[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]








                             THE STATUS OF
                       INTERNAL REVENUE SERVICE'S
                 REVIEW OF TAXPAYER TARGETING PRACTICES

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 27, 2013

                               __________

                          Serial No. 113-FC10

                               __________

         Printed for the use of the Committee on Ways and Means



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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel



















                            C O N T E N T S

                               __________

                                                                   Page

Advisory of June 27, 2013 announcing the hearing.................     2

                                WITNESS

Daniel Werfel, Principal Deputy Commissioner and Deputy 
  Commissioner for Services and Enforcement, Internal Revenue 
  Service........................................................     7

 
                             THE STATUS OF
                       INTERNAL REVENUE SERVICE'S
                 REVIEW OF TAXPAYER TARGETING PRACTICES

                              ----------                              


                        THURSDAY, JUNE 27, 2013

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to call, at 10:01 a.m., in Room 
1100, Longworth House Office Building, Hon. Dave Camp [Chairman 
of the Committee] presiding.

    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                                                CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Thursday, June 20, 2013
No. FC-10

                   Chairman Camp Announces Hearing on

                the Status of Internal Revenue Service's

                 Review of Taxpayer Targeting Practices

    Congressman Dave Camp (R-MI), Chairman of the Committee on Ways and 
Means, today announced that the Committee will hold a hearing on the 
Internal Revenue Service (``IRS'') and the agency's 30-day review of 
the practice of discriminating against applicants for tax-exempt status 
based on their personal beliefs. The hearing will take place on 
Thursday, June 27, 2013, in Room 1100 of the Longworth House Office 
Building, beginning at 10:00 a.m.
      
    The Principal Deputy Commissioner of the Internal Revenue Service, 
Mr. Daniel Werfel, will be the only witness at the hearing. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    Since June 2011, the Committee on Ways and Means has been 
investigating whether the IRS discriminated against taxpayers based on 
their personal beliefs. On May 10, 2013, IRS acknowledged that the 
agency had been targeting conservative-leaning political organizations. 
Appointed by President Obama on May 16, 2013, Mr. Werfel serves as the 
Principal Deputy Commissioner of the IRS and the Deputy Commissioner 
for Services and Enforcement. The day after his appointment, Treasury 
Secretary Jack Lew stated Mr. Werfel would ``within 30 days . . . 
report to me and we will report to the President on actions taken.'' 
The Committee will receive testimony from Mr. Werfel regarding the 
Agency's internal review of inappropriate practices, as well as any 
remedial and disciplinary actions that have been implemented by the 
IRS.
      
    In announcing the hearing, Chairman Camp said, ``At the close of 
the Committee's first hearing into the IRS's targeting of 
conservatives, I said this phase of the investigation was just 
beginning. While the Committee continues a methodical investigation 
that includes interviewing IRS officials, reviewing internal IRS 
documents, and talking to those who were targeted, it is also important 
that we hear from IRS leadership about what immediate steps the agency 
has undertaken to address these actions. The hearing will ensure that 
we have the IRS's perspective as Congress considers additional actions 
that are necessary to address both this broken agency and the broken 
Tax Code the agency used as a means to target and intimidate Americans 
based on their political beliefs.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the Internal Revenue Service's 30-day 
report on the practice of discriminating against applicants for tax-
exempt status based on their personal beliefs.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
written comments for the hearing record must follow the appropriate 
link on the hearing page of the Committee website and complete the 
informational forms. From the Committee homepage, https://
waysandmeans.house.gov (https://waysandmeans.house.gov), select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Thursday, July 11, 2013. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-3625 or (202) 225-5522.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at:
      http://www.waysandmeans.house.gov/ (http://
www.waysandmeans.house.gov/).

                                 

    Chairman CAMP. The Committee will come to order.
    Good morning.
    It has been 6 weeks since the IRS first revealed it was 
purposefully targeting conservative-leaning organizations, and 
this week additional IRS documents revealed that the term 
``progressive,'' along with others, were also included on the 
``Be on the Lookout'' list, or the BOLO.
    And I want to make one thing clear. No taxpayer, regardless 
of political affiliation, should be unfairly targeted. It is 
wrong, and 
this Committee is working to ensure that it will never happen ag
ain.
    The Committee has welcomed all groups that feel they have 
been targeted for extra scrutiny to come forward, and I urge 
them to do so. So far, the evidence only shows conservatives 
being systematically targeted by the IRS, not just flagged 
through the BOLO, but actually targeted. These Americans 
consistently had their applications delayed for nearly 3 years, 
were asked intrusive and inappropriate questions, had their 
donor information leaked, and were even threatened by the IRS 
with additional taxes.
    But, as I have long said, we are in the early stages of 
this investigation, and, as we gather the facts, we will follow 
those facts wherever they lead. Again, if there are any 
additional groups of any political affiliation, we urge them to 
come forward.
    From what we have already learned, it is clear that the IRS 
is a broken agency that needs to answer to the American people.
    Mr. Werfel, in the interest of accountability and at the 
discretion of Treasury Secretary Lew, you spearheaded a 30-day 
review of the practice of discriminating against conservative 
groups.
    Unfortunately, while I am aware this is an initial report, 
it fails to deliver the accountability the American people 
deserve. This report doesn't answer even the most basic 
significant questions: Who started this practice? Why has it 
been allowed to continue for so long? How widespread was it? In 
fact, this report suggests that you haven't even asked anyone 
those questions.
    Additionally, the report fails to address some of the most 
egregious offenses by the IRS. I am specifically talking about 
the intentional leaking of confidential taxpayer information 
and the IRS threatening conservative donors with additional 
taxes.
    The review notes that it is important that the Inspector 
General continues to identify inappropriate actions, but where 
is the internal oversight? Where are the checks to prevent this 
behavior in the first place? How will the IRS learn from these 
inexcusable actions and provide the American taxpayer with real 
proof and evidence that it will not happen again?
    It will be necessary to provide concrete reforms and 
assurances to begin rebuilding the trust this agency has lost 
with the American people.
    A glaring recommendation in this report is that Congress 
fulfill the agency's budget request of an additional billion 
dollars. And, frankly, it is insulting to taxpayers that the 
IRS would ask for an additional billion dollars right after we 
find out that the IRS was targeting taxpayers for their 
beliefs, after they spent millions of taxpayer dollars on 
frivolous conferences, produced completely useless videos, and 
put expensive dinners and alcohol on IRS credit cards.
    And, Mr. Werfel, let me be clear, until the IRS proves that 
it can responsibly manage its current funds, the IRS will not 
see one more dime in taxpayer funding.
    We need real reforms, and they must be implemented so the 
American people can have a restored faith that they have a 
government that works for them, not against them. That begins 
with instituting long-term and meaningful changes--changes to 
both how the agency operates and to the Tax Code that the 
agency is trying to enforce.
    And, as I have stated before, I often hear from 
constituents in Michigan about their fear of being audited by 
the IRS. That fear used to stem from the fact that the Tax Code 
was so complicated, nobody really knew what was in it or if 
they had filed their taxes correctly. Even when people paid 
someone else to do their taxes, they would sign their return 
not really knowing what was in it and hoping the preparer got 
it right. And that is something this Committee must and will 
fix.
    However, today, Americans fear an audit not just because 
the Tax Code is too complex but because we have an agency that 
is out of control. We have managers in Washington sitting on 
cases for years, directing intrusive and inappropriate 
questions to be asked.
    And after a month-long internal review, what you tell this 
Committee is that a few people have been removed from their old 
jobs, but you cannot even assure us that they have been removed 
from the agency. It is my understanding that they either 
continue to be paid or are receiving full retirement benefits. 
And, on top of those salaries and benefits, those employees 
have received over a quarter of a million dollars in bonuses 
over the last few years. And you have not identified any 
structural changes within the IRS that would prevent these 
abuses of power from happening again.
    If there is anything this report shows, it is just how much 
more work must be done. Congress will continue the 
investigation into the IRS's actions and get to the bottom of 
this so we can ensure that no American is targeted again.
    And, with that, I yield to Mr. Levin for the purposes of 
his opening statement.
    Mr. LEVIN. Thank you, Mr. Werfel.
    I will go over my opening statement in just a moment. I 
want to urge you--you have heard the opening statement of the 
Chairman. I know you mostly have been kind of a technician all 
your years in both the Bush Administration and in this 
Administration. I hope, though, that you will, if I might 
suggest, respond very vigorously when statements are made. I 
hope you will actively report on what you have done during your 
first 30 days.
    Where mistakes have been made by the Internal Revenue 
Service, we on the Democratic side have been very, very clear: 
When inappropriate criteria were used, we were among the first 
to say that those who were in charge in the IRS should be 
relieved of their duties.
    So I hope you will respond very actively and vigorously to 
all the questions. I think we need to get the facts and not 
innuendos. We are here today to learn about the corrective 
action that the IRS has taken to address mismanagement and 
processing of tax-exempt applications.
    So, Mr. Werfel, welcome to the Ways and Means Committee. I 
am not sure how warm it is, but welcome.
    I am glad to see in your 30-day report that you have 
instituted management changes that span the entire IRS 
management chain. It is needed. I see from your report that 
these changes reach into the Exempt Organization Division--
which, indeed, is necessary--and the team responsible for 
determinations on applications for tax-exempt status.
    We are 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 IRS 
accountability and responsiveness to stakeholders, including 
this Congress.
    As your report makes clear, there was clear mismanagement 
on the part of the IRS Exempt Organizations Division in 
processing these tax-exemption applications. The additional 
assessment and plan of action appear to be a solid roadmap to 
addressing the problems. And we encourage you, as I said at the 
beginning, to actively, to vigorously, to completely pursue 
this plan.
    But for our Committee, which launched this investigation on 
a bipartisan basis, the backdrop for today's hearing is the 
troubling new information that has come to light about the 
report issued by the Treasury Inspector General of Tax 
Administration.
    This week, we learned for the first time the three key 
items: One, the screening list used by the IRS included the 
term ``progressives''; two, progressive groups were among the 
298 applications that TIGTA reviewed in their audit and that 
received heightened scrutiny; and, three, the Inspector General 
did not research how the term ``progressives'' was added to the 
screening lists or how those cases were handled by a different 
group of specialists in the IRS.
    The failure of the I.G.'s audit to acknowledge these facts 
is a fundamental flaw in the foundation of the investigation 
and the public's perception of this issue. I wrote to the I.G. 
and asked him to explain these omissions.
    And all Committee Democrats have asked you, Mr. Chairman, 
today that you ask Mr. George to return to the Committee to 
provide the appropriate context for his report and answer 
questions under oath regarding all of these matters. Our 
Committee, in its oversight role, has an obligation to fully 
understand the manner in which the I.G. conducted his audit and 
at what direction.
    Deeply troubling is that, when asked about the new 
information that has come to light, the Treasury I.G. Office 
initially said in media reports that ``our audit report 
answered questions it was asked to address,'' and that the 
House Oversight Committee Chairman, Darrell Issa, had 
specifically requested that investigators ``narrowly focus on 
Tea Party organizations.'' We asked TIGTA about this in the 
letter, and it responded that ``many of the press reports are 
not accurate.''
    If these or some of the reports were accurate, TIGTA's 
initial explanation of the scope of the audit is inconsistent 
with the description of the I.G.'s audit work in the 2013 audit 
plan and the stated objective on the first page of the May 
14th, 2013, audit report. The stated objective was ``to 
determine whether allegations were founded that the IRS, one, 
targeted specific groups applying for tax-exempt status; two, 
delayed processing of targeted groups' applications; and, 
three, requested unnecessary information from targeted 
groups.''
    The I.G.'s failure to be forthcoming in the audit and at 
congressional hearings, even when asked directly if there was a 
screening list for ``progressive'' and whether progressive 
groups were included among the 298 applications reviewed by 
TIGTA, has contributed to the distortion of the entire 
investigation, including use of innuendo and totally 
unsubstantiated assertions of White House involvement.
    Democrats have condemned the singling out of ``Tea Party'' 
by name. I hope our colleagues on the Republican side of the 
aisle will now join us in condemning the use of the term 
``progressives'' on the screening lists and the failure of the 
I.G. to be forthcoming with this and other congressional 
committees.
    We have also been supportive of letting the facts lead 
where they may. None of us, including the Acting IRS 
Commissioner, can describe how an application was processed 
once it was screened. I caution my colleagues from jumping to 
conclusions until we know all the facts. Searching for the 
facts is the only way we are going to get back on the course 
that I hope is our mutual goal: The fixing of the problems, all 
of the problems, at the IRS and restoring the trust of the 
American people.
    Thank you, Mr. Chairman.
    Chairman CAMP. Thank you, Mr. Levin.
    Now I would like to introduce our witness, Mr. Daniel 
Werfel, Principal Deputy Commissioner and Deputy Commissioner 
for Services and Enforcement of the Internal Revenue Service.
    Thank you, Mr. Werfel, for being with us today. The 
Committee has received your report, and it will be made part of 
the formal hearing record. You will have 5 minutes for your 
oral remarks.
    You are now recognized.

 STATEMENT OF DANIEL WERFEL, PRINCIPAL DEPUTY COMMISSIONER AND 
  DEPUTY COMMISSIONER FOR SERVICES AND ENFORCEMENT, INTERNAL 
                        REVENUE SERVICE

    Mr. WERFEL. Chairman Camp, Ranking Member Levin, and 
Members of the Committee, thank you for the opportunity to 
appear before you today to discuss the progress we have made 
thus far in charting a path forward for the IRS and what we 
hope to accomplish in the future.
    The report we released on Monday describes a number of 
important findings, aggressive actions, and next steps for the 
IRS. The problems with the 501(c)(4) application process that 
were uncovered by the Treasury Inspector General for Tax 
Administration have created significant concerns for taxpayers, 
and it is incumbent upon us to take swift action to ensure 
accountability, fix the problems that occurred, and thoroughly 
examine other aspects of IRS operations.
    Over the past month, an ongoing review of the events 
described in the TIGTA report 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 disclose the problems that 
emerged with the review of applications for tax-exempt status. 
Our report outlines management deficiencies and the steps that 
must be taken to correct them.
    Importantly, the report does not provide a complete and 
final set of answers. Instead, it offers an initial set of 
conclusions and action steps, along with an explanation of the 
additional reviews and investigations under way.
    While fact-gathering is still ongoing, we have not found 
evidence of intentional wrongdoing by anyone at the IRS or 
involvement in these matters by anyone outside of the IRS. 
Furthermore, there is no current evidence of the use of 
inappropriate screeners or other types of criteria in other IRS 
operations beyond those discussed in the I.G. report.
    We recognize, however, that there is public concern 
regarding the criteria used for applications for tax-exempt 
status, and more needs to be done to evaluate our screening 
criteria and procedures. We will therefore establish a review 
process by which screening criteria and procedures across the 
IRS will be periodically assessed to safeguard against any 
risks of inappropriate criteria.
    In addition to this important review, I also want to 
briefly mention some of the actions that we have taken and will 
take to address the problems we have found.
    First, we have installed new leadership at all five levels 
of the IRS senior executive managerial chain that had 
responsibility over the activities identified in the I.G. 
report. In addition, we have empaneled an Accountability Review 
Board to provide recommendations within 60 days, and later if 
needed, on additional personnel actions that should be taken.
    Next, immediately upon learning that ``Be on the Lookout,'' 
or BOLO, lists with inappropriate criteria were still in use, 
we suspended the use of any such lists in the application 
process for tax-exempt status.
    Next, we have established a new voluntary process for 
certain taxpayers who have been in our backlog for more than 
120 days to gain expedited approval to operate as a 501(c)(4) 
tax-exempt entity. This is a self-certification process which 
allows them a streamlined path to tax-exempt status if they 
agree they will operate within defined limits and thresholds of 
political and social welfare activities.
    Next, we will establish an enterprise risk management 
program across the IRS to provide a common framework for 
capturing, reporting, and addressing risk. This is intended to 
ensure that such information is brought to the attention of the 
IRS Commissioner and other IRS leaders and external 
stakeholders in a timelier manner.
    Next, we will initiate additional internal and external 
education and outreach about the role of the national taxpayer 
advocate in assisting taxpayers in resolving problems with the 
IRS.
    I also want to point out that our pursuit of broad-based 
reforms in the IRS does not mean that we believe the specific 
challenges and concerns identified in the I.G. report on 
501(c)(4)s are necessarily present in other parts of the 
organization. In fact, I believe that any comprehensive review 
of IRS operations must recognize the many critical successes 
that the IRS has had in carrying out its mission over the last 
several years.
    The IRS is committed to correcting its mistakes, holding 
individuals accountable as appropriate, and establishing 
control elements that will help us mitigate the risks we face. 
The employees of the IRS are committed to our mission and to 
operating with integrity and fairness to all.
    The IRS serves a vital purpose for this country, and we 
need to earn and maintain the trust of the American people in 
order to accomplish our mission. We are firmly moving in that 
direction. And we will continue to report on our progress on a 
regular basis as we fulfill our commitments.
    Mr. Chairman, Ranking Member Levin, that concludes my 
statement. I would be happy to answer your questions.
    [The prepared statement of Mr. Werfel follows:]
    
    
    
