great challenges. on it, this generation is more empathetic than any other generation in history. this generation is more engaged peer-to-peer in volunteering, that data bears that out. .. >> in recent testimony before the house byes and means committee, acting irs commissioner daniel we are femme said his -- werfel said groups were targeted for extra scrutiny by the si's -- agency's

tax-exempt office. bolo lists and long delays in processing applications were among the practices that prompted an investigation which found that the irs had targeted conservative groups for applying for tax-exempt status. a number of high ranking officials have been replaced since news of the targeting first came out. this is just over three hours. [inaudible conversations]

>> okay. we all set? you ready? >> yeah. >> okay. >> do you -- [inaudible conversations] >> the committee will come to order. good morning. it's been six weeks since the irs first revealed that they were purposefully targeting conservative-leaning organizations, and this week additional irs documents revealed that the term progressive along with others were also included on the be on the lookout list or bolo. and i want to make one thing

clear: no taxpayer should be unfairly targeted. it's wrong x this committee is working to insure that it will never happen again. the committee's welcomed all groups that feel they've been targeted for extra scrutiny to come forward. so far the evidence only shows conservatives being systematically targeted by the irs. not just flagged but the bolo, but actually targeted. these americans consistently had their applications delayed for nearly three years, were asked intrusive and inappropriate questions, had their donor information leaked and were even threatened by the irs with additional taxes. as i've long said, we're in the early stages of this investigation, and as we gather the facts, we'll follow those facts wherever they lead. again, if there are any additional groups of any political affiliation that feel they were mistreated, i urge them to come forward and share their story. from what we've already learned, it's clear that the irs is a broken agency that needs to answer to the american people.

mr. werfel, in the interest of accountability and at the discretion of treasury secretary lew, you spearheaded a 30-day practice of discriminating against conservative groups. unfortunately, while i'm aware this is an initial report, it fails to deliver the accountability the american people deserve. this report doesn't answer even the most basic, significant questions; who started this practice, why has it been allowed to continue for so long, how widespread was it. in fact, this report is suggests that you haven't even asked anyone those questions. additionally, the report fails to address some of the most egregious offenses by the irs. i'm specifically talking about the intentional leaking of confidential taxpayer information and the irs threatening conservative donors with additional taxes. the review notes that it's important that the inspector general continues to identify inappropriate actions, but where is the internal oversight? where are the checks to prevent

this behavior in the first place, how will the irs learn from these inexcusable actions and provide the american taxpayer with real proof and evidence it will not happen again. it will be with necessary to provide concrete reforms and assurances to rebuild the trust this agency has lost with the american people. a glaring recommendation is that congress fulfill the agency request of an additional billion dollars. and, frankly, it's insulting to taxpayers that the irs would ask for an additional billion dollars right after we find out the irs was targeting taxpayers for their beliefs, after they spent millions of taxpayer dollars on frivolous conferences, produced completely useless videos and put dinners and alcohol on irs credit cards. until the irs proves that it can responsibly manage its funds, the irs will not see one more dime in taxpayer funding. we need real reforms, and they must be implemented so the

american people can have a restored faith that they have a government that works for them, not against them. that begins with instituting long-term and meaningful changes, changes to both how the agency operates and to the tax code that the agency is trying to enforce. and as i've stated before, i often hear there constituents in michigan about their fear of being audited by the irs. that fear used to stem from the fact that the tax code was so complicated, nobody really knew what was in it or if they had filed their taxes correctly. even when people paid someone else to do their taxes, they'd sign their return not really knowing what was in it and hoping the preparer got it right. and that is something this committee must and will fix. however, today americans fear an audit not just because the tax code is too complex, but because we have an agency that is out of control. we have managers in washington sitting on cases for years directing intrusive and inappropriate questions to be asked, and after a monthlong internal review, what you tell this committee is that a few

people have been removed from their old jobs, but you cannot even assure us that they have been removed from the agency. it's my understanding that they either continue to be paid or are receiving full retirement benefits. and on top of those salaries and benefits, those employees have received over a quarter of a million dollars in woe us ins over -- bonuses over the last few years, and you've not identified structural changes within the irs that would prevent these abuses of power from happening again. congress will continue the investigation into the irs' actions and get to the bottom of this so we can insure that no american is targeted again, and with that, i yield to mr. levin for the purposes of his opening statement. >> thank you, mr. werfel. i'll go other my opening statement in just a moment. i want to urge you, you've heard the opening statement of the chairman. i know you mostly have been kind

