saying nothing. [laughter] it is a challenge. it is worth trying different things. scoldingost quietly the bench for not giving bill lawyer the time he or she deserves. it might be effected. that you remain seated while we adjourn the conference. may we also express our appreciation for the wonderful visit of the chief justice to the fourth circuit court of appeals. i cannot tell you what a pleasure and honor is to have you with us. >> thank you. appreciate that. [applause] well done. thank you very much. [applause] [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] >> three quick things.

staff andory and your program committee, thank you for a great conference. i declare it the best conference we have ever had. i appreciate all you have done. [applause] judge king reports the professor is feeling better this morning and appreciates all of your thoughts and prayers on his behalf. waive his feeto next year into his performance. we all have that to look forward to. drive safely. be careful going home. the conference is concluded. thank you. [applause]

>> the 2012 supreme court term ended last week. the high court handed down several decisions, including one dealing with the voting rights act and same-sex marriage. this week, we will show you the oral arguments in their entirety starting monday with the voting rights act case. the supreme court decided 5-4 that while the advanced approval remains constitutional, the formula is used by congress in determining which states require the approval needs to be updated. cases onight, two same-sex marriage.

the high court cleared the way to resume same-sex marriages in california. that is the so-called proposition 8 case. in the other, the justices ruled the federal law opposing gay wasiage, doma, unconstitutional. see all of these oral arguments including justice opinions in primetime this week on c-span. >> tomorrow, american history tv commemorate the 150th anniversary of the battle of gettysburg. the 24tha monument to michigan infantry. it belonged to a larger organization that had become famous throughout the army as the iron brigade. they had a reputation as being tough fighters. they brought 496 men on to the field. 363 will remain as casualties. over 115 survivors of

the 24th michigan who were wounded or captured here returned to this spot for the dedication of their monument. on theor was the speaker dedication day. as he looked over the assembled veterans, he grew quiet and then sent this. written withbeen the battle of gettysburg as the only topic. the whole story has not been told. much of the planning and more of doing has been omitted. the living men have given their vision of what they did and witnessed. could bee dead lips unsealed, while larger testimony might be spread across the pages of history? 9:30ve coverage begins at and continues throughout the day.

calls we will take your and tweets. at 8:00, the commemorative ceremony followed by a candlelight procession to soldiers national cemetery. we will in the day at 9:15 with the civil war institute director taking your calls and tweets. use twitter to stay up-to-date on this weekends activities. submit questions for our guests. terrorhomeland security representative is our guest this week. he will talk about immigration and border security and call for more transparency between the surveillance programs and members of congress. 10:00 and 6:00 eastern on c-span. >> it is criminal to me that i

had to authorize my budget and financial people to write a check for $454 million, a little bit more than a month ago, to extend our contract with the russians to continue to carry our crews to the international space station for 2016 and 2017 because we have not yet brought about the american capability coming with the commercial program. the president's budget calls for $821 million for a commercial crew. we're not halfway there. my job is to try to persuade congress the plan is good and we're going to be efficient users of taxpayer money. i have not been successful yet, but i am working on it. we're up to $525 million. as i have told members of $821 million in the 2014 budget is vital if we are to make the 2016 date so americans are transported to space again on the american

spacecraft. at 8 --on sunday night 8:00. commissioner irs testifies on his agency's reported targeting and spoke about his 30-day review. this is about three hours.

>> this week additional documents revealed the term "progress of" along with others were included on the bolo. i want to make one thing clear. no taxpayer, regardless of political affiliation, should be targeted. it is wrong. this committee is working to make sure it will never happen again. we want groups that feel they have been targeted to come forward. so far the evidence only shows conservatives being systematically targeted by the irs. these americans consistently had applications delayed for nearly three years. they were asked interests of an inappropriate questions. they had their donor information leaked and were threatened by the irs with additional taxes.

as i have long said, we are in the early stages of the investigation. as we gather the facts, we will follow them wherever they lead. if there are additional groups of any political affiliation that feel they were mistreated, i urge them to come forward and share their story. from what we have learned, it is clear the irs is a broken agency that needs to answer to the american people. in the interest of accountability, he spearheaded a 30-day review of the practices of discriminating against conservative groups. i am aware this is an initial report. it fails to deliver the accountability of the american people deserve. this report does not 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? this report suggests you have not even ask anyone those questions. the report fails to address some

of the most egregious offenses by the irs. i am specifically talking about the intentional leaking of confidential information and the irs threatening conservative donors with additional taxes. the review notes it is important the inspector general continues to identify inappropriate actions. where is the internal oversight? where are the checks to prevent this behavior? how will the irs learned and provide the american taxpayer with real proof and evidence it will not happen again? it will be necessary to provide concrete reform and assurances to begin rebuilding the trust the agency has lost with the american people. the recommendation in the report is congress fulfill the agencies budget request of an additional $1 billion. it is insulting to taxpayers for ask for an additional $1 billion when we

learned the retarding taxpayers for their beliefs after they spent millions of dollars on frivolous conferences and put expensive dinners on irs credit cards. until the irs proves it can responsibly manage its funds, it will not receive one more dime of taxpayer money. we need real reforms. they must be implemented so the american people can have restored faith that they have a government that works for them and not against them. that begins instituting meaningful changes. changes to how the agency operates and to the tax code the agency is trying to enforce. as i have stated before, we often hear from constituents in michigan about their fear of being audited by the virus. that used to come from the fact the tax code was so complicated no one really knew what was in it or if they had filed correctly. even when people paid someone else to do their taxes, they signed the return not knowing what was in it and hoping the.

. got it right. this is something the committee will fix. americans. an audit, not just because the code is so complex because the agency is out of control. we have managers in washington sitting on cases for years directing an appropriate questions to be asked. after a months-long internal review, you tell this committee if you people have been removed from their jobs, but you cannot assure us they have been removed from the agency. it is my understanding they continue to be paid or are receiving full retirement benefits. on top of the salary and benefits, those employees received over $250,000 in bonuses the past few years. you have not identified structural changes to prevent the abuse of power from happening again. if there's anything this report shows, is how much more work must be done. congress will continue the investigation to get to the bottom of this so we can ensure

no american is targeted again. for the opening statement. over my opening statement in a moment. opening heard the statement of the chairman. i know you have mostly been a technician all of your years in the bush administration and in this administration. i hope you will respond vigorously when statements are made. i hope he 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 clear. when inappropriate criteria were used, we were among the first to say those who were in charge in the irs should be relieved of their duties. i hope you will respond actively and vigorously to all the questions. i think we need to get the facts and not innuendo. we're here to learn about the corrective action the irs has taken to address mismanagement in processing tax exempt applications. werfel, welcome to the ways and means committee. i am not sure how warm it is, but welcome. i am glad to see you have instituted management changes that span the entire management chain as needed.

i see from your report these changes reach into the exempt asanization division necessary. the team responsible for determination's on applications for tax-exempt status. we're also interested in your recommendations for obtaining greater effectiveness within the irs with respect to better early warning systems and risk- management. we look forward to hearing your testimony on your new enterprise risk-management program, which i understand will improve by address 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 applications. the additional assessment and

plan of action appeared to be a solid road map to addressing the problems. actively,ge you to vigorously, completely pursue this plan. for our committee which launched this investigation on a bipartisan basis, the backdrop for today's hearing is the troubling new information that has come to light about the report issued by the treasury inspector general of tax administration. this week we learned for the --st time three key items the screening list included the term "progressives," progressive groups were among the 298 applications reviewed in the audit the receive heightened scrutiny, the attorney general did not research how the term

was added to the screening list or how the cases were handled by a different group of specialists in the iris. the failure of the audit to acknowledge these facts is a fundamental flaw in the foundation of the investigation and the public perception of this issue. i.g. and asked him to explain the omission. asking you to 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 i.g. conducted his audit and in what direction. deeply troubling is the office

auditlly said, "our report answered questions it was asked to address." hadhouse oversight chairman specifically requested investigators "narrowly focused on key party organizations. we asked about this in a letter. he responded -- he responded that many -- it responded that many of the press reports are not accurate. if some of the reports were accurate, the initial explanation of the scope of the audit is inconsistent with the incription of the audit work the 2013 audit plan and the stated objective on the first page of the may 14, 2013, audit report.

was toted objective determine whether allegations were found that the irs targeted specific groups applying for tax-exempt status, delayed processing targeted group applications, and requested unnecessary information from targeted groups. i.g.'s bell year to be forthcoming in the audit and even when asked directly if there was a screening list for progressives and weathered those which included in the applications reviewed has contributed to the distortion of the entire investigation, including the use of innuendo and unsubstantiated assertions of white house involvement. democrats have condemned the singling out of tea party by name. i hope my colleagues on the republican side of the aisle will join us in condemning the

use of the term "progressives" on the screening list and the to bee of the i.g. forthcoming. we have been supportive of letting the facts lead where they may. the acting including 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're going to get back on the course i hope is our mutual goal, the fixing of the problems, all the problems at the irs, and restoring the trust of the american people. thank you, mr. chairman. introduceould like to our witness, daniel werfel. the committee has received your report and it will be made part

of the formal record. you will have five minutes for oral remarks. you are now recognized. the opportunity to appear before you today to discuss the progress we have made in charting a path forward for the irs and what we hope to accomplish in the future. the report released on monday describes a number of important findings, aggressive actions, and next steps for the irs. the problems with the application process that were uncovered by the inspector general have created significant concerns for taxpayers. it is incumbent upon us to take swift action to ensure accountability, fix the problems that occurred, and thoroughly examine other aspects of operations. over the past month, an ongoing review of the events described in the report has shed further light on the management failures that occurred within the irs and the causes of those failures.

