so you don't need a budget entry? >> going back to what congressman johnson was asking we enforce the tax cuts to go after fraud to dwarf any expenses that we have we just have to look at this to say has the irs data enough to get the shop and order? i will make the case going in the right direction but if we have other priorities to enforce the tax code because every dollar spent on the irs. >> don't forget you work for the taxpayers not the other way around. my time is expired.

>> they key very much mr. chairman. hell long have you been on the job? >> it has been about 34 days. >> all of this stuff just evaporates into air? and did not happen on your watch. >> i arrived late may and i'm doing my best to identify the problems. >> can you tell us something about your background? >> i have talked about this before in other hearings the reason why i was chosen and i appreciate congressman ryan comment that i have a strong reputation serving in leadership positions those with bush in the obama administration i consider myself to be non-partisan and across my career has

been non-partisan better government manage reducing fraud and improper payments and the wave of government manages real estate the way that the ranking member referred to me as a technocrat and i have developed expertise in public sector management. most recently with my role at the olin b. i developed a reputation and experience to tackle the toughest challenges in 2010 i you implemented the recovery act that was the largest of a complex plot that involves technical complexities and i was the point* guard to do it effectively. more recently i have been involved to help the government prepare for a shutdown, dealing with the sequester dealing with

sector challenges and i could distinguish myself to the leadership as someone that could handle a situation like this effectively. when you combine those factors when i was presented with this opportunity i said i will do this because will have a guiding principle i will work to find the right answer with the best interest of the taxpayer and the irs and if i can hold to those guiding principles thinking it is a smart decision to take the job to move forward. >> i want to thank you for your willingness to serve and put yourself in the way to make a contribution. have you feel about the

organization? >> when i arrived in late may we had a broken process clearly the ig report points to the misery of process failures and there is new leadership in place and i have a lot of trust in the new leaders ken corvine now is running the unit who is a process expert already inspiring confidence in me to working the issue to make the appropriate fixes and we have agreed to do all i g units in making good progress that hasn't been outlined in the report in taking steps above and beyond what the eyes you recommended because we think there is even more to be done to make sure we are extremely robust in those are also outlined we are making progress there is a challenging environment but

what i have learned to reviewing these applications for tax-exempt status is difficult because you are on ambiguous laws and regulations very few other areas in the irs the determination of political activity and a relevant factor to consider so this is a unique set of requirements and clearly when you combine those we had a failure but i am optimistic we have the right people in place right now with services and enforcement to get the problem corrected. >> i look forward to working with you. >> is a true one hedger percent of tea party applications were flight for extra scrutiny? >> yes.

the framework with the bolo. it is might understanding the way the process worked if it was tea party in the application was automatically moved into the area for further review, review, yes. >> you know, how many progressive groups were flagged? >> i do not have that number. our investigation shows there were seven. do you know, how many were approved? >> i do not have that number >> all of those applications were approved. i want to do follow-up on questioning from earlier regarding the attempts most of that time i was a homicide investigator so we had a lot of criminal intent so when you use the word intentional or unintentional

it is a flag for me to inquire further so you talk about criminal intent you said there was no attempt -- attempt. >> the questions being asked to with both criminal intent and other types like to which it could mean political bias but no criminal intent i am not a legal expert but i know that part of that ongoing review is to understand the nature of the circumstance. >> there are those that occur when i was a sheriff in seattle the criminal investigation is ongoing. sometimes the internal investigation is put to the side of a criminal investigation continues. are you in contact with those conducting the criminal investigation

defying any possible criminal allegations with the irs? >> the main point* of contact is the inspector general and his steve working directly with the justice department they give us periodic updates on their progress. >> you have any intermission it could be criminal? >> not at this time. >> so your report states they were subjected to overly burdensome intrusive questions that went way beyond the acceptable number but yet at the same time and the actions were intentional? i don't understand that how can you ask those questions

with information that was leaked to send in the program and intrusive questions and threatening of the donors i don't understand intentional in that light but to follow space my interest and your desire to be a public servant but in order for you to do that for the american public to have trust you cannot be vague and misleading in your statement given to this committee. after it was informed to put an end to the activity despite a request from congress on this topic. i understand how your

leadership could be unintentional and not reporting to congress. and your colleague to be nearly lost his memory. could you explain to me? and makes no sense to me. >> let me offer my best explanation. first to go back to the point* we hear questions from taxpayers if there was intentional wrongdoing we are answering that carefully that there is more work that needs to be done. >> i really can say that it was unintentional. you should not save -- say in your report that you found this was unintentional because you don't know. you don't know. is that true? >> there is no evidence. >> why did you say it was unintentional? if you don't know?

>> i did not say to make your time has expired. a answer briefly. >> to clarify said very clearly in the report that more work needs to be done to interview folks that this time we'll have evidence of intentional wrongdoing. we mint the different situation if a manager or employee thinks this is the right thing to do and how we should conduct my business and they could be mistaken and incompetent in total mismanagement how they carry out there duties which is different than them saying i know this is wrong but i will do it anyway because i have a particular agenda. that is the difference we try to distinguish. >> figure. >> do you need to more minutes of my time? >> no. the ig letter states there are at least two groups of

specialists to the irs that use the bolo. the first are dealt with those of have been flagged for intervention. second, the team of specialists in the touch and go and some progressive group applications the inspector general did not investigate how to handle with the touch and go unit. they looked into this? >> we're in the process that the report said start with the audit report of of the various materials the inspector general provided us are going deeper and broader than that and for example, that is how we found the bolo list going beyond the inspector general footprint and then of course, it was an immediate

fifth suspension but going deeper into the issue you see other categories like touch and go out so we try to understand what were the circumstances that caused the inappropriate political labels to occur? these are all questions via asking and i want answers like everyone in this committee but i will follow the process to get those answers and i'll be back in to those in the future. >> you are congratulated by those on the other side with vigor to pursue these different questions. then you are accused of not doing follow-up. there is some inconsistency as you figure how to pursue new information and data the the issue here is the

following. citizens united caused heavy irs to be flooded with applications from groups seeking 501(c)4 status and in large part the super pac it does not disclose the donors. that is what happened and as we try to an earth some of the questions were members on the democratic side pursue what we deem to be egregious it is obvious as well you have not finished your working you need to be given time and opportunity to pursue these cases. we all need to be outraged. we should not be afraid of the irs. but this simple point* is you would argue you need more time? is that correct? >> absolutely.

and every communication i have is that there is transparency into the process we are following and i want to be clear that the process we are following has certain constraints that we're moving as expeditiously as we can to get documents to the committee and witnesses interviewed, and materials furnished and a lot of the questions are materials we provided as part of the growing information we provided earlier this week. there is more questions to answer and i think the track record rea demonstrating his a diligence but also to do so. i won them as quickly as possible but it is absolutely essential to follow due process with

those organizations and leaders. >> we're all better off as a key as opposed to the accusatory tone that is suggested. you can see incidentally the argument has already shifted we move to a legitimate, criticism from the conference is a way from the point* of this hearing which is whether or not they are targeted by the irs a whitaker's to me that is weakening on the riverside. thank you. >> i agree but when disagreement i have with a