of a technician all your years in both the bush administration and in this administration. i hope, though, that you will -- if i might suggest -- respond very vigorously when the statements are made. i hope you will actively report on what you have done during your first 30 days. where mistakes have been made by the internal revenue service, we on the democratic side have been very, very clear. when inappropriate criteria were used, we were among the first to say that those who were in charge in the irs should be relieved of their duties. so i hope you'll respond very actively and vigorously to all

the questions. i think we need to get the facts and not innuendos. we are here today to learn about the corrective action that the irs has taken to address mismanagement in processing of tax-exempt applications. so, mr. werfel, welcome to the ways and means committee. i'm not sure how warm it is, but welcome. i'm glad to see in your 30-day report that you have instituted management changes that span the entire irs management chain as needed. i see from your report that these changes reach into the exempt organization division, indeed, as necessary. and the team responsible for determinations on applications for tax-exempt status. we are also interested in your recommendations for obtaining greater e -- effectiveness

within the irs with respect to better early warning systems and risk management. we look forward to hearing your testimony on your new enterprise racing management -- risk management program which i understand will improve irs accountability and responsiveness to stakeholders including this congress. as your report makes clear, there was clear mismanagement on the part of the irs exempt organizations division in processing these tax exemption applications. the additional assessment and plan of action appeared to be a solid road map to addressing the problems, and we encourage you, as i said at the beginning, to actively, to vigorously, to completely pursuing this plan. but for our committee which launched this investigation on a bipartisan basis, the backdrop

for today's hearing is the troubling new information that has come to lht about the report issued by the treasury inspector general of tax administration. this week we learned for the first timeey items -- one, the screening list used by the irs included the term "progressives", two, progressive groups were among the applications that were reviewed in the audit and received heightened scrutiny and, three, the inspector general did not research how the term "progressives" was added to the screening lists or how those cases were handled by a different group of specialists in the irs. the failure of the ig's audit to acknowledge these facts is a fundamental flaw in the foundation of the investigation and the public's perception of this issue. i wrote to the ig and asked him

to explain these omissions. and all committee democrats have asked you, mr. chairman, today that you ask mr. george to return to the committee to provide the appropriate context for his report and answer questions under oath regarding all of these matters. our committee in its oversight role has an obligation to fully understand the manner in which the ig conducted his audit and at what direction. deeply troubling is that when asked about the new information that has come to light, the treasury ig office initially said in media reports, and i quote: that our audit report answered questions it was asked to address, end of quote. and that the house oversight committee chairman, darrell issa, had specifically requested that investigators, in many quotes, narrowly focused on tea

party organizations. we asked about this in a letter, and he responded, it responded in quotes, that many of the press reports are not accurate. if these or some of the reports were accurate,, the it, the a's initial investigation of the scope of the audit is inconsistent with the description of the ig's audit work in the 2013 audit plan, and the stated objective on the first page of the may 14, 203 audit report. the stated objective was, and i quote: to determine when allegations were founded that the irs, one, targeted specific groups applying for tax-exempt status; two, delayed processing of targeting groups' applications; and, three, requested unnecessary information from targeted groups. the ig's failure to be forthcoming in the audit and at

congressional hearings even when asked directly if there was a screening list for progressives and whether progressive groups were included among the 298 applications reviewed by tigta has contributed to the distortion of the entire investigation including use of innuendo and totally unsubstantiated assertions of white house involvement. democrats have condemned the singling out of tea party by name. i hope our colleagues on the republican side of the aisle will now join us in condemning the use of the term "progressives" on the screening list and the failure of the ig to be forthcoming with this and other congressional committees. we have also been supportive of letting the facts 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 for the facts is the only way we are going to get back on the course that i hope is our mutual goal: the fixing of the problems, all of the problems at the irs, and restoring the trust of the american people. thank you, mr. chairman. >> thank you, mr. levin. now i'd like to introduce our witness, mr. daniel werfel, principal deputy commissioner of the internal revenue service. thank you for being with us today. the committee has received your report, and it will be made part of the formal hearing record. you will have five minutes for your oral remarks. you're now recognized. >> chairman camp, 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 thus far in charting a path forward for the irs and what we hope to accomplish in the future. the report we released on monday describes a number of important findings, aggressive actions and next steps for the irs.