there was insufficient action by irs leaders to identify, prevent, address, and disclosed the problems that emerged with the review of applications for tax-exempt status. our report outlines management deficiencies and steps that must be taken to correct them. 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 underway. the fact gathering is still ongoing. we have not found evidence of intentional wrongdoing or involvement in these matters by anyone outside the irs. there is no current evidence of the use of inappropriate screeners or other types of criteria in other irs operations beyond those discussed in the report. we recognize there is public concern regarding the criteria used for obligations for tax-

exempt status and more needs to be done to evaluate our screening criteria and procedures. we will establish a review process by which screening criteria and procedures across the irs will be periodically assess to safeguard against any risks of inappropriate criteria. review, ion to this re want to mention some actions we have taken and will take to address the problems we have found. we have installed new leadership at all five levels of the senior chain that had responsibility over the activities identified in the report. accountability review board to provide recommendations within 60 days and later if needed on additional personnel actions that should be taken. to beately upon learning on the lookout for bolo lists,

we suspended the use of any such lists for tax-exempt status. we established a new voluntary practice for certain taxpayers who have been in our backlog for more than 120 days to gain expedited approval to operate as a tax-exempt entity. this is a self-certification process that allows them a streamlined path to tax-exempt status if they agree they will operate within defined limits of political and social welfare activities. 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 ensure such information is brought to the attention of the irs commissioner and other virus leaders and external stakeholders in a timely -- and other irs leaders and external stakeholders in a timely manner.

have the advocate in assisting taxpayers in resolving problems. i want to point out our pursuit of broadbased reforms does not mean we believe the specific challenges and concerns identified are necessarily present in other parts of the organization. i believe any comprehensive review of iras operations must recognize the many critical successes the irs has had in carrying out its mission the last several years. the irs is committed to correcting its mistakes, holding individuals accountable, and establishing control elements that will help us to mitigate the risks we face. committed to are operating with integrity and fairness for all. purpose.erves a vital

we are firmly moving in the direction of regaining trust. we will report on a regular basis as we fulfill our commitment. that concludes my statement. i would be happy to answer your questions. >> thank you, mr. werfel. for the purposes of preparing reports, did you speak to the former commissioner? >> i did not. >> did you speak to the former acting commissioner steve miller? >> i did not. >> did you speak with joseph grant? >> i did not. >> did you speak with the chief counsel? >> yes. what are the summaries of those conversations? >> there were three things i set out to do which are in the report. first was to understand where the wrongdoing was so i can hold people accountable.

second to understand where the management failures are so we can fix them. of a broader understanding iras risks and operations. i spoke to many people in the irs. my leadership team engaged in a series of ongoing conversations. >> did you talk to the former deputy commissioner as you prepare the report? >> i spoke to her as part of my overall understanding of the situation on the ground. they all connect. >> did you speak with lois lerner? >> i did not. >> i would say your initial conclusion of no wrongdoing given the number of key players you did not talk to is an incomplete conclusion. i do not see how you were able

to reach that. we know from our investigation in the summer of 2011 lois lerner and directed the cincinnati office to change the words tea party label to advocacy groups. do you think this was an intentional attempt to cover up the targeting? >> i do not know the answer to the question. more work needs to be done to the valley with the circumstances. -- to evaluate the circumstances. >> i find it difficult to make the conclusion that no wrongdoing was done. >> there is no evidence in the record to suggest there was an intentional cover up. >> you did not speak to her. i control the time. after she directed the change, cincinnati when back to targeting tea party groups. do you know who is responsible for this? 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 the activity beginning again? >> we're looking into the facts and circumstances. there are a lot of questions to be asked and answered that have not been. i will not reach a definitive conclusion before the investigation is complete. >> if you do not know, it is fine to say you do not know. i think the answer is you do not know. do you know who in washington directed the lawyers to hold up the tea party applications? >> i do not know the answer to that question. i it is the is the -- is the rs interviewing employees? >> the justice department is conducting interviews. we're working with them. there is an ongoing it is critical because there is an ongoing investigation that we do not step in front front of the justice department. conducting any

internal document review outside of the request? >> we are conducting a very thorough documented view. >> it stays that there is no evidence for the use of inappropriate by thierry at -- criteria. how did you reach that? the major divisions that are involved in the type of fact devotees of dealing directly with taxpayer issues, our small business section, our large business section. leaders ofwith the the operating divisions. we talked about the issues. i have asked them to look internally into their own assessments of any specific evidence they may have of problems and challenges. they have determined there are is some good reason for that.

in this area of tax exempt review, it is one of the very few areas within the irs where it is relevant to any termination that we would make on eligibility or review. not normallyas do involve themselves in political activity. we understand and i am concerned about what is in this report. it is a very significant concern. we are hearing from taxpayers that they are concerned. it is important to reassure the taxpayers we will review all of irs activity across the and report. >> this leads back to the statement that the irs is digging deeper to determine if there are instances of wrongdoing or inappropriate context beyond the mismanagement identify. , are you reviewing

documents by congress? is there some other internal review in addition to that? >> there is a lot of overlap. >> we are in the process of producing them and produce a lot a document for this committee and others. we understand the causes of the circumstances the we can take the appropriate accountability steps. >> we are just beginning to get e-mails. it is not as though we have all the documents we need to review. i have another line of questioning. you acknowledge that the irs inappropriate retargeted tea party groups. there's a question about whether they were targeting

inappropriate groups. we reviewed all cases that the irs identify potential cases and did not limit our audit to allegations related to the tea party. i would like to repeat that. did not limit the audit to just these tees -- bt party. from our audit work although we did not find evidence that progressives were used by the 2010-2012the timeframe. we have conducted interviews during some of the key cincinnati irs employees. reporty part of your contradicted that recent letter by the inspecting general?

>> i do not think any part contradicts it. what he determines is that there is diversity in the types of political organizations that were accounted for. >> this is a flagging. only the tea party groups were referred for extra scrutiny. >> that is what we know so far. >> that is what the evidence points to so far. we are in the early stages of this. there is more investigation that needs to be done to answer that question. .> he said he found no evidence i would ask unanimous consent to places on record. thank you. i yield. >> to try to set the stage

whereme bipartisanship, did you start the government service? >> i started in the office of management and budget. at the time this administration came, i was a senior leader in omb and serving under president bush. >> your reports state we have found -- not found involvement in these matters. >> that is correct. >> you stand by that? >> i stand by it. the statement in the report is appropriately copyedited that

there are ongoing reviews and investigations that are necessary. taxpayers have questions. have you found any evidence of wrongdoing? the answer is we have not. let me justso says ask you in terms of the involvement outside of the irs. have you found any involvement by anyone out of the white house? >> we have not. >> there has been referenced to the i.t. investigation. i want everybody to understand in the letter that was sent there was use, a bolo that had the word "progressives" on it. is that correct? >> that is correct. >> you have asked that that

bolo and all others no longer be used. >> that is correct. we have suspended all below lists. s that therendicate were a number of groups of progressives that was sent to a different group within the irs. they did not talk regarding to anybody. >> the notion that this was only asked to tea party and not to progressives is simply incorrect. in your ig was sitting chair, he failed to indicate who the others were.

when asked specifically if it included progressive groups in another samiti or sub committee hearing, he was -- in another committee or subcommittee hearing, he was not forthright. i think he should come back and talk to us and have him ask questions. in terms of the selecting process, clearly it's involved progressive groups as well as tea party groups. the pie clear from chart. he never delineated who the others were. later asked. if he had come forth, i think it would have undercut a lot of the wild innuendos that talk about a white house enemies list. talking about a cover up. we want him back.