30 day report i don't see a sense of urgency the big picture is to have an obligation under seoul -- shoulders to restore the trust the american people with this congress and in your report with critical oversight organization to talk about the irs billiard to properly informed about the shoes even after a congressional committee specifically asked questions and we asked years ago. but in the acting commissioner letter i head of meetings and hearings and the letters fit the only response we got was that he took steps to ensure consistency. mr. brady ask questions earlier and you said you

disagreed with the characterization that the employees engaged in a cover-up but if you know, the truth, but there were false and the senior positions of the irs covering up what was going on with targeting, if you know, this then you are not coming forward. >> and what i said the earlier was that i am not ready to draw a conclusion he was asking a question in the way it would imply a was agree with the premise of his question. is there a cover-up? i know the answer but the key is we have to make sure we do the severalfold but yet they evade our questioning?

they're determined to sofar in the investigation we need you to have a sense of urgency. >> so the commitments i made today are to explore the fax including questions of that concern to answer more questions? and not draw a conclusion now but when of the important thing is in the report will be very helpful with to right in suggesting the irs needs to do is to more readily share information on issues within this committee. >> i want to talk about the bonuses. included during the time

targeting is occurring we know a quarter of a million dollars was paid out in those that are on the administrative leave at this point*. the first to resign received 83,000 and bonuses on top of the salary of 77,000. we also know others have received bonuses from the tax-exempt issues targeting but in light of all this we take any steps to put a freeze on this? will there be an attempt to recoup bonus money? >> i piggery when new look at the juxtaposition of individual management failures that went on in this situation it is very troubling and it is a part

of my larger conclusion that the irs leadership does not have time the understanding of what was going on with these activities to make informed judgments. second, i mentioned to congressman ryan to come back to additional ways to cut costs further and i think the bonus is an opportunity. >> put a freeze on it now. >> there has been some public miss understanding and i could clarify. >> but the trust of the american people has been broken. i understand contracts. >> here is the situation. i had a policy that in light of sequester but that guyton said it was subject to legal constraint it had to be

legally paid out but what is going on at the irs right now we have a bargaining unit we will bargain on the question of bonuses and my question is there is no question to be made about falling procedure i have an obligation if that is the decision that is made come i don't know because my first death of a legal requirement is to bargain that issue with the union and we go through that right now. >> we need a sense of urgency and the leadership. >> time has expired. >> thank you very much for being with us. we look forward to having you come back. i thank you mentioned everything you stated in your reports and everything

the irs has done so far to investigate this matter. >> that's correct. revenue say there is no evidence of wrongdoing it is as of this point*? >> i feel compelled to give the most honest answer i can. but at this point* in time to find evidence of intentional wrongdoing we have not. i a understand the confusion because the action still have been. whether somebody knows they're doing something wrong or incompetence or neglect of duty. we have evidence of neglect of duty but we don't have evidence someone knowingly did something wrong with political animus or criminal intent. that has not materialized yet.

>> you use the word of evidence. today there is evidence of wrongdoing. >> not intentional wrongdoing but managerial wrongdoing. >> today nothing that occurred at the irs to the white house? >> that's correct for topaz of today you're in the process of investigating? >> yes.

early stages of investigation and the inspector general is doing a thorough investigation saying we will not stop until we hear the full truth. so at this stage we have a half baked investigation to reach any conclusion means we reached half baked

conclusion so whether it is yours anyone to make accusations is only part of the information. >> to answer questions this is exactly how it happened is not a question we can answer yet but is there any evidence that any of this has materialized we can answer because we are in process. >> so far we appreciate that. we would like to have you back and we hope we would agree we have to have the inspector general back because he has some explaining to do. there is a lot he hasn't answered and some answers may not have been forthcoming. i would like to finish with 1.. this full investigation and

the 501(c)4 organization as you know, those are social wealth promoting under the law it applies to organizations that are not organized for profit but operate exclusively for social welfare. i am not sure you are aware but those same social organizations spent $256 million on political expenditures in 2012. did you know, that is more money spent than the two political parties combined? that is the crux of the problem that we have social welfare organizations that spend more manney than the political parties combined. when the irs is concerned some tried to gain the system that is why we have this investigation. we hope to have you back.

i yield back the balance of my time. >> mr. werfel, my constituents are afraid. they look at this hearing and listen to you and i accepted face value you have a good reputation from the past but they look at you and they are afraid. they are afraid of the power that you have, they are afraid of your political in dispassionate approach and i want to walk you through this to recognize the fear that they have because of the power that you have. my prediction is my a -- or country is that a tipping point* with an awakening of monks the government of the authority they have delegated to congress and they have misplaced with the irs and that authority has been abused.

, you use language earlier like i am furious and rule of law and frankly i would expect you to say things like that and i would be discouraged not to hear it you are familiar with the taxpayer bill of rights of 1998, a statute, it is very clear the internal revenue service is prohibited under the law from willful miss use of section 61 '03 for the purpose of concealing information from congressional inquiry. this is a congressional inquiry clearly, there has been a request by this committee of documents to be forthcoming by the internal revenue service and here is an example of two of them. they have been redacted to the point* of absurdity.

we have knowledge there is information in these two documents that is not subject to the 61 '03 protection so the entire section should be set aside. what i am suggesting is the fear that animates when they look at you is that we're not getting a straight answer. we see bureaucratic doubletalk, a bunch of nonsense and how can we possibly pierced through this? so low level of anxiety and the concern that you hear from committee members is the recognition of the of the abuses of power but now with the investigation comes up the committee based on a lawful request now doesn't get the type of the answers. can you assure us this type

of nonsense where i know beyond a shadow of a doubt, this information in these documents that should not be subject to 61 '03 that the irs is planning to assert as some levels this means to be protected? can you assure us based on your 30 days on the job that this nonsense will stop? >> i will give field several assurances, the first is the information you're holding off is not just the irs we have submitted all information to the chairman of this committee so the implicate chef that that is being held is incorrect. >> you know, the law. we're prohibited under the law under that see you have to release this.

that is exactly. >> let me get to my second point*. i went to understand that they henderson and that the second reassurance is there is tension in. >> you are not releasing the information pursuant to the 61 '03. >> i can answer. >> go-ahead. >> people understand the tension that exists we also of a solemn responsibility to protect the confidentiality of their taxpayer information and procedures are set up so this redacted information although we send them to the chairman of the ways and means and that there is a notion and a concern of over redaction.