the problems with the 501c4 application process that were uncovered by the treasury inspector general for tax administration have created significant concerns for taxpayers, and it is incumbent upon us to take swift action to insure accountability, fix the problems that occurred and thoroughly examine other aspects of irs operations. over the past month, an ongoing review of the events described in the tigta report have shed light on the management issues that occurred within the irs and the causes of those failures. there was insufficient action by irs leaders to identify, prevent, address and disclose the problems that emerged with the review of applications for tax-exempt status. our report outlines management deficiencies and the steps that must be taken to correct them. importantly, the report does not provide a complete and final set of answers. instead, it offers an official set of conclusions and action

steps along with an explanation of the additional reviews and investigations underway. while fact gathering is still ongoing, we have not found evidence of intentional wrongdoing by anyone at the irs or involvement in these matters by anyone outside of the irs. furthermore, there is no current evidence of the use of inappropriate screeners or other types of criteria in other irs operations beyond those discuss canned in the ig report. -- discussed in the ig report. we recognize, however, there is public concern regarding the criteria used 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 screening criteria and procedures across the irs will be periodically assessed to safe a guard against any risks of inappropriate criteria. in addition to this important review, i also want to briefly mention some of the actions that

we have taken and will take to address the problems we have found. first, we have installed new leadership at all five levels of the irs senior executive managerial chain that had responsibility over the activities identified in the ig report. in addition, we have impaneled an accountability review board to provide recommendations within 60 days and later, if needed, on additional personnel actions that should be taken. next, immediately upon learning that be on the lookout or bolo lists with inappropriate criteria were still in list, we suspended the use of any such lists in the application process for tax-exempt status. next, we've established a new, voluntary process for certain taxpayers who have been in our backlog for more than 120 days to gain expedited approval to operate as a 501c4 tax-exempt entity. this is a self-certification process which allows them a stream hughed path to --

streamlined path if they agree they will operate within 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 risk. this is intended to insure that such information is brought to the anticipation of the irs commissioner -- attention of the irs commissioner and other leaders and external take holders in a timelier manner. next, we will initiate additional external and internal education and outreach about the role of the national taxpayer advocate in assisting taxpayers in resolving problems with 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 and concerns identified in the ig report on 501c4s are necessarily present in other parts of the organization. in fact, i believe that any

comprehensive review of irs operations must recognize that many, the many critical successes that the irs has had in carrying out its mission over the last several years. the irs is committing, is committed to correcting its mistakes, holding individuals accountable as appropriate and establishing control elements that will help us mitigate the risks we face. the employees of the irs are committed to our mission and to operating with integrity and fairness to all. the irs serves a vital purpose for this country, and we need to earn and maintain the trust of the american people in order to accomplish our mission. we are firmly moving in that direction, and we will continue to report on our progress on a regular basis as we fulfill our commitments. mr. chairman, ranking member levin, that concludes my statement. i would be happy to answer your questions. >> well, thank you very much, mr. werfel. for the purposes of preparing your report, did you speak to

former commissioner doug shulman? >> i did not. >> with did you speak to former acting commissioner steve miller? >> can i did not. >> and did you talk with joseph grant, the former deputy commissioner for tege? >> no, i did not. >> did you talk with chief counsel william wilkens? >> yes. >> what were the basic summaries of those conversations? >> i, as a first matter, there were three things i set out to do which are in the report. first, understand where the wrongdoing was so i can hold people accountable. second, understand where the management failures and process mistakes are in the exempt organizations unit so we can fix them. and, third, a broader understanding of irs risks and operations. and i spoke to many people within the irs. in fact, my whole senior leadership team engaged in an ongoing series of discussions, and bill well kins is one of -- wilkins is one of the senior leaders. >> did you talk to the deputy

commissioner? >> i have spoken to sarah, yes. >> for the purposes of preparing the report, did you speak to her? >> i'm not sure how to answer that question. i spoke to her as part of my overall understanding of the situation on the ground can with the irs so, yes, i guess they all connect. >> and did you speak with lois lerner, the former director -- >> i did not. >> well, i would say your initial conclusion given the number of key players that you did not talk to i think is not necessarily an initial conclusion, but an incomplete one. i really don't see how you're able to reach that. we know in 2011 lois lerner directed the since natty -- cincinnati office. do you think this was an intentional attempt to cover up the targeting? >> i don't know, i don't know the answer to that question. i think more work needs to be done to evaluate the circumstances. >> again, i find it difficult

then to make the conclusion that no evidence of intentional wrongdoing by irs personnel was r was done. >> well, what i'm suggesting is there's no evidence in the record to suggest there was an intentional cover-up -- >> but you didn't even speak to her. >> each point that i've made the point -- >> mr. werfel, i control the time, and my question is after she directed this change, cincinnati intentionally went back to targeting tea party groups. do you know who is responsible for this? >> do i know who was -- well, i challenge the premise of your question. >> after the change was made to advocacy groups, the cincinnati office went back to targeting tea party groups. do you know who was responsible for that activity beginning again? >> we are looking into the facts and circumstances that arose. there's a lot of questions to be asked and answered that haven't been asked and answered yet, and i'm not going to reach a definitive conclusion before the investigation is complete. >> if you don't know, it's fine to say you don't know. >> yeah. >> i think the answer is you don't know. do you know who in washington, d.c. directed the lawyers at the