i hope you will have him come back. we know that you will encourage the digging out of all of the possible.ully as >> i do give you that pledge. >> thank you. >> there is a question that i answered from you that i think warrants further clarification. i do not remember your exact question. i want to make sure that i get out early in this hearing so we have that basis of information to guide us. where we are right now in our fact gathering, we have evidence obviously of diversity of political labels used. diversity ofhad political labels. this week we are sending out letters to taxpayers that have been in our backlog of more

than 120 days to offer them this option. there is diversity of political labels and groups that are getting this label. it is our understanding as we reviewed the facts that there is a diversity in the organizations that were put in for further review. the challenge i have for going deeper is as follows. to go deeper into those facts could and up with sensitive taxpayer information under 60 013. the other is that in looking at the diversity of groups, it is not always clear where they stand on the political spectrum. i do not know -- want to know where they stand. i want the iressa to be on the side of just predict teen -- irs on the side of just predicting. i did not want to leave the committee with the impression that we're not seeing diversity diversity of political labels

across the spectrum. what i am suggesting is more analysis is needed before we reach conclusions about what that means in terms of an irs failure or issue. >> i find it perplexing that you would conclude there is no evidence of intentional wrongdoing by the irs. the inspector general says he reviewed not only just tea party cases but others. his letter dated june 26 says that only tea party cases at this point were flagged and sent to another review. there were no progressive cases. >> to a different review. >> do not interrupt me. >> that is an important point. that is why we need before butter in the record. -- that is why we need before report in the record. i would call them incomplete

given that we have more information. >> thank you. want andcan all deserve to know the truth. i hope we get it. back in my district it appears the island area patriots have been a target of the iressa. the iressa has been used as a -- the irs. the irs has been use of the -- as a political weapon. why don't they target fraud and abuse? it is costing law-abiding taxpayers billions of dollars. i would like to play a short video clip on an issue i have been working on for some time. public needs to know about this. >> they have been flooded. it allows them to use their

numbers to get huge refunds from the irs. the loophole is called the additional child tax credit meant to help working families who have children living at home. many undocumented workers are claiming the tax credit for kids who live in mexico. we are talking lots of kids. >> we have seen 10 or 12 on these taxes. the more you put on their the more you put back. >> he says he has thousands of examples. >> they have sounded the alarm with a thousand dollar refundable tax credit. do you agree this is a problem? >> i agree. >> isn't it true that one of the rules is that the child has to live with the tax filer for more than half of the year? >> that is difficult to could firm that eligibility. enforcing't the irs

this rule? >> i hope you will work with us to address this. i have a bill that would save taxpayers $24 billion. i want to ask you about another scandal. that is the irs management program. why doesn't the irs target fraud and abuse incident americans? last summer they issued a damning report in which it found that irs management discouraged workers from detecting fraudulent applications. on the screen, i have figure six from the 2012 report showing most frequently used addresses for the tax refunds. you can see nearly 24,000 tax 46.4 millioning

dollars were issued to the same address in atlanta, georgia. are causing taxpayers dearly. they can be used to fraudulently get tax refunds. last month they issued another report that makes it clear they could be doing a better job protecting taxpayer dollar. look at the figure on the screen. over 1000 were assigned to individuals using the same address. do you agree there's still a problem? >> i do agree there's still a problem. >> they found the workers remain concerned that management will basically pressure them into rubber stamp application senses of that only qualified individuals received. can you give us the assurance that the management will not do this anymore? >> i need to look further into

that allegation. it sounds like something that is inappropriate. >> your own report acknowledges the tax code is nearly impossible to administer because it is so complex. they are being made with refundable credit. it is time for the irs to stop targeting americans and start targeting fraud. i yield back. you have said this diversity. that conservative groups were on the list. not know if there

were progressive groups on the below list? >> we do know there -- the word "progressive" it did appear on a set of below list. i was trying to capture that the types of political organizations that are on these lists are wide-ranging. >> we seem to know what a conservative is. he come aggressive now comes diversity incident of what it is? they are considered to be liberals as opposed to the tea party that is considered to be conservative. is that correct? >> i think it is fair. >> as long as it is fair, why are you having problem with the chairman? there arey

the staff were looking for signals for organizations whether they were liberal or conservative? the methods they used were not appropriate. is that a fair statement? >> i do not want to jump to a particular conclusion. >> which part gives you a problem? >> where we are right now in our review is we understand that these political labels were on the below lists. >> the tea party is a type. a type of give me name that would describe a aggressive democratic liberal organization? >> this is where i reach my broadsion that there is

range diversity. >> you are saying there are groups that can stay in progressive groups. >> there is one that is purely on the conservative end of the spectrum. there is a set of groups were it is difficult to determine where they would land on that spec term. maybe they do not land anywhere. >> so far even though you do not like the technique that was used, you do not find that it was any deliberate political attacks. it was just that they were trying to do their job. they did not do it in the right way. >> the way in which this should be structured should be looking generically at political activity and not using labels that point toward particular political persuasion.

that is consistent with how we are supposed to do our work. >> do you think it is possible that the white house would be targeting a progressive organization that support the candidacy? >> i do not even want to speculate on that. i have seen no interaction that would extend to that level. i have had no contact to brief the president. >> could you reduce to us the type of names that are on the low low list so we can make determinations as to whether they are from the left or the right? can you help us out? >> that has been provided to the taxpayergiven the information. >> you're saying he has a list of organizations that were considered to be aggressive that were targeted. >> the chairman has delivered the unredacted version.

>> that include organizations 6 c1 are considered to be the unredacted version. >> that include organizations that are considered to be progressive. >> it includes information across a broad spec in. >> the chairman should know that the targeting should concern liberal as well as conservative organizations. >> that is not a question i feel appropriate to answer. >> it was delivered to the chairman. >> there is the redacted in unredacted. >> it includes progressive organizations. >> it does. it is both on the redacted and unredacted. >> i do want to note for the record that information is also provided to the the senate finance chairman, senator office. m.have delegated 61-032 hi

a progressive organization? >> yes. we're working in a bipartisan way of sharing this. the use was to both type of organizations. now i will recognize mr. brady. there's extras journey based on their political beliefs. >> that is still subject to further and permission -- to further investigation. >> there are a variety of different employees being interviewed by the inspector general. i know you will make the point that i have not personally interviewed. i understand that.

>> you just testified. >> i have not. if it is helpful to the committee i can explain the structure of my review. >> let's go to the key question. you do not know who initiated the targets. initiated a target of donors to properly apply the gift tax. >> the types of questions that were raised to donors -- who? >> i'm taking the issue with the targeting of donors. >> mr., please. you have not interviewed them yet. you honestly do not know. correct? >> it is a question that the investigation is ongoing. >> truly private organizations are the human right campaign. >> i do not have that information.

>> who leaked this for 31 conservative groups? do you know? >> i do not have that information. the ig reviewed the circumstances and found those to be not intentional. >> you do not know who. >> i do not have that information. i will have to learn more about the circumstances. >> who was the agency with in the white house that was involved to be on the lookout list? >> that i can answer. i'm not aware anyone at the white house that was involved in this. all the evidence that we have points to the involvement of individuals within the irs. i'm happy to talk through that with you. >> in regard to the targeting

delays of the quinstreet tea party to the boat application, who at the irs shared private taxpayer information to other agencies? about aieve a question specific taxpayer and i cannot answer that question. >> who was involved in covering up his pattern of abuse with in the agency and concealing get? i will be happy to walk through the managerial chain with the. >> you are not conducting interviews. in your report you declare there , noo evidence of misconduct evidence of intentional wrongdoing. this report is a sham. i would call it a whitewash but

it is too thin and of substantial to even meet that description. irs.o not work for the you work for the american people. your job is not to cover up here at we're seeing these pattern -- this pattern of abuse. the only goal is to silence people who abuse you do not lie. this is critical. the only goal is to silence people who abuse you do not lie. this is critical. -- views you do not like. this is critical. i am told you are a decent person. are you serious about getting to the truth? >> absolutely. >> about restoring the integrity of the irs? >> i'm consistent with the rule of law and procedure. many of the criticisms that you are saying is in order for me to overcome these.

>> is very important to understand that in gathering these answers we have to follow follow the rule of law. >> wouldn't have been great -- >> point of order. >> mr. brady controls the town. it is up to mr. brady to conduct his questioning as he sees fit your >> would in a each rivet of the irs to follow -- wouldn't it have been nice of the irs to follow the rule of law, concealing this from the public and misleading congress? you need to understand one thing. the ways and means committee will get to the tree. they participated in conceal

them. we're going to hold them accountable including you if you hinder this investigation. then we are going to make sure the irs never does this again. >> your time has expired. >> thank you. being willing to be the director of the irs. as for the last set of questions, it is important to enqueue. you have been at the center of a firestorm as has the whole agency. the irs has made attempts to address the criticisms and meet the challenges it faces. i said it before. it bears repeating. the higher rest has a difficult and impossible in thankless job. it is the agency easiest to

dislike and easiest to throw under the bus. if you go back to the bible, they go to tax collectors. these are the people that are at the bottom of the society. i do not believe this is fair. you dord-working -- your very best to administer the law. i am going to stop my, what i was going to say except for one thing. i do not think the low 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 leaves the cock pit and goes down with a bow low list. he is on the lookout for a lot of things on that play. you use it to organize your thinking. the american college of surgeons -- just adopted bow low list

below lists -- bolo lists. there's a whole was the things they look at before the preview under nst's yet. that is the way you organize your thinking. if you take 292 or 298 and do not organize or inking, it does not make any sense. i want you to be careful about how you read organize i would like you to take the rest of my time to answer the questions that mr. brady kept interrupting you on. >> the point i was trying to

make that there are certain procedures that need to be followed. learly the employees involved need to be interviewed. i am helping to make sure that those employees are interviewed. have been asked by the inspector general to enable them to ask all the there are questions to get to the bottom of this. that will make sure that if there is a prosecutorial action that it'll be taken. this is very specific. this is not accurate. i am going to follow the rule of law and getting to the bottom of

this. one more point that i want to make of the rule of law around accountability. there'll be a lot of questions and implications of the accountability is not real because people are still getting a paycheck. when you take personnel action for discipline around a civil servant, they are our rules that need to be followed. if i cut off those rule of procedures and fire people and suspended them without pay, i personally would be violating those rules of law. they are put in place for a reason. they are put in place in the event an appointment -- an employee is unfairly disciplined. there is a good reason for that. if you see things that bother us

in government, and we want people held accountable, what we need to focus on is that we're are following a very expedient process and holding them accountable. that is what we are doing rightt now. we are pursuing the correct disciplinary actions. we are doing it consistent with the laws and regulations. >> thank you. he asked you to put this report together to make sure that nothing like this ever happens again. i look at page dirty five. i see a case made for a budget increase. your budgets ask for over a billion dollars in more spending. you're asking us to hire another 4572 employees. let me read you what we have already learned in just two months.