>> this is junk. of has no meaning. we know it is not. you were hiding behind it. this committee will unfold the night -- to uphold the 1999 act to make sure the irs is forthcoming not to create a bunch of nonsense hiding behind a bureaucratic doubletalk. >> i know at the staff level mr. werfel we can raise the issue of overproduction. but it limits the ability for you to use it. so i do think this is an issue that is appropriate that has been raised and it is something that we probably need to pursue further. >> i think so but to be clarified, it is mind

standing, correct me if i'm wrong but the chairman of the ways and means committee you can release information if you think it is not 6103 sensitive. i cannot do that to the whole house. >> we have to have the experts involved. >> getting context of the final report and we're not there yet i can release information to the house but i can't single arbor shirley what is and what is not because senator baucus and patch received this as well but we do have concerns at the staff level there is the overreaction that limits the ability to use the information. i just wanted to clarify. >> we do receive the a

redacted versions of those are not shared. >> sorry mr. chairman i have is a blended. >> is thank you for your willingness to be here obviously to step in the line but you have a much larger duty to restore faith in confidence in the irs or even the issue before us today the exempt organizations. let me stare back to a troubling issue. obviously many organizations especially after services united plying -- applying for tax-exempt status, the inspector general looked into it and recommended certain steps are procedures

to do have additional ideas but the point* is these groups are not automatically entitled to tax-exempt status and have to meet qualifications. every time there is an organizational there that does qualify that increases the relative tax burden on organizations that don't. in the rule has been they have to engage with c-4 we got away from the definition of exclusively engaged in social laugh -- will fare but how do we move forward to do a proper review to ensure that they are qualified with the c-4 definition of social welfare status without being accused of them baa victim or political selection is taking place? how is it a generic neutral

screening process to pass muster of all sides it is still doing the tough job to screening of those organizations that should not qualify for the tax-exempt status because they are engaged with political activity. we know that is going on anyone here is fooling themselves to think that these c-4 applications are social welfare of the pliocene what has happened the last couple years of the political system. >> we have an approach that begins to answer that question but it needs to be a dialogue between ian us, with the irs and this committee and the treasury department plays an important role because there is a policy question to be answered but we all wind the certification program and we take a high priority backlog those had the keys -- advocacy cases more than 120

days offering a more objective review and if they test the not more than 40 percent of expenditures go to political campaign intervention at the same time a test more than 60 percent of expenditures and voluntary personal always go to social welfare then they are to be received an approval to go forward but they are two of the sf kiss like every other c-4 subject to audit your examination in the future. >> i just hope that the irs isn't subjected to scrutiny every time tough questions have to be asked in what activities but understand you will be set up for accusations here on forth from any group receiving scrutiny.

of that is amazing maybe there has not been more denials' applying for that c-4 clearly engaged in political activity that is the main purpose. so do they have rolled? >> we want to involve the tax payer advocate and in particular one of the main concerns that i have is when you look at the situation with taxpayers better frustrated not getting answers from the irs and frustrated by the overly burdensome questions they were getting, they did have an avenue and they did not exercise that to go to the national taxpayer advocate to raise greater awareness. it does have a track record to help the public saul's matters before the irs and individuals cannot do that on their own. we did not see that in this

report but to raise awareness and effectiveness of the framework so we can solve those problems. >> we have to go for do we look forward to working with you closely with the candid investigation because we have a role to play to clear out a clear definition and as far as c-4 applications and if there were rules for those who used it as a more objective criteria. we look forward to hear your recommendations as to move forward. >> thank-you mr. werfel for being here today. my first question is would you agree irs officials disclosing taxpayer information is proper and illegal? >> it is yes. what is the process that is

the official did leak taxpayer information to the outside group what is the internal process to summarize very quickly the handling of the investigation? >> we refer the information immediately to the inspector general who makes one of two conclusions. intentional or not. if not come within the next up what process or controls breakdown led to the unintentional release. those situations in verge but if it was intentional intentional, then it is referred to further investigation which is criminal or disciplinary action. >> mr. brady raise the national organization for marriage from 2008 to the affirmation was disclosed and passed on to the

human-rights campaign. based upon the testimony given by the national organization for marriage to pass that allegation to the inspector general's office with that investigation to the best of your knowledge? >> two responses. i am not aware specifically that i can give you that process but if you keep mentioning a specific taxpayer. >> has the irs past that? >> i don't want to comment specifically because i don't have familiarity with that issue. >> so you don't know? >> i will say there is a series of issues from the

inspector general for disciplinary action. where this particular situation fits and i don't know but i could get that for you. >> i would appreciate it. as also as a follow-up -- follow-up to the amount of money, a $46 million of child care tax credit checks sent to the one address in texas. a year, you mentioned on the issue why the checks are being sent for the credit, how do you verify the children resided at that place for a least six months? you said it was hard to confirm the child was there for at least six months. >> there is no facile childhood is database.

>> so of that is a criteria and you cannot confirm the child has lived there for at least six months why you sending out a check? >> i did not say it is impossible but just as challenging with a higher degree of errors. >> stuart knowledge they have sent checks to individuals that don't meet the eligibility criteria? >> it is called the improper payments. we have way too many and we need to work god that. >> so what disciplinary action had you taken? >> first of all, i personally have not taken any disciplinary action item know if it is appropriate in all situations. >> some individuals within the irs have the responsibility back to the taxpayer who is sending checks out and $46 million to one address to make sure

the criteria for the eligibility is confirmed but still said the money alan no disciplinary action was taken? >> we have to look further into the ash -- issue of. >> with anything that has done wrong has it take action? over the past year? >> in the aggregate way yes that is from the privacy act but i can share the information with you but not with the public. >> you can share that with the committee to see when the disciplinary action was taken under what circumstance. >> i have already taken a number of disciplinary actions so i do know that i have been involved in several of them.

>> it is hard to say will come this far down into the panel but i think all this committee is asking is that you be honest and forthcoming. >> always. >> in the light i suspect the process has been broken. >> i agree with that. >> do you agree the trust has been violated? >> i would agree with that. >> the irs targeted groups leaked information and targeted those donors for auditing. it is chilling. to say this is the kind of thing that frightens his constituents and also might as well. >> chairman speaking at to people like a former irs commissioner you said no.

former acting irs commissioner you said no. but sarah ingram you said yes. who is she? period she runs the affordable care act operation with the irs and i speak to her of the ongoing basis as part of my responsibility to engage with the senior leadership team with the ongoing relationship of the irs. >> what was her role during this period of time? >> that is a good question in the year looking and i will do my best. she was the commissioner of the tax-exempt government entities organization of leading into when these events occurred. the ig report starts to surface issues around march march 2010 when it starts and it is my understanding she served as a commissioner

of tax-exempt organizations in she served in that capacity around spraying or summer of 2010. that is an overlap so then she had her work to run the affordable care act. >> why should the american people believe the trust of the american people with the implementation and enforcement of the affordable care act by the individual in the tax-exempt status during this time in question and? why do they trust that individual? >> i asked them to trust in the process to get to the bottom. >> you understand that has

violated that trust already and candidly they won every individual that is involved to answer the questions prior to have any other trustee in a situation in their capacity? is that too much to ask? to make it is valuable in but we are analyzing and she is no different analyzing the footprint of responsibility with respect to this individual some complexity and out of the affordable care act in to

that point* have guidelines with the mandate of the irs? >> not at this time up. >> via understand correctly it will be this summer and then he would comply this fall have the rules been promulgating if? >> they were outlined civic have been promulgated with a part-time distinction. >> cabral's been promulgated with part-time workers? >> i will give the full schedule but i don't have it. >> there is a huge lack of trust of the enforcement the affordable care act it is extremely concerning i would urge you to get this

information to individuals who have to comply with all of the rules that you promulgated to make sure they are true to your roles as soon as possible. >> mr. werfel it appears that period of time that you have been here this morning morning, we're not pass the point* where members of congress would be speculating about cultures of corruption with conspiracy theories. if you check the last set of questions, first of all, i wonder why in god's name you took this job at this point* in your life you have a distinguished past, a very distinguished past if i took the last series of questions

the person not even in front of us to answer that but we can ask questions about anything but with both sides of the ideal they appear to be against singling out any types of groups this is what we are opposed to. i commend you for standing and standing tall and i wish you success in your job did you are trying your best. in your report, if you announce with the backlog of applications for the 501(c)4 status the irs will allow the option to give preliminary approval if they self certified they default