exempt organization's technical office to hold up the tea party applications? >> i do not know the answer to that question. >> is the irs interviewing employees who were directly involved with the tea party discrimination at this point? >> right now the irs is relying on the justice the president and the inspector general to conduct those interviews. we're working closely with them, but it's critical that because there's an ongoing criminal investigation that we do not step in front of the justice department and the ig at this time. >> is the irs conducting any internal document review outside of complying with the requests that congress has been sending the agency? >> we are conducting a very thorough document review at time. >> your report also states that there's no evidence of the use of inappropriate criteria in other irs business unit operations. and how did you reach that conclusion? are you interviewing employees and requesting information, or is there -- >> yeah. there's -- the major divisions that are involved in these types

of activities of dealing directly with taxpayer issues are our small business section, our large business section, tege which is the subject of the audit report and wage and investment. i've met with the leaders of those operating divisions, we've talked about the issues in the ig report that dealt with the exempt organizations unit. i've asked them to look internally and do their own assessments of any specific evidence they may have of similar problems or challenges in their areas. they've determined that there are not -- and there's some good reason for that, and in particular i think it's important to point out that in this area of tax-exempt review, it's one of the very few areas in the irs where the nature of political activity is relevant to any determination we would make on eligibility or review. and so the other areas o. irs normally don't involve themselves in political activity. all this said, we understand and you know i'm, like all of you, very concerned about what is in

this ig report. it's a very significant concern. we're hearing from taxpayers that they're concerned, and that's why out of an abundance of caution and because it's important to reassure the taxpayers we're going to review all of our criteria and report back to you op our findings. >> so i think this leads into the statement that in the report that the irs is digging deeper into the evidence, this is a quote, to determine if there are instances of wrongdoing or inappropriate conduct beyond the mismanagement identified -- >> absolutely. >> so that's beyond the exempt organizations division. is this, in that process are you reviewing documents requested by congress, or is there some other internal review in addition to that? >> i think they, there's a lot of overlap, mr. chairman. you have asked this committee and other committees have asked for an enormous footprint of documents which is very justifiable, and we are in the process of producing them and have produced a lot of documents for this committee and others. we, as part of our efforts to

get to the bottom of this, are looking at a very similar foot print of documents in order to make sure we understand the causes of these circumstances so that we can take the appropriate accountability steps and corrective action. >> well, i would note we're just beginning to get e-mails, so it's not as if we have all the documents at our disposal yet that we're going to need to review. i have another line of questioning. you acknowledged and your report acknowledges that the irs inappropriately targeted tea party groups, and since then there have been questions raised about whether the irs was inappropriately targeting progressive groups, and i would like to read the treasury inspect jenner's question -- general's question. quote: we reviewed all cases that the irs identified as potential cases and did not limit our audit to allegations related to the tea party, end quote. so i'd like to repeat that. tigta did not limit its audit to just the tea party. and let me just read another excerpt from their answer, their written answer. quote: from our audit work, we

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

>> i think that's what the evidence points to so far, but as you've mentioned in your opening remarks, we're in the early stages of this, and there's more investigation that needs to be done to answer that very question. >> yes. and the inspector general is doing a more thorough investigation, but at least in the recent letter or he sent us, he said he found no evidence, and your report as you responded does not contradict it. i would ask unanimous concept to place in the record the entire letter that was received on june 26th from the inspector general regarding this matter and, thank you, i yield to mr. levin. >> you know, to try to set the stage for some bipartisanship just quickly, where did you start your government service? [laughter] >> i started my government service in the office of management and budget. i was at the justice department for some time. but at the time that this

administration came, i was a senior leader in omb and serving under president bush. your report statements we have found, not found involvement in these matters, talking about the criteria, by anyone outside of the irs, is that correct? >> that is correct. >> and you stand by that. >> with i stand by it. i mean, i think the statement in the report is appropriately caveated with the point that there are crop going reviews and investigation that are necessary. but at this time taxpayers and the public have questions, and the answer to the question have you found any evidence of intentional wrongdoing, our answer is, no, we have not. >> your report also says, um -- let me just ask you in terms of the involvement outside of the

irs, have you found any involvement by anybody in the white house? >> no, we have not. >> there's been reference here to the ig's investigation, and i want everybody to understand in the letter that was sent there was use, there was a bolo that had the word "progressives" on it, is that correct? >> yes, that is correct. >> and you have asked that that bolo and all others no longer be used? >> that is correct. we suspended the use of all bolo lists. >> the ig letter also indicates and all of this was indicated for the first time, that there were, there was a number of groups, progressives involved in the bolo that was sent to a different group within the irs,

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

progressive groups as well as tea party groups. that was clear from the pie chart in his report. but he never delineated who the others were. even as later asked. and if he had come forth with that information, i think it would have undercut a lot of the wild innuendos that talk about a white house enemies list. they're talking about a culture of cover up. so we want him back. i hope, mr. chairman, you'll have him come back. and i think, mr. werfel, we know that you will encourage the digging out of all the facts as fully as possible as you proceed. do you give us that pledge? >> are i do give you that pledge, absolutely. >> thank you. >> i, actually, mr. chairman, there is a question that i answered from you that i think warrants further clarification.