we have a conference in atlanta which has wolfgang puck catered costing two point $4 million. we have a conference in anaheim california. conference in philadelphia, $2.9 million, a conference in san diego, $4.1 million. thousand. -- $135,000 per speaker. the iressa paid for the deputy commissioner to save five nights in the presidential suite. you pay $17,000 to his beaker to create paintings of on no -- bono and others. we hear a reports of crony contracting. a person whose business had less than 250 thousand dollars in

income the prior year is getting awarded a $500 million contract. 2010-2012, you had 200 25 conferences costing $49 million. let me put this in perspective for you. i represent a town in wisconsin hear it a little less than 7000 people live there. it is a great village. the village is basically a blue- collar town. people work at the tractor factory. it is surrounded by corn fields and teen fields and lots of small businesses. it took more than 100% of the federal taxes aid by the working 225,000 to pay for the -- 225 comments as you spent at conferences.

that is how you need to think of this. people are working hard. they're living paycheck to paycheck. they are paying their taxes. this is what you are spending their dollars on. now you come here asking us for $1 billion, a 10% increase. you're asking us to hire another 45 people. i represent rock county. that is my home. the population, their taxes would not even cover the billion dollar that you're asking for. you are here representing the president. you're asking us for this increase. i know you are new to the irs. you come from the office of management and budget and you have a great reputation. you are a budget crunch her. how on earth do you think you have the moral authority to ask for this? why would we give you all this

extra money you are asking or if this is what the irs is doing with hard-earned taxpayer dollars? we are seeing waste, fraud, abuse and taxpayer targeting. this is been the case is inappropriate and should not happen. the report such a coming out that are identifying these are covering events that occur to them three years ago. ifconcern would be greater the patterns of spending are continuing today. in many cases they are not.

there are deep cuts going in -- going on. take placeve them and then come back in a year or two and see if you are running this well. >> that is a fair point. there are more cuts to be made. i will furnish for you additional cut so that we can go even deeper so that every penny is what she even more closely. >> it sound like you you do not need it increase. >> no. there is a broader macro point. we still haven't an dispensable mission to -- have an indispensable mission to go back to tax fraud. the materiality different as much a difference we have to look at this and say has the iress irs done enough to make te

costs?ve if we underfund other critical priorities that leave -- lead to the tax force, every dollar spent -- >> do not forget. you were for the taxpayers not the other way around. >> i understand that. >> how long have you been on the job? >> about 40 days. >> all of this stuff just that operated in the air? it did not happen on your watch. toi'm doing the best

identify the problems. >> can you tell us something about your background? i have talked about this before in other hearings. i think the reason why i was -- chosen as a couple of different reason. i appreciate his, that i have a strong reputation. i certainly their sip decisions in both administrations. i am nonpartisan. this is all about better government management, reducing fraud, reducing error, improving the way the government manages its real estate. most recently in my role at omb, i developed a reputation and

experience in tackling some of government temperament -- governments have this challenges. in 2009, i was the lead on implementing the recovery act which was a very large and complex law that involved a lot of different technical complexities that needed to be done. i was the point guard for it. more recently, i've been involved in helping the government prepare for government shut down and helping deal with the sequester. these are the management challenges. i was able to distinguish myself from the leadership of someone who can handle a situation like this effectively. when you combine those fact is, when i was presented with this opportunity i basically said i will do this. i will do it because i'm going to have this guiding principle that i will always work to find the right answer to every challenge.

interest ofthe best .he irs if i can do that it would be smart move to have taken this job. >> i want to thank you for your willingness to serve. in a way andlf make a contribution to get this in order. how do you feel about the organizations? >> when i arrived we had a very broken process. this points to both management and process failures that were going on. there is new leadership in place. i have a lot of trust. he is inspiring me that he is in

there working these issues and reengineering and redesigning the process and making the appropriate fixes. we are making progress. we think there is even more to be done to make sure we are extremely robust. these are also outlined in the report. we are making good progress. it is a challenging environment. reviewing these applications is difficult. you are on a foundation of ambiguous loss in regulation. is aery few other areas determination on the extent of political activity a relevant factor to consider. this has a unique set of requirements. when you combine those in management weakness, we have a

failure. they are going to lead us to get this problem corrected. >> i look forward to working with you. >> thank you. that 100% ofrue tea party applications were flagged or extra scrutiny? --the framework of the below party ine was teamwor the application it was moved for further review. >> do you know how many progressive groups were flagged? >> i do not have that number. >> i do. there were seven flagged. do you know how many were proved?

>> i do not have that number. >> all of those applications were approved. somet to follow up on questioning that occurred a little earlier in the hearing. i am an old cop. most of the time i was a homicide investigator. we dealt with a lot of terminal intent. when you use the word unintentional"or " it is a flat for me to acquire further. are you talking about criminal intent? are you saying there is no intent to what? >> there are questions being asked by investigators to deal with criminal intent in others. it could mean political bias but no criminal intent. there are gradations here. i am not a legal expert.

i know part of the review is to understand the nature and circumstance. >> i also know there are two , thetigations that occur criminal investigation and an internal investigation. sometimes you know the internal investigation is put to the side while the criminal investigation continues on. are you in contact with those that are conducting the criminal investigation? are they making you aware of the information? point of contact in this effort is inspector general and his team. he is working directly with the justice department. they give us periodic updates on their progress. >> do you have any information that there may be some criminal question were >> none have been shared with me at this time. states that some

applicants were subjected to overly burdensome an questionnaires that went well beyond the acceptable level of fact-finding. at the same time it says none of the actions were intentional. i do not understand that. how can you asked those questions, asking for certain data and yet be unintentional and conducting that sort of activity. tea party members say a donor had been threatened. they have confidential information that had been leaked. they were sent intrusive questions. hato not understand it in t light. i have been falling in line with what he has said. i understand your desire to be a public servant and want to do the right thing. in order for you to do that and

for the american public to have trust in you, you cannot be vague and missed reading in your statement that you have given to this committee. you say even after senior leadership was informed of the inappropriate activities it failed to effectively put an end to the activity and inform the committees and a timely fashion despite requests from congress on this topic area i and don't know how your leadership could be thought to be unintentional. he conveniently lost his memory airing his questioning. or thes no sense to me american public. >> let me offer my best explanation. i want to go back to questions from taxpayers. they want to know if there was

intentional wrongdoing. we're seeing there is more work that needs to be done. >> you really cannot say that it was unintentional. inyou should not be saying your report that you found this unintentional. you do not know. >> there is no evidence. why is it unintentional? time has expired. why don't you answer briefly. >> let me clarify. i said very clearly that more work needs to be done to review documents and interview folks. this is the right thing to do. this is how i'm supposed to conduct my business.

they could be incompetent. it could be total mismanagement and how they think they are tearing out their duties. -- carrying out their duties. we are the difference trying to distinguish. >> thank you. need more time? >> know. thank you for the offer. >> the ig letter says there are two groups of specialists that use these. the first are the specials that are dealt with 298 cases 54 political campaign. a team of specialists in the touch and go unit. we know some went to the 298 teams. inspector general do not investigate how these were handled by the touch and go

unit. have you looked into this? >> we are in the process of looking into it. we start with the audit report. all the various materials that they provided us are going deeper than that and broader than that. that is how we found the below list with the inappropriate activity. when we found them we put in an immediate suspension. when you go deeper and broader into this issue, you see other categories. you mentioned touch and go. we're trying to understand how these were used. what are the circumstances that caused these political labels to occur. these are all questions that we are asking in real time. i want answers to them. i'm going to follow a fair and thorough process to get those answers.

