.. reviewed in their audits and receive tighten scrutiny. three and, the inspector general didn't research how the term progressive was added to the screening list or how the cases were handled by a different group or a specialist in the irs. the failure of the ig of dayton

to acknowledge the fact is a fundamental flaw in the investigation and the public perception of this issue. i wrote and asked him to explain these omissions. all committee democrats have asked you, mr. chairman, today that you ask him to return to the committee to provide the appropriate context for his report and ask the questions under oath regarding all these matters. it has an obligation to fully understand the manner in which they conducted his audit. a deeply troubling is that when asked about the new information has come to light, the treasury office initially said in the media reports, and i quote, that the audit report answered questions it was asked to

address and the house oversight committee chairman darrell issa had requested that investigators merely focus on the key party organizations. we asked him tigta about this in the letter and he responded, quote, many of the press reports are not accurate. if these are some of the reports are accurate, tigta's initial explanation of the scope of the audit is inconsistent with the audit work in the truth 13, 2013 audit plan, and the stated objective on the first page of the may 14th, 2013 of 8 report. the state objective was, and i could come to determine whether the allegations were founded that the irs won the targeted specific groups applying for the tax-exempt status to delay the

processing of the group applications and number three, request u.n. necessary information from the targeted groups. the ig failure to be forthcoming in the congressional hearings even when asked directly if there was a screening list for the progressives and whether they were included among the 290 applications reviewed by tigta has contributed to the distortion of the entire investigation including the use of innuendo and totally unsubstantiated assertions of white house involvement. democrats have condemned the singling out of the tea party by name. i hope our colleagues on the republican side of the ogle will join us in condemning the use of the term progressives on the screening list and the failure to be forthcoming with this and other congressional committees. we have also been supportive of

letting the fact lead where they may. none of us including the acting irs commissioner can describe how an application was processed once it was screened. i caution my colleagues from jumping to conclusions until we know all the facts. searching as the only way the we will get back on the course that i hope it is our mutual goal. the fixing of all of the problems at the all irs and restoring the trust of the american people. >> thank you to read now we would like to introduce the witness, principal deputy commissioner of the internal revenue service. >> thank you for being with us today. you will have five minutes for your oral remarks and you are now recognized. >> chairman, ranking member levin and members of the committee thank you for the opportunity to appear before you today to discuss the progress we

have made in charting a path forward for the irs and we hope to accomplish in the future. the report we released monday describes a number of important findings, aggressive actions and next steps for the irs. the problem with the 501c for replication process uncovered by the treasury inspector general for the tax administration has created significant concerns for taxpayers and it is incumbent upon us to take swift action to ensure accountability, fix the problems that occur and thoroughly examine other aspects of the operations. over the past month an ongoing review of the defense described in the report has shed further light on the failure that occurred within the irs and the cause of the failures to the there was insufficient action by the leaders to identify, prevent, address and disclose the problems that emerged with a review of complications for the tax-exempt status.

our report out lines management deficiencies and the steps that must be taken to correct them. importantly, the report did 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 under way. while fact gathering is still ongoing, we have not found evidence of intentional wrongdoing by anyone at the irs or involvement in the matters by anyone outside of the irs. furthermore, there is no current evidence of the use of inappropriate screening or other types of criteria and other operations beyond those discussed in the ig report. we recognize, however, that there is public concern regarding the criteria used for of the kitchen for tax-exempt status and more needs to be done to evaluate our screening criteria and procedures. we will therefore establish a review process by which the screening criteria and

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 senior executive managerial chain that had responsibility over the activities identified in the ig report. in addition, we have entitled and accountability review board to provide recommendations within 60 days and later if needed on additional actions that should be taken. next come immediately upon learning to be on the lookout of the lists with inappropriate criteria still in use, we suspended the use of any such list in the application process for the tax-exempt status. next we have established a new process for certain taxpayers who have been in the back wall

for more than 120 days to gain expedited approval to operate as a 501c for tax-exempt entity. this is a self certification process which allows them a streamlined have to tax-exempt status if they agree we will operate within the defined limits and thresholds of political and social welfare activities. next, we will establish an enterprise risk-management program across the irs to provide a common framework for capturing, reporting and addressing risks. this is intended to ensure that such information is brought to the attention of the commissioner and other leaders and external stakeholders in a timely manner. we will reach additional internal and external outreach about the role of the national tax payer advocate in assisting taxpayers in resolving problems in the irs. i also want to point out that our pursuit of broad based reforms in the irs does not mean

that we believe the specific challenges identified in the ig report. the alterations must recognize that the many critical successes carrying out its last several years they are committed to protecting its mistakes. holding individuals accountable as appropriate and the risks we face. the employees of the irs are committed to the mission and operating of the integrity and fairness to all. the onerous serves a vital purpose for this country and we need to earn and maintain the trust of the american people in order to accomplish or mission. we are firmly moving in that direction and we will continue to report on our progress on a regular basis as we fulfil our commitments. mr. chairman, ranking member,

but complete my statement i would be happy to answer your questions. >> for the purpose of preparing the report did you speak to the former commissioner dog shulman? deduce bet to the former acting commissioner steve miller? >> i did not. >> did you talk with joseph grant the former commissioner? >> no, i did not. >> did you talk to the chief counsel? >> yes tebeau >> what were the basic summaries of those conversations? >> as a first matter there were three things set out to do which are in the report first understand for the wrongdoing was sore again hold people accountable and second understand where the management failures and processing stakes are in these organizations so we can fix them and third and the irs risks and obligations and i spoke to many people within the

irs and the leadership engaged in the ongoing discussions and bill wilkins is one of the senior leaders. >> did you talk to the former deputy commissioner? >> i have spoken as he prepared the report did you speak to her? >> i'm not sure that i would ask that. it was my overall understanding of this attrition on the ground so yes, i guess they all connect to the estimate did you speak with the former director of the xm organizations? >> i would say that your initial conclusion found no evidence of intentional wrongdoing by the personnel given the number of the key players you didn't talk to i didn't see how you were able to reach that and we know from our investigation in the summer of 2011 we directed the cincinnati office to the tea party label to the advocacy

groups to think this is an intentional intent to cover the targeting. >> more work needs to be done to evaluate the circumstances. >> i find it difficult to make the conclusion that no evidence of intentional wrongdoing was done. >> there was no intentional cover-up. >> each point that i made the point cincinnati went back to targeting the tea party groups. do you know who is responsible for this? >> well, i challenge -- >> after the change was made to the advocacy groups, the cincinnati -- the office went back to targeting the tea party groups. do you know who is responsible for that activity beginning again? >> we are looking into the facts and circumstances that a rose. there's a lot of questions to be asked and a answered and to

reach a definitive conclusion before the investigation is complete. >> if you do not know -- do you know who in washington, d.c. directed the lawyers at the xm organizations technical office to hold up the tea party applications? >> i do not know the answer to that question. spinnaker the intervening employees that are directly involved in the tea party discrimination at this point? >> right now they are relying on the justice department and the inspector general to conduct those interviews. >> we are working closely with them and it's critical because there is an ongoing criminal investigation that we do not step in front of the justice department and the ig at this part. >> is the irs conducting any internal document reviews outside of complying with the request that congress has been sending the agency? >> we are conducting a document review at this time. >> the report also states that there is no evidence and the use of inappropriate criteria and

other irs business operations and how did you reach that conclusion. >> the major divisions on involved in these types of activities are directly with taxpayer issues the large business section, the tege which is the subject of the report investment. i met with the leaders of those operating divisions. we talked about the issues and in the ig report that dealt with the organization units and i asked them to look internally and do their own assessments. they determine there is some good reason for that and then put together think it's unfair to point out it one of the few areas in the all irs where the nature of the political activity is relevant to any determination that we would make on eligibility or the review.

and so, the other areas of the irs normally don't involve themselves in political activity. all this said, we understand -- like all of you i am very concerned about what is in this report. it is a very significant concern we are hearing from taxpayers but they are concerned and that is why i had an abundance of caution and because it is important to assure the taxpayers we are going to review all of the criteria across the irs and report back to you on the findings to the estimate i think this leads into the statement in the a report that the irs is digging deeper into the evidence to determine if there are instances of wrongdoing or inappropriate conduct beyond the mismanagement identified. >> absolutely. >> that's beyond the organization. is this in that process or you reviewing documents requested by congress or is there some other internal review. >> there is a lot of overlap,

mr. chairman. you've asked this committee and other committees have asked for an enormous footprint of documents. we as a part of our effort to get to the bottom of this are looking at a very similar footprint of documents in order to make sure we understand the causes of the circumstances that we can take the appropriate account of the steps and corrective action. >> i would note we are just beginning to get e-mails and so it's not as if we have all of the documents at our disposal that we are going to need to review. but i have another line of questioning. you have acknowledged in your reporting acknowledges the all irs inappropriately targeted the tea party groups and since then there's been questions raised whether the irs and appropriately is targeting the progress of groups and i would like to read to you the treasury inspector general answer to the question which the minority was kind enough to share with me this morning. quote commonly review all of the cases the irs identified the potential political cases and did not limit our audit to the obligations related to the tea