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    Chairman CAMP. Well, thank you very much, Mr. Werfel.
    For the purposes of preparing your report, did you speak to 
former Commissioner Doug Shulman?
    Mr. WERFEL. I did not.
    Chairman CAMP. Did you speak to former Acting Commissioner 
Steve Miller?
    Mr. WERFEL. I did not.
    Chairman CAMP. Did you talk with Joseph Grant, the former 
Deputy Commissioner for TEGE?
    Mr. WERFEL. No, I did not.
    Chairman CAMP. Did you talk with Chief Counsel William 
Wilkins?
    Mr. WERFEL. Yes.
    Chairman CAMP. What were the basic summaries of those 
conversations?
    Mr. WERFEL. As a first matter, there were three things I 
set out to do, which are in the report: First, understand where 
the wrongdoing was so I could hold people accountable; second, 
understand where the management failures and process mistakes 
were in the Exempt Organizations Unit so we could fix them; 
and, third, gain a broader understanding of IRS risks and 
operations.
    And I spoke to many people within the IRS. In fact, my 
whole senior leadership team engaged in an ongoing series of 
discussions. And Bill Wilkins is one of the senior leaders 
within IRS.
    Chairman CAMP. Did you talk to Sarah Hall Ingram, the 
former Deputy Commissioner?
    Mr. WERFEL. I have spoken to Sarah Hall Ingram, yes.
    Chairman CAMP. As you prepared the report?
    Mr. WERFEL. I----
    Chairman CAMP. For the purposes of preparing the report, 
did you speak to her?
    Mr. WERFEL. I am not sure how to answer that question. I 
spoke to her as part of my overall understanding of the 
situation on the ground with the IRS. So, yes, I guess they all 
connect.
    Chairman CAMP. Okay. And did you speak with Lois Lerner, 
the former Director of Exempt Organizations?
    Mr. WERFEL. I did not.
    Chairman CAMP. Well, I would say that your initial 
conclusion that the IRS found no evidence of intentional 
wrongdoing by IRS personnel, given the number of key players 
that you did not talk to, I think is not necessarily an initial 
conclusion, but an incomplete one. And I really don't see how 
you were able to reach that.
    But we know from our investigation that in the summer of 
2011 Lois Lerner directed the Cincinnati office to change the 
``Tea Party'' label to ``advocacy groups.'' Do you think this 
was an intentional attempt to cover up the targeting?
    Mr. WERFEL. I don't know--I don't know the answer to that 
question. I think more work needs to be done to evaluate the 
circumstances.
    Chairman CAMP. Again, I find it difficult, then, to make 
the conclusion that no evidence of intentional wrongdoing by 
IRS personnel was done. But----
    Mr. WERFEL. What I am suggesting is there is no evidence in 
the record to suggest that there was an intentional coverup of 
any kind.
    Chairman CAMP. But you didn't even speak to her, so----
    Mr. WERFEL. But each time that I have made the point, each 
time that I have made----
    Chairman CAMP. Mr. Werfel, I control the time. And my 
question is, after she directed this change, Cincinnati 
intentionally went back to targeting Tea Party groups. Do you 
know who was responsible for this?
    Mr. WERFEL. Do I know who was--well, I challenge the 
premise of your question.
    Chairman CAMP. After the change was made to ``advocacy 
groups,'' the Cincinnati office went back to targeting Tea 
Party groups. Do you know who was responsible for that activity 
beginning again?
    Mr. WERFEL. We are looking into the facts and circumstances 
that arose. There are a lot of questions to be asked and 
answered that haven't been asked and answered yet. And I am not 
going to reach a definitive conclusion before the investigation 
is complete.
    Chairman CAMP. If you don't know, it is fine to say you 
don't know.
    Mr. WERFEL. Yes.
    Chairman CAMP. I think the answer is you don't know.
    Do you know who in Washington, D.C., directed the lawyers 
at the Exempt Organizations Technical Office to hold up the Tea 
Party applications?
    Mr. WERFEL. I do not know the answer to that question.
    Chairman CAMP. Is the IRS interviewing employees who were 
directly involved with the Tea Party discrimination at this 
point?
    Mr. WERFEL. Right now, the IRS is relying on the Justice 
Department and the Inspector General to conduct those 
interviews. We are working closely with them. But it is 
critical that, because there is an ongoing criminal 
investigation, we do not step in front of the Justice 
Department and the I.G. at this time.
    Chairman CAMP. Is the IRS conducting any internal document 
review outside of complying with the requests that Congress has 
been sending the agency?
    Mr. WERFEL. We are conducting a very thorough document 
review at this time.
    Chairman CAMP. Your report also states that there is no 
evidence of the use of inappropriate criteria in other IRS 
business unit operations. And how did you reach that 
conclusion? Are you interviewing employees in these units and 
requesting information, or is there----
    Mr. WERFEL. Yes, there is--the major divisions that are 
involved in these types of activities of dealing directly with 
taxpayer issues are our small business section; our large 
business section; TEGE, which is the subject of the audit 
report; and Wage and Investment.
    I have met with the leaders of those operating divisions. 
We have talked about the issues in the I.G. report that dealt 
with the Exempt Organizations Unit. I have asked them to look 
internally and do their own assessments of any specific 
evidence they may have of similar problems or challenges in 
their areas. They have determined that there are not--there is 
some good reason for that.
    And, in particular, I think it is important to point out 
that in this area of tax-exempt review, it is one of the very 
few areas within the IRS where the nature of political activity 
is relevant to any determination that we would make on 
eligibility or review. And so the other areas of the IRS 
normally don't involve themselves in political activity.
    All this said, we understand and mean no--I am, like all of 
you, very concerned about what is in this I.G. report. It is a 
very significant concern. We are hearing from taxpayers that 
they are concerned. And that is why, out of an abundance of 
caution and because it is important to reassure the taxpayers, 
we are going to review all of our criteria across the entire 
IRS and report back to you on our findings.
    Chairman CAMP. So I think this leads into the statement in 
the report that the IRS is digging deeper into the evidence 
``to determine if there are instances of wrongdoing or 
inappropriate conduct beyond the mismanagement identified in 
the report.''
    Mr. WERFEL. Absolutely.
    Chairman CAMP. So that is beyond the Exempt Organizations 
Division. In that process, are you reviewing documents 
requested by Congress, or is there some other internal review 
in addition to that?
    Mr. WERFEL. I think there is a lot of overlap, Mr. 
Chairman. You have asked, this Committee and other committees 
have asked for an enormous footprint of documents, which is 
very justifiable. And we are in the process of producing them 
and have produced a lot of documents for this Committee and 
others.
    We, as part of our efforts to get to the bottom of this, 
are looking at a very similar footprint of documents in order 
to make sure that we understand the causes of these 
circumstances so that we can take the appropriate 
accountability steps and corrective action.
    Chairman CAMP. Well, I would note we are just beginning to 
get emails. And so it is not as if we have all the documents at 
our disposal yet that we are going to need to review.
    But I have another line of questioning. You acknowledged 
and your report acknowledges that the IRS inappropriately 
targeted Tea Party groups. And since then, there have been 
questions raised about whether the IRS was inappropriately 
targeting progressive groups.
    And I would like to read to you the Treasury Inspector 
General's answer to this question, which the Minority was kind 
enough to share with me this morning. ``We reviewed all cases 
that the IRS identified as potential political cases and did 
not limit our audit to allegations related to the Tea Party.'' 
So I would like to repeat that. TIGTA did not limit its audit 
to just the Tea Party.
    And let me just read another excerpt from their answer, 
their written answer. ``From our audit work, we did not find 
evidence that progressives were used by the IRS to select 
potential political cases during the 2010 to 2012 timeframe. We 
found no indication in any materials that `progressives' was a 
term used to refer cases for scrutiny for political campaign 
intervention.''
    So we have conducted interviews with some of the key 
Cincinnati IRS employees, and they have confirmed that to be 
true. Does any part of your 30-day report contradict that 
recent letter and finding by the Inspector General?
    Mr. WERFEL. No, I don't think any part of our report 
contradicts it. What our report determines is that there is 
diversity in the types of political organizations that were 
accounted for in the BOLO list. And that is all that is in our 
report.
    Chairman CAMP. And the BOLO list is a flagging. And only 
the conservative Tea Party groups were referred for extra 
scrutiny, isn't that correct, at this point? That is what we 
know so far?
    Mr. WERFEL. I think that is what the evidence points to so 
far. But, as you have mentioned in your opening remarks, we are 
in the early stages of this, and there is more investigation 
that needs to be done to answer that very question.
    Chairman CAMP. Yes. And the Inspector General is doing a 
more thorough investigation. But at least in the recent letter 
he sent us, he said he found no evidence to date. And your 
report, as you have responded, doesn't contradict that.
    And thank you. I yield to Mr. Levin.
    Mr. LEVIN. You know, to try to set the stage for some 
bipartisanship, just quickly, where did you start your 
government service?
    Mr. WERFEL. I started my government service in the Office 
of Management and Budget. I was at the Justice Department for 
some time. But at the time that this Administration came, I was 
a senior leader in OMB and serving under President Bush.
    Mr. LEVIN. Your report states, ``We have not found 
involvement in these matters,'' talking about the criteria, 
``by anyone outside of the IRS.'' Is that correct?
    Mr. WERFEL. That is correct.
    Mr. LEVIN. And you stand by that?
    Mr. WERFEL. Yes, I stand by it. I think the statement in 
the report is appropriately caveated with the point that there 
are ongoing reviews and investigations that are necessary. But, 
at this time, taxpayers and the public have questions, and the 
answer to the question, have you found any evidence of 
intentional wrongdoing, our answer is, no, we have not.
    Mr. LEVIN. Your report also says--let me just ask you, in 
terms of the involvement outside of the IRS, have you found any 
involvement by anybody in the White House?
    Mr. WERFEL. No, we have not.
    Mr. LEVIN. There has been reference here to the I.G.'s 
investigation. And I want everybody to understand, in the 
letter that was sent there was use--there was a BOLO that had 
the word ``progressives'' on it. Is that correct?
    Mr. WERFEL. Yes, that is correct.
    Mr. LEVIN. And you have asked that that BOLO and all others 
no longer be used?
    Mr. WERFEL. That is correct. We suspended the use of all 
BOLO lists.
    Mr. LEVIN. The I.G. letter also indicates--and all of this 
was indicated for the first time--that there was a number of 
groups, progressives, involved in the BOLO that were sent to a 
different group within the IRS, and the I.G. did not talk with 
anybody regarding what happened to those. So the notion that 
the selecting out was only as to ``Tea Party'' and was not as 
to ``progressives'' is simply incorrect.
    And when the I.G. was sitting in your chair, he failed to 
indicate who the others were. And when asked specifically if it 
included progressive groups in another committee or 
subcommittee hearing, he wasn't forthright. So I think he 
should come back and talk to us and answer some questions.
    Because, in terms of the selecting-out process, clearly it 
involved progressive groups as well as Tea Party groups. That 
was clear from the pie chart in his report, but he never 
delineated who the others were, even as later asked. And if he 
had come forth with that information, I think it would have 
undercut a lot of the wild innuendos, that talk about a White 
House enemies list, that talk about a culture of cover-up.
    So we want him back. I hope, Mr. Chairman, you will have 
him back.
    And I think, Mr. Werfel, we know that you will encourage 
the digging out of all the facts as fully as possible as you 
proceed. Do you give us that pledge?
    Mr. WERFEL. I do give you that pledge, absolutely.
    Mr. LEVIN. Thank you.
    Mr. WERFEL. Actually, Mr. Chairman, there is a question 
that I answered from you that I think warrants further 
clarification----
    Chairman CAMP. Fine.
    Mr. WERFEL [continuing]. If that is okay?
    Chairman CAMP. Yes.
    Mr. WERFEL. And I don't remember your exact question, but I 
want to make sure that I get out early in this hearing so that 
we have that basis of information to guide the questions, is 
that where we are right now in our fact-gathering--and, as you 
said, it is early--we have evidence, obviously, of diversity of 
political labels used in the BOLO lists.
    Chairman CAMP. Yes.
    Mr. WERFEL. We have also--as another example of where we 
have diversity of political labels, this week we are sending 
out letters to taxpayers that have been in our backlog for more 
than 120 days to offer them this option, this fast-track 
option.
    Chairman CAMP. Yes.
    Mr. WERFEL. There is diversity of political labels in the 
groups that are getting this letter.
    And, also, it is our understanding, as we review the facts, 
that there is a diversity of political labels in those 
organizations that were put in through process for further 
review.
    The challenge that I have in going deeper than that is as 
follows. To go deeper into those facts could end up with 
sensitive taxpayer information under 6103. The other challenge 
is that, in looking at the diversity of groups, it is not 
always clear where they stand on the political spectrum, and, 
frankly, I don't want to know where they stand on the political 
spectrum. I want the IRS to be in the business of just 
detecting, because we have to under the law and regulation, the 
extent of political activity, not knowing the type of politics.
    But going back to your earlier question, I didn't want to 
leave the Committee with the impression that we are not seeing 
diversity of political labels across the spectrum. What I am 
suggesting is more analysis, significantly more analysis, is 
needed before we reach more conclusions about what that means 
in terms of an IRS failure or an IRS issue.
    Chairman CAMP. Well, that is why I find it perplexing that 
you would conclude there is no evidence of intentional 
wrongdoing by the IRS, when the Inspector General says that he 
reviewed not only just Tea Party cases but others and, in his 
letter dated June 26th, says that only Tea Party cases at this 
point were flagged and sent to another review. There were no 
progressive cases sent to another review.
    Mr. LEVIN. To a different review.
    Chairman CAMP. Please don't interrupt me, Mr. Levin.
    Mr. LEVIN. To a different review.
    Chairman CAMP. And so I think that is an important point. 
And that is why we need the full Inspector General letter in 
the record.
    And I think that you might have called these ``initial 
conclusions,'' and I think ``initial'' probably should be 
emphasized. I would call them incomplete, given that we still 
have more information to review.
    With that, I will recognize Mr. Johnson.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    Mr. Werfel, the American people want, need, and deserve to 
know the truth, and I hope we get it.
    Mr. Werfel, back in my district, it appears the Allen Area 
Patriots have also been a target of the IRS. The bottom line is 
that the IRS has been used as a political weapon. And that is 
just outrageous.
    Mr. Werfel, instead of targeting Americans because of their 
belief, why doesn't the IRS target fraud and abuse that is 
costing hardworking, law-abiding American taxpayers billions of 
dollars?
    Mr. Werfel, I would like to play a short video clip on an 
issue that I have been working on for some time now. The clip 
is from a WTHR TV investigative report. And this isn't a single 
case.
    [Video shown.]
    Over the years, the I.G. has sounded the alarm about fraud 
and abuse with the $1,000 refundable Child Tax Credit. Do you 
agree this is a problem, yes or no?
    Mr. WERFEL. Yes, I certainly agree that our----
    Mr. JOHNSON. Okay. That is good.
    Isn't it true that one of the rules to claim the Child Tax 
Credit is that the child has to live with the tax filer for 
more than half of the year, yes or no?
    Mr. WERFEL. That is difficult to confirm, that eligibility 
point, I agree.
    Mr. JOHNSON. Why, then, isn't the IRS enforcing this 
residency rule? Mr. Werfel, I hope you will work with us to 
address this. I have a bill that would help put a stop to this. 
In fact, the bill would save taxpayers $24 billion.
    I want to also ask you about another scandal, and that is 
the IRS management of the Individual Taxpayer Identification 
Number program, or ITIN. Again, why doesn't the IRS target 
fraud and abuse instead of Americans for their beliefs?
    Last summer, the I.G. issued a damning report in which it 
found that IRS management discouraged IRS workers from 
detecting fraudulent applications. The I.G.'s report led me to 
call on the then-Commissioner Shulman to resign.
    On the screen, I have Figure 6 from the 2012 I.G. report 
showing most frequently used addresses for ITIN tax refunds. As 
you can see, nearly 24,000 tax refunds, totaling $46.4 million, 
were issued to the same address in Atlanta, Georgia. Bottom 
line, these ITINs are costing taxpayers dearly because they can 
be used to fraudulently get tax refunds.
    And, last month, the I.G. issued another report that makes 
it clear the IRS could be doing a better job protecting 
taxpayer dollars. Just look at the figure on the screen. Over 
1,000 ITINs were assigned to individuals using the same address 
in Atlanta, Georgia.
    Do you agree there is still a problem or not, yes or no?
    Mr. WERFEL. I do agree there is still a problem, yes.
    Mr. JOHNSON. Also, the I.G. found the IRS workers handling 
the ITIN applications remained concerned that management will 
basically pressure them to rubber-stamp applications instead of 
ensuring that only qualified individuals receive.
    Can you give us assurance that the IRS management won't do 
this anymore?
    Mr. WERFEL. I need to look further into that allegation. 
But, on its face, it sounds like something that is 
inappropriate, and I will work with the team. I----
    Mr. JOHNSON. Let me just say in closing, your own report 
acknowledges the Tax Code is nearly impossible to administer 
because it is so complex. And, based on the billions in 
improper payments being made with refundable credits, I will 
just say your agency is proving you right every day. And it is 
time for the IRS to stop targeting Americans and start 
targeting fraud.
    I yield back.
    Chairman CAMP. All right.
    Mr. Rangel is recognized.
    Mr. RANGEL. Welcome to the Committee.
    You have said there is diversity in the BOLO lists, and you 
admit that conservative groups were on the BOLO lists. Why is 
it that we don't know whether or not there were progressive 
groups on the BOLO lists?
    Mr. WERFEL. Well, we do know that the word ``progressive'' 
did appear on a set of BOLO lists. We do know that.
    When I was articulating the point about diversity, I was 
trying to capture that the types of political organizations 
that are on these BOLO lists are wide-ranging. But they do 
include progressives.
    Mr. RANGEL. But, you know, we seem to know what a 
conservative is, but people--how come ``progressive'' now 
becomes ``diversity'' instead of what it is? It is groups that 
are considered to be liberal as opposed to the Tea Party that 
is considered to be conservative. Is that correct, fair?
    Mr. WERFEL. I think it is fair. I think----
    Mr. RANGEL. Okay. As long as it is fair, why are you having 
a problem with the Chairman? Couldn't you say that, in 
determining whether there was abuse of the provisions of the 
Internal Revenue Code, the staff were looking for signals for 
organizations, whether they were liberal or whether they were 
conservative, and the methods they used were not appropriate? 
Is that a fair statement?
    Mr. WERFEL. I don't want to jump to a particular 
conclusion. I want----
    Mr. RANGEL. Well, what part of that statement gives you a 
problem?
    Mr. WERFEL. Because where we are right now in our review is 
we understand that these political labels of varying types were 
on the BOLO lists, and we understand----
    Mr. RANGEL. Okay. ``Tea Party'' is a type, right?
    Mr. WERFEL. Yes.
    Mr. RANGEL. Can you give me a type of name that would 
describe a progressive, Democratic, liberal organization?
    Mr. WERFEL. That is where--I mean, the word--and this is 
where I reach my conclusion that there is a broad range or 
diversity in the political groups, because there are some more 
on the obvious side of the spectrum like the ``Tea Party'' and 
then----
    Mr. RANGEL. That is good enough for me. You are saying that 
there are groups that you can say are progressive groups.
    Mr. WERFEL. I would put them in three categories. There are 
ones that are clearly on the conservative end of the spectrum, 
some that are clearly on the liberal end of the spectrum, and 
then there is a set of groups where it is difficult to 
determine on the facts where they would land on that spectrum. 
And maybe they don't land anywhere on that. Maybe they land 
right in the middle.
    Mr. RANGEL. Well, that just makes so much sense. And, so 
far, even though you don't like the technique that was used, 
you don't find that there was any deliberate political attacks 
made. It was just that they were trying--based on what you know 
now, they were trying to do their job, and they didn't do it in 
the right way.
    Mr. WERFEL. Yes, my position is that the way in which this 
should be structured, it should be looking generically at 
political activity and not using labels that point toward 
particular political persuasions, because that is inconsistent 
with the IRS mission statement for how we are supposed to do 
our work.
    Mr. RANGEL. Do you think it is possible that the White 
House would be supporting a targeting of progressive 
organizations that supported his candidacy?
    Mr. WERFEL. I don't even want to speculate on that. From my 
short time at the IRS, I have seen no interaction between the 
White House and the IRS that would extend to that level. I 
personally have had no contact with the White House other than 
to brief the President on this report.
    Mr. RANGEL. And could you produce to us the type of names 
that are on the BOLO lists so that we can make determinations 
as to whether we think they are from the left or the right? 
Could you help us out with that?
    Mr. WERFEL. That has been provided to the Chairman, given 
the taxpayer-sensitive nature of the information protected by 
Section 6103 of the Code.
    Mr. RANGEL. So you are saying the Chairman has a list of 
organizations that were considered to be progressive that were 
targeted.
    Mr. WERFEL. What I am saying is the Chairman has been 
delivered the unredacted version of the BOLO lists.
    Mr. RANGEL. And that list that is unredacted includes 
organizations that are considered to be progressive.
    Mr. WERFEL. It includes taxpayer-sensitive information 
across a broad spectrum of political organizations.
