At our first Hearing, and every day since, each of us on a bipartisan basis have condemned the actions within the IRS exempt organization division and condemned the actions by the IRS leadership who failed to accurately and adequately inform Congress after they had all of the facts of what had occurred between 2010 and 2012.
We have all said that the singling out by name was wrong. The President said it was “outrageous." The delays of over 13 months in processing applications were wrong and the fact that the applications of some organizations have been pending for over three years is inexcusable. The inability to get clear guidance on how to measure political activity was wrong. And, the burdensome questions and inquiries were totally inappropriate. The handling of these applications was gross mismanagement by the IRS exempt organization division. That’s why the day after the report was issued I called for Acting Commissioner Steve Miller and the Exempt Organization Division Director Lois Lerner to be replaced.
Since our Hearing, progress has been made to address the malfeasance that occurred within the IRS exempt organization division and to ensure that all of the facts come to the surface and that all identified problems are corrected so that the confidence of the American people may be restored.
* Steve Miller resigned as the IRS Commissioner
* The President appointed Daniel Werfel as the acting IRS Commissioner and Secretary Lew instructed him to immediately conduct a 30-day review and to implement the recommendations in the IG’s report.
* Lois Lerner, the Director of the Exempt Organization division, was put on Administrative Leave by Commissioner Werfel.
* Commissioner Werfel appointed David Fisher as the Chief Risk Officer. Mr. Fisher previously served as the Chief Administrative Officer and Chief Financial Officer at GAO.
* And yesterday, he appointed a new Deputy Commissioner and Chief of Staff, both with significant managerial and administrative experience.
To the individuals testifying before us, the organizations they represent, and all the others who were caught up in this malfeasance, you are owed an apology. We say to you that each of us is committed to doing our part to ensure this does not happen again.
The IG’s report includes a number of key facts that we should keep in mind today:
The IG determined that the applications of 298 organizations were set aside for further review. One-third of the applications that were set aside - 96 - contained the name, “Tea Party," “9/12," or “Patriots." While the remaining 202 applications did not.
The IRS released a list of 176 advocacy organizations that have been approved for tax-exempt status through May 9, 2013. The news organization Tax Analysts did an analysis of the list released by the IRS. Its conclusion as to the approved applicants states: “these organizations are the following: 46 with Tea Party, Patriots, or 9/12 in their name, 76 other conservative organizations, 48 non-conservative organizations, and six organizations about which we can make no determination."
This is not a Democratic or Republican issue. It should not be.
This issue is a direct reflection on highly inappropriate actions within the IRS Exempt Organization division and totally incompetent management within and over that division. The TIGTA report highlights more problems than the singling out by name. The report found that IRS employees were screening applications that had no indications of significant political activities while closing cases that did have such indications.
To qualify for tax-exempt status as social welfare organizations, the tax code provides that an organization must be operated “exclusively" for the promotion of social welfare. The regulations, however, state that an organization will qualify for tax-exempt status if it operated “primarily" for social welfare purposes. Overall the data indicate an emerging use of the social welfare designation under Section 501(c) 4 to engage in political activity. 501(c) 4s spent $92 million in the 2010 election. They spent $254 million in the 2012 election - the second largest category of organizations making political expenditures - equal to that of political parties.
One recommendation in the TIGTA report was that the IRS and the Department of Treasury include guidance on how to measure the “primary activity" of social welfare organizations be included for consideration in their priority guidance plan. We urge them to move with all deliberate speed to implement this recommendation.
In closing, I thank the witnesses for being here today and discussing your experiences.
Please be assured that we take seriously our responsibility to ensure that Congress gets to the bottom of what happened, that those responsible are held accountable, and that safeguards are in place to ensure that this does not happen again.
