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

    EXAMINING THE SKYROCKETING PROBLEM OF IDENTITY THEFT RELATED TAX FRAUD
                                   AT THE IRS

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

                                    HEARING

                                   before the

                     SUBCOMMITTEE ON GOVERNMENT OPERATIONS

                                     of the

                             COMMITTEE ON OVERSIGHT
                             AND GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 AUGUST 2, 2013

                                   __________

                               Serial No. 113-71

                                   __________

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                  COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     DARRELL E. ISSA, California, Chairman
    JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland,
    MICHAEL R. TURNER, Ohio                  Ranking Minority Member
    JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
    PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of
    JIM JORDAN, Ohio                         Columbia
    JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
    TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
    JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
    JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
    PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
    PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
    SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT,
    TREY GOWDY, South Carolina               Pennsylvania
    BLAKE FARENTHOLD, Texas              TAMMY DUCKWORTH, Illinois
    DOC HASTINGS, Washington             ROBIN L. KELLY, Illinois
    CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
    ROB WOODALL, Georgia                 PETER WELCH, Vermont
    THOMAS MASSIE, Kentucky              TONY CARDENAS, California
    DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
    MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
    KERRY L. BENTIVOLIO, Michigan        Vacancy
    RON DeSANTIS, Florida

                       Lawrence J. Brady, Staff Director
                    John D. Cuaderes, Deputy Staff Director
                        Stephen Castor, General Counsel
                           Linda A. Good, Chief Clerk
                     David Rapallo, Minority Staff Director

                     Subcommittee on Government Operations

                        JOHN L. MICA, Florida, Chairman
    TIM WALBERG, Michigan                GERALD E. CONNOLLY, Virginia
    MICHAEL R. TURNER, Ohio                  Ranking Minority Member
    JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
    THOMAS MASSIE, Kentucky              Vacany
    MARK MEADOWS, North Carolina

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on August 2, 2013...................................     1

                                   WITNESSES

    The Hon. Daniel Werfel, Acting Commissioner, Internal Revenue
      Service
        Oral Statement...............................................     6
        Written Statement............................................     9
    Ms. Nina E. Olson, National Taxpayer Advocate, Internal Revenue
      Service
        Oral Statement...............................................    19
        Written Statement............................................    21
    Mr. Michael McKenney, Deputy Inspector General for Audit,
      Treasury Inspector General for Tax Administration
        Oral Statement...............................................    42
        Written Statement............................................    44
    Mr. Douglas MacGinnitie, State Revenue Commissioner, Department
      of Revenue, State of Georgia
        Oral Statement...............................................    61
        Written Statement............................................    64

                                    APPENDIX

    Opening Statement by Chairman Mica...............................    98
    Opening Statement by Rep. Connolly...............................   100
    Letter to the Hon. J. Russell George, Submitted by Mr. Cummings..   102
    Letter to Chairman Issa and Mr. Jordan, Submitted by Mr. Cummings   108
    Statement by the President on May 15, 2013, Submitted by Mr. Mica   115
    May 3, 2013 e-mail from the Deputy Inspector General for
      Investigations, Dept. of Treasury, Submitted by Mr. Mica.......   116
    Questions for the Record, Submitted by Mr. Mica, with Responses..   117