    Mr. RANGEL. So the Chairman knows, or should know, that the 
targeting concerned liberal as well as conservative 
organizations.
    Mr. WERFEL. That is not a question I feel appropriate to 
answer.
    Mr. RANGEL. But that information was delivered to the 
Chairman.
    Mr. WERFEL. We have delivered both the redacted and 
unredacted version of all the BOLO lists to this Committee.
    Mr. RANGEL. And the unredacted includes progressive 
organizations.
    Mr. WERFEL. It does, because it is on both the redacted and 
the unredacted, yes.
    Chairman CAMP. All right.
    Mr. RANGEL. Thank you so much, Mr. Chairman.
    Chairman CAMP. Time has expired.
    And, Mr. Rangel, I do want to note for the record that that 
information was also provided to the Senate Finance Chairman, 
Mr. Baucus.
    And you should know that I have also delegated 6103 status 
to Mr. Levin, so any 6103 information I have Mr. Levin also 
has.
    Mr. RANGEL. Are progressive organizations on that?
    Chairman CAMP. Yes. So we are working in a bipartisan way 
in terms of the sharing of 6103 information.
    Mr. RANGEL. You don't know how glad I am to hear that, Mr. 
Chairman. There appeared to be so much confusion before, but at 
least we know that the abuse was to both types of 
organizations, conservative as well as so-called progressives. 
Thank you.
    Chairman CAMP. And never wanting to comment too much on the 
Senate, I believe Mr. Baucus has also shared this information 
with Mr. Hatch, Senator Hatch.
    Mr. RANGEL. Thank you.
    Chairman CAMP. So now I will recognize Mr. Brady.
    Mr. BRADY. Mr. Werfel, who initiated the targeting of 
conservative organizations for extra scrutiny based on their 
political beliefs?
    Mr. WERFEL. That question is still subject to further 
investigation.
    Mr. BRADY. Who have you interviewed in the IRS on that 
matter?
    Mr. WERFEL. There are a variety of different employees 
being interviewed----
    Mr. BRADY. No----
    Mr. WERFEL [continuing]. By the Inspector General, the 
Justice Department.
    I know you are going to make the point that I have not 
personally interviewed the----
    Mr. BRADY. Or----
    Mr. WERFEL [continuing]. Employees. I understand that.
    Mr. BRADY. Because you just testified you have not----
    Mr. WERFEL. I have not.
    Mr. BRADY [continuing]. Interviewed anyone within your 
agency.
    Mr. WERFEL. Right. And if it is helpful to the Committee, I 
can explain the structure of my review----
    Mr. BRADY. Sure.
    Mr. WERFEL [continuing]. And how we are----
    Mr. BRADY. Let's go to the----
    Mr. WERFEL [continuing]. Uncovering every fact----
    Mr. BRADY. Let's go to the key questions.
    Mr. WERFEL. Please.
    Mr. BRADY. You don't know who initiated the--who initiated 
the targeting of donors to conservative organizations who 
improperly apply the gift tax to their donations?
    Mr. WERFEL. Again, the types of questions that were raised 
to donors----
    Mr. BRADY. Who, I guess is my question?
    Mr. WERFEL [continuing]. Are still subject to further 
investigation. I am just taking issue with the ``targeting of 
donors.'' I want to make sure that there is no supposition of--
--
    Mr. BRADY. Commissioner, please. At this point, you haven't 
interviewed them yet, so you can't honestly know, correct?
    Mr. WERFEL. We----
    Mr. BRADY. That is not a crime.
    Mr. WERFEL. No, no, no. It is not a question of that we 
haven't interviewed.
    Mr. BRADY. Okay.
    Mr. WERFEL. It is a question of that the investigation is 
ongoing.
    Mr. BRADY. Who leaked private taxpayer information, 
including donors to the National Organization for Marriage, to 
the Huffington Post and the Human Rights Campaign? Do you know?
    Mr. WERFEL. I do not have that information.
    Mr. BRADY. Who leaked private taxpayer information for 31 
conservative groups to the media, specifically ProPublica? Do 
you know?
    Mr. WERFEL. I don't have that information. I will point out 
that the I.G. reviewed those circumstances and found those 
releases of information to be not intentional.
    Mr. BRADY. But you don't know who leaked it.
    Mr. WERFEL. I don't have that information at my fingertips.
    Mr. BRADY. Who leaked private tax information to 
participants of the President's Economic Recovery Advisory 
Board?
    Mr. WERFEL. Again, I have to learn more about the 
circumstances of each issue that you are identifying----
    Mr. BRADY. Who at the agency in Washington or within the 
White House was involved in the targeting, delay, and 
intimidation of applicants on the ``Be on the Lookout'' list? 
Do you know?
    Mr. WERFEL. I can answer some of the questions. I will say 
this. I am not aware of anyone at the White House, the Treasury 
Department, or otherwise that was involved in this. As I have 
said, all the evidence that we have points to the involvement 
of individuals within the IRS. And I am happy to talk through--
--
    Mr. BRADY. Right.
    Mr. WERFEL [continuing]. That with you.
    Mr. BRADY. Let's do--let's talk through this.
    Mr. WERFEL. Okay.
    Mr. BRADY. In regard to the targeting delays of the King 
Street Tea Party/True the Vote application, who, at the time 
IRS shared private taxpayer information to other Federal 
agencies, such as the FBI, ATF, and OSHA, do you believe was 
involved?
    Mr. WERFEL. I believe, based on the question you have just 
asked me, it is a question about a specific taxpayer, and I 
can't answer that question.
    Mr. BRADY. Finally, who at the IRS was involved in covering 
up this pattern of abuse within the agency and concealing it 
from the public and Congress for the past 2 years?
    Mr. WERFEL. Again, I don't know that I would be comfortable 
with the characterizations in the question. But I am happy to 
walk through the managerial chain with you and the events as I 
understand them.
    Mr. BRADY. I guess my point is, you are not conducting 
interviews. You don't know answers to the key questions. Yet, 
in your report, you declare, ``There is no evidence of 
intentional wrongdoing or misconduct on the part of IRS 
personnel''--there is no evidence of intentional wrongdoing.
    Mr. Werfel, this report is a sham. I would call it a 
whitewash, but it is too thin and unsubstantial to even meet 
that description.
    And my point to you is that you don't work for the IRS; you 
work for the American people. Your job isn't to cover up, it is 
to open up this agency. Because what we are seeing, these 
patterns of abuse and intimidation, the only goal appears to be 
to silence the voice of people whose views you don't like. And 
so getting to the truth is critical.
    So my question is, I am told you are a decent person, so 
are you serious about getting to the truth?
    Mr. WERFEL. Absolutely. Absolutely.
    Mr. BRADY. Are you serious about----
    Mr. WERFEL. And I am serious about----
    Mr. BRADY [continuing]. Restoring the integrity of the IRS?
    Mr. WERFEL. I am serious about getting to the truth, and I 
am serious about doing it consistent with the rule of law and 
procedure. And many of the criticisms that you are levying in 
your set of questions, in order for me to overcome those 
criticisms, in many cases I would have to violate that rule of 
law and procedure.
    Mr. BRADY. Let's do this.
    Mr. WERFEL. So if----
    Mr. BRADY. Let's do this.
    Mr. WERFEL. Okay. Go ahead.
    Mr. BRADY. Since you are serious, will you commit to 
returning to the Committee in 30 days with more complete 
answers to the key questions before us?
    Mr. WERFEL. Absolutely. As these answers become available, 
I am ready to submit them.
    But I think it is very important to understand that, in 
gathering these answers, we have to follow the rule of law and 
procedure. So the point----
    Mr. BRADY. You know, wouldn't it have been great if the 
IRS----
    Mr. LEVIN. Could the witness finish? Point of order.
    Mr. BRADY. If I can finish?
    Chairman CAMP. Mr. Brady controls the time.
    Mr. LEVIN. But let the witness answer the questions.
    Chairman CAMP. It is up to Mr. Brady to conduct his 
questioning as he sees fit.
    Mr. BRADY. Wouldn't it have been terrific if the IRS had 
followed the rule of law and procedure when targeting these 
conservative groups and donors, leaking their private taxpayer 
information, concealing it from the public, and then misleading 
Congress?
    You need to understand one thing. The Ways and Means 
Committee is going to get to the truth, good or bad. We are not 
going to stop until we learn the whole truth. And we are going 
to reveal who initiated these abuses, who participated, who 
encouraged them, and who concealed them. We are going to hold 
them accountable, including you if you hinder this 
investigation. And then we are going to make sure the IRS never 
does this again to average taxpayers.
    I yield back.
    Chairman CAMP. All right. Time has expired.
    Mr. McDermott is recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Mr. Werfel, thank you for being willing to be the Director 
of the IRS. After that last set of questions, I think it is 
important to thank you. You have been at the center of a 
firestorm, as has the whole agency. And the IRS has made 
attempts to address the criticisms and meet the challenges that 
face us.
    I said it before in this Committee, but it bears repeating: 
The IRS has a difficult and almost impossible and thankless 
job. It is the agency easiest to dislike and easiest to throw 
under the bus. You go back to the Bible, who do they pick out 
to talk about? Tax collectors. Remember Zacchaeus? These are 
the people who are at the bottom of the society. And that is 
the way we are treating IRS people, and I don't believe it is 
fair. You are hardworking, dedicated civil servants who do your 
very best to administer the law.
    Now, I am going to stop my--what I was going to say, except 
to say one thing. I don't think BOLO lists should be thrown 
out. Every time I get on a United Airlines flight to go home to 
Seattle, before it leaves the ground the first officer leaves 
the cockpit and goes down a BOLO list. He is on the lookout for 
a lot of things on that plane. You use it to organize your 
thinking.
    The American College of Surgeons has just adopted BOLO 
lists. Before they take somebody into surgery, there is a whole 
long checklist of things that they look at in anticipation 
before they put you under anesthesia and do surgery.
    We think that is the way you organize your thinking. And it 
is clear to me that a ``Be on the Lookout'' list is a good 
idea. So don't say you are going to throw them away, because we 
know that--otherwise, you become the DMV in Seattle, where you 
go in to get your driver's license, you take a number, and you 
wait, and you will have a long line of people because they are 
not organized. They are taking them one at a time. And if you 
take 292 or 298 one at a time and don't organize your thinking, 
it doesn't make any sense. So I want you to be careful about 
how you reorganize.
    But I would like you to take the rest of my time to answer 
the questions that Mr. Brady kept interrupting you on.
    Mr. WERFEL. I appreciate that, Congressman.
    The point I was trying to make in response to Mr. Brady's 
questions was that there are certain procedures that need to be 
followed in getting the answers that this Committee is looking 
for and the American people are looking for.
    As an example, clearly, the employees involved need to be 
interviewed. And I am helping to make sure that those employees 
are interviewed. The issue is that I have been asked by the 
Justice Department and the Inspector General to enable them to 
do the interviews, to ask all the thorough questions to get to 
the bottom of this, because that will make sure that if there 
is a prosecutorial action that needs to be taken, that it will 
be clean and the evidence chain will be clean. These are very 
specific instructions coming from the Justice Department and 
the Inspector General.
    So the notion that no witnesses are being interviewed is 
not accurate. The accurate answer is that witnesses are being 
interviewed. Whether I am personally sitting across the table 
or not from interviewing--I would love to be able to. But the 
reality is I am going to follow the process and the rule of law 
in getting to the bottom of it. And one of the constraints that 
I have is that I have to let professional investigators do the 
interviewing. And that is a constraint that I am willing to 
live with, because I trust that these professional 
investigators will be able to get to the bottom of it.
    One more point that I want to make is about the rule of law 
and procedure around accountability. There is going to be a lot 
of questions and implications that the accountability is not 
real because people are still at the IRS and they are still 
getting a paycheck.
    The reality is that when you take personnel action for 
discipline against a civil servant, there are rules of 
procedure that need to be followed. And if I went off and cut 
out those rules of procedure and fired people and suspended 
them without pay, then I personally would be violating those 
rules of law and procedure.
    And they are put in place for a reason. Those due-process 
protections are put in place so that, in the event that an 
employee is unfairly selected for discipline, they have an 
opportunity to defend themselves. There is a good reason for 
them.
    So when we see things that bother us in government, in 
particular in the IRS, and we want people held accountable, 
what we need to focus on is making sure that we are following a 
very diligent and expedient process in holding those 
individuals accountable. And that is what we are doing right 
now. We are pursuing the correct set of disciplinary actions, 
but we are doing it consistent with the laws and regulations 
that govern our operations.
    Chairman CAMP. All right. Thank you.
    Time has expired.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Chairman CAMP. Mr. Ryan is recognized.
    Mr. RYAN. Thank you.
    Mr. Werfel, Secretary Lew asked you to put this report 
together to make sure that nothing like this ever happens 
again. I look at page 35, and I see basically a case made for a 
budget increase. Your budget asks for over a billion dollars in 
more spending for your agency, and you are asking us to hire 
another 4,572 employees.
    Let me read to you what we have already learned in just 2 
months. In just 2 months, we have a conference in Atlanta which 
a celebrity chef, Wolfgang Puck, catered, costing $2.4 million; 
we have a conference in Anaheim, California, $4.1 million; a 
conference in Philadelphia, $2.9 million; a conference in San 
Diego, $4.1 million.
    At one of these conferences, you spent $135,000 for 15 
speakers. That is about $9,000 per speaker. The IRS paid for 
the Deputy Commissioner to stay 5 nights in the presidential 
suite at the Hilton hotel during one of these conferences. You 
paid $17,000 to a speaker to create paintings of Bono, Michael 
Jordan, Abraham Lincoln, and others.
    We hear of a report of crony contracting between an--
improper relationship between an IRS contractor and a person 
whose business had less than $250,000 in income the prior year, 
getting awarded a $500 million contract.
    Between 2010 and 2012, you had 225 conferences, costing $49 
million.
    Let me see if I can put this in perspective for you. I 
represent the town of Sturtevant, Wisconsin. A little less than 
7,000 people live there. It is a great village. The village of 
Sturtevant is basically a blue-collar town. People work at the 
Case tractor factory. They work at the S.C. Johnson factory. It 
is surrounded by cornfields and bean fields and lots of small 
businesses.
    It took more than 100 percent of the Federal taxes paid by 
the working families of the Village of Sturtevant, Wisconsin, 
to pay for the 225 conferences you arranged for at the IRS from 
2010 to 2012. That is the way you need to think of this. People 
are working hard, they are living paycheck to paycheck, they 
are paying their taxes, and this is what you are spending their 
taxpayer dollars on?
    And now you come here asking us for a billion dollars, 
about a 10 percent increase. You are asking us to hire another 
4,500 people.
    I represent Rock County, that is my home. The population of 
Rock County, all the families of Rock County, their taxes 
wouldn't even cover the billion-dollar increase that you are 
asking for.
    You are here representing the President. You are 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. So you are a budget cruncher. How on earth do you 
think you have the moral authority to ask for this? Why would 
we, representing the taxpayers we represent, give you all this 
extra money you are asking for if this is what the IRS is doing 
with hard-earned taxpayer dollars? We are seeing just in 2 
months waste, fraud, abuse, and taxpayer targeting, and you are 
saying give us another billion dollars. Why should we do that?
    Mr. WERFEL. Congressman, you are asking very important 
questions and I would love the opportunity to address them.
    First, I agree that the costs that you are referring to are 
excessive and in many cases inappropriate and should not have 
happened. The reports that are coming out that are identifying 
these are covering events that occurred 2 and 3 years ago. And 
my concern is great, but my concern would be even greater if I 
saw that those patterns of spending are continuing through 
today.
    In many cases they are not. We are looking at a 68 percent 
cut in training travel, we are looking at a 45 percent cut in 
other travel in the IRS. We have cut our printing by 30 
percent, we have cut our professional and technical services by 
25 percent. There are deep cuts going on----
    Mr. RYAN. Okay.
    Mr. WERFEL [continuing]. In a lot of these activities. 
Now----
    Mr. RYAN. Okay. Here is my suggestion. Let's have these 
cuts take place and then have you come back to us in a year or 
2 and let's see if you are running this place well, then we 
will consider a budget increase. How does that sound?
    Mr. WERFEL. I will say that it is a fair point. I will say 
this, that there are more cuts to be made. And I think in this 
report, in section three, and in subsequent testimony that I 
will give to this Committee, I will furnish for you additional 
cuts so that 
we can go even deeper so that every penny is watched even more 
closely----
    Mr. RYAN. Great. So it sounds like you don't need a budget 
increase.
    Mr. WERFEL. No, I am not saying that, because I think there 
is a broader macro point. It goes, I think, back to some of the 
questions that Congressman Johnson was asking. We still have an 
indispensable mission to enforce the Tax Code, to go after 
fraud. The cuts that we are seeing dwarf any kind of conference 
expenditures that we have. The materiality difference is much 
different. And we just have to look at this and say, okay, has 
the IRS done enough to get its shop in order to cut those 
excessive costs? I will make the case to you that we are going 
in the right direction. But I will also make the case to you 
that if we underfund other critical priorities that lead to 
improved taxpayer service and improved enforcement of the Tax 
Code then we are leaving dollars on the table for the American 
people because every dollar spent by the IRS has a positive----
    Chairman CAMP. Time has expired.
    Mr. RYAN. Just don't forget, you work for the taxpayer, it 
is not the other way around.
    Mr. WERFEL. I understand that.
    Chairman CAMP. Time has expired.
    Mr. Lewis.
    Mr. LEWIS. Thank you very much, Mr. Chairman.
    Thank you, Mr. Commissioner, for being here.
    Could you tell us how long you have been on the job?
    Mr. WERFEL. I started----
    Mr. LEWIS. How many days?
    Mr. WERFEL. It has been about 34 days.
    Mr. LEWIS. So all of this stuff, all of this stuff just 
evaporated into air? It didn't happen on your watch?
    Mr. WERFEL. No, I arrived in late May and am doing my best 
to identify the problems and fix them.
    Mr. LEWIS. Could you tell us something about your 
background, your last job?
    Mr. WERFEL. Yes. I think you know, and I have talked about 
this before in other hearings, the reason why I was chosen for 
this job is a couple of different reasons. And I appreciate 
Congressman Ryan's comment that I have a strong reputation. I 
served in leadership positions in both the Bush and Obama 
Administrations. I consider myself to be nonpartisan. The 
issues that I have worked on across my career have been very 
nonpartisan. It is all about better government management, 
reducing fraud, reducing error, reducing improper payments, 
improving the way the government manages its real estate, just 
very nuts and bolts.
    I think Ranking Member Levin referred to me as a 
technocrat, and I have developed an expertise in public sector 
management over a 16-year career as a civil servant. Most 
recently in my role at OMB I developed a reputation and 
experience in tackling some of government's toughest 
challenges. For example, back in 2009, 2010 I was the 
Administration's 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, and I 
was the point guard for it and developed a reputation of doing 
it effectively.
    More recently I have been involved in helping the 
government prepare for a government shutdown, helping us deal 
with the sequester. These are tough public sector management 
challenges, and I was able to distinguish myself to the 
Administration leadership as someone who can handle a situation 
like this effectively.
    So when you combine those factors I think the bottom line 
is, and when I was presented with this opportunity I basically 
said, I will do this. I am going to do it because I am going to 
have this guiding principle that I am always going to work to 
find the right answer to every challenge that I am confronted 
with. I am doing what is in the best interest of the taxpayer, 
I am doing this in the best interests of the IRS. And I think 
if I can hold to those guiding principles then I am going to be 
able to go to sleep every night knowing that it was a smart 
decision to take this job and take the IRS forward.
    Mr. LEWIS. Mr. Commissioner, I want to thank you for your 
willingness to serve, to put yourself in the way and make a 
contribution to getting the IRS in order.
    How do you feel about the IRS' future in processing tax-
exempt organizations' applications?
    Mr. WERFEL. When I arrived in late May we had a very broken 
process, clearly. The IG report points to both management and 
process failures that were going on in that area. There is new 
leadership in place, I have a lot of trust in those new 
leaders. In particular, an individual named Ken Corbin is now 
running the Exempt Organizations Unit. He is a process expert. 
He is already inspiring in me a lot of confidence that he is in 
there working the issue, reengineering, and redesigning the 
process, and making the appropriate fixes.
    We have agreed to all nine IG recommendations for how to 
fix the Exempt Organizations Unit. We are making good progress 
on that and that progress is outlined in this report. We are 
taking steps above and beyond what the IG recommended, because 
we think there is even more to be done to make sure that we are 
extremely robust in our fixes. Those are also outlined in the 
report and we are making good progress there.
    It is a challenging environment. What I have learned is 
reviewing these applications for tax-exempt status is difficult 
because you are on a foundation of ambiguous laws and 
regulations. And as I said, in very few other areas within the 
IRS is a determination on the nature and extent of political 
activity a relevant factor to consider. So this part of the IRS 
has this kind of unique set of requirements. And, clearly, when 
you combine that unique set of requirements and management 
weakness and leadership weakness, we had a failure. But I am 
optimistic that we have the right people in place right now, 
specifically in the Exempt Organizations Unit, in services and 
enforcement, to lead us to get this problem corrected.