-- divulge the time on things related to social welfare. is there any reason this is not the existing standard for all 501(c)4 organizations? >> it potentially could be what we thought would be appropriate we have a situation with the overdue backlog, a situation where we clearly have had struggles to effectively implement the current regulation of primary and we came up that we thought it would be less burdensome on the taxpayer to meet the regulation a primary. >> how did you arrive at the 40% in the first place? >> keep in mind the irs role is to implement the

regulations as clearly and effectively as possible. we have the word primary what is the most pleasing wage understanding that we can defend and we came up with the conclusion north of 50 percent. >> who? >> the irs. before we issued its final that if your activities are greater than 50% you clearly are not primary. political intervention is greater than 50% if you're less than 40 percent we would thank you are in a comfortable safe zone to not be in the primary range. between 40 and 50 it gets tougher therefore if you for the taxpayer a andy believe expenditures are between 40 and 50% you go through the traditional review and we take a close look. >> that is why people applied to obtain the status and to determine from the

information they give you if they are more than 40% if they are involved in the political culture. >> we try to figure out what primary means in trying to figure out the inherent structure. >> once that receives approval will they be able to increase on the 40%? that is part of the application. >> if they do that they are no longer operating under privileged have to alert the irs. >> but they are allowed to continue? >> but the reason why is one of the key points you can operate as of 501c(4) without an application if there are two of entities operating that way if you have the application approved in those that never

apply but supply and the appropriate forms. be exempt from -- >> expired.. >> if they are. ing more than 60%. my hope would be we have a sect and exam and audit process that would identify this and work with the taxpayer to correct it. >> thank you.

>> mr. buchanan. >> thank you. it's been 34 days on the job and from what it appears you have a great background. let me ask you, i think you got cut off from someone you were going to mention -- and look at your résume here you put up here. you manage an agency of 90,000 employees. the intelligent -- budget is $11 billion a year. part of the reason you want additional money for the taxpayers, you said a dollar investment invested in enforcement gives you back such a return. what was the numbers you were going to tell us about that? that would yield more than 1.6 billion in annual enforcement revenue which is a return on investment which is $6 returned

for every one investment as i understand about the exexcessive expenditure that occurred in 2010 and 2011. >> we get five minutes. for every dollar invested you get $6 back is that what your saying? >> yes. that's what i'm saying. >> you heard the saying the power to tax is a power to destroy. i can just tell you that there seems to be a culture,ed at least from what i've heard, i've been here a little over six years, in the irs, there's a lot more money being in enforcement. you can destroy people's lives. i think so you to understand that. the power, the leverage, the magnitude of the irs, 11,000 employees, $11 billion in budget. it's not even a level playing field for individuals, and i look at a lot with small business. what i'm hearing from my constituents you want more money to go after more monies. -- americans. they are concerned.

it's been ramped up in this environment. i'm telling you what i hear every day. >> yep. >> in this environment trail dollar deficit people feeling like the irs is a lot more aggressive about coming after organizations especially small businesses and individuals. because in at the end of the day, you can win every time. you can say go to court, you need more cpa and lawyer. you never run out of money or resources response let me -- and go ahead. let me glan through that, if you would. >> row are raising an important question. and i think it's notable we are can dieted about organizational and individual failures within the irs. we are not claiming nothing went wrong here. we are recognizing there were significant problems and we're also recognizing that this remits an opportunity -- >> let me go back. because of our limited time.

let me ask you in term of yours. you said you manage 90,000 employees. is that a correct? >> i lead an organization that has roughly 90,000. >> who is responsible for the attitudes and the cultural and environment at the organization. >> it's a shared responsibility. the leadership team at the irs and the staff. i place a lot of importance on the leadership driving -- >> you are one of the leaders; right? >> saying with 34 days i recognize that. i want to make sure you have a balanced approach going forward. that you don't create an attitude or climate in the irs about going after american. i'm very concerned that it's more of a balanced approach. there's a sense out there that that's been heightened not just in the last three months but the the last five or six years. there's a sense that we have to make sure if you're looking for more money to go after more american, you get a 601 return, i'll tell you you are going win

at every turn. they can't begin to compete with the irs with the leverage and power you have. that's why it's so important as a leader going forward and your team of leadership is that has something -- it make some sense that we're not killing small businesses and as a result killing jobs. >> one final point, in the report, there's a direct commitment to address that question by doing a review across all irs of the appropriateness of the criteria and filters and activity. hold us accountable for the objectivity of the review and in the report, we are going share the results of that with you and with the american people so we can -- >> you understand it's not a leverage playing field. you realize if you want to win at the end of the day you are going to win. they run out of money. they like to get the day in court or like to resolve it. they can't afford what it costs to get the day in court. so i'm just telling you as someone that has seen the environment, and what i hear every day, you have to be careful in how you move forward

in terms of going after americans. >> all right. thank you. mr. smith. >> thank you, mr. chairman. thank you, commissioner, today. how long have 501(c)(4) been around? >> i think -- i'm not exactly sure. but it's decades. >> they've been around awhile. >> how long do you think an application should reasonably take for approval? >> we have a standard of 120 days. >> and obviously many of these cases exceed. >> yes. absolutely. that was unfortunate and needs to be fixed. >> and you have indicated that no intentional wrong doing has taken place to your knowledge? >> yeah. again, the evidence hasn't surfaced yet. i would caution that more analysis review and investigation is needed. >> so that would be an incon clues i have finding in term of the -- >> right. in other words if the taxpayers is going ask what -- has there been any evidence yet. no, not yesterday. more needs to be done.

that can be term conclusive. i'm not going argue with the characterization. >> and sifting through the many documents that we've had over the last few weeks, we know that there have been very exhaustive lists of questions asked of applicants. is that correct? >> that's correct. and we're talking about requesting lists of books read and reports associated and ask in membership, list, volunteer list, whether or not an applicant intended to run for office or a family member of theirs run for office. would you -- [no audio] >> do you agree it took a vast number of resources to even come up with the questions? >> i don't know how many resources it took, but i would agree that that we needed to stop asking a great number of questions that we are asking, and revisit and change how we approach our outreach to taxpayers. >> okay. and i appreciate that. it just strikes me as difficult to sort through all of this

when, you know, we are being asked for more resources for the irs when it would steam me there were some existing resources, perhapses, that were misappropriated, certainly misapplied as it relates to overreach in term of asking applicants the question. and so moving forward, i would hope that we can accomplish our objective of reducing the complexity of our tax code that i think -- [inaudible]

as the weeks have gone on, we have seen that there is a culture of intimidation. but no from a white house but rather from my republican colleagues. we know for a fact there have -- further and deeper in to this investigation. my fear is the ig, appointee of george w. bush, a former committee starer of the oversight committee chaired by darrell issa drafted a report that suited chairman issa's personal ideology, and not the

facts of the case. we then saw members of the majority party make basis claims about a so-called white house enemy's list. and ideological election year targeting, again all false. in fact, we know congressman issa knew about the targeting investigation in the summer of 2012, well before the national election's occurred. does anyone think for a moment that there was a white house targeting of conservative groups before the 2012 elections that chairman issa wouldn't have said anything about that? he would have sat back and said nothing about that? then, as we see, the progressive groups were targeted side by side with their tea party counter part groups. the chairman of the committee excused that, in my opinion. both in public releases as well as, again, here today in the opening statement. there's been no outcry by the