are congratulated by members on the other side with the bigger of which you taken a he task of pursuing -- taken up the task of pursuing this. you are accused of not doing follow up. there is an element of inconsistency as you try to figure out how to pursue new information and data. the issue really for all of us is the following. citizens united caused the irs to be flooded with applications from groups seeking 501(c) four status. the super packs must disclose their status. that is really what happens. this whereo unearth

they have been equally vigilant, moments pursues. it is obvious as well that you have not finished your work. you need to be given some time and opportunity to pursue these cases. american people should not be afraid of the irs. we have established that. you would argue that you need more time. is that correct? >> absolutely. my hope today and in every communication i have with the committee is that there is transparency into the process we are all going. i want to be clear that the process has certain constraints. expeditiouslyas as we can. witnesses are being interviewed. materials are being furnished. we have provided this is part of

a growing basis of information. absolutely. there are more questions to answer. i think the track record we are demonstrating is a religion to answer them and also a caution to make sure we are following the rule of and doing so. it is a tough balance. this is absolutely essential that i file appropriate due process procedures. i think any investigation across a broad spectrum of leaders would follow those same principles. cracks we're all better off if we have an accurate -- accurate portrayal of what happened as opposed to the accusatory tone of what is being suggested. you can incidentally see that the argument has artie shifted here. we moved to the conferences

which is a legitimate criticism. some of the argument is weakening on the other side. >> thank you. >> thank you. i agree it is going to take time to get to the bottom of this. one disagreement i have with you with this report is i do not see a sense of urgency. the big picture here is you have an obligation on your shoulders to restore a trust in this entity, the trust with the american people and this congress. in your report, you have a section titled transparency where you talk about the failure to properly inform congress about the issue. asking questions.

we began asking questions years ago. let me get this straight. in this letter to me after we there areack, hearings with both of them. the only response that we got was that they took steps to coordinate the handling of these cases to ensure consistency. you ask questions earlier. you said you disagreed with the characterization that tim floyd's engage in a cover-up. if you know the truth, if you know there were folks in senior positions she were misleading and covering up what was going you are not coming forward with this. am nott a cover-up? >> i ready to draw a conclusion.

this could imply that i was dealing with this. is there a cover-up? the key is that we have to make sure we do the investigation. >> we know commissioner shulman and miller were informed of these things. they continued to evade our questioning. they were misleading with us. this has so far been determined in the investigation and determined by the audit. we need you to have a sense of urgency, to come clean. >> the commitment i am making are one to explore all the fact including questions about the concern you have with respect to why the answers were not answered more quickly.

i will not draw a conclusion now. point i an important think will be very helpful. i am suggesting the irs needs to share more readily information on operational issues with in this committee. >> i want to shift gears for a moment. during the time, we know that a quarter of a million dollars were paid out to just four .mployees, all of whom resigned more than $83,000 in bonuses on top of the salary. we also know that others were involved in this tax exempt

issue. it targeted the tea party entities. in light of all this, the good take any steps to put a freeze on this. is recoup this bonus money? >> 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, it is very troubling. conclusionlarger here that the irs leadership did not have a timely enough understanding of what was going on with these particular activities to make informed judgments about compensation through 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. i think bonus is an opportunity. >> you can put a freeze on it now. >> i'm glad you asked the question, because there have been some public misunderstanding about where we stand with our bonuses for this

year year. if i could clarify it. >> yes, because the trust with the american people have been broken. i understand contracts. >> if i could explain it. here is the situation with our bonuses. aen i was at omb, i find policy that froze bonuses in light of the sequester. it was one of our methods to deal with the sequester -- a bonus freeze. that got also said it was subject to legal constraints, so they had to be legally paid out. what is going on at irs right now 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 unit. my answers on bonuses is that there is no decision has been made, going back to my comment about following rules and laws, i have an obligation before i freeze bonuses, if that is a decision that is made, i do not know at this time because i first step in my legal requirement is to bargain that

issue with the unions, and that takes time. we are going through that process right now. >> mr. chairman, we need a sense of urgency and leadership with this. >> time has expired. mr. becerra. , thank you very much for being with us. i look forward to having you come back. i think you have 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 accurate? >> that is correct. >> so when you say at this point you have found no evidence of wrongdoing, it is as of this point. >> if that is the question we are getting rates, that i feel compelled to give the most honest answer i can. more analysis is needed, but at this point in time, if you are asking me have we found evidence of intentional wrongdoing, we have not.

i understand the confusion around the world intentional because these actions do happen. i tried to understand the difference between somebody knowing they do something wrong or if it is a question of a management, competence, or a neglect of duty. we have evidence of neglect of , but we do not have evidence of somebody knowingly did something wrong based on criminal intent. that's evidence has not materialized yet. >> you used the operative word -- the evidence. to date, there is no evidence of wrongdoing. >> no evidence of intentional wrongdoing, just managerial wrongdoing third >> there is no evidence reefing anything that occurred at the irs to the white house or >> that is correct. today, you are still the process of investigating. people toere is more talk to and more documents to retrieve -- to review. what you try to make clear, the

reason you have not spoken to some of the folks that are present will to this investigation is because others have the principal responsibility to the investigation. >> i have two thoughts to this because the kids coming up. it keeps coming up. one is the rule of law per habits me from talking to employees, the justice department inspector general, appropriate officials. even if there was no, we also have professional investigators on a team that are very skilled and talking to witnesses and ultimately we might make a decision that those individuals are the ones who should be interviewing the witnesses and providing that information to me. >> we want you to be able to continue that investigation the right way. we hope that you were able to follow the investigation and you can't give at the work you can -- can get the work you are doing. at this stage, what we're hearing from you, what we heard from mr. george, the inspector general, is that there is an investigation that is ongoing. the chairman of the committee

in his opening statement said that we are still in the early stages of this investigation. the inspector general is doing a more thorough investigation. mr. brady, my colleague, said we're not going to stop until we learned the whole truth. so we still need to find out the facts. anthis stage, we have investigation ongoing, it is a half bacon investigation. to reach any conclusions would mean we've reached half-baked conclusions are so whether it is your conclusion or my republican colleague's conclusion, for anyone to make accusations at this stage, it is only part of the information. >> there comes the distention. to answer questions, this is exactly how it happened, it's not a western we can answer. i think we can answer is there any evidence that any of this has materialized. that is the question that we can answer because we are in process. i can comment on whether the evidence has materialized. >> so far, what the evidence does is what you are responding to.

i would like to have you back. i hope every one of my colleagues on this panel would agree that we have to have an inspector general george back , as ricky has ricardo would tell lucille ball, he has some 'splaining to do. he had some answers that may not have been forthcoming. i would like to finish with one last point. it all serves around the issue organization's. those are social welfare organizations. they apply to organizations that are not organized for profit, but operating lucidly for the promotion of social where for -- welfare. i'm not sure if you are aware, but those same 501(c)4 organizations spent 250 $6 million on political younditures in 2012, did

know that that is more money spent by the social where for -- social welfare organizations, and the two political parties combined, which spent $255 million. that is the crux, that we have so-called social where for -- social welfare organizations is the more money combined -- more money than the two political combined.ons th that is why we have to have these investigations are we have to have you back. i yield back. >> thank you. mr. werfel, my constituents are afraid of guys like you. they look at this hearing, they listen to you, and i accept at face value that you have a good reputation from the past. but they look at you and they are afraid. they are afraid of the power that you have, they are afraid of your 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. my prediction is that our country is at a tipping point right now, and the tipping point an awakening amongst the governed about authority they have delegated to congress and that congress has delegated in this space of the irs, and that authority has been abused. ,ou used language earlier things like i am serious, i cling to the rule of law, those types of things. frankly, i would expect you to say things like that, and i would be discouraged not to hear you say things like that, but you are familiar with the taxpayer bill of rights of 1998, i assume, as a general document. it taxpayer bill of rights, is very clear that the internal reference -- internal revenue services promoted under the law misuse of section

6103 for the purpose of concealing information. you are familiar with that, aren't you? >> yes. >> this is a congressional inquiry. there is when a request by this committee of documents to be forthcoming from the internal revenue service. here is an example of two of them. they have been rejected to the point of absurdity. now, we have knowledge that there is information into these two documents that is not subject to 6103 protection. so the entire section 6103 question should be set aside. what i'm suggesting is, the fear that animates in the heart of my constituents when they look you if they say we are not getting the straight answer. are seeing bureaucratic doubletalk, a bunch of nonsense. how can we possibly pierced

through this? anxiety, andof the concern that you hear from committee members is the recognition of an abuse of power, but it is a gratuitous abuse of power. when the investigation comes up, the committee, based on lawful request, is now not getting the type of answers. so, can you assure us that this type of nonsense, where i know beyond the shadow of a doubt that there is information in these documents that should not 03, that the 61 irs is claiming to an absurd level that somehow this easy be protected? can you assure us that this nonsense will stop? >> let me give you several assurances you can give to your constituents.

the first-ever give it that the information you're holding in your hands is not being held just by the irs. we have submitted all the information, minus all those black lines and reductions, to the chairman of this committee. so the notion and implications that that information is being held just in the irs is incorrect. >> you know the law, you know when it is cloaked in 6103, we are permitted under the law from revealing that. so you have got to release this information so that it can be ly discussed. that is exactly what the statute speaks of. >> let me get to my sec and why because i want to address each of those points. e want to make sure that tha public understand. the second reassurance as there is a tension. >> you are not releasing be information or to 6103. >> i can answer these questions if you enable me.