    Mr. LEWIS. Well, thank you very much, and I look forward to 
working with you.
    Chairman CAMP. Thank you.
    Mr. Reichert.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Mr. Werfel, isn't it true that 100 percent of Tea Party 
applications were flagged for extra scrutiny?
    Mr. WERFEL. It is my understanding the way the process 
worked is if there was Tea Party in the application it was 
automatically moved into this area of further review, yes.
    Mr. REICHERT. Okay. And do you know how many progressive 
groups were flagged?
    Mr. WERFEL. I do not have that number.
    Mr. REICHERT. I do.
    Mr. WERFEL. Okay.
    Mr. REICHERT. Our investigation shows that there were seven 
flagged. Do you know how many were approved?
    Mr. WERFEL. I do not have that number at my fingertips.
    Mr. REICHERT. All of those applications were approved.
    I want to follow up on some questioning that occurred a 
little earlier in the hearing regarding intent. I am an old 
cop, 33 years. Most of that time I was a homicide investigator. 
So we dealt a lot with criminal intent. And so when you use the 
word intentional or unintentional it sort of is a flag for me 
to inquire a little bit further.
    So are you talking about criminal intent? Are you finding 
that there is no criminal intent? Or are you saying that there 
is no intent to what?
    Mr. WERFEL. The questions that are being asked by 
investigators deal with both criminal intent and other types of 
intent, which, for example, could mean political bias, but no 
criminal intent. There is gradations here. I am not a legal 
expert on them. But I know that part of the ongoing review is 
to understand the nature and circumstances of this.
    Mr. REICHERT. I also know that there are two investigations 
that occur, just like there were in the sheriff's office when I 
was the sheriff in Seattle. You have the criminal investigation 
that is ongoing and then you have an internal investigation. 
Sometimes we 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 that they are finding as far as any possible 
criminal allegations with any of the employees within the 
Internal Revenue Service?
    Mr. WERFEL. My main point of contact in this effort is 
Russell George, the Inspector General, and his team. He is 
working directly with the Justice Department. They give us 
periodic updates on their progress.
    Mr. REICHERT. Do you have any information that there may be 
some criminal----
    Mr. WERFEL. No such evidence has been shared with me at 
this time.
    Mr. REICHERT. So to get back to the intent part, your 
report states that some applicants were subjected to overly 
burdensome, intrusive questions, questionnaires, and data 
requests that went way beyond the acceptable level of 
factfinding. Yet at the same time it says that none of the 
actions taken by the IRS employees were intentional. I don't 
understand that, how you can ask those questions, provide those 
questionnaires, asking for certain data, but yet be 
unintentional in conducting that sort of activity.
    Tea Party members had--a donor had been threatened, some 
donors have been threatened. They had confidential information 
that had been leaked. They were sent inappropriate and 
intrusive questions, unintentionally threatening donors. I 
don't understand unintentional in that light either.
    And so I am falling in line with what Mr. Brady said, that 
the report--I understand your desire to be a public servant, 
you want to do the right thing, but in order for you to do 
that, Mr. Werfel, and for the American public to have trust in 
you and the IRS again, you can't be vague and misleading in 
your statement that you have given to this Committee. You say 
that even after senior IRS leadership was informed of the 
inappropriate activities in question it failed both to 
effectively put an end to the activity and to inform the proper 
committees in Congress in a timely fashion despite requests 
from Congress on this topic.
    So I don't understand how your leadership could be found to 
be unintentional and why they are not reporting to Congress. 
Mr. Miller sat here and conveniently lost his memory during his 
questioning. So could you explain to me unintentional?
    Mr. WERFEL. I can.
    Mr. REICHERT. It makes no sense to me and I am sure it 
makes no sense to the American public.
    Mr. WERFEL. Let me offer my best explanation.
    First, I want to go back to the point where we are hearing 
questions from taxpayers, they want to know if there was 
intentional wrongdoing here. We are answering that question 
very carefully and saying there is more work that needs to be 
done but right now we don't have evidence.
    Mr. REICHERT. But, Mr. Werfel, you really can't say that it 
was unintentional is my point.
    Mr. WERFEL. Let me address that.
    Mr. REICHERT. You should not be saying--sir, you should not 
be saying in your report that you found that this was 
unintentional, because you don't know. You don't know.
    Mr. WERFEL. And that is basically what we are saying, there 
is no evidence.
    Mr. REICHERT. Is that true, you don't know?
    Mr. WERFEL. But let me make the point about----
    Mr. REICHERT. Why did you say it was unintentional?
    Mr. WERFEL. Let me offer----
    Mr. REICHERT. No, why did you say it was unintentional when 
you don't know? You just said you don't know.
    Mr. WERFEL. I did not say that it was unintentional.
    Chairman CAMP. Time has expired. Mr. Werfel, why don't you 
answer briefly and then we will go on.
    Mr. WERFEL. Okay. First of all let me clarify what I said. 
I said very clearly in the report that more work needs to be 
done to review documents, to interview folks, but at this point 
we don't have any evidence of intentional wrongdoing.
    And what we meant by that is that it is a different 
situation if a manager thinks and an employee thinks this is 
the right thing to do, this is how I am supposed to conduct my 
business. And they could be mistaken, and they could be 
incompetent, and it could be total mismanagement in how they 
think they are appropriately carrying out their duties, which 
is different than them saying, I know this is wrong, but I am 
going to do it anyway because I have a particular agenda in 
mind. And that is the difference that we are trying to 
distinguish.
    Chairman CAMP. All right, thank you. Time has expired.
    Mr. Neal is recognized.
    Mr. NEAL. Thank you, Mr. Chairman.
    Mr. Werfel, do you need 2 more minutes of my time.
    Mr. WERFEL. No--thank you for the offer, though. Thank you.
    Mr. NEAL. Mr. Werfel, clarify something. The IG letter 
states that there are at least two groups of specialists within 
the IRS that used the BOLOs. The first is the specialists that 
are dealt with in 298 cases flagged for political campaign 
intervention. The second, it is the team of specialists in the 
Touch and Go unit. We know that some of the progressive group 
applications went to the 298 teams of specialists. The 
Inspector General did not investigate how the progressives were 
handled by the Touch and Go unit. Have you looked into this?
    Mr. WERFEL. Yes, we are in the process of looking into it. 
When the report says that we start with the audit report and 
all the various materials that the Inspector General provided 
us in support of the audit report we are going deeper than that 
and broader than that. That is, for example, how we found the 
BOLO lists with the inappropriate criteria because we were 
going beyond the Inspector General footprint. And, of course, 
when we found them we put an immediate suspension to them 
because we were very concerned about them.
    And when you go deeper and broader into this issue you see 
other categories. You mentioned Touch and Go. And so we are 
looking into it and trying to understand, how were these lists 
used, what were the circumstances that caused these 
inappropriate political labels to occur? How were they used? 
What impact did it have on taxpayers?
    These were all questions that we are asking in real time, 
and like everyone on this Committee I want answers to them, but 
I am going to follow an expedient and fair and thorough process 
to get those answers. And I will be back here to answer those 
questions in the future.
    Mr. NEAL. You are congratulated by Members on the other 
side for the vigor with which you have taken up the task of 
pursuing these different questions and then you are accused of 
not doing followup. I mean, there is an element of 
inconsistency to that as you try to figure out how to pursue 
new information and data as you come across it.
    Now, the issue really here for all of us is the following. 
Citizens United caused the IRS to be flooded with applications 
from groups seeking 501(c)(4) status, and why was that? In 
large part it is because Super PACs must disclose their donors 
while 501(c)(4)s do not. That is really what happened here.
    And as we have tried to unearth some of these questions 
where Members on the Democratic side have been equally vigilant 
in pursuing what we might deem to be egregious moments with IRS 
pursuit, it is obvious as well that you haven't finished your 
work and you need to be given some time and opportunity to 
pursue these cases.
    We all need to be outraged. The American people shouldn't 
be afraid of the IRS, we have all established that. But I think 
the simple point is you would argue you need more time. Is that 
correct?
    Mr. WERFEL. Absolutely we need more time. And my hope 
today, and in this report, and in every communication I have 
with the public or the Committee, is that there is transparency 
into the process that we are following. And I want to be clear 
that the process that we are following has certain legal and 
process constraints, procedural constraints, but we are moving 
as expeditiously as we can. We are getting documents to the 
Committee, witnesses are being interviewed, materials are being 
furnished to the Congress. A lot of the questions orient around 
materials that we provided as part of this growing 
investigation of information that we provided earlier this 
week.
    So absolutely, there are more questions to answer. And I 
think the track record we are demonstrating here is a diligence 
to answer them, but also a caution to make sure that we are 
following the rule of law and procedure in doing so. It is a 
tough balance because, as I said, I want these answers as 
quickly as possible. But it is absolutely essential that I 
follow appropriate due process procedures in running this 
investigation. I think any investigation across a broad 
spectrum of organizations and leaders and legal investigations 
would follow those same principles.
    Mr. NEAL. Mr. Chairman, we are all better off if we have an 
accurate portrayal of precisely what happened as opposed to the 
accusatory tone that is being suggested. And you can see, 
incidentally, that the argument has already shifted here. We 
have moved to the conferences, which is a legitimate criticism, 
away from the focal point of this hearing, and that is whether 
or not political groups were targeted by the IRS. So it occurs 
to me that perhaps some of the argument is weakening on the 
other side.
    Thank you. Thank you, Mr. Chairman.
    Chairman CAMP. Thank you.
    Dr. Boustany.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    Welcome, Mr. Werfel.
    Mr. WERFEL. Thank you.
    Mr. BOUSTANY. I agree it is going to take time to get to 
the bottom of this, but one disagreement I have with you at 
this point in time with the 30-day report, Mr. Werfel, is I 
don't see a sense of urgency. The big picture here is that you 
have an obligation on your shoulders to restore the trust in 
this entity, the IRS, to restore the trust with the American 
people and with this Congress.
    Now, in your report you have a section titled 
``Transparency with Critical Oversight Organizations'' where 
you talk about the IRS' failure to properly inform Congress 
about the issues that were occurring, even after congressional 
committees specifically began asking questions, and we started 
asking questions years ago on this. But let me get this 
straight, in Acting Commissioner Miller's June 15th letter to 
me after we had gone back and forth--and I had meetings with 
Shulman, meetings with Miller, hearings with both of them, and 
letters. I have a June 15th letter here and the only response 
essentially that we received was that EO took steps to 
coordinate the handling of these cases to ensure consistency.
    Now, Mr. Brady asked questions earlier and you told Mr. 
Brady that you disagreed with the characterization that IRS 
employees engaged in a coverup. But if you know the truth on 
this, I mean if you know that there were folks in senior 
positions at IRS who were misleading, evasive, essentially 
covering up what was going on with targeting, if you know this 
and you are not coming forward with this, is that a coverup?
    Mr. WERFEL. No. And what I said to the Congressman earlier 
was that I am not ready to draw a conclusion. He was asking a 
question in a way that if I answered it, it could imply that I 
was agreeing with the premise of his questions. Your question 
is, is there a coverup? I don't know the answer to that 
question. I think the key is that we make sure that we do the 
thorough investigation. I think the Justice Department and the 
IG are doing that.
    Mr. BOUSTANY. But we know that Commissioner Shulman and we 
know that Acting Commissioner Miller were informed of these 
things and yet they continued to basically evade our 
questioning, they were misleading with us. This has been 
determined so far in the investigation, it certainly had been 
determined by the TIGTA audit. We need you to have a sense of 
urgency to come clean. You have an obligation to the American 
taxpayer and to this Congress to follow through with our 
oversight function and with transparency in front of the 
American people.
    Mr. WERFEL. So the commitments that I am making today are, 
one, to explore all the facts, including questions about intent 
or concern that you have with respect to why answers weren't 
questioned more quickly. I am not going to draw a conclusion 
now and say we have definitely decided.
    But let me make one more point. One of the important things 
in this report is an important point that I think is going to 
be very helpful to this Committee. I am suggesting that what 
the IRS needs to do is more readily share information on 
emerging risk areas and emerging operational issues within the 
IRS with this Committee sooner rather than later.
    Mr. BOUSTANY. No, I get that, I get that.
    Mr. WERFEL. Yes.
    Mr. BOUSTANY. I want to shift gears for a moment and talk 
about the bonuses that have been distributed. It has gotten a 
lot of press.
    Mr. WERFEL. Yes, yes.
    Mr. BOUSTANY. And included in these bonuses during the time 
that targeting was occurring, we know that a quarter of a 
million dollars were paid out to just four employees at the 
IRS, all of whom resigned or are on administrative leave at 
this point due to their involvement in the Tea Party 
discrimination issue.
    One individual, the first to resign, received more than 
$83,000 in bonuses on top of his salary of $177,000. And we 
also know that others have received bonuses who were involved 
in this tax exempt issue targeting Tea Party entities.
    Now, in light of all this, are you going to take any steps 
to put a freeze on this? Is there going to be an attempt to 
recoup some of that bonus money?
    Mr. WERFEL. Let me answer the question in a couple of 
different ways. First, I agree when you look at the 
juxtaposition of individual management and judgment failures 
that went on in this situation and you juxtapose that against 
the bonuses received, it is very troubling. It is part of my 
larger conclusion here that the IRS leadership did not have 
timely enough understanding of what was going on with these 
particular activities to make informed judgments about 
compensation through bonuses.
    Second, I mentioned earlier to Congressman Ryan about me 
coming back to this Committee with additional ways in which we 
can cut costs even further, and I think bonuses is an 
opportunity.
    Mr. BOUSTANY. You can put a freeze on it now. Put a freeze 
on these bonuses.
    Mr. WERFEL. I am glad you asked the question, because there 
has been some public misunderstanding about where we stand with 
our bonuses for this year and if I could clarify it.
    Mr. BOUSTANY. Yeah, but the trust with the American people 
has been broken. I understand contracts and union contracts----
    Mr. WERFEL. Well, if I can explain it----
    Mr. BOUSTANY [continuing]. And those kinds of things.
    Mr. WERFEL. If I can explain it, here is the situation with 
our bonuses. When I was in OMB I signed out a policy that froze 
bonuses across the government in light of the sequester. It was 
one of our methods of dealing with the sequester cuts, a bonus 
freeze. But that guidance also said it was subject to legal 
constraint. So if the bonuses had to be legally paid out we had 
to look into that issue.
    What is going on----
    Mr. BOUSTANY. But the trust has been broken.
    Mr. WERFEL. Right. What is going on at IRS now is that we 
have a union and we have a bargaining unit and an agreement 
that we will bargain on the question of bonuses with that 
union. And my answer on bonuses is that no decision has been 
made. Going back to my point about following the rules of law 
and procedure, I have an obligation before I freeze the bonuses 
for IRS, if that is the decision that is ultimately made. I 
don't know at this time. The first step is my legal requirement 
to bargain that issue with the unions, and that takes time. We 
are going through that process right now.
    Mr. BOUSTANY. Mr. Chairman, we need a sense of urgency with 
this and leadership to put a freeze on these bonuses.
    Chairman CAMP. Time has expired.
    Mr. Becerra.
    Mr. BECERRA. Mr. Werfel, thank you very much for being with 
us, and I look forward to having you come back. I think you 
have mentioned that everything you have stated in your reports 
and everything that the IRS has done so far to investigate this 
matter is not yet complete. Is that accurate?
    Mr. WERFEL. That is correct.
    Mr. BECERRA. So when you say at this point you have found 
no evidence of wrongdoing, it is as of this point.
    Mr. WERFEL. If that is the question we are getting raised, 
then I feel compelled to give the most honest answer I can, 
which is exactly the point. 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. And I understand the 
confusion around the word intentional because these actions 
still happen. I tried to explain it is the difference between 
whether someone knows they are actually doing something wrong 
or if it is a question of management incompetence or neglect of 
duty.
    We certainly have evidence of neglect of duty. What we 
don't have evidence yet of is that someone knowingly did 
something wrong based on political animus or criminal intent. 
That evidence just hasn't materialized yet.
    Mr. BECERRA. And you use, I think, the operative word, the 
evidence. So to date there is no evidence of wrongdoing.
    Mr. WERFEL. There is no evidence of intentional wrongdoing. 
There is evidence of managerial wrongdoing.
    Mr. BECERRA. And to date there is no evidence linking 
anything that occurred at the IRS to the White House.
    Mr. WERFEL. That is correct.
    Mr. BECERRA. Okay. And as of today you are in the process 
of investigating.
    Mr. WERFEL. Yes, there are more people to talk to, and in 
many cases under oath, and there are more documents to review.
    Mr. BECERRA. And, as I think you have tried to make clear 
but have been interrupted as you tried to provide the answer, 
the reason you haven't spoken to some of the folks that are 
principal to this investigation is because others have the 
principal responsibility to do the investigation.
    Mr. WERFEL. I have two thoughts to this question because it 
keeps coming up. One is the legal, the rule of law. The legal 
process prohibits me from talking to these employees. The 
Justice Department and the Inspector General are the 
appropriate officials.
    Second, even if there was no constraint, we also have 
professional investigators on the scene that are very skilled 
in talking to witnesses, and ultimately we might make a 
decision that those individuals are the ones who should be 
interviewing the witnesses and providing that information to 
me.
    Mr. BECERRA. Well, we want you to be able to continue with 
that investigation the right way, and we hope that you are able 
to come back and answer the questions that you can given the 
work that you are doing and the jurisdiction you have to 
provide the answers.
    But I would say at this stage what we are hearing from you, 
in fact I think what we heard from Mr. George, the Inspector 
General, is that there is an investigation that is ongoing. In 
fact the Chairman of the Committee in his opening statement 
said that we are still in the early stages of this 
investigation, that the Inspector General is doing a more 
thorough investigation. Mr. Brady, my colleague on the 
Republican side, said we are not going to stop until we learn 
the whole truth. So we still need to find out the facts.
    At this stage we have an investigation ongoing. It is a 
half-baked investigation. And to reach any conclusions would 
mean we have reached half-baked conclusions. And so whether it 
is your conclusion or my Republican colleagues' conclusion, for 
anyone to make accusations at this stage it is with only part 
of the information.
    Mr. WERFEL. And there comes the distinction. To answer 
``this is exactly how it happened'' is not a question that we 
can answer yet. But I think we can answer, is there any 
evidence that any of this has materialized, that is a question 
we can answer because we are in the process. And I can 
comment----
    Mr. BECERRA. Good point.
    Mr. WERFEL [continuing]. On whether the evidence has 
materialized in any way.
    Mr. BECERRA. Good point. So far what the evidence tells you 
is what you are responding to and we appreciate that.
    I would say I, too, would like to have you back. I hope 
every one of my colleagues on this panel would agree that we 
have to have Inspector General George back because he has, as 
Ricky Ricardo would tell Lucille Ball, he has some 'splaining 
to do. There is a lot that he has not yet answered. In fact, 
there are some things that he answered that may not have been 
forthcoming.
    I would like to finish with one last point. Now, this whole 
investigation centers around the issue of 501(c)(4) 
organizations. Now, as you know, 501(c)(4) organizations are 
social welfare organizations. Under the law 501(c)(4) applies 
to organizations that are not organized for profit, but 
operated exclusively for the promotion of social welfare.
    I am not sure if you are aware, Mr. Werfel, but those same 
501(c)(4) social welfare organizations spent $256 million on 
political expenditures in 2012. Did you know that that is more 
money spent by these social welfare organizations, nonprofits, 
than the two political parties combined, which spent $255 
million?
    So that is the crux of the problem here, is that we have 
so-called social welfare organizations that spend more money 
than the two political parties combined. And so when IRS is 
concerned that there may be some organizations that are trying 
to game the system at taxpayer expense, that is why we have to 
have these investigations. So we hope to have you back.
    I yield back the balance of my time.
    Chairman CAMP. Mr. Roskam.
    Mr. ROSKAM. 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.
    And my prediction is that our country is at a tipping point 
right now, and the tipping point is there is an awakening 
amongst the governed about authority that they have delegated 
to Congress and that Congress has delegated in this place to 
the IRS, and that authority has been abused.
    You used language earlier, things like, I am serious, I 
cling to the rule of law, you know what I mean, those types of 