    EXAMINING THE SKYROCKETING PROBLEM OF IDENTITY THEFT RELATED TAX FRAUD
                                   AT THE IRS

                                  ----------

                             Friday, August 2, 2013

                      House of Representatives,
                 Subcommittee on Government Operations,
                  Committee on Oversight and Government Reform,
                                                       Washington, D.C.
        The subcommittee met, pursuant to call, at 9:01 a.m., in
    Room 2247, Rayburn House Office Building, Hon. John Mica
    [chairman of the subcommittee] presiding.
        Present: Representatives Mica, Issa, Meadows, Turner,
    Connolly, and Cummings.
        Also Present: Representative Jordan.
        Staff Present: Ali Ahmad, Communications Advisor; Alexia
    Ardolina, Assistant Clerk; Molly Boyl, Senior Counsel and
    Parliamentarian; Lawrence J. Brady, Staff Director; David
    Brewer, Senior Counsel; Steve Castor, General Counsel; Drew
    Colliatie, Professional Staff Member; Adam P. Fromm, Director
    of Member Services and Committee Operations; Tyler Grimm,
    Senior Professional Staff Member; Frederick Hill, Director of
    Communications and Senior Policy Advisor; Justin LoFranco,
    Digital Director; Mark D. Marin, Director of Oversight; Tegan
    Millspaw, Professional Staff Member; Kristin L. Nelson, Senior
    Counsel; Ashok M. Pinto, Chief Counsel, Investigations; Laura
    L. Rush, Deputy Chief Clerk; Scott Schmidt, Deputy Director of
    Digital Strategy; Sarah Vance, Assistant Clerk; Meghan Berroya,
    Minority Counsel; Jaron Bourke, Minority Director of
    Administration; Claire Coleman, Minority Counsel; Susanne
    Sachsman Grooms, Minority Deputy Staff Director/Chief Counsel;
    Jennifer Hoffman, Minority Communications Director; Adam
    Koshkin, Minority Research Assistant; Dave Rapallo, Minority
    Staff Director; Safiya Simmons, Minority Press Secretary; and
    Cecelia Thomas, Minority Counsel.
        Mr. Mica. Good morning. I'd like to welcome everyone and
    call to order this hearing of the Government Operations
    Subcommittee of the Government Oversight and Reform Committee
    of the House of Representatives. The subject of today's hearing
    is ``Examining the Skyrocketing Problem of Identity Theft
    Related to Tax Fraud at the Internal Revenue Service.''
        The order of business today will be, we will begin with
    opening statements from members, and then we'll hear from our
    witnesses. We have four witnesses today, and I'll introduce
    them later. And I would remind members it looks like we're
    going to have votes commencing about 9:15, which gives us to
    about 9:30. So we will again try to get through this and maybe
    most of our witnesses. We will then recess and return probably
    for questions at that point.
        So with that, Chairman Issa and myself, we usually start
    these hearings by saying that just generally that we have a
    responsibility to investigate problems with our Federal
    Government. For lack of a better term, some of those problems,
    we call them scandals or wasteful spending or conduct by
    Federal agencies or employees.
        And this is not an opportunity, say, to pick on IRS, but an
    opportunity to follow up actually on this matter. We have had
    some four hearings. I was given a list of hearings, and they
    date back--I don't know, Mr. Connolly, did you participate in
    some of those before?
        Mr. Connolly. Yes, sir.
        Mr. Mica. So this is not a new scandal or problem, it's
    something that we've seen as an issue for some time.
    Unfortunately, too, you will hear in just a second, as I cite
    some of the issues at hand, it isn't resolved and it hasn't
    gotten any better.
        Unfortunately, we've heard lately a lot about phony
    scandals, and the IRS and some of the things that we've had to
    deal with are not phony scandals. Even leaders in the
    administration have conceded that in the past, particularly in
    regard to some of the targeting by IRS brought to our attention
    by the inspector general and other Members of Congress. We
    also, as you may recall, just briefly looked at the conferences
    in a previous hearing of wasteful spending on IRS conferences.
    And I think they were spending about $45 million in 1 year.
    After we began some of the revelations with GSA and others, we
    discovered in that hearing again wasteful spending that
    exceeded what we saw and everyone was appalled at with GSA. And
    that review of that matter has resulted in going from $45
    million to about $5 million. Considerable saving for the
    taxpayers.
        And then I think all of us were stunned when we heard about
    the--and I don't know of a better term than scandal--with the
    IRS improperly awarding contracts to Strong Castle. I'm sure
    the members who were here that heard Tammy Duckworth, one of
    our war heroes, question the witness who had scammed the system
    and also IRS getting a $0.5 billion worth of contract potential
    under false pretenses with his veteran's disability.
        So again, we have, I think, an important responsibility to
    look at these matters. Unfortunately, IRS has had a number of
    problems, and this one that we're looking at today continues.