>> go ahead. >> i want to make sure that your constituents understand the extension -- the tension that exists that we have a solemn responsibly to protect the confidentiality of their taxpayer information, annie's procedures are set up so -- and these procedures are set up so that we redact this information, although we sent all of it to the ways and means committee so it is outside of the irs, and the extent that there is a notion or a concern that there is over reduction, that is something that -- >> this is junk. it has no meaning. >> mib junk, but have sensitive taxpayer -- it might be junk, but it might have sensitive tax their information. >> it is not. this committee intends to uphold the 1998 act, and we will make sure that the irs is forthcoming and not creating a bunch of nonsense, hiding behind bureaucratic doubletalk. >> there is a particular -- >> time has expired. >> ok. >> i know the staff level, mr.

werfel, we have raised the issue of over reductioaction. what it does is it limits the ability of the committee to use it. so i do think this is an issue that is appropriate that mr. roskum has raised, and it is something that should be pursued further. >> it is minus any, you can correct me if i'm wrong, it is my understanding that the chairman of the ways and means committee, you can release information if you think that it is not 6103 sensitive. >> i cannot and must that is to the full house, and clearly this is an area we really have to have the experts involved. in the context of a final report, which clearly we are not there yet, i can release the information ultimately to the full house, but i cannot be the single arbitrator of what 6103 is and what is not, because optically senator baucus and

senator hatch received this as well. but we do have concerns that at a staff level there is an over redaction that limits the ability of the committee to use the information. you toant to work with explore that. i want to clear find that this information is not just residing within the irs. that was my main point. >> we do receive the on- unredacted- the version, but those are not shared. .he next person, mr. caswell >> sorry, i was being blocked by my esteemed colleague from connecticut. esther werfel -- mr. werfel,, thank you so much. i know you appreciate, you have a much larger duty of restoring faith and trusting confidence

in the irs than just the spending that went on with covers as an bonus payments or even the issue before us today, the exempt organizations. let me steer back to troubling issue that i have been wrestling with, obviously we have many organizations, especially after citizens united (c)4 that are applying for tax-exempt status. the specter general looked into it and how to review that and , and youll that out probably have additional ideas, but the point here is these groups are not automatic lien tighter to -- automatically entitled. they have to meet certain criteria. every time there is an organization out there that does qualify for tax-exempt status, that increases the road to the tax burden on those who don't. role husband had to be principally engaged in social

welfare. we have gotten away from the more definitive definition of exclusively engaged in social welfare. but how do we move forward today of 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? isthat political selection being taken place. have you institute a generically neutral screening process now that is going to pass muster on both sides of the aisle that is still doing the tough job of screening out those organizations that really ought not be qualifying for tax-exempt status because they are presently engaged in political activity? we know that is going on. i think anyone here who is fully new cells and thinking that a lot of these (c)4 applications are social welfare has nothing whatever happened over the last couple of years in the american political system. 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, in particular, the treasury department play they particular role. there is a policy question to be answered. in the report, we outline the certification program. what we essentially take is our high-priority backlog, those had that have been dashed those advocacy cases that have been in our backlog for more than 120 days, and we are offering them a more objective review. essentially, if they test that not more than 40% of very spongers or their voluntary restore hours will go to political campaign intervention, and at the same time, they also attest that more than 60% of their exposures will go to a social welfare program, then they would receive an approval from the irs, and they will go toward with the responsible update us if that changes, and an understanding like other

subject to audit information in the future. >> i hope we're not going on the road of the irs being subjected to this kind of scrutiny every time a couple of questions have to be asked in regards to how these organizations are spending their money and what activities they are also really engaged in. you are going to be set up for acquisitions from here on forth from any group that is receiving more scrutiny or perhaps a denial. that is one of the more major things. perhaps there has not been more denials of organizations applying for (c)4 status who are clearly engaged in political activity. that is their main purpose for being. advocatexpayers office, do they have a role? >> absolutely. we want to involve them more clearly. in particular, one of the main concern is that i have is that when you look at the situation, 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're getting from the irs, and they did have an avenue. in many cases they did not exercise that avenue to go to the national taxpayer advocate, to raise the issue. advocatenal text or will help. we did not see that connectivity here. one of the recommendations is to raise awareness and effectiveness of this framework of the national taxpayer advocate, so we can solve those problem's. >> mr. werfel, you have a tough job. we're going to work very closely in your candid investigation and work. we have a role to play in clearing up a lack of definition as far as (c)4 applications. the irs would be helped if there were brighter line roles for people that institute more objective criteria that is used.

we look forward to hearing your recommendations as we move forward on that front. >> thank you. >> mr. garlock. >> thank you, mr. chairman. thank you, mr. werfel, for being here today. my first question is -- would you agree that iris officials disclosing taxpayer information to outside groups or individuals is improper and in fact illegal? >> it is under section 6103, yes. >> ok, what is the process of an allegation that someone did in fact leak out later information to another group or individuals. what is the internal trust us handling the investigation of that? >> we referred the allegation immediately to the inspector general. who then makes one of two conclusions, one coming was intentional, too, it was not cured if it was not, the next step is to figure out what control breakdowns led to the

unintentional release. we have those situations emerge, and we make those rss improvements. makee finding -- and we those improvements. if the finding is intentional, then there is an investigation, which could be criminal or some other type of disciplinary action. >> mr. brady raised the issue for the international organization, and the fact that it forms 990 information from 2008 was disclosed and passed on to the human rights campaign. based upon the testimony that was given on our last hearing at the committee, what do you know about the irs passing that allegation to the inspector general's office, and what is the status of that investigation to the best of your knowledge? >> two responses. one, i am not aware specifically of that issue at my fingertips

so that i can give you the exact process. since would be concerned you are mentioning a specific taxpayer, it may be more appropriate not to, in this setting -- >> has in fact the irs pastore referred the matter to the inspector general's office? >> i do not have familiarity with a particular issue. >> so you do not know at this point. point time,ven there are issues that have been passed to the inspector general, which are in process where it was inadvertent, and we're doing process improvements. where this particular situation filled in, i'm not sure, but i can get that for you. >> i would appreciate it. i would like to also ask you as a follow-up to mr. johnson's questions with regards to the amount of money, $46 million of child care tax credit, checks that were sent just to the one

address in texas. in your comments, you mentioned that on the issue of why checks ,re being sent for this credit how do you verify the children in fact resided at that place of residence for at least six months, which is one of the requirements for that? you said it was hard to confirm that a child in fact is there for at least six months. >> there is no national childhood of residency database, so it is one of the difficult aspects of enforcing a particular eligibility credits. >> if that is one of the criteria, and you could not confirm that the child has lived there for at least six months, why are you sending out a check? >> what happens is that -- i did not say it is impossible to confirm, it is just challenging, so we have a higher degree of errors associated with that criteria. >> so you'd knowledge the irs have sent checks to individuals that do not meet the eligibility criteria? >> that happens unfortunately could we have way too many of them in the irs, and we need to work on that issue. >> so what disciplinary action

have you taken as an agency against the individuals that have continued that practice? i arrived in late may. i personally have not taken any disciplinary actions. i'm not sure if it would be appropriate in all circumstances in a situation. withine are individuals the irs who have a response ability over the money that is released by the irs back to the taxpayer, who was sending checks out, and his case, $46 million just to one address, not making ,ure the criteria is confirmed and still sending the money out, no disciplinary actions were en against the individual's response will for that? >> we would have to look further into that issue -- >> is disciplinary action be taken for anything in the iris that gets done wrong? >> absolutely and -- ?> can you identify any

>> in an aggregate way, i can, i would've to do it in another setting, but i can't share it with you, just not with the public. executed sure that with the committee, i am sure the committee members would be --erested to see when facts when in fact this is been taken. >> i have artie taken a number of disciplinary actions within the iris, so i know that they do go on, and i have personally been involved with several of them. >> thank you, mr. werfel. >> dr. price. ,> it is hard to say welcome but welcome. 34 days into your challenge, and we appreciate that. i think all this committee is asking, and all the american people are asked in, that you be honest and forthcoming. >> always. >> i would suspect you agree -- processs prices has been broken. >> i would agree with that. >> would you agree that the trust for the american people in the iris has been violated? >> i would agree with that. , the irs has

targeted groups, it has leaked information on donors of groups, and targeted those donors for auditing. this is chilling stuff. , this isskam said stuff that frightens his constituents. it concerns and frightened by constituents as well. the chairman asked you if you've spoken to another -- a number of people, former irs commissioner, you said no, former acting irs commissioner mr. miller, you said no. and then sarah hall ingram, and you said yes. who is she? >> sarah hall ingram runs the affordable care act operations within the iris, and i speak to her on an ongoing basis as part of my responsibility to engage with my leadership team on the ongoing operations of the irs. >> what was her role during this period of time? >> it is a good question, and i

will do my best to explain it right now. ms. ingram was the commissioner of the tax exempt government entities organization leading into when these events occurred. starts with issues in and around early, let's say march 2010, is when this fact pattern began in the ig timeline. so i understand that ms. ingram served as the commissioner of the tax exempt government exempt organizations, which is a level above the exempt organizations, and uncharted in my report. and she served in that capacity until somewhere around the spring or summer of 2010. >> so there was an overlap -- >> there was an overlap. at that point in time, she moved over to begin her work in running the affordable care act. >> let me ask you why you believe -- or why should the american he will be leave that the trust that is required and

the american people on the implementation and enforcement of the affordable care act by an individual who is involved with the tax-exempt status entity of the irs -- why should they trust that individual? >> i would ask the american people to trust in the process that we are going through to make sure that we get into the bottom of this. , you understand that the process has violated that trust with the american people already, and candidly, my constituents come and i believe the vast majority of american people, want every individual who was involved in this process to answer the questions prior to being able to have any further trusting situation in their capacity in the internal revenue service. is that too much to ask? >> i think it is valuable input. i would like to share what we're doing, which is analyzing for any employee.