things. And, 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 is a statute. And in 
the Taxpayer Bill of Rights it is very clear that the Internal 
Revenue Service is prohibited under the law from willful misuse 
of provisions of section 6103 for the purpose of concealing 
information from a congressional inquiry. You are familiar with 
that, aren't you?
    Mr. WERFEL. Yes.
    Mr. ROSKAM. This is a congressional inquiry, clearly. There 
has been a request by this Committee of documents to be 
forthcoming from the Internal Revenue Service. And here is an 
example of two of them. They have been redacted to the point of 
absurdity.
    Now, we have knowledge that there is information in these 
two documents that is not subject to 6103 protection, and so 
the entire section 6103 question should be set aside. And what 
I am suggesting is the fear that animates the hearts of my 
constituents when they look at you is they say, we are not 
getting the straight answer, we are seeing bureaucratic 
doubletalk, we are seeing a bunch of nonsense, how can we 
possibly pierce through this?
    And so the level of anxiety and the concern that you hear 
from Committee Members is the recognition of an abuse of power, 
but it is a gratuitous abuse of power. Now even when the 
investigation comes up, the Committee, based on lawful 
requests, is not getting the type of answers it requires.
    So can you assure us that this type of nonsense, where I 
know beyond a shadow of a doubt that there is information in 
these documents that should not be subject to 6103--that the 
IRS is claiming to an absurd, Kafkaesque level, that somehow 
this needs to be protected--can you assure us, based on your 30 
days on the job, that this nonsense will stop?
    Mr. WERFEL. Let me give you several assurances that you can 
give to your constituents to clarify. The first assurance I 
would give is that the information that you are holding in your 
hand is not being held just by the IRS. We have submitted all 
the information, minus all those black lines and those 
redactions, to the Chairman of this Committee. So the notion 
and the implication that that information is being held just by 
the IRS is incorrect.
    Mr. ROSKAM. But, Mr. Werfel, you know the law, you know 
that when it is cloaked in 6103 we are prohibited under the law 
from revealing that. So you have to release this information so 
that it can be publicly discussed. That is exactly what the 
statute speaks to.
    Mr. WERFEL. Let me get to my second point, because I want 
to address each of those points. I just wanted to make sure 
that the public understood that that information resides with 
this Committee and the Senate Finance Committee. The second 
reassurance is that there is a tension here. We have a----
    Mr. ROSKAM. But you didn't answer the question as it 
relates to the cloaking of 6103.
    Mr. WERFEL. I will answer the question.
    Mr. ROSKAM. You are not releasing the information pursuant 
to 6103.
    Mr. WERFEL. I can answer these questions if you enable me.
    Mr. ROSKAM. Go ahead.
    Mr. WERFEL. I want to make sure that people understand, 
your constituents understand the tension that exists, that we 
also have a solemn responsibility to protect the 
confidentiality of their taxpayer information. And these 
procedures are set up so that we redact this information, 
although we sent all of it to the chairmen of the Ways and 
Means and Senate Finance Committee so it is outside the IRS. 
And to the extent that there is a notion and a concern that 
there is over-redaction, that is something that we need----
    Mr. ROSKAM. This is junk. This is junk. This has no 
meaning.
    Mr. WERFEL. It might be junk, but it might be sensitive 
taxpayer information.
    Mr. ROSKAM. It is not, we know it isn't. And you are hiding 
behind it. And I am telling you, I am putting you on notice, 
this Committee intends to uphold the 1998 Act and we are going 
to follow through on it to make sure that the IRS is 
forthcoming and not creating a bunch of nonsense hiding behind 
bureaucratic doubletalk.
    Mr. WERFEL. If there is a particular instance----
    Chairman CAMP. Time has expired.
    Mr. WERFEL. Okay.
    Chairman CAMP. I know at the staff level, Mr. Werfel, we 
have raised the issue of over-redaction. What it does is limits 
the ability of the Committee to use it. And so I do think this 
is an issue that is appropriate that Mr. Roskam has raised, and 
it is something that we probably need to pursue further.
    Mr. WERFEL. I think so. And I think one thing that should 
be clarified given Congressman Roskam's comments, it is my 
understanding, you can correct me if I am wrong, it is my 
understanding that as the Chairman of the Ways and Means 
Committee you can release information if you think that it is 
not 6103 sensitive.
    Chairman CAMP. I cannot unless it is to the full House. And 
clearly this is an area where we really have to have the 
experts involved.
    Mr. WERFEL. Yes, I agree with that.
    Chairman CAMP. In the context of the final report, which 
clearly we are not there yet, I can release the information 
ultimately to the full House, but I can't be the single arbiter 
of what is 6103 sensitive and what isn't, because obviously 
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. So we have been trying to work through that.
    Mr. WERFEL. As I have always said, if there are concerns we 
want to work with you to explore that. But I just wanted to 
clarify that this information is not just residing within the 
IRS. That was my main point.
    Chairman CAMP. No, it isn't. And we do receive the 
unredacted versions. But, again, those aren't shared other than 
with Mr. Levin at this level.
    The next person is Mr. Kind--no, Mr. Pascrell. Oh, Mr. Kind 
is here, I am sorry.
    Mr. KIND. I am sorry, Mr. Chairman, I was being blocked by 
my esteemed colleague here from Connecticut.
    Mr. Werfel, thank you so much, and thank you for your 
willingness to assume this very tough duty. I mean, you are, 
obviously from today's hearing, stepping into the lion's den. 
And I really appreciate that. You have a much larger duty of 
restoring faith and trust and confidence in the IRS than just 
the spending that went on with conferences or bonus payments or 
even the issue before us today, the exempt organizations.
    Let me steer back to a troubling issue that I have been 
wrestling with. Obviously, you have many organizations, 
especially after the Citizens United case, that are applying 
for (c)(4) tax-exempt status. The Inspector General looked into 
it and recommended to the IRS certain steps and procedures in 
how to review that and how to filter it out, and you probably 
have some additional ideas.
    But the point here is that these groups aren't 
automatically entitled to tax-exempt status, they have to meet 
certain qualifications, certain criteria in order to qualify 
for it. And every time there is an organization out there that 
does qualify for tax-exempt status that increases the relative 
tax burden on organizations that don't or individuals 
throughout our country that don't need it.
    And in applying for (c)(4), the rule has been they have 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 now, 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 or that 
political selection is taking place?
    In other words, how do you institute a generically neutral 
screening process now that is going to pass muster on both 
sides of the aisle, yet still do the tough job of screening out 
those organizations that really ought not be qualifying for 
tax-exempt status because they are principally engaged in 
political activity? And we know that is going on. I think 
anyone here who is fooling themselves into thinking that a lot 
of these (c)(4) applications are social welfare hasn't seen 
what has happened over the last couple of years in the American 
political system.
    Mr. WERFEL. We have an approach that begins to answer that 
question, but I think there needs to be a dialogue between us, 
the IRS, this Committee, and others, and in particular the 
Treasury Department I think plays an important role here, 
because there is a policy question to be answered.
    But in the report we outline the self-attestation or 
certification program, and what we essentially take is our high 
priority backlog, 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 attest that not more than 40 percent 
of their expenditures or their voluntary person hours will go 
to political campaign intervention, and at the same time they 
also attest that more than 60 percent of their expenditures and 
voluntary person hours will go to a social welfare purpose, 
then they would receive an approval from the IRS and they would 
go forward, with a responsibility to update us if the nature of 
those activities change and an understanding, like every other 
(c)(4) or (c)(3) organization, that they are potentially 
subject to audit or examination at some point in time in the 
future.
    Mr. KIND. Well, I just hope we are not going on the road of 
the IRS being subjected to this type of scrutiny every time 
tough questions have to be asked in regards to how these 
organizations are spending their money and what activities they 
are ultimately engaged in. Because you understand you are going 
to be set up for accusations from here on forth from any group 
that is receiving more scrutiny or perhaps a denial. And that 
is one of the more amazing things, is that perhaps there hasn't 
been more denials of organizations applying for (c)(4) status 
who are clearly engaged in political activity and that is their 
main purpose for being.
    So is the taxpayer advocate's office, do they have a role--
--
    Mr. WERFEL. Absolutely. And that is a big theme in the 
report, is that we want to involve the taxpayer advocate more 
clearly in all of these elements. In particular, one of the 
main concerns that I have is that when you look at the 
situation where we had taxpayers that were frustrated by the 
length of time that they were not getting an answer from the 
IRS, they were frustrated by the types of overly burdensome 
questions they were getting from the IRS, they did have an 
avenue. And in most cases they didn't exercise that avenue to 
go to the National Taxpayer Advocate, to raise greater 
awareness about the issue. The National Taxpayer Advocate has a 
track record of helping the public resolve matters before the 
IRS that the individual taxpayers are having trouble doing on 
their own. We didn't see that connectivity here, and one of the 
important recommendations in this report is to raise awareness 
and effectiveness of this framework of the National Taxpayer 
Advocate so we can solve those problems.
    Mr. KIND. Mr. Werfel, you have a tough job as you go 
forward and obviously we are going to be looking forward to 
working with you very closely in your candid investigation and 
the recommendations before this Committee. We, too, have a role 
to play as far as clearing up, I think, a lack of a clear 
definition as far as (c)(4) applications. I think the IRS would 
be helped if there were brighter line rules for people to 
institute and more objective criteria used. And we will look 
forward to hearing your recommendations as we move forward on 
that front.
    Mr. WERFEL. Thank you.
    Chairman CAMP. All right. Thank you.
    And we will now be moving two to one, so Mr. Gerlach and 
then Dr. Price.
    Mr. GERLACH. Thank you, Mr. Chairman.
    Thank you, Mr. Werfel, for being here today. My first 
question is, would you agree that IRS officials disclosing 
taxpayer information to outside groups or individuals is 
improper and in fact illegal?
    Mr. WERFEL. It is under section 6103, yes.
    Mr. GERLACH. Okay. What is the process if there is an 
allegation that an IRS official did in fact leak taxpayer 
information to an outside group or individual, what is the 
internal process, if you can summarize it very quickly, for 
handling the investigation of that?
    Mr. WERFEL. Yes. We refer the information or the allegation 
immediately to the Inspector General. The Inspector General 
makes one of two conclusions: One, it was intentional, or two, 
it was not. If it was not then the next step is to figure out 
what process breakdown or control breakdown led to the 
unintentional release. We have those situations emerge and we 
make those process improvements. If the finding is that it was 
intentional, then it is referred for further investigation, 
which could be criminal or some other type of disciplinary 
action.
    Mr. GERLACH. Okay. Now, Mr. Brady raised the issue of the 
National Organization for Marriage and the fact that its Form 
990 information from 2008 was disclosed and passed on to the 
Human Rights Campaign. Based upon the testimony that was given 
at our last hearing here on the Committee by the representative 
from the National Organization for Marriage, what do you know 
about at this point 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?
    Mr. WERFEL. I have two responses. One, I am not aware 
specifically of that issue and I don't have that information at 
my fingertips so that I can give you the exact process. Two, I 
would be concerned, since you are mentioning a specific 
taxpayer, that it may be more appropriate for me not to comment 
in this setting given it is the implication----
    Mr. GERLACH. Has in fact the IRS passed or referred the 
matter to the Inspector General's office?
    Mr. WERFEL. Again, I don't want to comment specifically on 
this because I just don't have familiarity with that particular 
issue at my fingertips.
    Mr. GERLACH. So to the best of your knowledge you don't 
know at this point whether it has or hasn't.
    Mr. WERFEL. I just don't know. I will say that at any given 
point in time there is a series of issues in this area that 
have been passed on to the Inspector General which are either 
in process for disciplinary action or in process where it was 
inadvertent and we are doing process improvements. Where this 
particular situation fits in, I don't know, but I can get that 
information for you.
    Mr. GERLACH. Okay, if you would respond as soon as you are 
able to, that would be appreciated.
    Mr. WERFEL. Absolutely, I will.
    Mr. GERLACH. I would also like to ask you, as a follow-up 
to Mr. Johnson's questions with regard to the amount of money, 
$46 million of child care tax credit checks that were sent just 
to the one address in Texas. And in your comment you mentioned 
that on the issue of why checks are being sent for this credit, 
how do you verify the children in fact resided at that place of 
residence for at least 6 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 6 months.
    Mr. WERFEL. Yes, there is no national childhood residency 
database, so it is one of the difficult aspects of enforcing 
that particular eligibility criteria.
    Mr. GERLACH. So if that is one of the eligibility criteria 
and you cannot confirm that the child has lived there for at 
least 6 months, why are you sending out a check?
    Mr. WERFEL. Well, I didn't say it is impossible to confirm, 
it is just challenging, and therefore we have a higher degree 
of errors associated with that eligibility criteria.
    Mr. GERLACH. So you acknowledge then the IRS has sent 
checks to individuals that don't meet the eligibility criteria.
    Mr. WERFEL. That happens, unfortunately. It is called an 
improper payment. We have way too many of them in the IRS and 
we need to work on that issue.
    Mr. GERLACH. And so what disciplinary action have you taken 
as an agency against the individuals that have continued that 
practice?
    Mr. WERFEL. I have not taken any--well, first of all, 
again, I arrived in late May. I personally have not taken any 
disciplinary actions. I am not sure disciplinary action would 
be appropriate in all circumstances in that situation.
    Mr. GERLACH. In other words, individuals within the IRS 
that have the responsibility over the money that is released by 
the IRS back to a taxpayer, who is sending checks out, in this 
case $46 million just to one address, not making sure the 
criteria for the eligibility for that check is confirmed and 
still sending the money out, no disciplinary action has been 
taken against that individual or individuals responsible for 
that?
    Mr. WERFEL. Well, we would have to look further into the 
issue to see if a disciplinary action is warranted.
    Look, we make----
    Mr. GERLACH. Does any disciplinary action get taken in the 
IRS for anything that is done wrong?
    Mr. WERFEL. Absolutely. And unfortunately----
    Mr. GERLACH. Can you share the number of disciplinary 
actions taken against IRS officials and employees over the past 
year for improper conduct?
    Mr. WERFEL. In an aggregate way, yes. In a personal 
specific way that is covered by the Privacy Act and I would 
have to do that in another setting, but I can share that 
information with you, just not with the public.
    Mr. GERLACH. Okay. Well, if you can share that with the 
Committee I am sure the Committee Members would be interested 
to see when in fact a disciplinary action is taken and under 
what circumstance.
    Mr. WERFEL. And I would point out that although I have only 
been at the IRS for a short time, I have already taken a number 
of disciplinary actions within the IRS. So I know for a fact 
they do go on and I have personally been involved in several of 
them.
    Mr. GERLACH. Thank you, Mr. Werfel, I appreciate it.
    Yield back.
    Chairman CAMP. Thank you.
    Dr. Price.
    Mr. PRICE. Thank you, Mr. Chairman.
    Mr. Werfel, this far down the panel it is hard to say 
welcome, but welcome.
    Mr. WERFEL. Thank you.
    Mr. PRICE. You are 34 days into your challenge, and we 
appreciate that. I think all this Committee is asking and all 
the American people are asking is that you be honest and 
forthcoming.
    Mr. WERFEL. Always.
    Mr. PRICE. In that light I would suspect you agree that the 
IRS process has been broken, would you not?
    Mr. WERFEL. I would agree with that.
    Mr. PRICE. Would you agree that the trust with the American 
people in the IRS has been violated?
    Mr. WERFEL. I would agree with that.
    Mr. PRICE. Mr. Werfel, the IRS has targeted groups, it has 
leaked information on donors of groups, and then targeted those 
donors for auditing. This is chilling stuff. As Mr. Roskam 
said, this is the kind of thing that frightens his 
constituents. It concerns and frightens my constituents as 
well.
    The Chairman asked you if you had spoken to a number of 
people in the process of your investigation. Former IRS 
Commissioner Shulman, you said no. Former Acting IRS 
Commissioner Mr. Miller, you said no. And then Sarah Hall 
Ingram, you said yes. Who is she?
    Mr. WERFEL. Sarah Hall Ingram runs the Affordable Care Act 
operations within the IRS and I speak to her on an ongoing 
basis as part of my responsibility to engage with my senior 
leadership team on the ongoing operations of the IRS.
    Mr. PRICE. What was her role during this period of time, 
during the period of time in the Tax Exempt----
    Mr. WERFEL. It is a good question and that is one that we 
are looking at, 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. 
So the IG report starts to surface issues in and around early, 
let's say, March 2010, when this fact pattern begins on the IG 
timeline.
    It is my understanding that Ms. Ingram served as the 
Commissioner of the Tax Exempt/Government Entities 
organization, which is a level above the Exempt Organizations 
unit, and that organizational chart is in my report. And she 
served in that capacity until somewhere around the spring or 
summer of 2010.
    Mr. PRICE. So there was an overlap.
    Mr. WERFEL. There is an overlap. At that time she moved 
over and was detailed to begin her work in running the 
Affordable Care Act.
    Mr. PRICE. Let me ask, why should the American people 
believe that the trust that is required between the Internal 
Revenue Service and the American people on the implementation 
and enforcement of the Affordable Care Act by an individual who 
was involved in the tax-exempt status entity of the IRS during 
this time in question, why should they trust that individual?
    Mr. WERFEL. Well, what I would ask the American people to 
do is to trust in the process that we are going through to make 
sure we are getting to the bottom of this. And with respect 
to----
    Mr. PRICE. Mr. Werfel, you understand that the process that 
the IRS has gone through has violated that trust with the 
American people already. And, candidly, my constituents and I 
believe the vast majority of the 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?
    Mr. WERFEL. I think it is valuable input. I would like to 
share what we are doing, which is analyzing for any employee--
and Ms. Ingram is no different--we are analyzing what their 
footprint of responsibility was. And with respect to this 
individual there is some complexity in doing that evaluation 
because she did move over to the Affordable Care Act early on. 
But at the same time, just in the interest of full candor, 
while she did move over to the Affordable Care Act within only 
a few months after this fact pattern begins, her title didn't 
change and there is some lack of clarity in terms of her 
ongoing role within TEGE.
    Mr. PRICE. And hence the concern that many of us have.
    To that point----
    Mr. WERFEL. We are looking into that question----
    Mr. PRICE. To that point, the IRS is the enforcement arm 
for the ACA. Have guidelines been promulgated for the 
enforcement of the employer mandate in the IRS?
    Mr. WERFEL. Not at this time. I think the schedule for the 
proposed rules is this summer, if I understand your question 
correctly.
    Mr. PRICE. And employers have to comply with this beginning 
this fall and January 1. Have rules been promulgated?
    Mr. WERFEL. Well, the proposals will outline the timing for 
employer responsibilities.
    Mr. PRICE. Have rules been promulgated on part-time, full-
time employee distinction?
    Mr. WERFEL. I don't know that I----
    Mr. PRICE. Have rules been promulgated on the difference 
between seasonal workers and part-time workers?
    Mr. WERFEL. I will give you the full schedule of our ACA 
rules footprint. I don't have it at my fingertips.
    Mr. PRICE. Mr. Werfel, there is a huge lack of trust in the 
IRS, and to have the IRS now the enforcement arm over the 
Affordable Care Act is extremely concerning for those of us on 
this panel and our constituents. I would urge you--urge you--to 
get this information to individuals who will have to comply to 
all of the rules that you promulgate and make certain that they 
are true to the letter of your rules as soon as possible.
    Mr. WERFEL. I understand.
    Mr. PRICE. Yield back.
    Chairman CAMP. Thank you.
    Mr. Pascrell.
    Mr. PASCRELL. Mr. Chairman, thank you.
    Mr. Werfel, it appears after the time that you have been 
here this morning that we are not past the point where Members 
of Congress would be speculating about enemies lists, cultures 
of corruption, and Nixonian conspiracy theories. I mean, if you 
took the last set of questions to you--first of all, I wonder 
why in God's 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, that young lady, is 
not even in front of us to ask direct questions to. Now, 
everything is open, ask questions about anything, I understand 
that, and 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.
    Mr. WERFEL. Yes.
    Mr. PASCRELL. This is what we are opposed to. So I commend 
you for standing up, standing tall, and I wish you success in 
your job. I think you are trying your best.
    In your report you announce that in order to deal with the 
backlog of applications for 501(c)(4) status the IRS will allow 
the 
option for groups to get preliminary approval if they self-
certify--
self-certify--that they devote more than 60 percent of their 
spending and time on things related to social welfare, to go 
with no more than 40 percent on political activities. Is there 
any reason that this is not the existing standard for all 
501(c)(4) organizations?
