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The Irs's Systematic Delay and Scrutiny Of THE IRS’S SYSTEMATIC DELAY AND SCRUTINY OF TEA PARTY APPLICATIONS HEARING BEFORE THE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM HOUSE OF REPRESENTATIVES ONE HUNDRED THIRTEENTH CONGRESS FIRST SESSION JULY 18, 2013 Serial No. 113–51 Printed for the use of the Committee on Oversight and Government Reform ( Available via the World Wide Web: http://www.fdsys.gov http://www.house.gov/reform U.S. GOVERNMENT PRINTING OFFICE 82–435 PDF WASHINGTON : 2013 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Aug 31 2005 11:16 Sep 03, 2013 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 C:\DOCS\82435.TXT APRIL COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM DARRELL E. ISSA, California, Chairman JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland, Ranking MICHAEL R. TURNER, Ohio Minority Member JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York PATRICK T. MCHENRY, North Carolina ELEANOR HOLMES NORTON, District of JIM JORDAN, Ohio Columbia JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts TIM WALBERG, Michigan WM. LACY CLAY, Missouri JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts JUSTIN AMASH, Michigan JIM COOPER, Tennessee PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California SCOTT DESJARLAIS, Tennessee MATTHEW A. CARTWRIGHT, Pennsylvania TREY GOWDY, South Carolina MARK POCAN, Wisconsin BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois DOC HASTINGS, Washington ROBIN L. KELLY, Illinois CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois ROB WOODALL, Georgia PETER WELCH, Vermont THOMAS MASSIE, Kentucky TONY CARDENAS, California DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico KERRY L. BENTIVOLIO, Michigan RON DESANTIS, Florida LAWRENCE J. BRADY, Staff Director JOHN D. CUADERES, Deputy Staff Director STEPHEN CASTOR, General Counsel LINDA A. GOOD, Chief Clerk DAVID RAPALLO, Minority Staff Director (II) VerDate Aug 31 2005 11:16 Sep 03, 2013 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 C:\DOCS\82435.TXT APRIL C O N T E N T S Page Hearing held on July 18, 2013 ............................................................................... 1 WITNESSES Ms. Elizabeth Hofacre, Revenue Agent, Exempt Organizations, Tax-Exempt and Government Entities Division, Internal Revenue Service Oral Statement ................................................................................................. 6 Written Statement ............................................................................................ 9 Mr. Carter Hull, former Tax Law specialist, Exempt Organizations, Tax- Exempt and Government Entities Division, Internal Revenue Service Oral Statement ................................................................................................. 12 Written Statement ............................................................................................ 14 The Hon. J. Russell George, Inspector General, Treasury Inspector General for Tax Administration, Mr. Michael McCarthy, Chief Counsel, Treasury Inspector General for Tax Administration, and Mr. Gregory Kutz, Assistant Inspector General for Management Services and Exempt Organizations, Treasury Inspector General for Tax Administration Oral Statement ................................................................................................. 61 Written Statement ............................................................................................ 64 APPENDIX Statement of Rep. Cummings Submitted for the Record ..................................... 126 Statement of Rep. Connolly Submitted for the Record ......................................... 128 The Committee on Ways and Means Democrats Statement Submitted for the Record by Rep. Connolly ............................................................................... 130 An IRS Document Regarding the BOLD Listing Submitted for the Record by Mr. George ....................................................................................................... 131 A Communication from the Head of Investgations Submitted for the Record by Rep. Connolly .................................................................................................. 