party end of quote today i would repeat that. they did not limit the audit to just the tea party. let me read another excerpt from their answer, the written answer and "from the audit work we did not find evidence that progressives were used by the irs to select potential political cases during the 2010 to 2012 time frame to the we found no indication in any material that the progressives was a term used to refer the cases for scrutiny for political campaign intervention. so, we've conducted interviews with some of the key cincinnati irs employees and they have confirmed that to be true. does any part of your 40 day report contradicted this recent letter and finding by the inspector general? >> no, i don't think any part of that contradicts it. with our report determines is that there is diversity and the types of political organizations that were accounted for on the

list and that is all that is on our list. >> and only the conservative ki party groups who were referred for extra scrutiny; isn't that correct at this point? >> that's what we know so far. i think that is what the evidence points to so far. but as you have mentioned in your opening remarks we are in the early stages of this spigot and there is more investigation that needs to be done to answer that very question. >> the inspector general is doing a thorough investigation that in the recent letter he sent us, he said he found no evidence to date and the report doesn't contradict that today i would ask unanimous consent to place in the record the entire letter that was received on june 26 from the inspector general regarding this matter. i 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 this administration came, i was a senior leader serving under president bush >> your report states we have not found involvement in these matters talking about the criteria by anyone outside of the irs. is that correct? >> that is correct to use the net and you stand by that. >> i stand by it pitted i think there would be the statement in the report as appropriately caveat it with the ongoing reviews and the investigations the necessary. but at this time, taxpayers and the public of questions.

>> your report says that. let me ask in the end of the inside of the irs have you found any involvement by anybody in the white house? >> no, we have not. >> there's been a reference to the ig's investigation and i want everybody to understand in a letter that was sent, there was a bolo that had the word progressive, is that correct? >> yes, that is correct. >> and you have asked that and all others no longer would be used? >> we suspended the list. >> of the letter also indicates in all of this was indicated for

the first time that there was a number of groups progressives involved that was sent to a different group within the irs and in the ig did not talk with anybody regarding what happened to those. so, the notion that the selecting out was only as to the tea party and was not as to progressives is simply incorrect? and win in 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 them ask questions because in terms of the selecting out process, clearly it involved progressive groups as well as tea party groups. that was clear from the pie chart in this report but he never delineated who the others were even as leader asked. and if he had come forward with that information, i think it would have undercut a lot of the wild innuendoes that talk about the white house enemies list talking about the culture of the covered up. so, we wind them back. i hope, mr. chairman, you will have them come back. and i think, mr. werfel, we know that you will encourage the digging out of all of the fact

as fully as possible if you proceed. do you give that pledge? >> i do give that pledge. >> there is a question that i answered that wants further clarification if that is okay. i don't remember the exact question but i want to make sure that i get out early in this hearing so that we have that basis of information to guide the questions that we're we are right now and the fact gathering and as you said it is early we have evidence of the diversity of the political labels used in the list. we have also another example where we have the diversity of the political labels. this week we are sending out letters to the taxpayers that have been in the backlog for more than 120 days to offer them this option, this fast track option. this diversity of political labels and the groups that are getting this letter. and also, it is our understanding as we review the fact that there is a diversity

of political labels and those organizations that were put in through the process for the further review. the challenge that i have in going deeper than that is as follows. to go deeper into those facts could end up with sensitive taxpayer information under 6103. the other challenge is that in looking at the diversity of groups it isn't always clear where they stand on the political spectrum and frankly i don't want to know where they stand cabinet i want the irs to be in the business of just detecting because we have to under the regulation to the extent of the public collectivity not knowing the type of politics. but going back to the earlier question i didn't want to leave the committee with an impression that we are not seeing diversity of political labels across the spectrum. what i'm suggesting is more analysis, significant analysis is needed before we reach conclusions on what that means in terms of an irs failure or

issue. >> that's why i find it perplexing that he would conclude there is no evidence of wrongdoing by the irs when the inspector general says that he reviewed not only just the tea party cases but others and in his letter dated june 26th he says that only the tea party cases at this point were flagged and sent to another review. there were no progress of cases sent. >> please don't interrupt me. i think that's important and that's why we need the fall inspector general report in the record. and i think you might have called these initial conclusions and initial should be emphasized to it i would call them incomplete given that we still have more information. with that i will recognize mr. johnson. >> thank you mr. chairman. the american people want and need and deserve to hear the truth and i hope that we get it.

mr. werfel, back in my district it appears that the patriots have also been a target of the irs. the bottom line is that the irs has been used as a political weapon and that is just outrageous. instead of targeting americans because of their belief, why doesn't the irs target fraud and abuse that is costing hard-working law-abiding american taxpayers billions of dollars werfel, i would like to play short video clip that i've been working on for some time now. it's for the tv investigative report. >> this isn't a single case. >> they figured out a loophole. it allows them to use their numbers to get huge funds from the irs. it is called the additional title the tax credit. it's meant to help working families that have children working at home.

the workers claiming the tax credit particularly in mexico and we are talking lots of kids. >> the more you put on their the more you get back. >> the whistle-blower says he has thousands of examples. >> over the years the baiji sounded a the alarm about the refundable child tax credit. you believe that this is a problem, yes or no? >> i certainly agree. >> okay. that's good. isn't it true that one of the claims is the child has to live for more than half of the year yes or no? >> that is difficult to confirm that eligibility point, i agree to the islamic why then is and the irs enforcing this rule clacks i hope he will work with us to address this. it will help to put a stop on this and save taxpayers

$24 billion to i want to also ask about another scandal and that is the lawyer as management of individual taxpayer identification number programs or again why doesn't the irs target fraud and abuse instead of americans for their beliefs. last summer the ig issued a report in which it found that the irs management discourage the workers from detecting fraudulent applications. the early part let me to call on the then commissioner to resign. on the screen i have figures six from the 2012 report showing most frequently used addresses for the tax refunds. you can see the tax refunds totaling $46.4 million issued to the same address. bottomline, these items were costing the taxpayers dearly because they could be used to

fraudulently get the tax refunds. last month the ing issued another report that makes it clear that the irs could be doing a better job of protecting taxpayers' dollars. just look at the figure over the screen over 1,000 were assigned the individuals using the same address in atlanta georgia. do you agree it is still a problem? >> i do agree there is still a problem. >> they felt of the workers handling the applications remained concerned that management will basically pressure them to rubberstamp of occasions instead of ensuring that only qualified individuals received. can you give the assurance that the management won't do this anymore? >> i need to look further into that but on its face it sounds like something that's inappropriate and i will work with the team. >> you're own report acknowledges the tax code is nearly impossible to administer because it is so complex and based on the billions of

improper payments being made with refundable credits your agency is proving you write every day and it is time for the irs to stop targeting americans and start targeting fraud to get on a yield back. mr. rangel is recognized. >> welcome to the committee. you have said this diversity in the list and you had met conservative groups are on the list? >> why is it that we don't know whether or not there were progress of loops on the list >> we do know that the word progressive appeared on a set of less. we do know that. when i was articulating the

point on the diversity i was trying to capture the types of political organizations that are on the lists are wide ranging. >> we seem to know what a conservative is. but how can progressive now become diversity instead of what it is? it's the groups that are considered to be liberal as opposed to the tea party that's considered to be conservative; is that correct and fair? >> i think it's fair. >> then why couldn't you say and determined there was a provision in the internal revenue code the staff were looking for signals and organizations whether they were liberal or whether they were conservative and they were

not appropriate is that if a statement? >> i don't want to jump to a particular conclusion. >> what part of that statement gives you a problem? >> because where we are right now in our review is we understand that these political labels with varying types were on the west. >> the tea party is tight, right? >> yes. >> can you give me a type of name that would describe a progressive democratic liberal organization? this is where i reach my conclusion that there is broad range diversity in the political groups because there are some that are more on the obvious side of the spectrum to be a cynic and saying that there are groups that you can say progressive groups. >> i will put them in three

categories. there are ones that are clearly on the conservative end of the spectrum and some that are clearly on the liberal end of the spectrum and then there is a new set of groups where it is difficult to determine on the facts where they would land on that spectrum and maybe they don't land anywhere. maybe the land right in the middle. >> that makes so much sense be the and so far even though you don't like that technique was used you don't find that there was any deliberate political attack made to the it was just that they are trying based on what you know now they were trying to do their job and do it in the right way. >> my position is the way in which this should be structured it should be looking generically at the political activity and not using labels that point towards a particular political persuasions because that is inconsistent with the irs mission statement for how we are supposed to do our work. >> do you think it is possible the white house would be supporting and targeting a progressive organization that supported the candidacy clacks

>> i don't even want to speculate on that. from my short time at the ims come i have seen no interaction between the white house and the irs that extend to that level. i've had no contact other than to brief the president on this report. >> could you reduce it to us the type of names that are on the bolo list so we can make determinations as to whether we think that if they are from the left or the right? can you help us with that? >> that has been provided to the chairman, given the taxpayer sensitive nature of the information protected. >> you say the chairman has a list of the organizations that were considered to be progressive that were targeted. >> i'm saying the chairman has been delivered the on redacted version of the list. stomach and that list that is under redacted includes organizations that are considered to be progressive? >> it includes the taxpayer sensitive information across a broad spectrum of political organizations.