    Mr. WERFEL. It potentially could be. What we thought would 
be appropriate was we have a situation with an overdue backlog. 
We have a situation in which we clearly have had struggles to 
effectively implement the current regulation of primary. We 
came up with this self-attestation program because we thought 
that it would be less burdensome on the taxpayer and still 
effective in meeting the underlying regulation of primary. But 
we haven't broadly applied it across all 501(c)(4)----
    Mr. PASCRELL. How did you arrive at the 40 percent in the 
first place?
    Mr. WERFEL. Keep in mind that the IRS' role here is to 
implement the laws and regulations as clearly and as 
effectively as possible. We have this word ``primary,'' and so 
we sat down with it and we said, what is the most plain 
language understanding of primary that we can defend? And we 
came up with the conclusion that if you are north of 50 
percent----
    Mr. PASCRELL. Who came up with that?
    Mr. WERFEL. The IRS. We sat down and we talked it through, 
and we briefed committees and others on this before we issued 
it in final, that if your activities are greater than 50 
percent you are clearly not primary, okay, if your political 
intervention is greater than 50 percent.
    If you are less than 40 percent we would think that you are 
in a comfortable safe zone of not being in that primary range. 
Between 40 and 50 percent it gets tougher, and therefore if you 
are a taxpayer and you believe that your expenditures are 
somewhere between 40 and 50 percent you wouldn't attest, you 
would go through the traditional review and we would take a 
close look to make sure----
    Mr. PASCRELL. And that is why people apply to you, in order 
to obtain this status.
    Mr. WERFEL. Yes.
    Mr. PASCRELL. And you determine from what they give you, 
the information they give you as to whether or not they are 
more than 40 percent involved in whatever political culture 
there exists.
    Mr. WERFEL. Essentially we are trying to figure out what 
this primary means and what we are offering with the self-
attestation is some inherent structure as to how we can think 
about----
    Mr. PASCRELL. Now, once that organization receives 
approval, will they be able to increase their political 
activities beyond the 40 percent of their spending and time? Is 
that part of the application?
    Mr. WERFEL. 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.
    Mr. PASCRELL. But they are allowed to continue?
    Mr. WERFEL. They are allowed to continue. And the reason 
why they are allowed to continue is because one of the key 
points here is that you can operate as a 501(c)(4) today 
without an application. There are two different types of 
entities that are operating as a 501(c)(4), those who have an 
application approved and those that never applied but just file 
the appropriate forms and operate as 501(c)(4).
    If you exceed your 40 percent after attesting, you just 
move yourself into that second category where you are operating 
without an approved application and you are joining many other 
501(c)(4) taxpayers that are doing that today.
    Mr. PASCRELL. So the exemption is very important in terms 
of revenue. The exemption is more important to decide whether 
it is more than 40 percent or less than 40 percent. And if you 
go over 40 percent, you simply have to file a form with the 
IRS.
    So there are, I can assume then in conclusion, other 
organizations out there that are performing more than 40 
percent or maybe more than 50 percent in the political area and 
are being exempt from taxes.
    Mr. WERFEL. I think----
    Chairman CAMP. Time has expired.
    Mr. WERFEL. Okay.
    Chairman CAMP. So just answer briefly.
    Mr. WERFEL. I would say if they are performing more than 50 
percent, then my hope would be that we would have an effective 
exam and audit process that would identify that and work with 
the taxpayer to correct it.
    Chairman CAMP. Okay. Thank you.
    Mr. Buchanan.
    Mr. BUCHANAN. Thank you, Mr. Chairman.
    And I also want to thank Mr. Werfel for being here today. I 
want to recognize that you have been 34 days on the job and it 
appears you have had a great background.
    Let me ask you, because I think you were cut off, you were 
going to mention, looking at your resume 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. And part of the reason you wanted the additional money 
from the taxpayers is you said a dollar invested in enforcement 
gives you back such a return. What were the numbers you were 
going to tell us about? Why do you need the additional money?
    Mr. WERFEL. We have asked for an increase on our 
enforcement budget of $412 million that would yield more than 
$1.6 billion in annual enforcement revenue, which is a return 
on investment of $6 for every $1 invested. And I understand the 
concern about our excessive expenditures that occurred back in 
2010 and 2011, and to the extent----
    Mr. BUCHANAN. Let me go back, because we only get 5 minutes 
each. For every dollar invested, you can get $6 back, is that 
what you are saying, from the taxpayers?
    Mr. WERFEL. Yes, that is what I am saying.
    Mr. BUCHANAN. Now, you have heard the saying a power to tax 
is a power to destroy. And I can tell you that there seems to 
be a culture, at least from what I have heard, I have been here 
a little over 6 years, in the IRS there is a lot more money 
being put in enforcement. And you can destroy people's lives. I 
think you have 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. And I 
look at a lot with small businesses.
    What I am hearing from my constituents, when you want more 
money to go after more Americans, they are very, very concerned 
because it seems like that has been ramped up in this 
environment. I am just telling you what I hear every day.
    Mr. WERFEL. Yes.
    Mr. BUCHANAN. In this environment of trillion-dollar 
deficits, people are feeling like the IRS is a lot more 
aggressive about coming after organizations, especially small 
businesses and individuals, because at the end of the day you 
can win every time. You can say, we will go to court. Well, 
these small businesses and individuals need more CPAs and more 
lawyers. They run out of money. You never run out of money or 
resources.
    Go ahead. Answer that, if you would.
    Mr. WERFEL. Well, you are raising an important question. 
And I will go back to the report, if I could. You know, it is a 
question about taxpayer concerns. And we have heard those 
taxpayer concerns. I think it is notable that in this report we 
are candid about organizational and individual failures within 
the IRS. We are not claiming that nothing went wrong here, we 
are recognizing that there were significant problems. And we 
are also recognizing that this represents an opportunity to 
learn from that.
    Mr. BUCHANAN. Let me go back, just because of our limited 
time, I want to get another question out.
    Mr. WERFEL. Yes, I understand.
    Mr. BUCHANAN. Let me ask you, in terms of yourself, it says 
you manage 90,000 employees. Is that a correct statement?
    Mr. WERFEL. I lead an organization that has roughly 90,000 
employees.
    Mr. BUCHANAN. Who is responsible for the attitudes and the 
culture and the environment at that organization?
    Mr. WERFEL. It is a shared responsibility of the leadership 
team at the IRS and the staff, but I place a lot of importance 
on the leadership driving----
    Mr. BUCHANAN. You are one of the leaders, right?
    Mr. WERFEL. I am one of the leaders.
    Mr. BUCHANAN. I am just saying, with 34 days, I recognize 
that, I want to make sure that you have a balanced approach 
going forward, that you don't create an 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 3 months, but in the last 5 or 6 years. 
And there is a sense that we have to make sure that if you are 
looking for more money to go after more Americans, because you 
get a 6-to-1 return, I will tell you, you are going to win at 
every turn. They can't begin to compete with the IRS with the 
leverage and the power that you have.
    And that is why it is so important as a leader going 
forward, and your team of leadership, to have something that 
makes some sense, that we are not killing small businesses and 
as a result killing jobs.
    Mr. WERFEL. Let me make one final point. In this report 
there is a direct commitment to address that question by doing 
a review across all IRS of the appropriateness of our criteria 
and our filters and our activities. Hold us accountable for the 
thoroughness and objectivity of that review, and in the report 
we are going to share the results of that with you and with the 
American people so that we can answer the question.
    Mr. BUCHANAN. But you understand it is not a level playing 
field, right? You realize if you want to win at the end of the 
day, you are going to win. They run out of money. They would 
like to get their day in court or they would like to resolve 
it, but they can't afford what it costs to get their day in 
court. So I am just telling you as someone that has seen that 
environment, and what I hear every day, you have to be very 
careful on how you move forward in terms of going after 
Americans.
    Chairman CAMP. All right. Thank you.
    Mr. Smith.
    Mr. SMITH. Thank you, Mr. Chairman.
    And thank you to the Commissioner today.
    How long have 501(c)(4)s been around?
    Mr. WERFEL. I am not exactly sure, but it is decades.
    Mr. SMITH. So they have been around a while.
    How long do you think an application should reasonably take 
for approval?
    Mr. WERFEL. We have a standard of 120 days.
    Mr. SMITH. And, obviously, many of these cases exceed 120--
--
    Mr. WERFEL. Yes, absolutely. And that was unfortunate and 
needs to be fixed.
    Mr. SMITH. And you have indicated that no intentional 
wrongdoing has taken place to your knowledge?
    Mr. WERFEL. Again, the evidence hasn't surfaced yet. But I 
would caution that more analysis, review, and investigation is 
needed.
    Mr. SMITH. So that would be an inconclusive finding in 
terms of the----
    Mr. WERFEL. Right. In other words, if the taxpayer is going 
to ask us has there been any evidence yet, we are going to say, 
no, not yet, but more needs to be done. So that could be termed 
inconclusive. I am not going to argue with that 
characterization.
    Mr. SMITH. And sifting through the many documents that we 
have had over the last few weeks, we know that there have been 
very exhaustive lists of questions asked of applicants. Is that 
correct?
    Mr. WERFEL. That is correct.
    Mr. SMITH. And we are talking about requesting lists of 
books read and reports associated, and requesting membership 
lists, volunteer lists, whether or not an applicant intended to 
run for office or a family member of theirs would run for 
office. Would you agree that it took a vast number of resources 
to even come up with those questions?
    Mr. WERFEL. I don't know how many resources it took. But I 
would agree that we needed to stop asking a great number of 
questions that we were asking and revisit and change how we 
approach our outreach to taxpayers.
    Mr. SMITH. Okay. And I appreciate that. It just strikes me 
as difficult to sort through all of this when, you know, we are 
being asked for more resources for the IRS when it would seem 
to me that there were some existing resources, perhaps, that 
were misappropriated, certainly misapplied as it relates to the 
overreach in terms of asking applicants the questions.
    And so moving forward I would hope that we can accomplish 
our objective of reducing the complexity of our Tax Code that I 
think leads to this very situation in terms of the complexity 
leading to the misapplication of resources.
    Thank you, Mr. Chairman. I yield back.
    Chairman CAMP. Thank you.
    Mr. Crowley.
    Mr. CROWLEY. Thank you, Mr. Chairman.
    And thank you, Mr. Werfel, for being here today.
    After the first hearing on the IRS which we had on this 
Committee, the Chair highlighted ``a culture of intimidation.'' 
A culture of intimidation. At the time, I think he was 
referring or hinting that this culture was coming from the 
White House, a claim that I believe was made without merit or 
evidence.
    As the weeks have gone on, we have seen that there is a 
culture of intimidation, 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. But this was not divulged by the Treasury IG in his 
audit of the IRS. The IG didn't even give us a hint that 
progressive groups were targeted until committee Democrats dug 
further and deeper into this investigation.
    My fear is the IG, an appointee of George W. Bush, and a 
former committee staffer of the Oversight Committee chaired by 
Darrell Issa, drafted a report that suited Chairman Issa's 
personal ideology and not the facts of the case.
    We then saw Members of the Majority party make baseless 
claims about a so-called White House enemies list and 
ideological election year targeting. Again, all false. In fact, 
we know Congressman Issa knew about the targeting investigation 
in the summer of 2012, well before the national elections 
occurred.
    Does anyone think for a moment that if there was a White 
House targeting of conservative groups before the 2012 
elections that Chairman Issa wouldn't have said anything about 
that, that he would have sat back and said nothing about that?
    Then, as we see, progressive groups were targeted side by 
side with their Tea Party counterpart groups. The Chairman of 
this Committee excused that, in my opinion, both in public 
releases as well as again here today in his opening statement. 
There has been no outcry by the Chairman or my Republican 
colleagues when progressive groups were also targeted over the 
past 3 years.
    I will point out in this May 21 testimony of Holly Paz, who 
was interviewed by the Committee, both this Committee and the 
Oversight Committee, when she was asked the question concerning 
the Tea Party investigation and their being investigated: And 
did it raise any questions with you? Her answer was, ``No. In 
the office, you know, it is not uncommon for people to have a 
shorthand reference to cases by name. And I was aware of, you 
know, other cases at that time that were working their way 
through the D.C. office that involved proposed denials of 
exemption to liberal organizations that supported the 
Democratic Party. So I had no indication that we were not being 
balanced in what we were doing.''
    Our Committee knew that testimony was given and yet there 
was no outrage, just as there was no Republican outrage when 
the Bush Administration targeted Christian churches and the 
environmental groups and the NAACP between the years of 2002 
and 2004 when 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 my 
Republican colleagues. That is why we demand that the IG be 
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 feel comfortable 
testifying before us here. But right now they are not 
comfortable coming before this Committee. And the Chairman's 
continued silence or excusing of the abuse of progressive 
groups makes it harder for these groups to come before us.
    We need to be a committee of facts and not a witch hunt if 
we plan to get to the bottom of the investigation and hopefully 
be able to tackle other legislative issues that we have coming 
before this Committee of great importance to the country. So I 
demand that this Republican culture of intimidation against 
progressive groups be stopped and that they be as outraged as 
we were outraged, Democrats were outraged, and we expressed 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. I would like to see a modicum of a 
similar outrage by my Republican colleagues for what we held 
when folks testified before this Committee----
    Chairman CAMP. The gentleman's time has expired.
    Mr. CROWLEY [continuing]. That we didn't politically agree 
with, but we stood by them and said, as Americans, they should 
not be investigated.
    Chairman CAMP. The gentleman's time has expired. And I 
would just refer the gentleman to my opening statement where I 
mentioned that progressives were on the Be On the Lookout list, 
or the BOLO list.
    Mr. CROWLEY. Will the Chairman yield?
    Chairman CAMP. No, I will not yield.
    Mr. CROWLEY. Where is the outrage, Mr. Chairman?
    Chairman CAMP. I will not yield.
    Mr. CROWLEY. Where is the outrage?
    Chairman CAMP. I thought you were talking about the modicum 
of this Committee, and yet the gentleman continues to interrupt 
the Chair. You have had your 5 minutes. You referred to me by 
name as the Chairman, and I am going to respond. And I would 
refer the gentleman to my opening statement, where I mentioned 
that progressives were on the Be On the Lookout list. And I 
made one thing clear, that no taxpayer, regardless of political 
affiliation, should be unfairly targeted.
    With that, I will yield to Mr. Schock of Illinois.
    Mr. CROWLEY. That is more like it.
    Mr. SCHOCK. Thank you, Mr. Chairman. Before I begin my 
questioning, I think I would just say that I think the Chairman 
has been more than accommodating, more than outreaching to the 
other side. In fact, if the Chair would indulge, when we had 
our first hearing where we invited witnesses who were victims 
of targeting, the Chair asked for witnesses from the Minority, 
and would the Chair remind us how many Minority witnesses were 
submitted?
    Chairman CAMP. There were none.
    Mr. SCHOCK. Thank you.
    Mr. Werfel, welcome.
    Mr. WERFEL. Thank you.
    Mr. SCHOCK. On page 14 of your report that you have 
submitted to this Committee you outline a proposal to eliminate 
the backlog of certain 501(c)(4) applicants that are currently 
before the IRS. You specifically suggest that to eliminate this 
backlog you ask for these 501(c)(4) applicants to certify under 
penalty of perjury to the IRS that no more than 40 percent of 
their expenditures and volunteer hours will go toward political 
campaign activity and that the remaining 60 percent would go to 
the promotion of social welfare. If that is certified by the 
501(c)(4) applicant, it is your policy, then, that the 
applicant would be approved in the next 2 weeks.
    Mr. WERFEL. That is correct.
    Mr. SCHOCK. I would like to bring your attention to a 
specific case and ask for how that would fall under this 
category. Specifically, the 60/40 rule that you are proposing.
    Mr. WERFEL. Is this a hypothetical case?
    Mr. SCHOCK. No. This is a real live, 48-hour-ago case.
    Mr. WERFEL. Well, I might have difficulty in answering it 
if it is about a specific----
    Mr. SCHOCK. Well, let's try. On Tuesday, the President 
unveiled his plan to cut greenhouse gas emissions. Within 
hours, millions of emails were sent to his reelection campaign 
supporters through BarackObama.com, the URL owned by Organizing 
for Action, a 527 organization. Within the email, it asks all 
its volunteers to ``call out via Twitter, email, letters, 
Facebook, and so on, Members of Congress who are so-called 
`climate change deniers.' '' The action item doesn't just 
suggest they should educate, but rather that they should call 
them out. 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 the promoting social 
welfare category.
    Mr. WERFEL. It is a good question. You are getting into a 
territory where I am not the legal expert. But I will do my 
best to provide some clarity as far as I understand this and 
the rule of law here.
    It is my understanding that the political campaign 
intervention has to do with--and I am answering these questions 
as a broad matter because I don't want to get into 6103 issues 
or the specific taxpayer. So I just want to qualify that my 
answer is in the broad context of how we think about political 
campaign intervention. And the key issue is, is the entity 
seeking (c)(4) status attempting to influence the outcome of an 
election by either supporting a particular candidate or 
opposing a particular candidate. And the Federal Election 
Commission has provided guidance to help us on that.
    And when you have a situation in which, for example, an ad 
mentions a candidate within 30 days of an election, they say, 
well, there you go, at that point in time you have political 
campaign intervention. But if they mention that candidate 120 
days before an election, it is not as clear and more work needs 
to be done.
    So, to get to your question, I think as a broad matter one 
of the first questions I would have in analyzing it, and I 
think the lawyers who are experts in that would have as well, 
was is there a candidate involved and is the activity intended 
to influence the outcome of an election.
    Mr. SCHOCK. Well, there were 85 Members of Congress 
specifically targeted.
    Mr. WERFEL. Again, now you are getting into--I don't want 
to get too specific.
    Mr. SCHOCK. Well, I understand you don't want to get too 
specific. But the point I am attempting to make is that the 
rule you are proposing requires the applicant to make a 
determination.
    Mr. WERFEL. Correct.
    Mr. SCHOCK. So as the Commissioner of the IRS who is 
proposing the rule, under not a hypothetical but a real case 
situation, if you can't make a determination how can we then 
ask a non-attorney, non-IRS Commissioner, non-IRS employee to 
make that same determination under penalty of perjury to 
classify their activity as either advocating for promoting 
social welfare or political campaign activity if we are going 
to limit it under a 60/40 rule?
    Mr. WERFEL. Right. I was talking at a very general level. 
There is specific guidance that we can provide in our 
application and in the self-attestation that we ask the 
taxpayer to look at and determine whether they are meeting the 
criteria. You know, right now, me articulating it to the 
taxpayer is actually done in much more specificity in the 
materials that the taxpayer receives in terms of exactly how to 
answer those questions.
    The key issue is, are they attempting to influence the 
outcome of an election. Now, you take it from there and do your 
further analytics, and then the taxpayer can help determine 
whether they believe their expenditures will go higher than 40 
percent for those types of activities.
    Mr. SCHOCK. I realize my time has expired. I would just 
like, if I can, followup from the IRS on exactly how this new 
rule would then be enforced, whether it be additional auditing, 
whether it would require additional personnel to enforce, and 
all that would be helpful.
    Mr. WERFEL. And I can provide for the record the more 
specific guidance that we give the taxpayer. It was just handed 
to me. But it might not be in the best interest to read it out 
loud.
    Chairman CAMP. No. I think you can submit it to the 
Committee and we will make it available.
    Mr. Paulsen is recognized.
    Mr. PAULSEN. Thank you, Mr. Chairman.
    Mr. Werfel, you opened your report with TIGTA's findings 
that the IRS used inappropriate criteria that identified for 
review Tea Party and other organizations applying for tax-
exempt status based on their names or policy positions.
    I am going to ask you this question: Were some of the 
organizations that were targeted for their personal beliefs, 
were they asked for their donor lists?
    Mr. WERFEL. It is my understanding that roughly 27 entities 
were asked for their donor lists, yes.
    Mr. PAULSEN. Do you know if these donor lists were used to 
target individual donors in the IRS for audits?
    Mr. WERFEL. I don't have precise information on exactly how 
that information was used. I think that is part of the ongoing 
review.
    Mr. PAULSEN. Well, the reason I am asking this is because 
part of the report, on page 31 of the enforcement section of 
the report, it states 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.'' It seems pretty definitive. I mean, how can you be 
sure that is the case?
    Mr. WERFEL. What I was referring to was, there are four 
main operating divisions within the IRS that deal with tax 
administration. The one that is the subject of this audit 
report is the Tax Exempt/Government Entities organization. The 
conclusion that is reached in the report is right now in areas, 