chairman or the republican colleagues when progressive groups were also targeted over the past three years. i'll point out in this may 21st system of holy who was interviewed by the committee, this committee, and the oversight committee which was asked the question concerning the tea party investigation and they're being investigated. it did it raise any questions with you? her answer was, i quote, no. of exceptional to liberal organizations that supported the democratic party. i had no indication that we were not being balanced in what we were doing. our committee knew that testimony was given. and yet, there was no outreach. just as there was no republican

outreach when the bush administration targeted christian charges and environmental group and the ncaap between the years 2002 and 2004 when they were being investigated by th irs. yes, i agree there's a culture of intimidation going on, but it's not by the white house. it's by the republican colleagues. that's why we demand that they be -- summoned to the committee to answer questions under oath. we demand that it stop so progressive groups will feel comfortable testiffing before us here. right now, they are not comfortable coming before the committee. and the chairman's continued silence or excusing of the abuse of progressive groups makes it harder for these groups to come before us. if we plan to get to the bottom of the investigation and hopefully, hopefully be able to tackle other legislative issues that have coming before the

committee of great importance to the committee. i demand it be stopped and they be as outraged as we were outraged. democrats were outraged and we express our outrage when groups that we don't agree with politically or aid logically being attacked or intimidated or investigated by the irs. i would like to see a modicum of a similar outreach by a republican colleagues for what we held when folks testified before the committee. we don't politically agree with but stood by them. >> the gentleman's time expire. i refer the gentleman to the opening statement i mentioned that progresses were to be on the lookout list or the bolo list. >> the chairman yield? >> no, i will not yield. >> it was the outrage. >> i thought you were talking

about the sort of mod cum of the committee and yet the gentleman continueses to interrupt the chair. you had the five minutes. you referred to me by name as the chairman i'm going respond. i refer the gentleman to the opening statement where i mentioned progressives on the lookout list. i made one thing clear no taxpayer regardless of -- affiliation. i yield. >> thank you, mr. chairman, before i begin my question, i would think the chairman has been more than accommodating, more outreaching to the other side. in fact, the chair would indulge when we had the first hearing where we invited witnesses who were victims of targeting, the chair asked for witnesses from the minority, and would the chair remind us how many minority withins were submitted? >> there were none. >> thank you. mr. werfel, welcome. >> thank you. >> on page 1 of your report you

submitted, you outline a proposal to eliminate the backlog of 501(c)(4) applicants that are currently before the irs. you specifically suggest that to eliminate the backlog, you asked for the 501(c)(4) applicants to certify under personality of perjury that no more than 0% of the expenditure and volunteer hours and the remaining 60% would go to the promotion of social welfare. if certified it would be approved in the next two weeks. >> that's correct. i like to bring your attention to a specific case and how it would fall under the category. specifically the 60/40 rule you proposing. >> a hypothetical case?

>> a real live, 48-hour ago case. >> i might have difficulty in answering. >> let's try it. on tuesday the president unveiled the plan to cut greenhouse gas emissions. within hours, millions of e-mails were sent through barack obama.com, the url owned by organizing for action. a 527 organization, within the e-mail, it asked on the volunteers to, quoting with call out via twitters, letters, e-mail, facebook members of congress, that are quote, climate changed deniers. the action item doesn't suggest they should educate but call them out. this then links to 85 plus hebes of -- members of congress they would like to be targeted. all of whom are republican. when of whom are on the committee. under that circumstance, i'm

wondering whether or not that activity, those hours and money would be classified under the political company activity or under the promoting self-social welfare category. >> it's a good question. you are getting to a territory where i'm not the legal expert. i'll do my best to provide some clarity as far as i understand this and the rule of law here. i understand that the political campaign intervention -- i'm answering these questions as a broad matter. i don't want to get in to 60103. how it's in the broad context of how we think about the political campaign intervention. it doesn't has to do in the key issue is the entity seeking c4 status inby a particular candidate or posing of a particular candidate. and the flail election commission provided guidance to help us on that. when you have a situation in

which, for example, an ad mentions a candidate within thirty days of an election, they say, there you go. at that point in time you have political campaign intervention, but if they mention that candidate 120 dais before an election, it's not as clear and more work needs to be done. to get to your question it's a broad matter. one of the phi questions i have in analyzing it. i think the lawyers who are experts in it is there a candidate involved, is the activity intended to influence the outcome of an election? >> there's 85 members of congress specifically targeted. >> again -- i don't want to get -- >> as i understand you don't want to get too specific. the point i'm attempting to make is that the rule you are proposing requires the applicant to make a determination. >> correct. >> as the commissioners of the irs is proposing the rule under nonhypothetical but a real-case situation, if you can't make a determination, how can we then

ask a nonattorney, nonirs commissioner, nonirs employee to make that same determination under penalty of perjury to classify their activity as either advocating for promoting social welfare or political campaign activity if we're going limit it under a 60/40 rule. >> i was talking in a general level. there are is a specific guidance we can provide in our application, and in the self-access station -- that we ask the taxpayers to look at and determine whether they are meeting cite tiara. right now me are fibbinglating to the tax bayers is -- in the material that's taxpayer receives in term of how exactly how to answer the question. den, it has to do, the key issue is are they attempting to influence the outcome of an election? now, you take it from there and do further an lettic and the

taxpayer can determine whether the expenditure will go higher than 40% for the activity. >> i realize my time is expired. i would like, if i can, follow up from the irs on exactly how this new rule would then be enforced whether it be additional auditing, whether it require additional personnel to enforce. >> i can provide for the record more specific guidance we give the taxpayer. it was handed to me. it might not be in the best interest to read it outlaud. >> i think you commit it to the committee and make it available. mr. paul zen is recognized. >> thank you, mr. chairman. mr. werfel, you opened your report with the finding. they used inappropriate criteria that identified for tea party and other organizations applying for tax-exempt status based on the name or policy position. were some of the organizations targeted for the -- were they asked for their donor list? >> i believe -- to my understanding roughly 27 enientities were asked for the donor list.

>> do you know if the donor lists were used to target individual dmors for the irs in audit? >> i don't have -- how it was used. i think that's part of the ongoing review. the reason i'm asking this is because part of the report on page 31 of the enforcement section it states all current indication are the political activity ambiguity does not occur elsewhere in the irs. it seems definitive. how can you be sure? >> what i was referring to was -- there's four main operating gigses -- divisions within the irs. the one that is the subject of this audit report is the tax exempt government entities or. the conclusion reached in the report is right now in area in -- dealing with individual taxpayers, small business, and large business those areas we don't have current evidence they

inappropriate. we asked our leader to look at it. we are going run a review. one of the reasons question by assured in the conclusion it's very rare outside of this part of irs that political activity is relevant to any determination. >> why it would assume many of the issue should be considered rare to occur in the first place. i know, there's a publication. it's a decoration of taxpayer right. it's states up front protection ever your right. irs employees will explain and protect your right as a taxpayer throughout your contact with us, the irs will not disclose to anyone the information you give us except to authorize by law. we know that has already been violated. and the information has been leaked publicly. you have the right no to know why we were asking you for the information, and how we will use it. we know that also hasn't been followed through. the organization testified before the committee that they asked the irs why is the information was being asked for. there was no response