>> fine. >> and if that's okay. >> yes. >> l and i don't remember your exact question, but i think, i want to make sure that i get out early in this hear so that we have that basis of information to guide the questions is that where we are right now in our fact gathering -- and as you said, it's early -- we have evidence, obviously, of diversity of political labels used in the bolo lists. >> yes. >> we have, also, as another example of where we have diversity of political labels, this week we're sending out letters to taxpayers that have been in our backlog for more than 120 days to offer them this option, this fast track option. >> yes. >> there's diversity of political labels in the groups that are getting this letter. and also it's our understanding as we review the fact that is there's a diversity of political labels in those organizations that were put in through process for 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's not always clear where they stand on the political spectrum and, frankly, i don't want to know where they stand on the political spectrum. i want the irs to be in the business of just detecting because we have to under the law and regulation the extent of political activity not knowing the type of politics. but i just, going back to your earlier question, i didn't want to leave the committee with the impression that we're not seeing diversity of political labels across the spectrum. what i'm suggesting is more analysis, significant more analysis is needed before we reach conclusions about what that means in terms of an irs failure or an irs issue. >> well, that's why i find it perplexing that you would conclude that there's no intention, there's no evidence of intentional wrong doing by the irs when the inspector general says that he reviewed not only just tea party cases,

but others, and in his letter dated june 26th says that only tea party cases at this point were flagged and be sent to another review. there were no progressive cases sent to another review. >> to a different review. >> please don't interrupt me, mr. levin. >> different review. >> so i think that's an important point x. that's why we need the full inspector general letter in the record, and i think you might have called these initial conclusions, and i think initial probably should be emphasized. i would call them incomplete given that we still have more information. with that i'll recognize mr. johnson. >> thank you, mr. chairman. mr. werfel, the american people want, need and deserve to know the truth, and i hope we get it. mr. werfel, back in my district it appears the allen air 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's just

outrageous. mr. werfel, instead of targeting americans because of their belief, why doesn't the irs target fraud and abuse? that is costing hard working, law-abiding americans, taxpayers billions of dollars. mr. werfel, i'd like to play a short video clip on an issue i've been working on for some time now from whr-tv investigative report. >> i think the public needs to know about this. >> are and this isn't a single case. >> his office has been flooded by illegal workers who have figured out a loophole. it allows them to use their -- [inaudible] numbers to get huge refunds from the irs. the loophole is called the additional child tax credit. it's meant to help working families who have children living at home. but 13 in in invest gates has fd claiming the tax credit for kids who live in mexico, and we're talking lots of kids. >> we've seen 10, 12, nieces and

nephews on these tax returns. the more you put on there, the more you get back. >> our whistleblower says he has thousands of examples. >> over the years the ig has sounded the alarm of abuse, do you agree this is a problem, yes or no? >> yeah, i certainly agree that -- >> okay. that's good. isn't it true that one of the rules to claim the child tax credit is that the child has to live with the tax filer for more than half of the year, yes or no? >> that's difficult to confirm that eligibility point, i agree. >> why then isn't the irs enforcing this residency rule? mr. werfel, i hope you will work with us to address this. i've to got a bill that would help put a stop to this. in fact, the bill would save taxpayers $24 billion. i want to also ask you about another scandal, and that is the irs management of the individual taxpayer identification number program or i-10. again, why doesn't the irs target fraud and abuse in

instead of americans for their beliefs? last summer the ig issued a damning report in which it found that irs management discounselorred irs workers -- discouraged irs workers from detecting fraudulent applications. the ig's report led me to call on then-commissioner shulman to resign. on the screen i've got figure six from the 2012ig report showing most frequently-used addresses for i-10 tax refunds. as you can see, nearly 24,000 tax refunds totaling $46.4 million were issued to the same address in atlanta, georgia. bottom line, these items, i-10s, are costing taxpayers dearly because they can be used to fraudulently get tax refunds. and last month the ig issued another report that makes it clear the irs could be doing a better job protecting taxpayer dollars. just look at the figure on the screen.