>> the chairman knows or should know the targeting concerned liberal as well as conservative organizations. spec that's not a question i feel appropriately should answer. >> but that information was delivered to the chairman. >> we delivered the of the didactic and the on redacted version of the list to the committee to the stomach and that includes progressive organizations to it >> it does because it is on the didactic and the on reacted to the estimate time is expired. >> i do want to note for the record that that information is also provided to the senate finance chairman to be and you should know that i have also delegated 6103 status. so any information i have mr. live in also has. so we are working in a bipartisan way in terms of the sharing of 6103. >> you don't know how glad i am to hear that mr. truman. there appears to be so much

confusion before. but at least we know that the abuse was to both types of organizations, conservative as well as the so-called progressive. >> and never wanting to comment much on the senate i believe mr. bachus also shared this information with senator hatch. now i will recognize mr. brady. >> mr. werfel, who initiated the targeting of the organizations on the scrutiny based on their political did believe? >> that is still subject to further investigation. >> there are a variety of different and we use being interviewed by the inspector general justice department. you are going to make the point i haven't personally interviewed -- >> anyone within your agency. >> if it is helpful to the committee i can explain the structure of my review and how we are uncovering of the fact. >> go to the key question to the and you don't know who initiated

-- who initiated the targeting to the conservative organizations to improperly applied the gift tax to their donations cox >> again, the types of questions the were raised -- on emt can issue with the targeting of the donors today i want to make sure -- >> please. at this point you have not interviewed them yet. so, you honestly don't know, correct? stomach it's not a question that we haven't interviewed him and it's a question that the investigation is ongoing. >> who leaked the private taxpayer information including the donors and the national organization to the huffingtonpost.com and the human rights campaign? >> i do not have that information. >> who linked the private taxpayer information for 31 conservative groups to the media specifically public? >> i don't have that information. i will point out that the review of the circumstances out of

those releases of information to be not intentional. islamic but you don't know who leaked it? who leaked the private tax information to participants at the president's economic recovery advisory board? >> i would have to learn more about the circumstances of each issue. >> who was the agency within the white house that was involved in the targeting delay intimidation be on the lookout list do you know? >> i would say this i'm not aware of anyone at the white house that was involved in this or the treasury department or otherwise. all of the evidence that we have plans to the involvement of individuals within the irs and i am happy to talk through that with you. >> let's talk to this. in regards to the targeting delays of the king street tea party to the voting application, who shared the private taxpayer information of other federal agencies such as the fbi, atf and osha?

>> on the question you asked based on the specific tax a year i can't answer that question. stacked who was involved in covering up this pattern of abuse within the agency and concealing it from the public and the past two years? >> again, i don't know that i would be comfortable with the characterization of the question. i am happy to walk through the managerial chain with you in the events as i enter stand them. >> i guess my point is you are not conducting interviews to the you don't know the answers to the questions. yet in your report you declare there's no evidence of an intentional wrongdoing or misconduct on the part of the personnel. no evidence of intentional wrongdoing. this report is a sham. i would call with a white wash but it's too thin and on a substantial to meet that description. my point to you is you don't work for the irs. you work for the american

people. and your job isn't to cover up. it is to open up this agency. we see the patterns of abuse and intimidation and the only goal appears to be the silence the voice of people whose views you don't like. and so getting to the truth is critical. my question is i'm told you are a decent person. are you serious about getting to the truth? >> absolutely. >> and i am serious about -- >> and the integrity -- >> i'm serious about getting to the truth and doing it consistent with a rule of law and procedure. many of the criticisms that you have in your set of questions in order for me to overcome the criticisms in many cases i would have to violate that procedure. -- >> let's do this, since you are seeing is would you commit to returning to the committee in 40 days with more complete answers to the key questions before us? >> absolutely commit as these answers become available i'm ready to submit them.

but i think it's important to understand that ingathering these answers, we have to follow rule law and procedures to this gimmick wouldn't it have been great for the irs -- >> point of order. mr. brady controls the time to read what it have been -- >> it is up to mr. brady to conduct the questioning as he sees fit this and it wouldn't it be terrific if the feingold the rule will fall in the procedures when targeting the conservative groups and donors leaking the private taxpayer information for seeking counseling it and then misleading the congress? you need to understand one thing. the ways and means committee is going to get to the truth, good or bad and we are not going to stop until we learn the whole truth and we are going to reveal to initiate, who participated and encourage them and who concealed them. we are going to hold them accountable including you if you handle this investigation then we are going to make sure that they never do this again to the

average taxpayer's. mr. mcdermott is recognized. >> thank you mr. chairman. thank you for being willing to be the director of the irs putting it in the last set of questions i think it's important to thank you. you've been at the center of the firestorm as has the wholley agency -- whole agency. to address the criticisms and meet the challenges that face us i said it before in this committee but it bares repeating. the irs has a difficult and almost impossible and thankless job bigot it is easiest to dislike and throw under the bus. go back to the bible who do they go back and talk about, tax collectors. these are the people that were sort of the bottom of the

society and that is why we are treating the onerous people and i do not believe that it's fair. they are hardworking dedicated civil servants who do your very best to administer the law. i am going to stop when i was going to say except to say one thing. i don't think that the bolo list should be thrown out. every time i get on a united airlines flight to go home to seattle before it leaves the ground, the first officer to leave the cockpit goes down with a list he is on the lookout for a lot of things on the plane. you do it to organize your thinking. the american college of surgeons just adopted the list before to somebody into surgery there is a long checklist of things they look at in anticipation before they put you under anesthesia

and do surgery. we think that's the way you organize your thinking and it's clear to me that he be on the lookout list is a good idea. so don't say you're going to throw them away because we know that other wise if you become the d-nd in seattle you go to get your driver's license taken a number and weight and then you have a long line of people because they are not organized to meet the taking it one at the time and if you take to wondered 92 or two wondered 981 at a time and don't organize your thinking it doesn't make any sense. i want you to be careful about how you reorganize. but i would like you to take the rest of my time to answer the questions that mr. brady kept interrupting you want. >> i appreciate that mr. congress and giving it like i was trying to make is there are certain procedures that need to be followed and getting the answers that this committee is looking for and the american people are looking for. as an example, clearly the

employees involved need to be interviewed and i want to make sure those employees are interviewed. the issue is i've been asked by the justice department and the inspector general to enable them to do the interviews to ask all of the faeroe questions to get to the bottom of this because the will make sure that if there is a prosecutorial action that needs to be taken that there will be clean and the evidence chain will be clean. this is specific instructions come from the justice department and the inspector general's of the notion that no witnesses are being interviewed isn't accurate. the activity answer that witnesses are being interviewed whether i am sitting across the table or not i would love to be able to but the reality is i'm going to follow the process and the rule of law and one of the constraints i had is i have to let professional investigators to the intervening in the that isn't a country by malling to live with because the investigators would be able to get to the bottom of it.

there's going to be a lot of questions and implications the accountability isn't real because people went up the irs and still have getting a paycheck. when you take the action for discipline against a civil servant there are rules of procedures that need to be followed and if i went off and cut off the rules and procedures and fired people and suspended them without pay by would be violating those rules of law and procedures and they are put in place for a reason. they are put in place in the event that an employee is on a fairly selective for discipline and they have an opportunity to defend themselves. there is a good reason for them. when we see things that bother us in government and in the irs and we want people held accountable, what we need to focus on is making sure that we are following a very diligent and expedient process holding the individuals accountable and

that is where we are doing right now. we are pursuing a correct set of disciplinary actions but we are doing it consistent with walls and regulations that govern the operations. >> mr. ryan is recognized. >> the secretary asked you to put this report together to make sure nothing like this ever happens again. i look at page 35 and i see the case made for a budget increase. you're budget asked for over a billion dollars of more spending for the agency and you are asking us to hire another 4,572 employees. let me read what the of already learned in just two months. in just two months we have got a conference in the land of which had the celebrity chef wolfgang puck and we have a conference of