forfollowup. lylet me tell you, i have constituents in my direct who are fearful. who have come forward to me concern they also have become targets because in recent years of audit that have been stepped up by their accountant, the finance planners, basedden -- they are concerned ting happening because of the political activity. other members of congress on the committee and the entire body have expressed same concern. several told me the person story of the accountant telling them we have never ever in the list 77 our experience -- we keep the receipt and the books clean. we monitor your activity. we never had this type of systemic auditing on a individual to this level before. we know that information on the individual donor has been collected, we know that information has been leaked. we know the audit have been intense intensified on individual. i think there's from my

perspective the report before us has a glaring mission. what assurance can you give the american people and the committee to making sure that individual taxpayer rights are being protected and there's a plan in place to make sure it will happen? >> two reaction to i probably should have said it earlier to the committee and the chairman. to the extend there's particular areas me along with the irs would be very interested to have the feedback and commit to exploring those questions with the committee and figuring out the best way to get answers. our goal with the report was to present a road -- several things. to recognize for the taxpayers, part of the reassurance and the path forward to recognize our failure upfront. to recognize that we made fundamental mistake. there's more questions to be asked about the nature of how those mistake os curred. we recognized those mistakes

exist. we want to show the american people in the report we recognize them and we're putting together an actively implementing corrective actions to move forward. question brought in experts public sector management to help lead the irs going forward on these new activities to -- and some of those activities involve reviewing our current operations to ask the very questions you're asking. >> let me ask you this, as my time run out. but there are several employees, and you have described how you have to go through appropriate procedures. are you seeking removal of miss lerner. does congress need to have legislative changes that would allow you to hold the employees accountable to make sure that the trust is restored for the american people if you can answer briefly. >> yeah, i will answer in two ways. one, respect to a specific employee. i can inform you of the current action. i have to do it in a nonpublic

setting to protect their right. there are due process procedureses in place for federal employees with respect to how they are displained or potential removal are handled. i'm not going commend on whether they are good or bad. i know you have been on the job roughly a month. and i'm sorry but some of my colleagues seem to be confusing you with the main decision maker at the ire. so just to clarify a little bit. you are not personally responsible for things like tax refund abuses or conference spending abuses or bo house abuses. that's not your position, is if? >> no. i'm here and want to standby my irs colleagues. i'm here to make sure any actions occurred before i got there are that need correcting

are getting correcting. you seemed a dissipation nate. there are rules you need to follow as you investigate these alleges. >> i don't feel dissipation nate. i feel concerned and i think the report has important language about failure of leadership and management that are very critical. yes, that concern and that sense of urgency, which i certainly

feel -- required. and i can't reinforce mistakes that the irs made in the past with new mistakes of not following appropriate procedures that are required by law and regulation. i appreciate that. i have a legal background. maybe others don't appreciate that. i would like that point out that, you know, wild west vigilantty justice was swift but not correct or fair. would be mistakes in how the investigation is handled and if it were to be done tastefully and not thoroughly. i don't think it serve the american public. >> i will be back here before the committee answering tough questions how we didn't handle it fairly. we are going do things by the rule of law. >> i appreciate that. the inappropriate criteria was

used by group of irs officials and selecting certain applications for further review. is that a fair statement. >> yeah. that's our finding. there were inappropriate criteria used. similar to what the ig found. during the force of your continued investigation, that assessment were to change, that would be in a updated report, i'm assuming. thread them being used. >> thank you. i appreciate in your initial report -- and certain suggestions moving forward in ways you make the process a fairer and sort of more transparent one. one of the things i wanted to ask you about, because it's something that perhaps is little known, your report suggests that the taxpayer advocates office

scrolled helped exempt organizations that were struggling to have the applications processed by the irs. they can play a critical role helping taxpayers -- they do very effective job in many situations, i think in looking at this situation in particular, we noted a very smaller dmin use amount of characteristic between the taxpayers and the 501(c)(4) burdensome requests and all of the things they went through. there's a lack of connectivity between them and the national taxpayer advocate. that's a lesson learned for us. we want to try to educate them better on the avenue news they have to help when they are having trouble resolving a matter with the irs. >> do you think that broad education project can make people aware of the fact there even is a taxpayer advocate would be beneficial. >> that's one of the

recommendation in the report. we are committed to it. much has been made about the funding and spent at the irs. there's been a request for additional funding for enforcement. by the same token, they don't want to pay for them. and on the other hand too much enforcement pits the little guy against it the irs. >> what i want a opportunity to do is demonstrate two things. one, that the irs is making real progress in eliminating unnecessary expenses and cutting our budget. taxpayer service we are going position the irs for success in the future.

>> thank you mr. chairman. in one of your first day on the job i wrote a letter addressed to you asking that you find out the status in my group. the tea party. is it your representation over the next week or two weeks that this organization will receive the determination? >> let me answer that question carefully since you named a particular taxpayer. i have to be very cautious. i will list out your question and say that all tax payer that are in our priority backlog who are in this advocacy group that are more in the backlog for more than 120 days will receive a letter from the irs this week explaining their option to self-certify and get an expedited approval if they are willing. >> this particular group joined in a lawsuit with the aclj.

will that lawsuit have any effect whatsoever on the determination of that group or any group inside that . >> two responses. i definitively don't want to comment on the lawsuit. secondly, i'll repeat my earlier point. if they are in the backlog, they are getting the letter. >> so there will be no retribution for a group that joined in -- >> it would certainly be the policy of the irs to not have any type of retribution in the situation. yes, they will receive -- if there is an entity if there is an entity in the backlog, it's our intention to send them this letter. and if they don't receive the letter for whatever reason, then they should immediately re-- they can reach out to you or whatever -- the committee or the national

taxpayer advocate and look in to it. our intention is try to see within every entity in the backlog to exattendant proper letter. >> on february 11th, cub committee i served on, wrote the acting commissioner a request to produce a star "star trek" -- they asked for the cost of the "star trek" video and any other video produced by the irs with the resources. two months later, and three leaders later, we had these "star trek" video and the cost estimate in hand. it turned out it was produced for entertainment for the famous irs convention that was mentioned. imagine the committee's surprise when late on friday, may 31, i

believe you have taken over, in an effort to get ahead of the report, expected the following -- the irs about the irs's lavish spending at the conference. it turned out that this video depicting line dancing, and irs employees was also produced in the 2010 conference. it was wrong for the irs not to undertake a good faith search for other material. we that was not on your watch. when was the second video brought to your attention? >> very early. very obviously in my term. it was one of the earlier issues that was raised to me in term of it was my understanding that the committee had a request for a video and we were delivering them. >> if you are produced immediately to the committee? >> it's my recollection once we

became arare and it was -- we provided it. i think there may have been a need to redact some of the names to protect personal privacy. i think we turned the video over to you very quickly. did you or others in the irs directly consult with the -- to produce the video to congress? >> how to produce it? i'm not aware of us consulting with the irs -- with the treasury department on how to produce it. but i'm necessarily don't understands your question. >> let me follow up. the lack of transparency pertains to a villely video, and being from texas very bad line banning. now, for something more consequential they wrote to ask about all documents contain the word tea party. you wrote back on june 7th,