over 1,000 i-10s or were assigned to individuals using the same address in atlanta, georgia. do you agree there's still a problem or not? yes or no? >> i do agree there's still a problem, yeah. >> also the ig found the irs workers handling the i-10 applications remain concerned that management will basically pressure them to rubber stamp applications instead of insuring that only qualified individuals receive. can you give us assurance that the irs management won't do this anymore? >> i need to look further into that allegation. but on its face, it sounds like something that's inappropriate, and i'll work with the team. >> met me just say in closing, your own report acknowledges the tax code is nearly impossible to administer because it's so complex. and based on the billions in improper payments being made with refundable credits, i'll just say your agency is proving you right every day, and it's time for the irs to stop targeting americans and start

targeting fraud. i yield back. >> all right. mr. rangel's recognized. >> welcome to the committee. you said this diversity in the bolo lists, and you admit that conservative groups were on the bolo lists. why is it that we don't know whether or not there were progressive groups on the bolo list? >> well, we do know that the word "progressive" did appear on a set of bolo lists, we do know that. when i was articulating the point about diversity, i was trying to capture the types of political organizations that are on these bolo lists are wide ranging. but they do -- >> you know, we seem to know what a conservative is, but

people -- how come progressive now become withs -- becomes diversity instead of what it is? it's groups that are considered to be liberal as opposed to the tea party that's considered to be conservative. is that correct? or fair? >> i think it's fair. >> and okay. as long as it's fair, then why are you having problem with the chairman, couldn't you say that in determining whether there was abuse of the provisions of the internal revenue code the staff were looking for signals for organizations whether they were liberal or whether they were conservative? and the methods they used were not appropriate? is that a fair statement? >> i don't want to jump to a particular conclusion. i want -- >> well, 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 of varying types were on the bolo lists. >> okay. tea party is a type, right? >> yes. >> can you give me a type of name that would describe a progressive democratic liberal organization? >> that's where, i mean, the word -- i mean, and this is where i reached my conclusion that there's broad range or diversity in the political groups, because there are some that are more on the obvious side of the spectrum --? >> that's good enough for me. your saying that they are groups that you can say are progressive groups. >> i would put them in three categories. there's one that are clearly on the conservative end of the spectrum, some that are clearly on the liberal end of the spectrum, and then there's a set of groups where it's difficult to determine on the facts where they would land on that

spectrum, and maybe they don't land anywhere on that. maybe they land right in the middle. >> that just makes so much sense. and so far on though you don't like the technique that was used, you don't find that there was any deliberate political attacks made, it was just that they were trying -- paced on what you know -- based on what you know now -- they were trying to do their job, and they didn't do it in the right way. >> my position is that the way in which this should be structured, it should be looking generically at political activity and not using labels that point towards political persuasions because that's inconsistent with the irs mission statement for how we're supposed to do our work. >> do you think it's possible that the white house would be supporting a targeting of progressive organizations that supported his candidacy? >> i don't even want to speculate on that. from my short time at the irs, i are seen no interaction between the white house and the irs that would extend to that level.

i personally have had no contact with the irs other than to brief the president on this report. >> and could you produce to us the type of names that are on the bolo list so that we can make determinations as to whether we think they're from the left or the right? could you help us out with that this. >> that has been provided to the chairman given the taxpayer-sensitive nature of the -- >> so you say the chairman has a list of organizations that were considered to be progressive that were targeted? >> what i'm saying is the chairman has been delivered the unredacted version of the bolo list. >> and that list that's unredacted includes organizations that are considered to be progressive? >> it includes taxpayer-sensitive information across a broad spectrum of -- >> so the chairman knows or should know that the targeting concerned liberal as well as conservative organizations. >> when that's not a question i'm going -- i feel appropriate i should answer. >> but that information is, was

delivered to the chairman. >> we've delivered the both redacted and unredacted version of all the bolo lists to this committee. >> and the unredacted includes progressive organizations. >> be well, the -- it does because it's on both the redacted and unredacted. >> all right, time has expired. and, mr. rangel, i do want to note for the record that information is also provided to the senate finance chairman, mr. baucus. and you should know that i have also dell gated 6103 status to mr. levin. so any 6103 information i have, mr. levin also has. >> are progressive organizations on that? >> yes. >> so we are working in a bipartisan way in terms of the sharing of 6103 information. >> you don't know how glad i am to hear that, mr. chairman. it appeared to be so much confusion before, but at least we know the abuse was to both type of organizations, conservative as well as so-called progressive. thank you. >> and never wanting to comment