ms. ingraham is no different. we are analyzing what their footprint of responsibly was. with respect to this individual, there is some complexity in doing that and valuation because she did move over to the affordable care act early on. at the same time, just in the issue -- the interest of candor, well-suited move over to the affordable care act within a few months after the fact pattern begins, her title do not change, and there is no -- there is some lack of clarity in terms of her ongoing role. we are looking into that question. >> to that point, the irs -- have guidelines been promulgated for enforcement of the mandate? >> not at this time. complyemployers have to with is beginning to fall in january? promulgated?en

on part-time, full-time employee distinction. >> i don't know -- rule been promulgated on the difference between seasonal and full-time workers? >> i will give you the full schedule of the work -- >> there is a huge lack of trust in the irs, and the irs having an enforcer arm of the affordable care act, i would urge you to get this information to individuals who will have to rules with all of the that you promulgate, and make certain that they are true to the letter of your roles as soon as possible and i yield back. >> thank you. mr. pascual. .> thank you, mr. chairman. >> mr. werfel, it appears that we are not past the point where members of congress would be speculating about enemies lists,

cultures of corruption, and insperity theories. i mean, if you'd -- and conspiracy theories. if you took the last set of questions to you, i am wondering why in gods name you took this job in the first place at this point in your life, you have a distinguished past. a very distinguished past. but if i took the last series of questions, 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. , i questions about anything understand that, but in both sides of the aisle, seem to be against, appear to be against singling out any particular groups because of their political thinking. this is what we are opposed to. so i commend you for standing up, standing tall.

i wish you success in your job. i think you are trying your best. you announcets, that in order to deal with the backlog of applications, for 501(c)4 status, the irs will allow the option for groups to if real in an area approval theyself certify, that devote more than 60% of their on thingsnd time related to social welfare. to go with no more than 40% on political activities. this is any reason that 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 here we have a

situation in which we clearly have had struggles to effectively implement the current primary. we thought it would be less partisan on the -- less burdensome on the taxpayer. but we have not broadly applied across all 501(c)4 -- >> how did you arrive at the 40% in the first place you g? >> the irs role is to implement the regulations as clearly and effectively as possible. we have this word primary. so we sat down with is and that what is the most plain language understanding of primary weekend invent.- that we can ea we sat down and talk through it and we briefed committees and others before we issued it in final, that if your activities are greater than 50%, you are clearly not primary.

if your political intervention is greater than 50%. if you are less than 40%, we would think that you are in a comfortable safe zone of not being in a primary range. between 40% and 50%, it gets tougher, and therefore if you are a taxpayer, you believe that your monitors are summer between 40% and 50%, you would test to go to the judicial review -- >> and that is what people apply to you to obtain the status. >> yes. >> and you determine as to whether or not they are more than 40% involved in whatever political culture and that exists. >> essentially we are trying to figure out what this primary means and what we are offering -- some inherent structure to how we can think about it. >> once that renovation receives approval, will they be able to increase the political activities beyond the 40%? spending and time.

>> if they do that, then they are no longer operating under an approval, and they have to alert the irs that they have changed the nature and extent of their activities. >> but they are allowed to continue? >> they are, and the reason is because one of the key point here is that you can operate as a 501(c)4 today without an application. there are two different kinds of entities operating as a 501(c)4, those that have an application approved, and those that never applied, but folly of progress forms and operated as a 501(c)4. if you exceed the 40%, you just move yourself into that second category where you are without an approved application, and you are running many other 501(c)4 taxpayers that are doing that today. >> so the pension is important in terms of revenue? invention is more important to so the exemption is more important in terms of revenue? the invention is more important to decide, you have to file a form with the irs. so i can assume, in conclusion,

other organizations out there are performing more than 40%, or be more than 50% in the political area, and are being exempt from taxes -- .> time is expired please answer briefly. >> if it is more than 50%, my hope is that we would have i not a process that would identify that and to work with the taxpayer to correct it. >> to why. -- thank you. mr. chairman -- mr. buchanan. >> thank you, mr. chairman. and thank you, mr. werfel. you have a more than 40 days on the job, and it appears you have a great background. i think you got caught off, let me mention, looking at your resume here that they put up here, you manage an agency of 90,000 employees, your budget is about $11 billion a year, and i think you are asking for additional dollars. part of the reason you wanted the additional money on the taxpayers is you said a dollar

investment enforcement gives you back sets of return. what with the numbers you were going to tell us about that? why you need additional money? asked for an increase on our enforcement budgets of $412 million that would yield more than 1.6 billion dollars in annual enforcement revenue, return investment. i understand the concern about excessive expenditures that occurred back in 2010 and 2011 -- >> let me go back because we only official minutes each. five minutest each. for every dollar invested, you get six dollars back. >> yes. -- theheard the saying power to tax is the power to destroy. i can just tell you that there seems to be a alter, at least from what i have heard, i have been here a little over six years.

, there is a lot more money being put in enforcement, and you can destroy peoples lives, so you've got to understand that, the power, the leverage, the magnitude of the irs, 90,000 employees, $11 billion in budget -- it is not even a level playing field for individuals. what i'm hearing from my constituents, when you look at you want more money to go after more americans, they are very concerned because it seems like that has been ramped up in this environment. i'm just telling you what i hear everyday. this environment, one trillion dollar deficit, people are feeling like the irs is a lot more aggressive about coming after organizations are at especially businesses and individuals here at the end of the day, you can win every time. anymore cpas and more lawyers, they run out of money, -- they need more cpa's and more

lawyers, they run out of money. you never run out of money. go ahead. >> you raise an important question. the reports, this question about taxpayer concerns, and we have heard that, i think it's notable that in this report, we are candid about organizational and individual failures within the irs. we are not claiming another winner on your. we're recognizing that there were significant problems. we are also recognizing that this represents an opportunity to learn from that. >> from our limited time, let me ask you in terms of yourself, if that's you manage 90,000 employees. is that a correct statement? >> i lead an organization that has roughly 90,000 employees. >> who is responsible for the attitudes and culture and environment at that organization? >> it is a shared response ability of the leadership team at the irs and the staff. i played a lot of importance on the leadership driving -- >> you are one of the leaders, rights? --h authority for days,

with 34 days, i recognize that and i want to make sure you have a balanced approach going forward, the you do not create attitude or a climate in the irs about going after americans. i am very concerned that it is more of a balanced approach. there is a sense out there that that has been heightened, not just in the last three-month, but in the last five or six years. there is a sense that we have got to make sure that if you are looking for more money to go after more americans because you get a 601 return, i will tell you you will when at every turn .- will win at every turn they cannot compete with the irs with the power you have. as a leader going forward, and your team of leadership, is that that has something that make some sense, that we are not killing small businesses come and as a result, killing jobs. >> i want to make one final point. in this report is a direct commitment to address the question by doing a review across all irs of the appropriateness of our criteria, filters, activity. hold us accountable for the

objectivity of that review, and in the reports, we're going to share the results of that that with you and with the american people. >> you understand it is not a level play and field, writes? at the end of the day, if you want to win, you will win. they would like to get their day in court, they would like to resolve it, but they cannot afford what it costs to get their day in court. so i just telling you, as someone who is thin and environment, and what i hear everyday, you have got to be very careful how you move forward in going after americans. >> mr. smith. andhank you, mr. chairman, thank you for been a commissioner today. 's beeng have 501(c)4 around? >> decades. >> how long do you think an application to 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 have indicated that no intentional wrongdoing has taken place to your knowledge. >> again, the evidence has not surfaced yet, but i would caution that more analysis, review, an investigation is needed. >> so that would be an england close of finding -- >> and other words, if the taxpayer is going to ask us, has there been any evidence yet, we will say no, not yet, but more needs to be done. so that be turned inconclusive. i will not argue with that. >> sifting through the many doctorates -- document that we've had, we know that there have been very exhaustive list of questions. >> that is correct. >> and we are talking about requesting lists of books read, and reports associated, and lists of volunteers, lists whether or not an applicant intended to run for office or a

family member would run for office. vast you agree it to a number of resources to even come up with those questions? >> i do not know how many resources we took, but i would agree that we needed to stop asking a great number of questions that we were asking, and revisit and change how we we pro tower out which -- approach our outreach to taxpayers. >> it strikes me as difficult to sort through all of this when we are being asked for more resources for the irs when it was the to be that there were existing resources that were misappropriated and certainly misapplied as it relates to the overreach in terms of asking applicants questions. moving forward, i would hope that we can cobble a shower -- we get a congress our objective -- we can

accomplish our objective. 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 as, the chair highlighted culture of intimidateion. at the time, i think he was referring or hinting that this culture was coming from the white house. i believe was made without merit or evidence. s the weeks have gone on, you will see that there is a culture of intimidation, but not 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. -- this was not diebold stood by the treasury ig in this audit of the irs.