$4.1 million, a conference in philadelphia $2.9 million, a conference in san diego 4.1 million. one of these u.s. $135,000 for 15 speakers. that's $9,000 per speaker. the irs paid for the deputy commissioner to stay five nights in the presidential suite at the hotel during one of these conferences. you paid $17,000 to the speaker to create paintings of bono, abraham lincoln and others. we hear the report of contracting between the improper relationship between an onerous contractor and a person who is -- whose business had less than two entered $50,000 of income in the prior year is getting awarded a 500 million-dollar contract. between 2010 and 2012, you had

to under 25 conferences costing $49 million. let me see if i can put this in perspective for you. i represent a town of wisconsin. a little less than 7,000 people live there. it's a great village. the village is basically a blue-collar town. people work at the factory. the work of the se johnson factory. it's surrounded by corn and bean fields and lots of small businesses. it took more than 100% of the federal taxes paid by the working families of the village and wisconsin will to pay for the 225 conference is you spend at the irs from 2010 to 2012. that's the way the you need to think of this. people are working hard. they are living from paycheck to paycheck. they are paying their taxes. and this is what you are spending their tax payer dollars on? and now you come here asking us

for a billion dollars about a 10% increase to hire another 45 people. i represent rock county. that's my home. the population of rock county and all of the working families of rock county, their taxes wouldn't even cover the billion dollar increase that you are asking for. you are here representing the president asking us for this increase. i know you are new to the irs. you come from the office of management and budget and have a great reputations and you are a budget crunch her. how on earth do you think you have the moral authority to ask for this? why would we, representing the taxpayers we represent, give you all this extra money you are asking for if this is what the irs is doing with hard earned tax payers' dollars xbox we are seeing just in two months waste,

fraud, abuse and taxpayers targeting and you are saying give us another billion dollars. why should we do that? >> congressman, you are asking very important questions and i would love the opportunity to address them. first, i agree that the cost that you are preferring -- referring to are excessive and in many cases inappropriate and should not have happened. the reports that are coming out that identify these are covering evens that occurred two and three years ago. and my concern is great. but my concern would be even greater if i saw that those patterns of spending are continuing through today. in many cases, they are not putting it we are looking at 68% cut and training travel. we are looking at 45% cut in the irs. we cut printing by 38% and professional technical services by 25% -- >> okay -- >> there are cuts going on these activities -- >> here's my suggestion, have

the cuts take place and come back in a year or two and come back to see if you are running this place well and then -- >> that is another fair point. i will say there are more cuts to be made. and i think in this report in section 3 and in the subsequent testimony that i will give to this committee i will furnish additional cuts so that we can go even deeper so that every penny is watched even more closely. >> great so it sounds like you don't need a budget increase. >> great, so it sounds like you -- >> we still have an indispensable mission to enforce the tax code to go after fraud. the cuts that we are seeing dwarf any kind of expenditure that we have. the materiality difference. we just have to look at this and say has the irs done enough to get it in order to cut the excessive costs? i will make the case to you that we are going in the right direction. but i will also make the case to you that if we under fund other critical priorities that need to

improve taxpayer service and improve enforcement of the tax code, then we are leaving dollars on the table for the american people. every dollar sign -- >> just don't forget you work for the taxpayers, not the other way around. >> time is expired. mr. lewis? >> thank you mr. chairman and commissioner for being here. >> could you tell us how long you've been on the job? >> i started -- >> how many days? >> it's been about 34 days. >> so, all of this stuff over -- all of this stuff just evaporated into thin air. it didn't happen on your watch? >> no, i arrived in late may. and i'm doing my best to identify the problems and fix them. >> can you tell us something about your background? >> the last job? >> so i think -- and i talked about this before in other hearings -- i think the reason

why i was chosen for this is a couple different reasons. one -- and i appreciate congressman ryan's remark i have a strong reputation. i served in both the bush and obama administrations did i consider myself to be non-partisan. the issues i've worked on across my career have been very non-partisan. all about better government management, reducing fraud, reducing the error and improper payments, improving the way the government manages its real-estate. just very nuts and bolts. i think the ranking member 11 referred to me as a technocrat. i've developed an expertise in public-sector management over a 16 year career as a civil servant. most recently, in my role at the omb, i developed a reputation and experience tackling some of the government's toughest challenges. for example, back in 2009, 2010, i was the administration lead on implementing the recovery act which was a very large and complex wall that involved a lot of different technical

complexities that needed to be done, and i was the point guard for it and developed a reputation of doing it effectively. more recently i've been involved in helping the government prepare for the government shut down, helping us deal with a sequester. these are tough public sector management challenges. and i was able to distinguish myself to the administration leadership as someone who could handle a situation like this effectively. so, when you combine those factors come i think the bottom line is when i was presented with this opportunity i basically said i'm going to do it because i'm going to have a guiding principle and work to find the right answer to every challenge i am confronted with. i'm doing what is in the best interest of the tax payer and i think if i can hold on to those guiding principles will go to sleep every night knowing this was a smart decision to take this job and take the irs forward.

>> mr. commissioner, i want to thank you for your willingness to serve, to put yourself in the way and make a contribution to get in -- the onerous in order. how do you feel about the tax-exempt organizations? and applications? >> i think we have -- when i arrived a minute late may we had a very broken process. clearly the ig report points to both management and process failures that were going on in that area. there's new leadership in place and i have a lot of trust in those leaders in particular individual that is now running the organization unit and he's a process expert inspiring me and a lot of confidence working and redesigning the process and making the appropriate fixes. we have addressed all mine recommendations how to fix the organizations in the unit and we are making good progress on that

and it's outlined in this report. we are taking the steps above and beyond what they recommended because there is more to be done to make sure that we are extremely robust in the fixes. those also outlined and we are making good progress there to get it's a challenging environment. you are in a foundation of ambiguous laws and regulations, and as i said, very few other areas within the irs is a determination on the nature and extent of political activities a relevant factor to consider. so this point has kind of unique set of requirements and clearly when you combine those requirements and management weakness and leadership weakness we had a failure but i am optimistic that we have the right people in place right now specifically in the is organization units and service enforcement that are going to lead us to get the problem

corrected. >> thank you. i look forward to working with you. >> thank you mr. chairman. mr. werfel, isn't it true that 100% of the tea party applications for flagged for extra scrutiny? >> it's my understanding the way the process works as if there was tea party in the application. it was automatically moved into this area for the further review. yes. >> okay. and do you know how many progressive groups were flagged? >> i do not have that number. >> i do. our investigation shows that there were seven flagged. do you know how many were approved? >> i do not have that number at my fingertips. >> all of those applications were improved -- approved. i want to follow-up on some questioning that occurred a

little bit earlier in the hearing regarding intent. i am an old cop, 33 years. most of the time i was a homicide investigator so we built a lot with criminal intent. when you use the word intentional or unintentional, it's sort of it is a flag for me to inquire will that further. are you talking about the criminal intent, are you finding there is no criminal intent or are you saying there is no intent -- >> the questions that are being asked by the investigators deal with with criminal intent and other types of intent, which for example could mean political bias, but no criminal intent. ..

>> my main point of contact in this effort is russell george, the inspector general, and his team to he is working directly with the justice department. they gave us periodic updates on their progress. >> to getting information there may be criminal -- >> nonesuch evidence has been shared with me at this time. >> to get back to the intent, your report states that some applicants were subjected to overly burdensome, intrusive

questions, questionnaires and data requests that went way beyond the acceptable level of fact-finding yet the same time this is not the actions taken by the irs employees were intentional. i don't understand that. how you can ask those questions, provide those questionnaires, asking for certain data but yet the unintentional in conducting that sort of activity. tea party members, donors, have been threatened. some donors have been threatened. and confidential information that had been leaked. they were sent inappropriate and intrusive questions. unintentional threatening of donors. i don't understand in that light other. so sort of falling in line with what mr. but he says, is the report i understand your desire to be a public servant and want to do the right thing. but in order for you to do that, mr. werfel, for the american public to have trust in you and the irs again, you've got to become and you can't be vague and misleading in your statement

that you have given to this committee. you say that even after senior irs leadership was informed of the activities and question if you both to effectively putting into the cavity and to inform the proper committees in congress in a timely fashion, despite requests from congress on this topic. so i don't understand how your leadership could be found to be unintentional and they're not reported to congress. mr. miller sat here and conveniently lost his memory during his questions. so could you explain to me, it makes no sense to me and i'm sure it makes no sense to the american public. >> let me, let me offer my best explanation. first, want to go back to the point we are hearing questions from taxpayers. they want to know if there was intentional wrongdoing. we are answering that question very carefully and saying there's more work that needs be done the right now -- >> mr. werfel, you really can't say that it was unintentional is

my point, you should not be saying in, you should not be saying in the report that you found that this was unintentional. because you don't know. you don't know. >> that's basically what -- [talking over each other] >> why did you say it was unintentional? >> let me make, let me offer speak why did you say it was unintentional and you don't know? you just said you don't know. >> time has expired or time has expired but why don't you answer briefly and we will go on. >> let me clarify. i said very clearly in the report that more work needs to be done to review documents to interview folks but at this point we don't have any evidence of intentional wrongdoing. and what we meant by that is that it's a different situation if a manager thinks and an employee thinks this is the right thing to do, this is how i'm supposed to conduct my business. they could be mistaken and he could be incompetent at could be total mismanagement, and how they think they're perfectly carrying out their duties, which is different than them saying i

know this is wrong but i'm going to do anyway because i of a particular agenda in mind. and that's the difference where trying to distinguish. >> thank you. time has expired. >> do you need to more minutes of my time? >> no. i think -- thank you for the offer though. thank you. >> esther were for, clear fight. the ig letter states that there are at least two groups of specialists within the irs that use the bolo. the first, specialist that are dealt with in the 298 cases flight from political campaign intervention. the second, it's the team of specialists in the touch and go unit. we know that some of the progressive group applications went to the 298 teams of specialists, the inspector general did not investigate how the progressives were handled by the touch and go unit. have you looked into this? >> we are in the process of looking into, when the report says we start with the audit