for example, in our Wage and Investment Division, which deals 
with individual taxpayers, small business and large business, 
those areas, where we don't have current evidence that the 
criteria in the screening criteria are inappropriate. We have 
asked our leaders to look at it. We are going to run a thorough 
review. And, as I said, one of the main reasons why we can be 
more reassured in that conclusion is that it is very rare, 
outside of this part of IRS, that political activity is 
relevant to any determination.
    Mr. PAULSEN. Well, I would assume that many of these issues 
should be considered rare to occur in the first place. I know 
that there is a publication, the Declaration of Taxpayer 
Rights, which was also part of the report you submitted, that 
states right up front, ``Protection of your rights. IRS 
employees will explain and protect your rights as a taxpayer 
throughout your contact with us. The IRS will not disclose to 
anyone the information you give us except as authorized by 
law.'' We know that that has already been violated and that 
information has been leaked publicly.
    ``You have the right to know why we are asking you for the 
information and how we will use it.'' We know that that also 
has not been followed through because these organizations 
testified before this Committee that they asked the IRS why 
certain information was being asked for and there was no 
response for followup.
    And I will just tell you that I also have constituents, 
many Minnesotans 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 
planners. They are concerned that it is happening because of 
their political activity. This has all occurred over the last 
couple of years. And other Members of Congress on this 
Committee and in the entire body have expressed the same 
concern.
    Several have told me these personal stories of their 
accountants telling them, we have never, ever in the history of 
our experience--we keep the receipts, we keep the books clean, 
we monitor your activities--we have never had this type of 
systematic auditing on an individual at this level before.
    And so we now know that information on individual donors 
has been collected, we know that information has been leaked, 
and we know that these audits have intensified on individuals. 
And I think, from my perspective, the report before us has some 
glaring omissions. There is going to have to be a followup 
report coming down the road. And 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 that will 
happen?
    Mr. WERFEL. I have two reactions. One, to the extent--I 
probably should have said this earlier to this Committee and to 
the Chairman--to the extent there are particular areas in the 
report and questions that aren't answered, me, along with the 
IRS would be very interested to have that feedback and would 
commit to exploring those questions with this Committee and 
figuring out the best way to get answers.
    Our goal with this report was several things. First, to 
recognize for the taxpayers, part of our reassurance and our 
path forward is to recognize our failures upfront, to recognize 
that we made fundamental mistakes. There are more questions to 
be asked about the nature of how those mistakes occurred, but 
we recognize those mistakes exist.
    We want to show the American people in this report that we 
recognize them and we are putting together and actively 
implementing corrective actions to move forward. We have 
brought in experts of public sector management to help lead the 
IRS going forward on these new activities. And some of those 
activities involve reviewing our current operations to ask the 
very questions you are answering.
    Mr. PAULSEN. So, Mr. Werfel, let me just ask you this, as 
my time runs out. There are several employees, and you have 
described how you have to go through appropriate procedures, 
but are you seeking the removal right now of Ms. Lerner or any 
other individuals? And does Congress need to have legislative 
changes that would allow you to hold these employees 
accountable so that we can make sure that the trust is restored 
for the American people?
    Chairman CAMP. And if you could just answer briefly.
    Mr. WERFEL. Yes, I will answer in two ways. One, with 
respect to a specific employee, I can inform you of our current 
actions, I just have to do it in a nonpublic setting to protect 
that employee's privacy rights.
    Second, you know, as I said earlier, there are due process 
procedures in place that are put in place for Federal employees 
with respect to how their discipline or potential removal are 
handled. I am not going to comment on whether they are good or 
bad. I am saying right now that I am following the rule of law 
and moving as aggressively as we can.
    Chairman CAMP. Thank you.
    Ms. Sanchez is recognized.
    Ms. SANCHEZ. Thank you, Mr. Chairman.
    Mr. Werfel, I want to state my appreciation for you being 
here and answering these questions. I know you have been on the 
job roughly a month. And I am sorry, but some of my colleagues 
seem to be confusing you with the main decisionmaker at the 
IRS. So just to clarify a little bit, you are not personally 
responsible for things like tax refund abuses or conference 
spending abuses or bonus abuses, that is not your position, is 
it?
    Mr. WERFEL. No. And I want to stand by my IRS colleagues. I 
am here to make sure that any actions that occurred before I 
got there that need correcting are getting corrected. That is 
my role.
    Ms. SANCHEZ. Thank you. Because I just think you are an 
easy target. Nobody really likes the IRS, and so it is easy to 
throw a lot of different issues at you when we are specifically 
here to talk about the tax-exempt applications and the process 
that went on there.
    Now, you are still investigating that matter, right? Your 
initial 30-day report is not a final report. Is that correct?
    Mr. WERFEL. Right. And there are several entities that have 
ongoing investigations, yes. They are still underway.
    Ms. SANCHEZ. Including potential criminal investigations, 
is that not correct?
    Mr. WERFEL. The Justice Department is actively looking at 
that right now.
    Ms. SANCHEZ. And I think you have stated numerous times, 
and people have said that you have seemed a little 
dispassionate, but there are rules that you need to follow as 
you investigate these allegations, is that correct?
    Mr. WERFEL. I don't feel dispassionate. I feel very 
concerned. And I think the report has some important language 
about failures of leadership and management that are very 
critical.
    But, yes, that concern and that sense of urgency which I 
certainly feel has to be balanced against these procedures that 
need to take place because they are legally required. And I 
can't reinforce mistakes that the IRS has made in the past with 
new mistakes of not following appropriate procedures that are 
required by law and regulation.
    Ms. SANCHEZ. I appreciate that, because I have a legal 
background. And maybe others on the Committee don't appreciate 
that, but I would just like to point out that, you know, Wild 
West vigilante justice was often swift, but it was not always 
correct, nor was it always fair. I think that probably 
compounding some of the potential failures at the IRS would be 
mistakes in how the investigation is handled, and if it were to 
be done hastily and not thoroughly I don't think that that 
serves the American public.
    Mr. WERFEL. I would be right back here before this 
Committee answering tough questions of how we didn't handle the 
investigation fairly. So we are going to do things by the rule 
of law.
    Ms. SANCHEZ. I appreciate that very much.
    Now, your initial assessment in the preliminary report is 
that perhaps some inappropriate criteria was used by a group of 
IRS officials in selecting certain applications for further 
review. Is that a fair statement?
    Mr. WERFEL. Yeah. That is our finding, that there were 
inappropriate criteria used. It is similar to what the IG 
found.
    Ms. SANCHEZ. And if during the course of your continued 
investigation that assessment were to change, that would be in 
an updated report, I am assuming.
    Mr. WERFEL. Yes. My hope is that the type of information we 
garner helps us understand better the nature and circumstances 
that led to these inappropriate criteria being used.
    Ms. SANCHEZ. Thank you. And I very much appreciate in your 
initial report the identification of certain areas of failures 
at the IRS and also certain suggestions moving forward and ways 
that you can make the process a fairer and sort of more 
transparent one.
    One of the things that I wanted to ask you about, because 
it is something that perhaps is little known, your report 
suggests that the Taxpayer Advocate's office could have helped 
exempt organizations that were struggling to have their 
applications processed by the IRS. Is that correct?
    Mr. WERFEL. That is correct. The National Taxpayer Advocate 
can play a very critical role helping a taxpayer who is having 
trouble resolving their matter before the IRS. They do a very 
effective job in many situations. I think, in looking at this 
situation in particular, we noted a very small or de minimis 
amount of contact between the taxpayers, the 501(c)(4) 
applicants who were receiving unfair or burdensome requests and 
all of the things they went through, and the National Taxpayer 
Advocate. There is a lack of connectivity between the taxpayers 
and the National Taxpayer Advocate. And that is a lesson 
learned for us, and we want to try to educate taxpayers better 
on the avenues they have for help when they are having trouble 
resolving a matter with the IRS.
    Ms. SANCHEZ. And do you think that a broad education 
project to make people aware of the fact that there even is a 
Taxpayer Advocate would be beneficial?
    Mr. WERFEL. That is one of our recommendations in our 
report. We are committed to it.
    Ms. SANCHEZ. And now much has been made about the funding 
and how the funding is spent at the IRS, and there has been a 
request for additional funding for enforcement. But one thing 
that I am hearing from my colleagues on the other side of the 
aisle is, on the one hand, they want you to enforce these 
people who are cheating on refunds, and they want you to, you 
know, come down hard on people who are abusing the Tax Code, 
but, by the same token, they don't want to pay for that. And 
then, on the other hand, too much enforcement pits the little 
guy against the IRS----
    Chairman CAMP. A quick answer, please.
    Mr. WERFEL. A very brief answer. What I want an opportunity 
to do before this Committee and others, is demonstrate two 
things. One, that the IRS is making real progress in 
eliminating unnecessary expenses and cutting our budget in 
areas like travel, conferences and others. And two, that if we 
can increase our funding in other critical areas related to 
enforcement and taxpayer service, that we are going to position 
the IRS for success in the future.
    Ms. SANCHEZ. Thank you.
    And thank you, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. Marchant.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    Mr. Werfel, on one of your first days on the job I wrote a 
letter addressed to you requesting that you find out the status 
of a group in my district, the North East Tarrant County Tea 
Party. Is it your representation that over the next week or 2 
weeks that this organization will receive its determination?
    Mr. WERFEL. Let me answer that question very carefully, 
since you have named a particular taxpayer and I have to be 
very cautious. I will lift up your question and say that all 
taxpayers that are in our priority backlog who are in this 
advocacy group that are in the backlog for more than 120 days 
will receive a letter from the IRS this week explaining their 
option to self-certify and get an expedited approval if they 
are willing to self-certify.
    Mr. MARCHANT. This particular group joined in a lawsuit 
with the ACLJ. Will that lawsuit have any effect whatsoever on 
the determination of that group or any group that is inside of 
that----
    Mr. WERFEL. Two responses. One, I definitively don't want 
to comment on the lawsuit. Second, I will just repeat my 
earlier point: If they are in the backlog, they are getting the 
letter.
    Mr. MARCHANT. So there will be no retribution for a group 
that joined in that lawsuit?
    Mr. WERFEL. It would certainly be the policy of the IRS to 
not have any type of retribution in those situations. If there 
is an 
entity that is in the backlog, it is our intention to send them 
this letter. And if they don't receive the letter, for whatever 
reason, then they should immediately--and they can reach out to 
you or this Committee or reach out to the National Taxpayer 
Advocate, and we will look into it. But, again, our intention 
is to try to get every entity within that backlog, to the 
extent appropriate, a letter.
    Mr. MARCHANT. On February the 11th, a subcommittee that I 
serve on, chaired by Mr. Boustany, wrote the Acting 
Commissioner a request to produce a ``Star Trek'' parity video 
that contained no training content and was produced at taxpayer 
expense. The subcommittee also asked for the cost of the ``Star 
Trek'' video and any other video produced with IRS resources. 
Two months later, and three letters later, we had the ``Star 
Trek'' video and the cost estimate in hand. Turned out that 
that video was produced as entertainment for the famous IRS 
convention that is mentioned.
    Imagine the Committee's surprise when late on Friday, May 
31, I believe after you had taken over, in an effort to get 
ahead of the TIGTA report expected the following week, about 
the IRS' lavish spending at this conference, it turned out that 
this video, depicting line dancing of IRS employees, was also 
produced at the 2010 conference.
    It was wrong for the IRS not to undertake a good faith 
search in February for other responsive material, but that was 
not on your watch. When was the second video brought to your 
attention?
    Mr. WERFEL. Very early in my term. I arrived on May 22, May 
23. It was one of the earlier issues that was raised to me. It 
was my understanding that this Committee had a request for our 
videos and we were delivering that.
    Mr. MARCHANT. Did you produce it immediately to the 
Committee?
    Mr. WERFEL. It is my recollection that once I became aware 
of it and we had it in hand and it was requested by the 
Committee we provided it. I think there may have been a need to 
redact some of the names on it to protect personal privacy. 
But, yes, I think we turned that video over to you very 
quickly.
    Mr. MARCHANT. And did you or others at the IRS directly 
consult with the Treasury on how to produce that video to 
Congress?
    Mr. WERFEL. How to produce it? I am not aware of us 
consulting with the Treasury Department on how to produce it. 
But I don't necessarily understand your question.
    Mr. MARCHANT. Well, let me follow up. The lack of 
transparency pertains to just a silly video--and, being from 
Texas, very bad line dancing.
    Now, for something really more consequential, Chairman 
Boustany wrote then Acting Commissioner Steven Miller on May 10 
to ask about all documents containing the word ``Tea Party'' 
and a list of IRS employees involved in the targeting. You 
wrote back on June 7. Did you consult with the Treasury 
Department on any of the correspondence that you had with the 
Committee before you responded?
    Mr. WERFEL. I talked generally to the Treasury Department 
about our correspondence with the Committee to make sure I am 
giving them an update on the various requests we are receiving 
and how we are producing information. I don't have a particular 
recollection that we talked about this letter.
    Chairman CAMP. All right.
    Mr. WERFEL. But generally we do talk about discovery 
requests that we get from Congress.
    Chairman CAMP. All right. Thank you.
    Mr. MARCHANT. Thank you.
    Chairman CAMP. Ms. Black is recognized.
    Ms. BLACK. Thank you, Mr. Chairman.
    And thank you, Mr. Werfel, for being here and helping us to 
work through this situation.
    I want to start out by saying that the very basis of any 
relationship is trust. And we certainly see here that the trust 
has been broken. There is no doubt about that. I think prior to 
all of this being revealed over the last several months here, 
if you had asked someone, what kind of reaction do you have if 
you get a letter from the IRS, they would have already said, I 
have fear, they are so powerful that even if I haven't done 
something intentionally, they are going to come down on me, it 
is not an organization that helps you work through something if 
you haven't done it properly. A lot of uncertainty. I can call 
one day, get one answer, the next day and get another answer.
    So there was already this image of the IRS with people 
prior to this. And I think that this has all just confirmed 
what their feelings were, that there was a distrust and a fear. 
And restoring this trust is going to be very difficult. And I 
just wanted to go back and chronicle a couple of things that 
have been said here, and I am going to add one to it.
    Obviously, we are here for the targeting issue; that is 
what this hearing was called for. But also we heard Chairman 
Johnson talk about, and I was on that committee and heard Mr. 
Miller, I believe it was Mr. Miller that was here the day that 
we talked about the abuse of the earned income tax credit that 
results in billions of dollars improperly being sent to people. 
And there wasn't a concern that we could even work together to 
fix this. We actually had to bring legislative action to fix 
it.
    Chairman Ryan talked about the misuse or the inappropriate 
use of funds on these activities, over $100 million, which is a 
significant amount of money, obviously. Chairman Boustany also 
talked about the bonuses that are being given out to people 
that perhaps were even involved in this. And we can't be 
assured that those bonuses are really bonuses that they 
deserve.
    I also want to lift up a TIGTA report that showed that 1.7 
million recipients received over $2.6 billion of improper 
payment where we couldn't confirm that they even attended the 
school that they were asking for the tax credit for on the 
American Opportunity Tax refund.
    And so we see over and over again this is not just about 
what has happened here in targeting that is a very serious 
issue, but it is a culture. There is a prevailing culture 
within this organization that leads people to think when they 
turn on their television night after night and they continue to 
see one thing after another after another that there is a 
reason to distrust this organization that has so much power 
over them.
    So my question for you is, in your report you do report 
here that there were three things that you are looking at, 
accountability, fixing the problem with the tax-exempt status, 
and then the third area is a broad review of the IRS operations 
and risk. Are those three things only related to what is 
happening now with this tax-exempt status or is this something 
you are going to look at overall?
    Mr. WERFEL. It is broader. In Section 3 of the report, what 
we attempt to do is we draw four general conclusions coming out 
of this issue with respect to the IG report, and we ask 
questions about the broader applicability of those four areas 
into the rest of the IRS, and we analyze each question and come 
up with a series of actions intended to deal with the issue. 
For example, and I think an important one, are the taxpayers 
not getting the appropriate customer service or treatment by 
being in a backlog too long and getting inappropriate 
questions----
    Ms. BLACK. Okay. So I am going to interrupt you because I 
am going to be limited on my time here and I want to go on to 
another question.
    Mr. WERFEL. Please. I understand.
    Ms. BLACK. But what I would like to know, I would like to 
know your plan. And I know you can't give me your whole plan 
today. But given what we are seeing here, there has to be a 
plan to show the American taxpayer they can have confidence, 
that they can trust the IRS with their most personal 
information.
    Mr. WERFEL. An initial blueprint of that plan is here and 
is in Section 3 of this report, and I would love feedback on 
it. And certainly there are places we can fill out and do more. 
And I think this report is about starting that dialogue.
    Ms. BLACK. I am going to run out of time here, but I do 
have one more question. Your report states that you have found 
no evidence to date that anyone outside of the IRS had any role 
in initiating or encouraging the Tea Party targeting.
    The question I have for you is, did you come to this 
conclusion by asking the White House or the Treasury officials 
whether they were aware of the activity?
    Mr. WERFEL. We came to this conclusion by looking at the 
evidence that we had, which was a variety of documents, emails, 
employee interviews, a lot of it conducted by the IG in their 
audit report.
    Ms. BLACK. So reclaiming any time----
    Mr. WERFEL. So essentially we have looked at the evidence 
that we have, but we have also said there is more evidence that 
needs to be looked at.
    Ms. BLACK. Okay. So I hope, then, that you will have a 
conversation with those in the White House, all the way up to 
the President, and that will be a part of your report that 
comes back as well. Thank you.
    Yield back.
    Chairman CAMP. Thank you.
    Mr. Davis.
    Mr. DAVIS. Thank you very much, Mr. Chairman.
    And, Commissioner, how are you? Thank you for being here.
    You know, like a number of other people who have expressed 
interest in the fact that you would take this position and even 
asked why, I think I have come to the conclusion of why. I 
think you know it is a very difficult situation, that you are 
going to have a tough job restoring trust in the agency by the 
American people. But I operate from the premise that if there 
is righteousness in the heart, there is beauty in the 
character.
    And listening to you all of this time this morning, I get 
the impression that that is really where you are and that is 
what you really want to do and that is how you are going to 
manage this agency, in a balanced kind of way, adhering to the 
policies and practices, procedures and points of law that have 
already been established legislatively, that this is what you 
are supposed to do.
    I have been tremendously impressed with the report that you 
have issued, and there are some things that jump out at me. One 
is the fact that you are ready to make some rectification for 
those groups and individuals who feel that they have been 
harmed with unusual delays of the processing of their 
applications, even to the point of self-certification. How 
would that work? How do you propose to have that work?
    Mr. WERFEL. This week, the taxpayers that are in our 
priority backlog for more than 120 days will receive a letter 
that will explain this new program that we have that will 
enable them to get a fast-track approval if they are willing to 
certify to these particular facts and realities. As I have 
said, it has to do with their expenditures and their voluntary 
person hours, and not to exceed certain thresholds.
    So if they feel comfortable that they can attest to that 
being the way they are going to carry out their operations with 
respect to political and social welfare activity, they will 
sign the document, just like they sign their application today, 
submit it to the IRS, and we will give them an approval. And if 
their activities change, they will be required to let us know. 
And it is possible, like with any taxpayer, that they could be 
reviewed on audit or exam at some later point, and if we find 
compliance, we will move forward, if we find noncompliance, we 
will deal with it at that time.
    Mr. DAVIS. I know that much of our conversation has been 
about transgressions and activity that was outside the realm of 
what one would expect. And I also know that history is history 