did you consult with the treasury on any of the response you had the committee before you responded. >> i talk generally to the treasury department about our response with the committee to make sure that i'm giving them an update on various request we are receiving and producing information. i don't have a particular recollection that we talked about this letter. in general we taunt -- talk about discovery request we get. >> thank you. mrs. blackman is recognized. >> thank you, mr. chairman. thank you, mr. werfel for being here. and helping us to work through the situation. i want to start by saying that the very basis of any relationship is trust. and we certainly see here that the trust has been broken. there's no doubt about that. i think prior to all of this being revealed over the last several months here if you would

have asked someone what kind of reaction do you have if you get a letter from the irs. they would have already said i have fear, say that are powerful, even if i haven't done something intentionally they're going come down on me. it's not an organization that is going help you work on something if you done it properly. a lot of uncertainty. there was already this image of the irs with people prior to this, and i think that this is all just confirmed. what their feelings were. there was a distrust and a fear. and restoring this trust will be difficult. i want to go back and chronicle a couple of things that have been said here. i'm going add one to it. obviously we're here for the targeting issue. that's what the hearing was called for. but also we heard chairman johnson talk about it, and i was on the committee and heard mr. miller, i believe was here

the day we talked about the abuse of the earned income tax credit that results in billions of dollars inimproperly being sent to people. there wasn't a concern we could work together fix it. we actually had to bring legislative action to fix it. chairman ryan talk about the misuse or the inappropriate use of funds on these activities. over $100 million. the chairman talked about bonuses being given out to people that perhaps were even involved in this. we can't be assure that the bonuses really bonuses that they deserve. i want to list on the report that showed that $1.7 million recipients received over $2.6 billion of improper payment we couldn't confirm they attended a school they were asking for the tax credit for on the american opportunity tax refund.

and so we see over and over again if this is not just about what is happened here in targeting that is a very serious issue. but it's a culture. there's a prevailing culture within the organization that leads people think when they turn on the television night after night and see one thing after another after another. there's a reason to distrust this organization that has so much power over them. my question for you is in your report you report here there were three thing you are looking at. accountability, fixing the problem with the tax-exempt status, and the third area was a broad review of the irs operations and risk. are those three things only related to what is happening with the tax exempt? or is it something you're going look at overall? >> it's broader. i mean, in section three of the report what we attempt to do is draw four general conclusions coming out of the issue with

respect to the ig report and ask questions about the broader applicability of those four areas in to the rest of the irs. and we analyze each question and come up with a series of actions intended to deal with the issue. for example,ic an important one is taxpayers not getting the appropriate customer service or treatment by being in a backlog too long and getting inappropriate questions. >> okay. i'm going interrupt you. i'm going to be limited on my time. >> please. >> i want to go to another question. what i would like to know, i would like to your plan. i know, you can't give me the whole plan today. given what we're seeing here, there is got to be a plan to show the american taxpayer that i can have confidence. they can trust the irs in their most personal information. >> an initial blueprint of the plan is here and section 3 of the report. i would love feedback on it. and certainly there are places we can fill out and do more. i think this is a -- the report is about starting that dialogue.

>> i'm going run out of time here. i have one more question. your report states you have found evidence to date that anyone outside the irs had any role in initiating or encouraging tea party targeting. the question that i have for you is did you don't con clues bying asking the white house or treasury officials whether they were aware of the activity? >> we came to the conclusion by looking at the evidence we had which was a variety of documents, e-mails, employee interviews, a lot of the conducted by the ig and audit report. >> so -- you -- >> essentially we looked at the evidence we have. >> okay. >> he said there is more evidence that needs to be looked at. >>. i hope you will have conversations with those in the white house all wait up to the president and that will be a party of your report that closet back as well. thank you. >> i yield back. >> thank you, mr. davis. >> thank you very much, mr. chairman, and commissioner, thank you for being here.

like a number of other people who have sort of expressed interest in the fact you would take this position and even asked why i think i have come to the conclusion of why. i think you know it's a very difficult situation, that you are going have a tough job restoring trust in the agency by the american people. but i operate from the premise if there's rich useness in the heart, there's beauty in the character. and listening to you, all of this time this morning i get the impression that that's really where you are. and that's what you really want to do. and that is how you are going manage it agency in a balanced kind of way.

ed a earning to the practices with policy, and point of law that have already been established legislatively. that that is what you are supposed to do. i've been tremendously impressed with the report that you have issued. and there are some things that jump out at me. one is the fact you are ready to make some rectification for those groups and individuals who feel they have been harmed with unusual delays of the process of their applications. even to the point of self-certification how would that work? how do you propose to have it work? >> well, this week the taxpayers that are in our priority backlog for more than 120 days will receive a letter that will explain this new program that we

have that would enable to them to gate fast-track approval if they are willing to certify to these particular fact and reality. as i said, it has to do the expenditure and the voluntary person hours and not exceed certain threshold. this they feel comfortable, they attest to that's the way they're going carry out the operation with respect to political and social welfare activity, they will sign the document just like they signed the application today. snit to the irs and we'll give them an approval. if the activities change, they will be required to let us know. and it's possible -- like with any taxpayer they could be reviewed on awe -- if we find compliance we'll move forward and if we find noncompliance we'll move forward. >> i know muchover conversation has been about questions and activity that was outside the

realm what would expect. i know, that history is history. and that difficult to change what already happened. it's to the impossible to make sure it's impossible to happen again. you mentioned in the report there are sirn risks that -- certain risks and information relative tow operations in the entire agency the commissioner's office may not have had enough information about. >> yes. >> and that you would want to seriously analyze that. how do you change that information gap that may exist? >> when i came to the irs, i recognized that across the

organization i dot believe today there's enough work being cone to both identify, cart grise, understands, emerging risks and operational challenges within the organization. so the senior cloip understand the issues and deal with them. not just deal with them by having transparency it automatically triggers accountability for them. it create an environment which the leadership and the division ritz working together toward a solution. it enables the leadership to push the information out earlier in process to the irs oversight record. the ig if necessary, to the committee if necessary. the way which we capture the

information and report it up. it seems very textbook, and it's getting at the fruit of the issues the committee is raising. >> thank you. >> mr. young is recognized. >> thank you, mr. chairman, and thank you commissioner for being here today. you are entering this organization at the difficult time, your organization like all others is only as effective and good of the people that populate it. and by extension, the extoant which we hold people accountable. we have many good public spirited, conscious public servant working in the irs and other educations -- agencies. we must ensure we don't put forward any base list or disciplinary action with respect to the individual. i know, you agree with that.