    The incidence of identity theft related to tax fraud--now
    listen to this--and some of this data is very interesting--it's
    grown from 456,000 cases in 2009 to an estimated 1.9 million
    cases in 2013. That's a 416 percent increase. The Treasury
    Inspector General for Tax Administration estimates that IRS
    could issue--in fact, this problem could balloon in the coming
    years to $21 billion in fraudulent returns over the next 5
    years. Some of the estimates are in 2011 as much as a whopping
    $5 billion went out the door being paid in potentially
    fraudulent returns.
        In fact, this has become such a lucrative business for
    criminals that criminals, in fact, are leaving the drug dealing
    trade and, we're told, and now getting into applying and also
    asking for these fraudulent returns from IRS. So it's being
    said that tax fraud is actually taking work away from drug
    dealers because it's easier and safer to scam the IRS than it
    is to sell drugs.
        Sad part about this for the average person, when they do
    file these fraudulent return claims, is that it takes more than
    a year in most instances to try to get their identity problems
    resolved, sometimes to try to get their credit restored, and
    very often to actually just get their lives back together. They
    are left in limbo, and it doesn't appear that IRS has a means
    of actually changing what's going on. They've made some
    attempts, but obviously, if you just look at the increases, the
    dramatic increases, whatever action IRS appears to be taking is
    not working. We've gone, again, from 456,000 to almost 2
    million cases. So they've failed to curtail this rip-off of the
    public.
        In reviewing this matter, I found that some States have
    been able to institute some fairly simple matters. And we may
    ask about what, again, they are doing that has worked and
    hasn't worked. But Georgia has taken some action. Some of the
    State revenue departments have taken action--we'll hear more
    good about that hopefully--that has successfully stopped people
    from illegally accessing taxpayer cash.
        The IRS has complained of a lack of resources and said it
    will need another $22 million to examine all cases of potential
    fraud. I've heard the numbers of 90,000 to 100,000 IRS
    employees. Maybe, Mr. Werfel, you can tell me how many you
    have. But we do know from our review some 21 units of IRS are
    engaged now in tackling this problem. And, again, it's gotten
    worse, not better.
        So, again, this subcommittee has held four previous
    hearings on this subject in the 112th Congress. My colleague,
    the ranking member, I think participated in some of those. I
    know he is as interested in getting to the bottom of this as I
    am and also correcting it, because it is a very serious
    situation. So with those opening comments, I'll yield now to
    the ranking member, the gentleman from Virginia, Mr. Connolly.
        Mr. Connolly. Thank you, Mr. Chairman. And I want to thank
    you for holding this hearing. There have been a lot of hearings
    about IRS on various and sundry matters, but this is one that
    touches almost every taxpayer potentially. And I really want to
    thank you for holding this hearing. And as you indicated in the
    previous Congress, with former Chairman Platts and Ranking
    Member Ed Towns, we had a series of hearings on this subject,
    and I attended every one of them.
        You know, as you indicated, I think, according to the IRS
    Taxpayer Advocate, identity theft jumped 650 percent between
    2008 and 2012. And as you indicated, there were almost 1.9
    million incidents of identity theft and fraudulent refunds.
        Maybe the unintended good news is it's cutting down on drug
    dealing, as you indicated. But, you know, this is unbelievably
    disruptive to constituents. And if I recall, and Mr. Werfel
    will correct my memory if wrong, but at the last hearing this
    subcommittee had under Chairman Platts, I think the statistic
    was there were only four prosecutions or convictions for this
    identity theft. Now, when you have 1.9 million identity thefts
    going on, that is an epidemic. And the number of prosecutions
    and convictions, not acceptable.
        It's profoundly disruptive to our constituents. In my own
    district, a gentleman and wife filed their 2010 tax returns
    electronically in April of 2011. They fell victim to tax-
    related identity thieves. Their tax filing was rejected because
    someone else had used their Social Security number and received
    a refund before they had filed their legitimate return. My
    constituent tried for 2 years to resolve the theft of this tax
    refund. He spoke with six different individuals at IRS between
    April and August of 2011 and was given six different timelines
    for the issue to be resolved, ranging from 6 to 8 weeks to a
    year. Further, the IRS provided conflicting information about
    forms to fill out, where to send the forms, and whether he
    should follow up with the IRS or wait for the IRS to contact
    them.
        In November of 2011, they received their refund and thought
    the issue was resolved. In May of 2012, two of my constituents
    tried to refinance their home and were rejected by the mortgage
    company because the company was using fraudulent IRS documents.