report and all the various materials that the inspector general provide us in support of the audit report, we are going deeper than that and broader than that. and that's, for example, how we found the bolo this with inappropriate criteria because we were going beyond the inspector general footprint. and, of course, when we found and we put an immediate suspension to them because we are very concerned about them. and with income when you go deeper and broader into this issue using other categories. you mentioned touch and go. so we're looking into in trying to understand how with useless use. over the circumstances that caused these inappropriate political labels to occur, however used? what impact it would have? these are all questions that we're asking in real-time, and like everyone in this committee, i want answers to them but i'm going to follow an expedient and fair and thorough process to get those answers and i will be back to answer those questions in the future. >> you are congratulated by members on the other side for the vigor with which you have

taken up the task of pursuing these different questions. and then you're accused of not doing follow. there's an element of inconsistency of that as you try to figure out how to pursue new information and data as you come across it. now, the issue really here for all of us is the following. citizens united cause the irs to be flooded with applications for groups seeking 501(c)(4) status. and why was that? in large part it's because super pacs must disclose their donors while 501(c)(4)s do not. that's really what happened here. and as we've tried to unearth some of these questions where members on the democratic side of an equally vigilant in pursuing what we might deem to the egregious, mom was with irs

pursuit, -- moments with irs pursuit, but you haven't finished your work and you need to be given some time and opportunity to pursue these cases. we all need to be outraged. the american people shouldn't be afraid of the irs. we've all established that. but a think a simple point is you would argue you need more time, is that correct? >> absolutely we need more time. and my hope today and in this report and in every communicate and i have with the public or the committee is that there's transparency into the process that we are following. and i want to be clear that the process that we're falling has certain legal and process constraints, procedural constraints, but we are moving as expeditiously as we can. we're getting documents to the committee. witnesses are being interviewed. materials are being furnished to the congress but a lot of the questions orient iran materials that we provided as part of this growing investigation of information that we provide earlier this week. so absolutely. there's more questions to

answer, and i think the track record of we are demonstrating here is a diligence to answer them what also a caution to make sure that we're following the rule of law and procedure in doing so. it's a tough balance because, as i said i want these actors as quickly as possible, but i have to, it's absolutely essential that i followed appropriate due process and procedures and running this investigation. i think any investigation across a broad spectrum of organizations and leaders and legal investigations with all those same principle. >> mr. chairman, we are all better off if we have an accurate portrayal precisely what happened, as opposed to the accusatory tone that is being suggested. and you can see incidentally that the argument has already shifted here. we have moved to the conferences, which is a legitimate criticism, away from the focal point of this hearing. and that is whether or not political groups were targeted

by the irs. so it occurs to me that perhaps some of the argument is weakening on the other side. thank you. thank you, mr. chairman. >> thank you. dr. boustany. >> thank you, mr. chairman. welcome, mr. ruffle. i agree, it's going to take time to get to the bottom of this but one discrete i have with you at this point in time with a 30 day report, mr. werfel, is i don't see a sense of urgency. big picture here is that you haven't offered -- obligation to restore the trust in this into become the irs, restore the trust with the american people and with his congress. now, in your report you have a section titled transparency with critical or decide organization we talk about the irs failure to properly inform congress about the issues that were occurring, even after congressional committees specifically begin asking questions. we started asking questions years ago on this. let me get this straight. and acting commissioner miller's june 15 letter to me after we'd

gone back and forth, i had meetings with shoulder, meetings with miller, hearings with both of them, and letters to a june 15 letter here and the only response is a center that what that was yellow took steps to protect handling of these cases to ensure consistency. now, mr. brady asked questions orient you told mr. brady that you disagreed with the characterization that irs employees engaged in a cover-up. but if you know the truth on this, i become if you know that there were folks in senior positions at irs who were misleading, evasive, essentially covering up what was going on with targeting, if you know this and you're not coming forward with this, is that a cover-up speak with no. and what i said to the congressman earlier was that i'm not ready to draw conclusion because asking a question in a way that if i edited it could imply that i was agreeing with the premise of this question. your question, is there a cover-up? i don't know the answer to that

question. i think they key is that we have to make sure that we do the thorough investigation. i thin think the justice departt and -- >> we know that commissioner shulman and when the acting commissioner miller were informed of these things, and yet they continued to basically evade our questions. they were misleading with us. this has been determined so far in the investigation. it's certainly been determined by the tigta audit. we did have a sense of urgency to come clean. you have an obligation to the american taxpayer and to this congress to follow through with her oversight function and with transparency in front of the american people. >> so, the commitments i am making today are, what, to explore all the facts, including questions about, you know, intent or concerned that you have with respect to why answers were not answered more quickly but i'm not going to try conclusion up and say we have definitively decided to let me make one more point. one of the important things in this report is an important point i think will be very

helpful to this committee, which what i'm suggesting the irs needs to do is more readily share information on emerging risk areas and emerging operational issues within the irs can within this committee. >> i get the. i want t to shift gears from a talk about the bonuses that have been distributed. gotten a lot of press to include in these bonuses during the time that the targeting was occurring we know a quarter of a million dollars were paid out to just four employees at the irs, all of whom resigned or on administrative leave at this point due to their involvement in the tea party discrimination issue. one individual, the first to resign receive more than $83,000 in bonuses on top of the summer of 177,000. now, we also know that others have received bonuses were involved in this attack is an issue targeting tea party entities. in light of all this, are you going to take any steps to put a

freeze on this? is there going to be an attempt to recoup some of the bonus money? >> let me answer the question a couple of different ways. first, i agree. when you look at the juxtaposition of individual management and judgment failures that went on in this situation and you juxtapose that against the bonuses received come it's very troubling. and it's a part of my larger conclusion here that the irs leadership did not have timely enough understanding of what was going on with these particular activities to make informed judgments about compensation to bonuses. secondly, i mentioned earlier to congressman ryan about me coming back to this committee with additional ways in which we can cut costs even further into the bonuses is an opportunity. >> you could put a freeze on it now. spin glad you asked because there's been some public misunderstanding about where we stand with her bonuses for this year. and if i could clarify it. >> but the trust has been broken. i understand contracts and those

kind of the speech if i can explain it, because the situation with her bonuses. when i was at omb i sign out a policy that goes bonuses across the garden in light of sequester. it was one of our methods of dealing with the sequester cuts was a bonus freeze, but that guidance also said it was subject to legal constraints. at the bonuses had to be legally paid out wher we had to look ine issue. what's going on at irs right now in is that we have a union and we have a bargaining unit, an agreement that we will bargain on the question of bonuses with that union. and my answer on bonuses is that there's no decisions been made. going back to my point about follow the rules of law and procedure, i have an obligation before i freeze the bonuses for irs, if that's the decision that ultimately, i do not this time because my first step and my legal requirement is to bargain issue with the unique and that takes time. we're going through that process right now. >> thank you we need a sense of urgency with this and leadership

to put a freeze on these bonuses. >> time has expired. mr. becerra. >> mr. werfel, thank you very much for being with us. look forward to having you come back. i think you've mentioned that everything you stated in your reports, and everything that the irs has done so far to investigate this matter is not yet complete. is that i could? >> that's correct. >> so when you say at this point you have found no evidence of wrongdoing, it's as of this point? >> that's the question we're getting raised and i feel compelled to give the most honest answer i can, which is exactly the point, more analysis is needed at this point in time if you ask me have we found evidence of intentional wrongdoing, we have not. i understand the confusion around the word intentional because these actions still happen.

i tried to explain, it's the difference between whether someone knows they're actually doing something wrong or to question of a management incompetence or neglect of duty. we have evidence of neglect of duty and we don't have evidence yet of is that someone knowingly did something wrong based on political or criminal intent. that evidence just doesn't materialized yet. >> you use i think the operative word, the evidence. so today there is no evidence of wrongdoing? >> no evidence of intentional wrongdoing. there is evidence of managerial wrongdoing spirit there is no evidence linking anything that occurred at the irs to the white house? >> that's correct. >> okay. and as of today, you are still in the process of investigative? >> yes. there's more people to talk to and in many cases under oath and more documents to review. >> as you tried to make clear, but then interrupted as you tried to provide the answer, the reason you haven't spoken to some other folks that are principle to this investigation is because others have the principal responsibility to do

the investigation? >> i have two thoughts because he keeps coming up. one is, the legal, the rule of law, the legal process prohibits me from talking to these employees. the justice department them inspectoinspecto r general, appropriate officials. secondly, even if there was no constraint we also have professional investors on the scene that are very skilled in talking to witnesses and ultimately we might make a decision that those individuals are the ones who should intervene to witnesses and providing that information to me. >> we want you to continue with that investigation the right way, and we hope that you're able to come back and answer the questions that you can given the work that you're doing and the jurisdiction you to provide answers. but i was at this stage what we're hearing from you, in fact i think what we heard from mr. george, inspector general, is there's an investigation that'thatis ongoing. in fact, the chairman of the committee in his opening statement said that we are still in the early stages of this investigation, that the

inspector general is doing a more thorough investigation. mr. brady, my colleague on the republican side, said when the going to stop until we learn the whole truth. so we still need to find out the facts. at this stage we have an investigation ongoing. it's a half-baked investigation, and to reach any conclusions would mean we've reached half-baked conclusions. and so whether it's your conclusion or my republican colleagues conclusion, for anyone to make accusations at this stage it's with only part of the information. >> there comes the distinction. to answer questions, is exactly how it happened is not a question we can answer yet. but he think we can answer is there any other sense that any of this has materialize, that's a question we can answer because we are in process and i can comment on whether the evidence is materialized. >> good point. so far with evidence tells you is what you're responding to. we appreciate that a guy with a to i would like to have you back. i hope everyone of my colleagues on this panel would agree that