any preference would be to hold the individuals, however to the same standard that other workers around the country outside of the federal government must pertain to. you have said time and again during thing we need to discover the fact or some variant of it. first discover the facts, weight -- wait on the facts to emerge and take corrective action. entirely reasonable, i agree with that. it would presume my apply to personnel as well. we have taken bold action with respect to management failure within your agency. replacing four individuals, five positions inspect is displayed in the plan of action here. what i want to know is specific facts have you collected which justify the replacement of steve? we'll begin with mr. miller. >> okay. as i mentioned earlier, the of

that level of the organization we perceived in our review that deficiency in leadership and not understanding earlier in the process the earlier challenges happening with the exempt organization unit. the concern registered by taxpayers. a lot of activity going on in the ig report should have surfaced to the leadership before the ig brought it. >> what do these fail to do were there signal that existed that he failed to identify? did he fail to put in place quality control mechanisms that should have existed? this ought to be documented. you know, i know that throughout our federal government, union protections for your rank and file workers are typically also applied at the higher echelon of management. you had to overcome a pretty high threshold of evidence before the decision was made to

replace steve miller. or any of the other individuals. i want to know with particularity why was steve miller replaced, commissioner? >> let me first state, i was not the irs when the situation happened. that was a decision i think that was determined between mr. miller en, the secretary of tissue i are, and on term of whether the confidence has been lost due to the current situation. it hasn't been documented -- have the reasons for that decision to replace mr. miller been documented? or could they be articulate bid the new commissioner yourself? grow bay slightly different time. i think i'm -- the report is in part an attempt to provide we talk about particular -- i think we identify them as failure within the commissioner's office to i think these are the exact words to

identify, prevent, correct, and disclose the information that -- >> all right to my constituent it seems like a lot of washington speak. you are taking up my time. i have five minute. i appreciate an answer. maybe i need to ask the question in a different way. i'll move to a different individual. how about joseph grant. can you tell me with spes necessity why joseph grant was removed from the position as acting commissioner government entity division? >> again, let me take a step back and make sure i don't violate anyone's right of privacy and don't impugn any particular individual. because there's -- these are organizational layers, these failure group of individual and organizational. i don't want to necessarily place the holistic blame for the situation on the individual. there was a collective organizational failure there was particular individual failure. i don't think in twenty five

second. >> i don't either. because you have used the clock. you are down to the end. i appreciate the answers that have been forthcoming. i would like to know, i would like do you report to the committee what disciplinary action beyond replacement of the individual has been taken. >> we can provide it to you in a different setting. >> perhaps you'll think or acquire mean the reasoning behind the separation and communicate with congress as well. thank you. >> mr. keller. >> thank you. mr. we are fell, i was thinking a long the same way as mr. young coming out private sector. you have a great deal of concern for the folks that were asking you to take a look at right now saying heim sure we don't violate any right or privacy. ic that's a very -- and thing is your desire. but in western pennsylvania people asked me about, you know,

why are they able to do this and why are they able to continue doing these things and nothing happens? what i would like to say is, you know, our rule as congress is to be here for the people that we represent. the voters in office. my i guess my question we're concerned about the individuals' right of privacy, but these folk that were targeted we continue have the same amount of concern. for all the idea about my right, my privacy, all of those things seem to be secondhand to an agency you are running right now. there's over 90,000 people. is that correct? >> yes. and $11 billion budget? my goodness is there any doubt that anything this big and expensive could possibly be reigned in? i don't understand how you are going to do it. i think it's a noble idea but i don't know how it can be done. moving forward, tell me the people that were let go, what

can you do assure the american people that -- they haven't been let go, have they? >> there's a combination of personnel a,s that have been taken. >> nobody has been let go? >> yeah. there's -- again, there's been -- >> but. >> left the organizations. >> they were let go. >> has anyone been fired yet as procedure -- matter. >> no. the way government works they question deployed. i haven't seen anybody get let go for anything. i don't know you don't have a lot of tool on the toolbox when people go on a leave of absence it's all paid. the americans say. >> people get fired from the federal government. >> i understand that. t a process. as i understand that. my two and a half years here, any of the wrong doing knob ever let go. they have been e are deployed and repositioned.

mrs. lerner people are pleading the fifty when they come before the people's house to answer questionses about something that can be involved in. i know, there's a rule of law. i can appreciate that. it adds to the publics' distrust. i know, you have a large job on your hands. as we go forward, you said to start off, let me be -- more investigation needs to be done. how long do you proceed it going on for? >> that's a good question. i don't want to lock in to a particular time frame. i want to make sure that we follow the facts whatever they take us. i would anticipate that over the next, you know, two months there will be a material amount of interviews and document review that would enable us to revisit the issues and see where we are. i think that's probably the right compliment of time.

would i say it was over at the point? >> no. it seem to be a good milestone to check in and figure out if we learned -- >> so far what i have seen there's been a lot of wrong doing or somehow things weren't handled the right way. nothing you say was intentional. >> at this time we haven't seen anything. we are taupe the fact it may have occurred. we want to make sure we're doing the right due diligence. >> i understand that. just to switch quick to cincinnati. >> yes. >> if it originate in cincinnati? does it go any deeper? can you tell that? >> what i think is important -- >> i'm run out of time. >> here is the plan i want to make the point. the individual that supervisors cincinnati office. back in washington, d.c. >> as i understand the answer is no you -- you don't know yet. >> i was offering more than that. we don't know the answer. if you want me to expand. >> i continue have the time. i don't know the definitive

answer to the question. >> okay. is there any doubt in your mind that it doesn't lead back farther? >> i don't understand that question. >> is it just cincinnati or does it come toward washington? >> i was about to say there are people in washington, d.c., in particular, for example, the position of director in agreement in my -- >> okay. it could go -- >> the person in d.c. there are five levels beneath the commissioner's office. they are involved in the activity and office in washington, d.c. >> okay. i appreciate it. i want to tell you the people i represent in pennsylvania do not -- for any -- they don't believe right now there's going to be a serious inquiry in to this. they don't think that the irs is going come out of the it outer administration will do it. it's going to be up on us to continue to look for what the answers. i wish you luck on the job. staledst critical to faith and trust to the people discovered right now their tarng is running on zero. we haven't seen anything that makes sense to the american

people. it's fair and just to them. i was watching the question it remine med in the day of the private sector life when i was hired go in to bad situation and turn them around. that's what you've had to do. i had to report every week in bankruptcy in situation as trustee representative. one of the things that people wanted to know those what are you going do to change them? how are you going fix them? i think those line of questions american people want to hear. and want to hear the answer. i have at love questions i'm going ask for yes and no answers. if you want to go back we can. did you talk to the tissue i are about your testimony and discovery today? >> yeah. i can consulted with the treasury about the hearing. >> did you submit your testimony? >> my testimony today was the report. so they had the report. >> the rsh -- tissue i are make any blank

or submit today? >> i wouldn't say correction. i was keeping them informed of how -- >> did they make any -- and, you know, they offered kind of high level suggestion. i don't think we got a line from it. guidance. >> you discussed it okay. >> ranking member levin said that targeted groups should be relieve of the duty. i made a quote with that. i agree with him. do you agree with him? >> i believe that if there's management neglect or inappropriate conduct, then it depends on the nature and extent of the management. >> if they targeted groups. >> intelligence intelligencally why we. >> you testified there was intentional wrong doing. there was wrong doing? >> i said there's not evidence yet of intentional wrong doing,

yes, i would articulate there's wrong doing. >> you testified i said i have at love question. >> keep going. keep going. >> you testified there was neglective duty. you said it earlier. it dow believe. >> yes. i do. there was wrong doing and neglective duty but no intentional -- >> there's no evidence yet of intentional wrong doing. i'm not going reach a conclusion until all the evidence is obtained. >> okay. do you believe targeting of individuals organizations for political purposes is illegal? request political bias? >> yeah i think there's potential legality. >> do you believe there's wrong doing. >> yes. >> neglective duty. >> yes. >> did the irs seek removal of mrs. lerner. >> i can't answer the question in this setting. i can answer it in