and that it is very difficult to change what has already 
happened, but it is not impossible to make sure that it does 
not happen again.
    You mention in your report that there are certain risks and 
information relative to operations of the entire agency that 
the Commissioner's office may not have had enough information 
about.
    Mr. WERFEL. Yes.
    Mr. DAVIS. And that you would want to seriously analyze 
that. And how do you change that information gap that may 
exist?
    Mr. WERFEL. When I came to the IRS, I recognized that 
across the organization I do not believe today there is enough 
work being done to both identify, categorize, understand 
emerging risks and operational challenges within the 
organization and bring it together on a portfolio basis across 
the IRS so that the senior leadership of the IRS can understand 
those issues and deal with them. Not just deal with them, by 
having transparency into them it automatically triggers 
accountability for them to deal with it, it creates an 
environment in which the leadership and the division itself are 
working together toward a solution. And, very importantly, it 
enables the leadership to then push that information out 
earlier in the process to the IRS Oversight Board, to the IG as 
necessary, to this Committee as necessary.
    We have an architecture that we are now putting together, 
an enterprise-wide risk-management program that will redefine 
the way in which we capture this information and report it up. 
It seems very textbook within this report, but it is actually 
very important. And it is potentially, I believe, 
transformational to getting at some of the root of the very 
issues that this Committee is raising. How can we----
    Chairman CAMP. Thank you.
    Mr. WERFEL. Okay.
    Chairman CAMP. Thank you.
    Mr. DAVIS. Thank you, Mr. Chairman.
    Chairman CAMP. Mr. Young is recognized.
    Mr. YOUNG. Thank you, Mr. Chairman.
    And thank you, Commissioner, for being here today. You are 
certainly entering this organization at a difficult time.
    Your organization, like all others, is only as effective, 
only as good as the people that populate it, and by extension 
the extent to which we hold people accountable. We have many 
good, public-spirited, conscientious public servants working at 
the IRS and other agencies, and we must ensure that we don't 
put forward any baseless sort of disciplinary actions with 
respect to these individuals. I know you agree with that.
    My preference would be to hold these individuals, however, 
to the same standards that other workers around the country 
outside of the Federal Government must pertain to. You have 
said time and again during this hearing that we need to 
discover the facts, or some variant of this, first discover the 
facts, wait on those facts to emerge, and then take corrective 
action. Entirely, imminently reasonable, and I agree with that.
    This would presumably apply to personnel actions as well, 
where you have taken some bold actions over at the IRS with 
respect to management failures within your agency, replacing 
four individuals, five positions. This is prominently displayed 
in your plan of action here.
    Mr. WERFEL. Yes.
    Mr. YOUNG. And so what I want to know is what specific 
facts have you collected which justify the replacement of Steve 
Miller? We will begin with Mr. Miller.
    Mr. WERFEL. Okay. As I mentioned earlier, at that level of 
the organization we perceived in our review a deficiency in 
leadership in not understanding earlier in the process the 
emerging challenges that were happening within the Exempt 
Organization unit, the emerging concerns that were being 
registered by taxpayers. A lot of the activities that were 
going on in the IG report should have surfaced to the 
leadership before the IG brought to it their attention.
    Mr. YOUNG. What did he fail to do? Were there signals that 
existed that he failed to identify? Did he fail to put in place 
quality control mechanisms that should have existed?
    This ought to be documented. I know that throughout our 
Federal Government union protections for your rank and file 
workers are typically also applied at the higher echelons of 
management. So you had to overcome a pretty high threshold of 
evidence before the decision was made to replace Steve Miller 
or any of these other individuals. So I want to know with 
particularity, why was Steve Miller replaced, Commissioner?
    Mr. WERFEL. Well, let me first state that I was not at the 
IRS when this situation happened. That was a decision I think 
that was determined between Mr. Miller, the Secretary of 
Treasury, and the President on terms of whether the confidence 
had been lost due to this current situation.
    Mr. YOUNG. Has it been documented? Have the reasons for 
that decision to replace Mr. Miller been documented? Or could 
they be articulated by the new Commissioner, yourself, though 
you go by a slightly different title?
    Mr. WERFEL. Yes. This report is in part an attempt to 
provide a review of what we found in the organization at 
multiple levels. And I think we talk very explicitly about 
particular--I think we identify them as failures within the 
Commissioner's office to--and I think these are the exact words 
that we use--to identify, prevent, correct, and disclose the 
information that was----
    Mr. YOUNG. All right. You know, to my constituents, that 
sounds like a lot of Washington speak. A lot of words. You are 
taking up my time here. I have 5 minutes. I appreciate an 
answer. But maybe I need to ask the question in a different 
way. So I will move to a different individual.
    How about Joseph Grant. Can you tell me with specificity 
why Joseph Grant was removed from his position as Acting 
Commissioner, Tax Exempt and Government Entities Division?
    Mr. WERFEL. Again, let me take a step back and make sure 
that I don't violate anyone's rights of privacy. Let me also 
step back and make sure that I don't impugn any particular 
individual, because these are organizational layers, these 
failures were both individual and organizational, and I don't 
want to necessarily place the holistic blame for the situation 
on a given individual. There was a collective organizational 
failure. There were particular individual failures. And I don't 
think in 25 seconds I can articulate----
    Mr. YOUNG. Well, I don't need it here, because you have 
used the clock down to the end. And I do appreciate the answers 
that have been forthcoming.
    I would like to know, I would like you to report to this 
Committee what disciplinary action beyond replacement of these 
individuals has been taken.
    Mr. WERFEL. And we can provide that to you in a different 
setting.
    Mr. YOUNG. Right. And perhaps you will think of or acquire 
through other means the reasoning behind these separations and 
communicate those to Congress as well. Thank you.
    Chairman CAMP. Thank you.
    Mr. Kelly.
    Mr. KELLY. Thank you, Mr. Chairman.
    Mr. Werfel, I was thinking along the same lines as Mr. 
Young, coming out of the private sector. And I did notice you 
do have a great deal of concern for the folks that we are 
asking you to take a look at right now, saying you want to make 
sure we don't violate any of their rights or privacy. And I 
think that is very noble. And I think that is your desire.
    But when I am back home in western Pennsylvania people ask 
me about, you know, why are they able to do this and why are 
they able to continue doing these things and nothing happens? 
Because what I would like to say is, you know, our role as 
Congress is to be here for the people that we represent, that 
voted us into office.
    I guess then my question would be, we are so concerned 
about these individuals' rights and privacy, but for these 
folks that were targeted, we don't have the same amount of 
concern. And for all of this idea about my rights, my privacy, 
all those things seem to be secondhand to an agency that you 
are running right now. There are over 90,000 people there. Is 
that correct?
    Mr. WERFEL. Yes.
    Mr. KELLY. And an $11 billion budget. My goodness, is there 
any doubt that anything this big and this expensive could 
possibly be reined in? I don't understand how you are going to 
do it. I think it is a noble idea, but I don't know that it can 
be done.
    And again, moving forward, tell me, the people that were 
let go, what can you do to assure the American people that--
they really haven't been let go, have they?
    Mr. WERFEL. There is a combination of personnel actions 
that have been taken.
    Mr. KELLY. But nobody has been let go.
    Mr. WERFEL. Again, there has been----
    Mr. KELLY. Either they were let go----
    Mr. WERFEL. Has anyone been fired yet as a procedural 
matter? No. But all of these options are being proceeded with--
--
    Mr. KELLY. Yeah. Because the way government works, they 
usually get redeployed. I haven't seen anybody get let go for 
anything. And I know you don't have a lot of tools in your 
toolbox when people go on a leave of absence that is always 
paid. And I think for the American taxpayers that like to 
think, you know what, shouldn't somebody be watching our 
dollars, the answer is that you don't have the----
    Mr. WERFEL. People do get fired from the Federal 
Government, but it follows a process.
    Mr. KELLY. I understand that. Yeah, well, I understand all 
that. But as of my 2\1/2\ years here, for any wrongdoing, 
nobody has ever been let go. They have been redeployed, they 
have been repositioned, they have been placed on administrative 
leave with pay, all different types of things. Both Ms. Lerner, 
and I think it was Mr. Roseman yesterday, people pleading the 
Fifth when they come before the people's house to answer 
questions about something that they could be involved in.
    Now, I know there is a rule of law. I can appreciate that. 
But that adds then to the public's distrust and loss of faith 
in the government. So I know you have a large job on your 
hands.
    As we go forward, though, you said to start off, and maybe 
I didn't understand you, but more investigation needs to be 
done. How long do you foresee this going on?
    Mr. WERFEL. That is a good question. And I don't want to 
lock into a particular timeframe because I want to make sure 
that we follow the facts wherever they take us. But I would 
anticipate that over the next 2 months there will be a material 
amount of interviews and document review that would enable us 
to revisit the issues and see where we are. I think that is 
probably the right complement of time.
    Will I say it is over at that point? No. But I think that 
seems to me a good milestone to check in and figure out, have 
we learned a material amount of information.
    Mr. KELLY. So, what I have seen in your comments so far is 
that there has been a lot of wrongdoing or somehow things 
weren't handled the right way, but nothing that you could say 
was intentional.
    Mr. WERFEL. At this time, we haven't seen anything, but we 
are open to the fact that it may have occurred. We just want to 
make sure that we are doing all the right due diligence to 
answer those questions.
    Mr. KELLY. I understand that. I understand that. Just to 
switch real quick to Cincinnati.
    Mr. WERFEL. Yes.
    Mr. KELLY. Did it originate in Cincinnati and only happen 
in Cincinnati? Does it go any deeper? Can you tell that yet?
    Mr. WERFEL. What I think is important to understand here is 
that there were----
    Mr. KELLY. I am sorry, I am running out of time. Did you--
--
    Mr. WERFEL. Here is the point. I need to make this point. 
The individual that supervised the Cincinnati office sat in 
Washington, D.C. And if I----
    Mr. KELLY. No, I understand. I understand. But the answer 
is, no, you don't know yet whether it is just in Cincinnati?
    Mr. WERFEL. I could offer more than that, but we don't know 
the answer. If you wanted me to expound, I could. But----
    Mr. KELLY. I don't have the time. I would love to have a 
longer conversation.
    Mr. WERFEL. Okay. I don't know the definitive answer to 
that question.
    Mr. KELLY. Okay. Is there any doubt in your mind that it 
doesn't lead back farther?
    Mr. WERFEL. I don't understand that question.
    Mr. KELLY. Well, is it just Cincinnati? Or does it come 
back? Does it come toward Washington? How high does it go?
    Mr. WERFEL. I was about to say that there are people in 
Washington, D.C., in particular, for example, the position of 
Director of Rulings and Agreement, which is in my report.
    Mr. KELLY. Okay. So it could go much deeper.
    Mr. WERFEL. That person sits in Washington, D.C. Now, there 
are five levels beneath the Commissioner's office.
    Mr. KELLY. Okay.
    Mr. WERFEL. But they are involved in these activities and 
their office is in Washington, D.C.
    Mr. KELLY. Well, I appreciate it. I just want to tell you 
that the people that I represent back in northwest Pennsylvania 
do not for any--they don't believe right now that there is 
going to be a serious inquiry into this, and they don't think 
that the IRS is going to come out on its own and do it or the 
Administration is going to do it on its own. It is going to be 
up to us in Congress to continue to look for what the answers 
are.
    So I wish you luck on your job, but I also would say this 
is critical to the faith and trust that the people have in this 
government. Right now their tank is running on empty because we 
haven't seen anything yet that makes sense to the American 
people that is fair and just to them.
    Chairman CAMP. All right.
    Mr. Renacci, and then Mr. Griffin.
    Mr. RENACCI. Thank you, Mr. Chairman.
    Thank you, Mr. Werfel, for being here. You know, I was 
watching all of this questioning. It reminded me of the days in 
my private sector life when I was hired to go into bad 
situations and turn them around. And that is exactly what you 
have had to do. And I had to report to a court every week in 
bankruptcy, in those situations, as a trustee's representative.
    So one of the things that people always wanted to know in 
those situations was, what are you going to do to change 
things? How are you going to fix things? And I think that is 
along the line of questions that American people want to hear; 
they want to hear the answers.
    I have a lot of questions, so I am going to ask you just 
for yes or no answers, and if you want to go back to them, we 
can.
    Did you talk to the Treasury about your testimony and 
discovery today?
    Mr. WERFEL. Yes, I consulted with Treasury about this 
hearing.
    Mr. RENACCI. Did you supply them your testimony or submit 
your testimony before----
    Mr. WERFEL. My testimony today was the report. So they had 
the report, of course.
    Mr. RENACCI. Did Treasury make any corrections, revisions, 
or make any suggestions on what you would say or not say or 
submit today? Yes or no.
    Mr. WERFEL. I wouldn't say corrections. I mean, I was 
keeping them informed of how the report was developing.
    Mr. RENACCI. Did they make any----
    Mr. WERFEL. I briefed them and, you know, they offered I 
would say high-level suggestions. But as an important point, I 
don't think we got a single line edit from them. It was more 
general guidance.
    Mr. RENACCI. Okay. Right. So you did discuss it. Okay.
    You know, Ranking Member Levin said in his opening 
statement that individuals at the IRS that targeted groups 
should be relieved of their duties. I made a quote of that, 
``relieved of their duties.'' I agree with Mr. Levin. Do you 
agree with Mr. Levin?
    Mr. WERFEL. I believe that if there is----
    Mr. RENACCI. If they targeted----
    Mr. WERFEL [continuing]. If there is management neglect or 
inappropriate conduct, and it depends on the nature and extent 
of the management neglect.
    Mr. RENACCI. If they targeted groups----
    Mr. WERFEL. Intentionally, yes, I would agree.
    Mr. RENACCI. Okay. You have testified several times today 
that there was no intentional wrongdoing. Was there wrongdoing?
    Mr. WERFEL. I said there is not evidence yet of intentional 
wrongdoing. But, yes, I would articulate there was wrongdoing, 
there were----
    Mr. RENACCI. Okay. You testified--as I said, I have a lot 
of questions. And I----
    Mr. WERFEL. Keep going, keep going.
    Mr. RENACCI. You testified that there was neglect of duty. 
You said that earlier. Do you believe there was neglect of 
duty?
    Mr. WERFEL. I do.
    Mr. RENACCI. So there was wrongdoing and there was the 
neglect of duty, but there was no intentional wrongdoing. Would 
you agree with that?
    Mr. WERFEL. There is no evidence yet of intentional 
wrongdoing. But I am not going to reach a definitive conclusion 
until all the evidence is obtained.
    Mr. RENACCI. Okay. Do you believe targeting of individuals 
or organizations for political purposes is illegal?
    Mr. WERFEL. To target with political bias? Yes, I think 
there is potential illegality there. It is certainly 
inconsistent with the IRS mission statement.
    Mr. RENACCI. Do you believe there is wrongdoing?
    Mr. WERFEL. Yes.
    Mr. RENACCI. Do you believe there is neglect of duty?
    Mr. WERFEL. Yes.
    Mr. RENACCI. Did the IRS seek removal of Mrs. Lerner?
    Mr. WERFEL. I can't answer that question in this setting. 
But I can answer that question in a different setting to you 
directly.
    Mr. RENACCI. So you can't answer whether she was asked to 
resign or be fired?
    Mr. WERFEL. Not in this setting, but in a separate setting, 
I can.
    Mr. RENACCI. What is Mrs. Lerner doing right now?
    Mr. WERFEL. I can't answer that question in this setting.
    Mr. RENACCI. Do you believe the IRS--again, I am going to 
go back--do you believe the IRS employees who were deemed to 
have targeted someone for political purposes should be fired?
    Mr. WERFEL. If it was based on political animus or that 
type of intent, yes. If the seriousness of the management 
neglect was to the appropriate level of seriousness, then, yes.
    Mr. RENACCI. Are you aware of Section 1203 of the IRS 
Restructuring and Reform Act of 1998?
    Mr. WERFEL. I am aware of the Act, but you would have to 
tell me exactly which section you are referring to.
    Mr. RENACCI. The section of the Act that creates a list of 
10 deadly sins----
    Mr. WERFEL. Yes.
    Mr. RENACCI [continuing]. That the IRS employees can be 
terminated for.
    Mr. WERFEL. Yes.
    Mr. RENACCI. Are you aware that political targeting is on 
it or not on it?
    Mr. WERFEL. I don't have the list memorized, but I can look 
into it. I think it is implied through other, more general 
criteria, is my recollection.
    Mr. RENACCI. It is specifically not mentioned. Can you 
think of any reason why we should not add the targeting of an 
individual for political purposes by the IRS agent to that 
list?
    Mr. WERFEL. Given these events, I think it is a reasonable 
suggestion.
    Mr. RENACCI. Okay. Well, I agree. So you know I will be 
introducing language to do that, and I hope your agency will 
support that.
    Mr. Chairman, I yield back.
    Chairman CAMP. Thank you.
    Mr. Griffin is recognized.
    Mr. GRIFFIN. Thank you, Mr. Chairman.
    Thank you, Mr. Werfel, for being here. I also have heard 
great things about your reputation, and I hope that you will 
get to the bottom of this. I want to raise some specific 
questions, though.
    This report, ``Charting a Path Forward at the IRS,'' is a 
public report. And in this town, as you know, you have been 
here a while, and I have spent some time in this town, a public 
report, whether it is intentioned to be or not, is a political 
report. People are going to seize upon what is in that report. 
Statements like the one that you made where you have not found 
evidence of intentional wrongdoing on behalf of IRS personnel, 
they are going to seize on statements like that and they are 
going to hold that up and say, aha, see there, no evidence. I 
was a staff investigator here in the House. I have been a 
prosecutor.
    Did you not know that by putting that in the statement you 
were communicating to the world, even though this is simply an 
update, you were communicating to the world from a political 
perspective that there is no evidence of wrongdoing? I 
understand factually what you mean. But the reason this has 
gotten so much attention is because what a responsible 
investigator would say is either nothing where that line exists 
or the investigation continues.
    The idea that you would say there is no evidence of 
intentional wrongdoing at this point is--I worked at the White 
House in political affairs. You have worked to the White House. 
I worked up here. That is a political statement. Whether you 
intended it to be or not, that is a political statement that, 
whether you mean it to or not, gives cover to people 
politically at a time when Lois Lerner pled the Fifth 
Amendment, where anybody who has gone to YouTube and seen the 
testimony of high-level IRS officials in front of this 
Committee, based on what we know now, it is clear that they 
were not being forthright in telling the whole truth with this 
Committee.
    Now, whether that constitutes what you would call evidence 
or not, if I knew that one of my top lieutenants had just pled 
the Fifth and my other lieutenants had given less than the 
whole truth to this Committee, and I saw a staff person write 
that sentence, if they did, I would take it out.
    So my first question is, did you write that sentence or did 
a staff member write that sentence?
    Mr. WERFEL. There was a group of people. I was one of the 
authors. We coauthored it amongst a group of people. I will 
take ownership of every sentence in this document. If you allow 
me the opportunity, I can respond to some of your points, but I 
don't want to use your time. It is up to you.
    Mr. GRIFFIN. Okay. I know. I would love to have a lot more 
time than I do. And maybe because I am last, I can keep going. 
Maybe not.
    But did the White House at any time--I know the White 
House, as I used to say, and probably you say, is not a 
person--did anyone at the White House review this statement?
    Mr. WERFEL. No.
    Mr. GRIFFIN. No one?
    Mr. WERFEL. Not that I am aware of.
    Mr. GRIFFIN. Okay. Anyone at Treasury?
    Mr. WERFEL. Yes.
    Mr. GRIFFIN. Yes. Well, I----
    Mr. WERFEL. Let me just say, I did brief the President a 
few hours before the report went out on the morning the report 
was issued on Monday, and I did mention this conclusion. I just 
want to make sure that was clear.
    Mr. GRIFFIN. I appreciate you pointing that out.
    I think the bottom line here is we have an ongoing 
investigation in this Committee. We have an ongoing 
investigation in the Senate. We have an ongoing investigation 
at another committee. We have a criminal investigation. We have 
a top lieutenant who has pled the Fifth Amendment. We have, in 
my view, we have video of high-level officials giving less than 
the whole truth to this Committee, which is potentially a 
criminal act. I just think that, whether you believe that 
statement or not, putting it in here with your background in 
Washington is irresponsible.
    And let me go on to the next point here. These individuals 
that you personally did not interview, Joe Grant, Steven 
Miller, Doug Shulman, Lois Lerner, can you tell me who is 
interviewing--first of all, is someone interviewing them?
    Mr. WERFEL. The Inspector General and the Justice 
Department are putting together a witness list or have put 
together a witness list. I assume it is evolving based on the 
facts that they are gathering. And the professional 
investigators of both the Inspector General and the Justice 
Department are conducting those interviews and at the 
appropriate time will share those results with me, and I assume 
you, in order to make sure that we have a collective 
understanding of the facts.
    Chairman CAMP. All right. Thank you. Time has expired.
    Thank you, Mr. Werfel, for your testimony this morning.
    And with that, this hearing is now adjourned.
    [Whereupon, at 1:07 p.m., the Committee was adjourned.]

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