we have to inspector general george back because he has come as ricky ricardo woodhill lucille ball, he has some spleen to do. there's a lot he has not yet answered. in fact, they are somethings is answered that may not have been forthcoming. i would like to finish with one last point. this whole investigation centers around the issue of 501(c)(4) organizations. as you know 501(c)(4) organizations are social welfare organizations under the law 501(c)(4) a place organizations that are not organized for profit that operate exclusively for the promotion of social welfare but i'm not sure if you're aware, mr. werfel, but those same 501(c)(4) social welfare organizations spent $256 million on political expenditures in 2012. did you know that that's more money spent by the social welfare organizations, nonprofits and the two political

parties combined which spent $255 million? that's the crux of the problem is that with so-called social welfare organizations that spend more money than the two political parties combined. and so when irs is concerned that the maybe some organizations that are trying to game the system at taxpayer expense, that's why we have tried these investigations. so we hope to have you back to i yield back the balance of my time. >> mr. ross,. >> thank you. mr. werfel, my constituents are afraid of guys like you. they look at this hearing. they listen to you and i expect at face value that you got 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 sort of your clinical and somewhat dispassionate approach on this. and i want to walk you through this to recognize the fear that they have because of the power

that you have. and my prediction is that our country is at a keeping point right now, at a tipping point is there is an awaking amongst the governed about authority that they've delegated to congress and the congress has delegated in this place, to the irs, and that authority has been abused. so you use language earlier, things like i'm serious, i cling to the rule of law, those type of things but, frankly, i would expect you to say things like that, and i would be discouraged not to use a things like that. but you are familiar with the taxpayer bill of rights 1998 i assume as a general document. it's a statute. antenna taxpayer bill of rights is very clear that the internal revenue service is prohibited under the law from willful misuse of provision of section 6103 for the purpose of

concealinconcealing informatione congressionally inquired. you're familiar with that, aren't you? >> yes. this is a congressional inquiry, clearly. there has been a request by this committee of documents to be forthcoming from the internal revenue service. and here's an example of two of them. they have been redacted to the point of absurdity. now, we have knowledge that there's information in these two documents that is not subject to 6103 protection, and so the entire section 6103 question should be set aside. and by suggesting is the fear that animate and hearts of my constituents when you look at you is they say we're not getting a straight answer. we are seeing bureaucratic doubletalk. were seeing a bunch of nonsense. how can we possibly here's through this. and so the level of anxiety and concern that you hear from

committee members is a recognition of an abuse of power, but it's a gratuitous abuse of power. now, even when the investigation comes up, the committee, based on lawful requests, is now not getting the type of answers. so can you assure us that this type of nonsense where i know beyond a shadow of a doubt that there is information in these documents that should not be subject to 6103, that the irs is claiming to an absurd level that somehow this needs to be protected ask can you assure us based on your 30 days on the job that this nonsense will stop? >> let me give you several assurances that you can give to your constituents to clarify. the first usher and i would give is that the information that you're holding in your hand is not being held just by the irs.

we have submitted all the information minus all those black lines and those redactions to the chairman of this committee. so the notion and the implication that that information is being held just in the irs is incorrect. >> you know the law. you know when is his cloak and 6103 were prohibited under the law from revealing that. so you've got to release this information so that it can be publicly discussed. that's exactly what, that's exactly what the statute speaks. >> let me get to my second point because i want to address each of those pointed i just want to make sure that the public understood that that information resides with this committee and the senate finance committee. a second insurance is that this tension here. we have a responsibility -- [talking over each other] >> you are not releasing the information pursuant to 6103. >> i can answer this question if you will enable me. >> go ahead. >> i want to make sure that people understand, your constituents understand the tension exist that we have a solemn responsibility to protect

the confidentiality and that's their taxpayer information and these procedures are set up, set up so that we redacted this information although we sent all the to the chairman's of the ways and means and senate finance committee so it's outside the irs. and to the extent that there is a notion and the concern that there's overreaction, that's something that we need -- >> this is a joke. this is junk. this has no meaning. >> it might be jump onto my be sensitive taxpayer information. >> we know it's not and you're hiding behind it and then tell you, i'm putting you on notice. this committee intends to uphold the 1998 act and were going to follow through on it to make sure that the irs is forthcoming and not creating a bunch of nonsense hiding and bureaucratic doubletalk. >> if there is a particular -- >> time has expired. >> okay. >> i know at the staff level, mr. werfel, we have raised the issue of overreaction.

what it does is limit the ability of the committee to use it. and so i do think this is an issue that is appropriate that mr. roskam has raised and it is something that we probably need to pursue further. >> i think so, and one thing that should be clarified given congressman roskam's comments come is my stancu you can correct me if i'm wrong, it's my understand that as the chairman of the ways and means committee you can release info, information if you think that it is not 6103 sensitive. >> i cannot unless it is to the full house. clear this is a that we really have to have the experts involved. and the context of a final report, which clearly we're not there yet, i can release the information ultimately to the full house but i can't, i can't be the single arbiter of what 6103 is and isn't because senator baucus and senator hatch received this as well. what we do have concerns that at a staff level there is an over

reaction that makes it, limits the ability of the committee to use the information. >> as i've always said we've been -- we want to work with you to explore the. but i just wanted to clarify that this information is not just residing within the irs. that was my main point. >> and we do receive the unredacted versions but again, those are not shared other than with mr. levin at this level. the next person is mr. kind. no. mr. pascrell. oh, mr. kind is here, sorry. >> sorry, mr. chairman, i was being blocked by my esteemed colleague here from connecticut. mr. werfel, thank you so much and thank you for your willingness to assume this very tough duty. i mean, you obviously from today's hearings stepping into the lions den. i know you appreciate them give a much larger duty of restoring faith and just and confidence in the irs tha than just the spendg that went on with conferences or bonus payment or even the issue

before us today, the exempt organizations. let me steer back to troubling issue that i have been wrestling with. we have many organizations, especially after citizens united case that are applying for (c)(4) tax-exempt status. the inspector general looked into it and recommended the irs certain steps and procedures in how to redo that and how to filter it down and you but we have some additional ideas. but the point here is that these groups are not automatically entitled to tactics and status. they have to meet certain qualifications, certain criteria in order to qualify for it. every time there is an organization out there that does qualify for tax-exempt status, that increases the relative tax burden on organizations that don't come or individuals throughout a country that doesn't even. and (c)(4), the rule has been, they have to be principally engaged in social welfare. we've gotten away from the more definitive definition of exclusively engaged in social welfare. but how do we move forward now,

today, doing a proper review of these organizations to ensure that they are qualifying under the (c)(4) definition of social welfare status, without being accused of them being picked on? or that political selection is taking place? in other words, how do you institute a generically neutral screening process now that's going to pass mustard on both sides of the aisle, yet still doing the tough job of screening out those organizations that really ought not be qualifying for tactics and status because they are principally engaged in political activity. we know that's going on. i think anyone here who is fooling themselves in thinking that a lot of these (c)(4) applications our social welfare hasn't seen what's happened over the last couple of years in the american political system. >> so, we have an approach that begins to answer that question but i think it needs to be a dialogue between us, the irs,

this committee and others, and particularly treasured arriving plays an important role there because patrick is a policy question to be answered. but in the report we outlined the self-segregation program. and what we essentially take is our high priority backlog, those that had been, those advocacy cases have been a backlog for more than 120 days and we are offering them a more objective review. essentially if they attest that not more than 40% of their expenditures or their voluntary personal hours will go to luca campaign intervention, and at the same time they also attest that more than 60% of their expenditures and for which it personal hours will go to social welfare purpose, then they would receive an approval from the irs and they would go forward with responsible to update us if the nature of the activities changed and and understand like every other (c)(4) or (c)(3) organization, that they're potentially subject to audit or examination at some point in time in the future.