the ig did not even give us a hint that progressive groups were targeted until committee democrats dug further and deeper into this investigation. an appointeee ig, of george w. bush, and a former staffer of the oversight committee chaired by darrell issa, drafted a report that suited chairman i suppose he personal -- chairman issa'personal ideology. we then saw him make bases claims about his so-called white house enemies list and his ideological election-year targeting, again, all false. we know congressman issa new 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, the chairman issa would not have said anything about that, that he would've sat back and said nothing about that? then, as we see the progressive groups were targeted side-by- side with their tea party counterpart groups, the chairman of this committee asked you that, in my opinion, both in releases, as well as today in his opening statement here there is then no outcry by the chairman or by the public and colleagues when progressive groups were also tormented over the past three years. i will point out, and this may 21 test money -- may 21 testimony, which was asked the question concerning the tea party investigation, and did it raising questions with you,

and her answer was "no, and the office, it is uncommon for someone who have a short head reference to cases i namby name" by proposedes denials to liberal organizations that supported the democratic party. so i had no indication that we were not being balance of what we were doing. our committee knew that test money was given, and yet there was no outrage. just as there is no rebuttal can outrage when the bush demonstration targeted christian churches and the environment of betweennd the naacp years of 2002 and 2004 when they they were being investigated by the irs. so yes, i agree that there is a culture of intimidation going on, but it is not by the white house, it is by the republican colleagues. at is why we demand that the ig summoned back to this committee to answer questions once again under oath. we also demand that the republican culture of intimidation stop so progressive

groups will comfortable testifying before us here. right now, they're not comfortable, and before this committee, and the chairman's commitment -- continued silence silence makes it harder for these groups to come forward. we need to be a committee of facts and not a witchhunt if we play due to the the bottom of the investigation and hopefully s. able to tackle other issue i demand that the us republican altar of intimidation against regressive groups be stopped and be as outraged as we were outraged, democrats were outraged, and we express our outrage, when groups that we don't agree with politically or ideologically were being attacked or being intimidated or being investigated by the irs. modicum ofe to see a

a similar outrage from my republican colleagues for what when folks testified before this committee who we do not agree with, but we stood by with them and said that they should not -- >> the gentleman's time is expired. i would refer the gentleman to my opening statement when i mentioned that progressives were on the be on the lookout list, or the bolo yield. -- bolo list. will you. >> will the gentleman yield? >> no. i would refer the gentlemen to my opening statement where i mentioned the progressives were on the be on the lookout list, and i made one thing clear that no taxpayer regardless of the lyrical should be unfairly targeted. with that, i will yield to

gentleman shock of illinois. >> i think the chairman has been more than accommodating. if the chairwoman dolch, -- if the chair would indulge, when we had our first hearing when we identified witnesses, the chair asked for when this is from the minority, and when the chair remind us how many minority witnesses were submitted? >> there were none. >> thank you. , welcome. ,n the report the submitted you outlined a proposal to eliminate the backlog of certain 501(c)4 applicants that are currently before the irs. you specifically suggested that to eliminate this backlog, you asked for the 501(c)4 applicants to certify under penalty of perjury to the irs that no more than 40% of their expenditures and volunteer hours will go toward political campaign

activity, and that the remaining 60% would go to the promotion of social where flair -- social welfare if that is certified by the 501(c)4 applicants, it is your policy that the applicant would be approved in the next two weeks. >> that is correct. >> i would like to bring your attention to aces of the case, and ask for have that would fall ,nder this category specifically the 6040 role that you are proposing. >> is a hypothetical case? 48 hourt is a real life ago case. let's try. on tuesday, the president unveiled his plan to cut greenhouse gas emissions. of e- hours, millions mails will to his reelection campaign supporters through owned obama.com, the url by a 527 organization. asked the e-mail, it

volunteers to "call out via twitter, e-mail, letters, facebook, and so on, members of congress who are so-called 'climate change deniers'." it then links to 85 plus members of congress that they would like to be targeted, all of whom are republican, many of whom are on this committee. under that circumstance, i am wondering whether or not that activity, those hours, and that money, would be classified under the political campaign activity, or under their promoting social welfare category. >> you are getting into a territory where i am not the legal experts, but i will do my best to provide clarity as far as i understand this and the role of law here. it is my understanding that the clinical campaign intervention has to do with, and i'm answering these questions of a

broad matter because i do not , so to get into 6103 issues i want to qualify that my answer is in a broad context of how we think about political campaign intervention. it has to do with, and the key issue is, are we the entity seeking (c)4 status seeking to influence the outcome of an election by supporting or opposing a particular candidate. we have a situation in which, for sample, an ad mentions a candidate within 30 days of an election, they say there you go, at that point in time, you have political campaign intervention, but if they've mentioned that 20 days before any election, it is not as clear, and more work needs to be done. so to your question, it is a broad matter. i think the lawyers who are experts in handling it was -- is there a candidate involves, it is the activity intended to

influence the outcome of an election? >> well, there are 85 numbers of congress targeted. >> i do not want to get too specific -- >> i understand that, but the point i am attending to is that the role you are proposing requires the applicant to make a determination. as the commissioner of the irs opposing the -- proposing the rule, if you cannot make a determination, how can we then ask a non-attorney, non-irs commissioner, non-irs employee to make that same determination to classify their activity as promotingocating for social welfare or clinical campaign activity if we are going to limited under 60/40 rule. >> there is a specific guidance that we can provide an hour -- thation, and in the

we ask the taxpayer to look at and determine whether they are meeting the criteria. right now, me articulating into the taxpayer is actually done and much more specificity and materials that the taxpayer receives in terms of exactly how to answer those questions. -- then, it has to do key issue is are they attempting to influence the outcome of an election. you take it from there it you do further analytics, and any tax or can help determine whether they very senators will go higher than 40% of the sets of activities. >> i realize my time of inspired. i would like to follow-up on exactly how this new rule would then be enforced, whether it would be additional auditing, additional personnel to enforce -- >> and i can provide for the record the more specific guidance that we give the taxpayer. it might be in the best interest to read it out loud. >> you can submitted to the committee, and we will make it available.

mr. paulson is recognized. >> thank you, mr. chairman. , youl mr., -- mr. werfel opened your report with the inappropriate criteria that identified those applying for tax exempt status based on his or her positions. i'm going to ask you this western -- were some of the organization started, when they asked for their donor list? roughly 27 entities were asked for their donor lists. >> do you know if these were the two target donors? the precisehave information. i think that is part of the ongoing review. >> the reason i'm asking is because part of the report, on page 31 on the enforcement section, it say that all current indications are that this sort of political activity analysis ambiguity and subjective utilization of criteria does not occur elsewhere in the irs.

how can you be sure -- >> and what i was referring to there are four operating divisions within the irs to deal with tax administration. the one that is the subject of this audit report is the tax- exempt government entities organization. the collusion receipt which -- the conclusion reached right taxpayers,dual small business, and large business, those areas we not have current evidence that the criteria, screening rights area is inappropriate, we've asked our leaders to look at it, and have us that, with the one of and as i said, that political activity is relevant to any determination. should of these issues be considered rape to occur in the first place. i know there is a publication, the declaration of taxpayer rights, that states right up front -- protection of your

rights. irs employees will protect and is when your rights throughout your contact with us. cia arrest will not disclose to anyone the information you give us except as authorized by law -- the irs will not disclose it to anyone the information you give us except as authorized by law. you have the right to know why we are asking for the information and how we will use it. not beenhat that is followed through because these organizations testified before this committee that they asked the iris why certain information was asked for, -- the irs why certain information with ask for, and there was no response. i've many constituents that are in my district who are also very fearful, who have come forward to me, concerned that they also have become targets because in recent years of audits that have been stepped up by their accountants, their finance winners, their concerns -- their finance planners, they're concerned it is happening because of their lyrical activity. other members of congress on this committee have expressed

the same concern. several have told me these personal stories of their accountants telling them we have never in the history of our experience, we keep receipts, we keep the books clean, we monitor your activity, we have never had this type of systematic auditing on an individual for this level before. so we now know that information on individual donors has been collected. we know that information has been leaked, and we know these audits have been intensified on individuals. i think there is, from my perspective, the report before it has some glaring omissions. there has to be a follow-up reports coming down the road. in the end, what assurance can you give the american people, can you give this committee, to making sure that individual taxpayer rights are being protected, and there is a plan in place to make sure that will happen? >> are probably it should have said this earlier. to the extent there are questions not answered, me and

the irs would be interested in having the feedback in exploring those questions with the committee and figuring out the best way to get answers. our goal with this report was to present several things. first, to recognize for the failures up our front, to recognize we made fundamental mistakes. there are more questions to be asked about how those mistakes occurred. we recognize the mistakes exist. we want to show the american people we recognize them and putting together and actively implementing corrective actions to move forward. fromought in experts public-sector management to help lead the irs going forward on these new activities. some of the activities involve reviewing our current operations, to ask the questions you are answering. >>