too much on the senate, i believe mr. baucus has also shared this information with mr. hatch. >> thank you. >> senator hatch. >> thank you. >> is now i will recognize mr. brady. >> mr. werfel, who initiated the targeting of conservative organizations for extra scrutiny based toen their political beliefs? >> that we is still subject to further investigation. >> who have you interviewed on that matter? >> there are a variety of different employees being interviewed by the inspector general and justice department. i know you're going to make the point that i have not personally interviewed, i understand that -- >> because you just testified you have not -- >> i have not. >> anyone within your agency. >> right. and if it's helpful to the committee, i can explain the structure of my review and how we're uncovering every fact. >> let's go to the key question. >> please. >> who initiated the target of donors to conservative organizations to improperly apply the gift tax to their donations? >> again, the types of questions that were raised to donors --

>> who do you know, i guess, is my question. >> it's till subject to further investigation. i'm just taking issue with the targeting of donors. i want to make sure there's no supposition. >> commissioner, please. at this point you don't -- you haven't interviewed them yet, so you honestly don't know, correct? >> no, no, it's not a question we haven't interviewed, it's a question of the investigation is ongoing. >> who leaked -- [inaudible] to the huffington post and the human rights campaign, do you know? >> i do not have that information. >> who leaks private taxpayer information for 31 conservative groups to the media specifically propublica, do you know? >> i don't know that information. i will point out that the ig reviewed those circumstances and found those releases of information to be not intentional. >> but you don't know who leaked them. >> i don't have that information at my finger tips. >> who leaked private information to the president's

economic recovery advisory board? >> again, i'd have to learn more about the circumstances of eac n washington or within the white house targeting, delay andtimidation n th the lookout list? >> that -- >> do you know? >> that i can answer some of the questions. i will say this, i am not aware of anyone at the white house that was involved in this or the treasury department or otherwise. asd, a the evidence we have points to the involvement of individuals in the irs, and i'm happy to talk true that with you. >> let's talk through this -- >> okay. >> in regards to the delays of the king street party to the vote application, who at the irs shared private taxpayer information to other federal agencies such as the fbi, atf and osha. >> i believe it's about a specific taxpayer, and i can't answer that question. >> finally, who at the irs was involved in covering up this pattern of abuse within the agency and concealing it from

the public and congress for the past two years? >> again, i don't know that i would be comfortable with the characterizations in the question, but i'm happy to walk through the managerial chain with you and the events as i understand them. >> i guess my point is you're not conducting interviews, you don't know answers to the key questions. yet in your report you declare there is no evidence of an intentional wrong doing or misconduct on the part of irs personnel. no evidence of intentional wrongdoing. mr. werfel, this report is a sham. i would call it a whitewash, but it's too thin and unsub substantial to even meet that description. and my point to you is that you don't work for the irs. you work for the american people. your job isn't to cover up, it is to open up this agency. because what we're seeing, these patterns of abuse and intimidation, the only goal appears to be to silence the voice of people whose views you

don't like. and so getting to the truth is critical. so my question is i'm told you're a decent person. so are you serious about getting to the truth? >> absolutely. >> are you serious about -- >> and i'm serious about -- >> -- restoring the integ -- integrity of the irs? >> i'm serious about getting to the truth and doing it consistent to the rule of law and procedure. and many of the criticisms that you're levying in your set of quons, in order for me to overcome those criticisms in many cases i'd have to violate that rule of procedure. >>, so if -- okay, go ahead. >> since you're serious, will you commit to returning to the committee in 30 days with more complete answers to the key questions before us? >> absolutely. as these answers become available, i'm ready to submit them. but i think it's very important to understand that in gathering these answers we have to follow the rules of law and procedures. >> you know, wouldn't it, wouldn't it have been great -- >> could the witness finish --

point offered. >> mr. brady controls the time. >> let him answer -- [inaudible conversations] >> it is up to mr. brady to conduct his questioning as he sees fit. >> wouldn't it have been terrific if the irs have followed the rule of law and procedures when targeting these conservative groups and donors leaking their private taxpayer information, concealing it from the public and then misleading congress? you need to understand one thing. the ways and means committee is going to get to the truth, good or bad. we're not going to stop until we learn the whole truth, and we're going to reveal who initiated these abuses, who participated, who encouraged them and who concealed them. we're going to hold them accountable, including you if you hinder this investigation, and then we're going to make sure the irs never does this again to average taxpayers. i yield back. >> time has expired. mr. mcdermott is recognized. >> thank you, mr. chairman. mr. werfel, thank you for being willing to be the director of

the irs. [laughter] after that last set of questions, i think it's important to thank you. you've been at the center of a firestorm, and as has the whole agency. and the irs has made attempts to address the criticisms and meet the challenges that face us. i've said it before in this committee, but it bears repeating, the irs has a difficult and almost impossible and thankless job. it's the agency easiest to dislike and easiest to throw under the bus. you go back to the bible, who do they pick out to talk about? tax collectors. remember sa key whereas? these were members who were of the bottom of society, and that's where we're treating irs people, and i don't believe it's fair. you're hard working, dedicated civil servants who do your very best to administer the law.