>> i do so for not going down the road of the irs being subjected to this type of scrutiny every time tough questions have to be asked in regards to how these organizations are spending their money and what activities are ultimate engaging. you will be set up for accusations from here on forth from any group that's receiving more scrutiny or perhaps a denial and that's one of the more amazing things is that perhaps there has been more denials of organizations applying for (c)(4) status who are clear engage in political activity. that's the main purpose for being. so is the taxpayer advocates office, do they have a role in -- >> absolutely and that's a big theme in the report is that we want to involve the taxpayer advocate more clearly in all of these elements. in particular and one of the main concerns that i have is that when you look at the situation, we had taxpayers that were frustrated by the length of time that they were not getting an answer from the irs, they were frustrated by the types of overly burdensome questions they were getting from the irs and

they did have an avenue and in many and in most cases they didn't exercise that avenue to go to the national taxpayer advocate, to raise greater awareness about the issue. there is a track record of helping the public to resolve matters before the irs that the individual taxpayer is having trouble doing on their own. we didn't see the connectivity here in one of the important recommendations in this report is to raise awareness and effectiveness of this framework of the national taxpayer advocate so we can solve those problems. >> you have a tough job issue before and will be looking for to working with you very closely and your candid investigation and the recommendations before this committee. we have a role to play as far as clearing up i think a lack of a clear definition as far as (c)(4) applications. i think irs would be helped if they were brighter line rules that for people that institute, more objective criteria that that's used and look forward to hearing your recommendations as we move forward on that front. >> thank you. >> will now be moving did when.

mr. gerlach and then dr. price. >> thank you, mr. chairman. thank you, mr. werfel, for being here today. my first question is would you agree that irs officials disclosing taxpayer information to outside groups or individuals is improper and, in fact, illegal? >> it is under section 6103, yes. >> what is the process if there's an allegation that an irs official did, in fact, the taxpayer information to an outside group or individual? what is the internal process if you can summarize it very quickly for handling of the investigation of that? >> so what happens is we refer the information or the allegations immediately to the inspector general. the inspector general makes one of two conclusions. one, it was intentional or, to come it was not. it was not in the next up is if you want process break down or control breakdown led to the unintentional release. we have the situations in merge and we make those process

improvements. if the fine is that it was intentional thing is referred for further investigation which could be criminal or some other type of disciplinary action. >> now, mr. brady raised the issue of the national organization for marriage and the fact that its form 990 information from 2008 was disclosed and passed on to the human rights campaign. based upon the testimony that was given at our last hearing by the represent from national organization for marriage, what do you know about at this point the irs passing that allegation to the inspector general's office, what is the status of that investigation to the best of your knowledge? >> two responses. one, i'm not aware specifically of the issue at my fingertips that i can give you the exact process. two, i would be concerned to mention a specific taxpayer it

made be more appropriate for me not to, and the setting giving speeches has attacked the irs pass or referred the matter to the inspector general's office speaks again, i don't want to comment specifically on this because i just don't have familiarity with that particular issue at my favorite tips. >> you don't know at this point whether it has or -- >> i would say at any given point in time there's a series of issues in this area that been passed onto the inspector general which are either in process for disciplined action or in process what it was inadvertent inadvertent and we're doing process improvements. where this particular situation fiction i don't know but i can get that for you. >> if you would respond as soon as you're able to do that it would be appreciated. >> i will spend i would like to ask you as a follow up to mr. johnson's questions with regard to the amount of money, $46 million of child care tax credit, checks that were sent just to the one address in texas. and in your comment you mentioned that on issue of why checks are being sent for this

credit, how do you verify that children in fact reside at the place of residence for at least six months, which is one of the requirements for that quick she said was hard to confirm that a child in fact is there for at least six months. >> there's no national childhood residency database. is one of the difficult aspects of enforcing that particular eligibility criteria. >> if that's what the uneven criteria and you cannot confirm that the child has lived there for at least six moscow where you sing out a check? >> well, what happens is that it's not am i did say it's impossible to confirm, it's just judging and, therefore, have a higher degree of errors associate with that criteria speculate does the irs has sent checks to individuals that don't meet the eligibility criteria? >> that happened unfortunate but it's calling improper payment. we have way too many of them in the irs and we need to work on that issue speaks to what disciplinary action had he taken

as an agency against the individuals that have continued that practice because i've not taken any -- football again, i arrived in let me. i've person not taking any. i'm not sure disciplined action would be appropriate in that situation. >> in other words, individuals within irs that have the responsibility over the money that is released by the irs back to a taxpayer who is sending checks out, in this case $46 million, just one address, not making sure the criteria for the applicability for that check is confirmed is still send the money out, no disciplined action has been taken against that individual or individuals responsible? >> one would have to look further into the issue to see this action is warranted. look, we make -- >> doesn't display action taken for anything done wrong? wrong? >> absolutely and partially -- >> can you share the amount of display actions taken against officials and employees over the past year for improper conduct? >> in an aggregate way, yesterday specific what is covered by the privacy act. i would have to do that in another setting but i can share that with you, just that with

the public. >> if you can share that with the committee i'm sure the committee members would be into much to see when, in fact, disciplined action is taken into what circumstances. >> i would point out i've been irs for short time i've taken a number of display actions within the irs i know for a fact they do go on and i've personally been involved in several of them spent thank you to appreciate that. >> dr. price. >> thank you, mr. chairman. mr. werfel, this sort on the panel is hard to say welcome, but welcome. >> thank you. >> thirty-four days into challenge and we appreciate that. i think all this committee is asking and all the american people are asking is that you be honest and forthcoming. >> always. >> in that light, i would suspect you agree the irs process has been broken, which in a? >> i would agree with that. >> would you agree to trust with the american people and the irs has been violated? >> i would agree with that. >> mr. whipple, the irs has targeted groups, it is leaked information on donors of groups

and then targeted those donors are auditing. this is chilling stuff. as mr. boskin said this is a kind of thing that frightens his constituents. it concerns and frightens my constituents as well. the term as you've spoken a number of people in the process of your investigation. former irs commissioner shulman, you said no. former acting irs commissioner mr. miller, you said no. then there hauling, you said yes. who is she? >> there hauling runs the affordable care act operations within the irs and i speak to her on an ongoing basis as part of my responsibility to engage with my senior leadership team on the ongoing operations of the irs. spent what was her role during this big time coming at a time -- >> has a good question at this one that we're looking at the comedy my best to explain it right now. ms. ingram was the commission of

the tax-exempt government entities or decision be taken when these events occur. so the ig report starts to surface issues in and around early, say march 2010 is when this fact pattern begins on the ig time i pick is biased and that ms. ingram served as a commissioner of tax-exempt organizations which is a level above exhibit organizations, that org chart is in my report, and she served in that capacity until somewhere around the spring or summer of 2010. >> so there was an overlap of? >> there is an overlap. at the point time she moved over and was detailed over to begin her work and running the affordable care act. >> let me ask you why you believe are why should the american people believe that the trust that is required between internal revenue service and the american people on the implementation and enforcement of the affordable care act by an

individual who was involved in the tax exempt status entity of the irs during this time in question, why should they trust that individual? >> what i would ask. >> and people to do is to trust in the process that we're going to to make sure we getting to the bottom of this. with a 60 to shoe understand the process that the irs has gone through has violated that trust with the american people already? and candidly, my constituents come and i believe the vast majority of the american people want every individual who is involved in this process to answer the questions prior to being able to have any further trusting situation in their capacity, and the internal revenue service. is that too much to ask? >> i think it's valuable input. i would like to share what we're doing, which is analyzing for any employee, ms. ingram is a different. we are analyzing what the footprint of responsibility was to end with respect to this

individual, there's some complexity in doing that evaluation because she did move over to the affordable care act early on, but at the same time just in interest of full candor, while she did move over to the afford will care act within only a few months after this fact pattern begins, her title didn't change and there's some lack of clarity in terms of her ongoing -- >> is the concern that many of us have. >> we are looking into the question. >> the irs is enforcement arm for the aca, have guidelines been promulgated for the enforcement of the employer mandate in the irs? >> not at this time but i think the schedule is this summer if i understand your question correctly. >> and oppose have to comply with this beginning in this fall, in january when. have rules been promulgated? [talking over each other] >> have rules been promulgated on part-time full-time employee distinction? >> i don't know that i can --

>> have rules been promulgated on the chip is between seasonal workers are part-time workers? >> i will give the full schedule of our aca rules. i don't have them at my fingertip. >> there's a huge lack of trust at the irs and have the irs now as the enforcement arm over the afford will care act is extremely concerning for those of us on the spam and our constituents. i would urge you, urge you to get this information to individuals who will have to comply of all of the rules that you promulgate and make certain that they're true to the letter of your rules as soon as possible. i yield back. >> thank you. mr. pascrell. >> thank you, thank you. mr. werfel, it appears after the time that you been here this morning that we are not passed the point where members of congress would be speculating about any these lives, cultures of corruption and draconian

conspiracy theories. i mean, if he took a last set of questions to you, first of all, i don't know why in god's name you took this job in the first place in your life. you have a distinguished pass. very distant whoosh past. but if it took the last series of questions come if you want to talk about a conspiracy theory, the person is not even in front of us to ask direct questions to that young lady. now, everything is open. ask questions on anything, i understand that, but both sides of the aisle seem to be against, appear to be against singling out any particular groups because of the political thinking. this is what we are opposed. this is what we are posted to. so i commend you for standing up, standing tall. i wish you success in your job. i think you're trying your best. in the report you announce that

in order to deal with the backlog of applications, for 501(c)(4) status, the irs would allow the option for groups to get preliminary approval if they self-certify. self-certify, that they devote more than 6% of their spending and time on things related to social welfare. to go with no more than 40% on political activities. is there any reason that this is not the existing standard for all 501(c)(4) organizations? >> it potentially could be. what we thought would be appropriate was we have a situation with an overdue backlog. we have a situation in which we clearly have had struggles to effectively implement the