135 (III) VerDate Aug 31 2005 11:16 Sep 03, 2013 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 C:\DOCS\82435.TXT APRIL VerDate Aug 31 2005 11:16 Sep 03, 2013 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 C:\DOCS\82435.TXT APRIL THE IRS’S SYSTEMATIC DELAY AND SCRUTINY OF TEA PARTY APPLICATIONS Thursday, July 18, 2013 HOUSE OF REPRESENTATIVES, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. The committee met, pursuant to call, at 11:05 a.m., in Room 2154, Rayburn House Office Building, Hon. Darrell E. Issa [chair- man of the committee] presiding. Present: Representatives Issa, Mica, Turner, Duncan, McHenry, Jordan, Chaffetz, Walberg, Lankford, Amash, Gosar, Meehan, DesJarlais, Gowdy, Farenthold, Hastings, Lummis, Woodall, Massie, Collins, Meadows, Bentivolio, DeSantis, Cummings, Maloney, Norton, Tierney, Lynch, Cooper, Connolly, Speier, Cart- wright, Duckworth, Kelly, Davis, Cardenas, and Lujan Grisham. Staff Present: Alexia Ardolina, Assistant Clerk; Kurt Bardella, Senior Policy Advisor; Richard A. Beutel, Senior Counsel; Brian Blase, Senior Professional Staff Member; Will L. Boyington, Press Assistant; Molly Boyl, Senior Counsel and Parliamentarian; Law- rence J. Brady, Staff Director; David Brewer, Senior Counsel; Dan- iel Bucheli, Assistant Clerk; Caitlin Carroll, Deputy Press Sec- retary; Steve Castor, General Counsel; Drew Colliatie, Professional Staff Member; John Cuaderes, Deputy Staff Director; Brian Daner, Counsel; Linda Good, Chief Clerk; Tyler Grimm, Senior Profes- sional Staff Member; Frederick Hill, Director of Communications and Senior Policy Advisor; Christopher Hixon, Deputy Chief Coun- sel, Oversight; Mark D. Marin, Director of Oversight; Kristin L. Nelson, Senior Counsel; Katy Rother, Counsel; Laura L. Rush, Deputy Chief Clerk; Scott Schmidt, Deputy Director of Digital Strategy; Sarah Vance, Assistant Clerk; Rebecca Watkins, Deputy Director of Communications; Jeff Wease, Chief Information Officer; Jedd Bellman, Counsel; Meghan Berroya, Counsel; Claire Coleman, Counsel; Susanne Sachsman Grooms, Deputy Staff Director/Chief Counsel; Adam Koshkin, Research Assistant; Julia Krieger, New Media Press Secretary; Elisa LaNier, Director of Operations; Jason Powell, Senior Counsel; and Dave Rapallo, Staff Director. Chairman ISSA. The committee will come to order. The Oversight Committee exists to secure two fundamental prin- ciples: First, Americans have a right to know that the money Washington takes from them is well-spent. And, second, Americans deserve an efficient, effective government that works for them. Our duty on the Oversight and Government Reform Committee is to protect those rights. (1) VerDate Aug 31 2005 11:16 Sep 03, 2013 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\82435.TXT APRIL 2 Our solemn responsibility is to hold government accountable to taxpayers, because taxpayers have a right to know what they get from their government. It’s our job to work tirelessly, in partner- ship with citizen watchdogs, to deliver the facts to the American people and bring genuine reform to the Federal bureaucracy. Today’s hearing particularly touches on taxpayers and what tax- payers should expect from their government. It continues the com- mittee’s investigation into the IRS’s inappropriate treatment of groups applying for tax-exempt status. It is now our understanding that some of those groups were 501(c)(3)s, groups for whom you re- ceive a tax deduction if you give, and that the vast majority were 501(c)(4)s, groups for whom you do not receive a tax deduction for your contribution but who do not pay the same corporate taxes on that income. This scandal first came to light via a planted question, directed at Lois Lerner’s request, at the American Bar Association event on May 10th. Prior to the planting of that question, designed to ob- struct the truth about targeting and break the news to a sympa- thetic audience that Friday afternoon, this committee had worked with our Inspector General for Treasury for more than 10 months. Multiple committees of the House of Representatives had wanted answers, had sought answers, and were waiting on those answers. In response to the planted question, Lois Lerner blamed the in- appropriate IRS activities of line people in Cincinnati. The IRS hoped it would—we believe the IRS hoped this would make the scandal quickly dissipate. It did not. And, in fact, today we are going to hear from one of those line employees in Cincinnati. But our committee has heard from many of those line employees. We have also begun hearing from people they reported to or exchanged information with in Washington. Sadly, the White House press secretary continues a narrative characterizing it as ‘‘inappropriate conduct by IRS officials in Cin- cinnati.’’ Today’s hearing needs to dispel that so we can begin fol- lowing the witnesses and following the testimony and following the truth wherever it leads. We are now convinced and we will hear testimony that, as the Inspector General found in his investigation/audit, what began in Cincinnati with one case of a Tea Party application soon was, in fact, in Washington at levels
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