now, i, i'm going to stop my what i was going to say except to say one thing. i don't think bolo lists 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 leaves the cockpit and goes down with a bolo list. he is on the lookout for a lot of things on that plane. we do, you use it to organize your thinking. the american college of surgeons has just adopted bolo lists before they take somebody into surgery, there's a whole long checklist of things that 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 a be on the lookout list is a good idea. so don't say you're going to throw them away, because we know

that -- otherwise you become the dmv in seattle where you go in to get your drive's license, you take a number, and you wait. and you'll have a long line of people because they're not organized. they're taking them one at a time. and if you take 292 or 298 one at a time and dent organize your thinking -- and don't organize your thinking, it doesn't make any sense. so 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 on. >> i appreciate that, congressman. the point i was trying to make in response to mr. brady's questions was that there are certain procedures that need to be followed in 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 am helping to make sure that those employees are interviewed. the issue is that i've been asked by the justice department and the inspector general to

enable them to do the interviews to ask all the thorough questions to get to the bottom of this because that will make sure that if there is a prosecutorial action that needs to be taken, that it'll be clean, and the evidence chain will be clean. this is very specific instructions coming from the justice department and the inspector general. so the notion that no witnesses are being interviewed is not accurate. the accurate answer is that witnesses are being interviewed whether i am personally sitting across the table or not from interviewing. i would love to be able to. but the reality is i'm going to follow the process and the rule of law in getting to the bottom of it. and one of the constraints that i have is that i have to let professional investigators do the interviewing. and that's a constraint i'm willing to live with because i trust that these professional investigators will be able to get to the bottom of it. one more point about, that i want to make about the rule of law and process around accountability. there's going to be a lot of questions and implications that the accountability is not real because people are still at the irs, and they're still, you

know, getting a paycheck. the reality is that when you take personnel action for discipline against a civil servant, there are rules of procedure that need to be followed. and if i went off and cut off those rule of procedures and fired people and suspended them without pay, then i personally would be violating those rules of laws and procedures. and they're put in place for a reason. those due process protections are put in place in the event that an employee is unfairly selected for discipline that they have an opportunity to defend themselves. there's a good reason for them. so when we see things that bother us in government, in particular in the irs, and we want people held accountable, what we need to focus on is making sure we're following a very diligent and expedient process in holding those individuals accountable, and that's what we're doing right now. we are pursuing the correct set of disciplinary actions consistent with laws and regulations that govern our operations. >> all right, thank you. time's expired. mr. ryan's recognized.

>> thank you. mr. werfel, secretary lew asked you to put this report together the make sure that nothing like this ever happens again. um, i look at page 35, and i see basically a case made for a budget increase. your budget asks for over a billion dollars in more spending for your agency, and you're asking us to hire another 4,572 employees. let me read you what we've already learned in just two months. in just two months, we've got a conference in atlanta which had celebrity chef of wolfgang puck cater costing $2.4 million, we've got a conference in anaheim, california, $4.1 million. a conference in philadelphia, $2.9 million. a conference in sand yea quo, $4.1 million. one of these conferences you

$135,000 for 15 speakers. that's about $9,000 per speaker. the irs paid for the deputy commissioner to stay five nights in the presidential suite at the hilton hotel during one of these conferences. you paid $17,000 to a speaker to create paintings of bono, michael jordan, abraham lincoln and others. we hear a report of crony contracting. between improper relationship between an irs contractor and a person whose business had less than $250,000 in income the prior year getting awarded a $500 million contract. between 2010 and 2012, you had 225 conferences costing $49 million. let me see if i can put this in perspective for you. i represent a town in wisconsin,

a little less than 7,000 people live there. it's a great ril village. the village is basically a blue collar town. people work at the case tractor factory, they work at the se johnson factory, it's surrounded by cornfields and bean fields and lots of small businesses. it took more than 900% of the -- 100% of the federal taxes paid by the working families of this village in washington to pay for the 225 conferences you spent at the irs from 2010 to 2012. that's the way you need to think of this. people are working hard, they're living paycheck to paycheck. they're paying their taxes, and this is what you're spending their taxpayer dollars on? and now you come here asking us for a billion dollars, about a 10% increase, you're asking us to hire another 4500 people. i represent rock county, that's