current regulation of primary. we came up with this self attestation program because we thought that it would be less burdensome on the taxpayer and so affecting the underlying revelation of primary. but we have a broadly applied across all 501(c)(4)s spirit how did you arrive at the 40% in the first was? >> here's what we can we try to, keep in mind that the irs role is to ever lead to loss and regulations as clearly as and as effectively as possible. where this word primary. so we set the width and we said what is the most plain language understanding of primary that we can defend. we came up with the conclusion that if you're north of 50% -- >> who came up with that? >> the irs. we said that we talked to a we preach committees and others on this before we issued it in final. that if you -- interactivity are greater than 50% you're clued in the primary. if you're a political intervention is greater than 50%. if you are less than% we would think that your in a comfortable

safe zone of not being in that primary range. between 40 and 50% it gets tougher. and, therefore, if you're a taxpayer and you believe that your expenditures somewhere between 40-50% you wouldn't attest to do is go through the traditional review and we take a close look t to make -- >> as a people applied to in order to obtain the status? >> yes. >> you determine what they give you, the information they give you as to whether not they are more than 40% involved in whatever political culture exists because essentially we're trying to figure out what this primary means and what we are offering with the self attestation is some inherent structured how we can think about is. >> once that orszag receives approval, will they be able to increase their political activities the on the 40%? >> you know, if they do that then they are no longer operating under an approved and

have to alert the irs that this change the nature and extent of activities. >> but they're allowed to continue? >> the atlantic continued and the reason why is because one of the key point here is that you can operate as a 501(c)(4) today without an application. there's two different types of entities that are pretty as a 501(c)(4). those of an application approved and those who never applied budget file the appropriate forms and operate as a 501(c)(4). if you exceed your 40% after testing, you just move her stuff into that second category where your opera and without an approved application and your joined many other 501(c)(4) taxpayers that are doing that today. >> the extension is very important in terms of revenue. the exemption is more important to decide what is more than 40% or less than 40%, and hugo over 40% use them to have defiled a form with the irs. >> exactly. >> i can assume a in conclusion other or decisions out there that are performing more than 40%, or maybe more than 50%, in

the political area and have been exempt from taxes? >> i think -- >> times expire to answer briefly. >> if you perform with a 50% my hope would be that we would have an effective exam and audit process that would identify that and to work with the taxpayer to correct. >> mr. buchanan. >> thank you, mr. chairman. i also want to thank mr. werfel for being here today. want to recognize also you have been 34 days on the job and from what it appears you've had a great background. let me ask you because i think you got cut off, you're going to mention, looking at your resume here, ma you managed an agency of 90,000 employees. your budget is about $11 billion a year. and i think you're asking for additional dollars and part of the reason you wanted the additional money from the taxpayer is used said a dollar invested in an enforcement gives you back such return.

what was the numbers you're going to tell us about that why you need the additional my? >> we've asked for kind of an increase on our enforcement budget of $412 million that would yield more than 126 billion in annual enforcement revenue, which is return on investment of $6 return for every 1 dollar invested it in my point was, and i stand concerned about out excess of expenditures that occurred back in 2010 and 20 let them 10 and 2011, to extend the -- >> let me just go back because we only get five minutes each. for every dollar invested you can get $6 back from is that what you're saying? >> that's what i'm saying. >> you've heard the same, a power to tax is a power to destroy. and i can just tell you that there seems to be a culture, at least what i've heard, then you're a little over six years, in the irs there's a lot more money being put in enforcement. you can destroy people's lives.

i think, you've got to understand that. the power, the leverage, the magnitude of the irs, 90,000 employees, $11 billion in budget. it's not even a level playing field for individuals. and i look a lot with small business. what i'm hearing from my constituents, when you look at yoyour more money to go after me americans, they are very great concern because it seems like that's been ramped up in this environment. just telling you what i hear every day. into sometime, a trillion dollar deficits, people are feeling like the irs is a lot more aggressive about coming after organizations, especially small businesses and individuals because you can when every time to give it a we'll go to court. you need more cpas and more lawyers. they run out of money. you never run out of money, more resources. so let me, go ahead. answer that if you would. >> you are raising an important question. i'll go back to the report if i

could. the report, you know, it's a question about taxpayer concerns and we've heard those concerns but i think it's notable that in this report we are candid about organizational and individual failures within the irs. we are not claiming that nothing went wrong. we are recognizing that there were significant problems. and we are also recognizing that this represents -- >> let me go back, because of her limited time. let me ask you, in terms of your self. it says you managed 90,000 employees. is that a correct statement? statement? >> i lead an orszag and that is roughly 90,000 employees. >> who is responsible for the attitudes and the culture and environment at that organization? >> is a sure response that of the leadership team at the irs and the staff, but i place a lot of importance on the leadership, driving -- >> you are one of the leaders? >> i'm one of the leaders. >> i recognize, i just want to make sure that you've got a balanced approach going forward, that you don't create an

attitude or a climate in the irs about going after americans. i'm very concerned that it's more of a balanced approach. there's a sense out there that that's been hiding, not just in the last three months but in the last five or six use. there's a sense that we've got to make sure that if you're looking for more money to go after more americans, because you've got a return, i'm going to tell you will win at every turn. they can't begin to compete with the irs with the leverage and power that you have. that's why it's so important as a leader going forward, and your team of leadership is that that is something that makes some sense that we're not getting small businesses and does result killing jobs. >> one final point. in this report there's a direct commitment to address that question by doing a review across all irs of the properties of our criteria and are filters and our activities. hold us accountable for the thoroughness and objectivity of that review, and in the report we are going to share the results of that with you and

with the american people so that -- >> but u.s. it's not a leverage playing field, right at you will win. because they run out of money. they would like to get their day in court or they would like to resolve it but they can't afford what it costs to get a day in court. so i'm just telling you that someone who has seen that environment and what i hear every day, you've got to be very careful in how you move forward in terms of going after americans. spent thank you. mr. smith. >> thank you, mr. chairman. and thank you to the commissioner today. how long have 501(c)(4)s been around? >> i think, i'm not exactly sure but it's decades spent so they been around a while. 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, and that was unfortunate and needs to be fixed.

>> you've indicated that no intentional wrongdoing has taken place to your knowledge of? >> again, the evidence hasn't surfaced yet but i would caution that more analysis review and investigation is needed. >> so that would be and include clues and find interna -- >> snorts at the taxpayer is going to ask us has to been any evidence yet, we will say no, not yet but more needs to be done. that could be termed inconclusive but i'm not going to argue with that characterization. >> and sifting through the many doctors that we've had over the last few weeks, we know that there've been very exhaustive lists of questions asked of applicants, is that correct of? >> that's correct. >> we're talking about requesting a list of books read and reports associated, requesting membership lists, on journalists, whether not an applicant intended to run for office or family member of theirs would run for office. would you agree that it took a vast number of resources to even come up with those questions of?

>> i don't know how many resources it took but i would agree that we needed to stop asking a great number of questions that we're asking and revisit and change how we approach our outreach to taxpayers. >> and i appreciate that. it just strikes me as difficult to sort through all of this win we are being asked for more resources for the irs when it would seem to be that there were some existing resources perhaps that were misappropriated, certainly misapplied as it relates to the overreach in terms of asking applicants the questions. and so moving forward i would hope that we can accomplish our objective of reducing the complexity of our tax code that i think leads to this very situation in terms of the complexity leading to a misapplication of resource. thank you, mr. chairman. i yield back. >> thank you. mr. crowley. >> thank you, mr. chairman.

thank you, mr. werfel for being here today. after the first hearing on the irs, which we have on this committee, that you highlighted a culture of intimidation, a culture of intimidation. at the time i think you were referring or hinting that this culture was coming from the white house. a claim that i believe was made without merit or evidence. as the weeks have gone on we have seen that there is a culture of intimidation. by now from the white house but rather from my republican colleagues. we know for a fact that there has been targeting of both tea party and progressive groups by the irs. but this is not, this was not divulged by the treasury ig in his audit of the irs. the ig didn't even give us a hint that progressive groups

were targeted until committee democrats dug further and deeper into this investigation. my fear is the ig, an appointee of george w. bush, and to form a committee staffer of the oversight committee, chaired by darrell issa, drafted a report that suited chairman issa's personal ideology, ma and not the facts of the case. we then saw members of the majority party make baseless games about a so-called white house enemies list. and ideology election you're targeting, all false. in fact, we know congressman issa knew about the targeting investigation in the summer of 2012. well before the national elections occurred. does anyone think for a moment that if there was a white house targeting of conservative groups before the 2012 elections that chairman issa wouldn't have said

anything about that, that he would've sat back and said nothing about that? then as we see progressive groups were targeted side-by-side with their tea party counterpart groups, the chairman of this committee excuse that, in my opinion, both in public releases as well as again here today in his opening statement. there's been no outcry by the chairman know my republican colleagues when progressive groups were also targeted over the past three years. i'll point out in this may 21 testimony of the interview by the committee both this committee and the oversight committee which she was asked a question of, concerning the tea party investigation and they're being investigated. ..

and 2004 when they were being investigated by the irs so yes i agree that there is cultural intimidation going on but it's not by the white house. it's by the my republican colleagues. that is why we demand the ig summoned back to his committee to answer questions once again under oath. we also demand the republican culture of intimidation stop so progressive groups will feel comfortable testifying before us here.