    When my constituent called the IRS, they stated, everything
    looks fine here, we can't explain it, and if there's a problem,
    we can't really do anything about it.
        After many ill-fated pursuits at clearing up the situation,
    the gentleman eventually give up in frustration, his problem
    left unresolved in refinancing his home. Obviously, that's
    unacceptable.
        To be fair, the IRS recognizes this fact and is
    implementing reforms to enhance its efforts to combat identity
    theft by adopting a three-pronged approach. The first prong is
    prevention, which means stopping this type of tax fraud from
    being successful in the first place. Clearly, given 1.9 million
    incidents, much more work needs to be done in this area. We
    seem to be losing the battle.
        The second prong is providing taxpayer services for those
    who have been the victims of identity theft. This is a
    significant focus for the IRS, but, again, it appears the
    agency is falling short. I can just tell you based on
    constituent work in my office, satisfaction is not a prevalent
    theme among constituents. For example, an audit by TIGTA
    sampled 17 different identity theft cases and found that the
    average time it took for those cases to be resolved was 414
    days. Unacceptable.
        The third prong of IRS's approach is catching and
    convicting the criminals who committed these crimes. This is a
    critically important step, and one in which we are failing. If
    we can step up enforcement, obviously, it deters tax-related
    identity theft and protects our constituents. I'm interested,
    Mr. Chairman, in learning more about the IRS's efforts on this
    three-pronged approach, including examining success stories, as
    well as challenges still to be faced.
        I would also like to be hear more about how customer
    service is being improved to prevent the bureaucratic nightmare
    that constituents, as well as millions of other Americans face
    every year. This year, as with every year, taxpayers face a
    number of issues and obstacles as they try to file their
    returns. I look forward to working with the IRS to implement
    corrective actions that will strengthen taxpayer assistance and
    issues during what can be a very difficult time for many
    citizens. I hope today we have a productive discussion about
    how we're going to achieve this goal in light of this massive
    problem.
        Thank you, Mr. Chairman.
        Mr. Mica. Thank the gentleman.
        Mr. Mica. Yield to the vice chairman, Mr. Meadows,
    gentleman from North Carolina.
        Mr. Meadows. Thank you, Mr. Chairman. And thank you for
    calling this hearing.
        Thank each one you for being here as we look forward to
    your testimony and we deal with this.
        You know, over the course of this year it cannot be denied
    that the IRS has been plagued with a wide range of scandals.
    And while many of these issues have been highlighted, an
    ongoing problem, which seems to have flown under the radar,
    continues to exist here at the IRS, is this issue of tax fraud
    and identity theft and how it relates.
        And I didn't realize how big the problem was until I talked
    to a few stakeholders. And as I started talking to them and as
    they started identifying the issue, I was dumbfounded by the
    amount of tax fraud that exists and really the potential for it
    to even be exacerbated with the new subsidy that we've got
    coming in with ACA and the Obamacare. If you have got a subsidy
    issue, and we're looking at really self-identifying who
    qualifies, it even presents a greater challenge. You know,
    identity theft, tax fraud has increased exponentially over the
    past 5 years to the tune of 650 percent. And when we start to
    look at that, TIGTA, who will testify here today, estimates
    that there could be as much as $21 billion--that's billion with
    a ``B''--in fraudulent tax returns over the next 5 years if the
    problem is not addressed. And they say that that estimate is
    conservative.
        As I talked yesterday to a stakeholder, he shared a couple
    of different stories, without sharing the details, of just
    massive tax returns that comes in and taking advantage of the
    tax system that we have, and yet thousands of returns filed on
    the same day with, truly, with Social Security numbers that are
    legitimate and then we see this, but that is one area. And
    we're having to police that in the private sector. So we need
    to really look at a solution where the IRS steps up and
    identifies this, corrects the problem, or we'll be sitting here
    12 months from now with an even bigger problem that is greater
    than $21 billion.
        So I thank each of you for being here. I thank the chairman
    for calling this important hearing. And I am looking forward to
    your testimony.
        Mr. Mica. Any other members have opening statements?
        Mr. Cummings?
        Mr. Cummings. I'll be very brief because I know we're going
    to have votes in a minute. I just want to make sure that we are
    aiming towards the problem. You know, we've had motion,
    commotion, emotion, and no results. And the problem just gets
    worse.
        And so I'm looking forward to the testimony. But I'm also
    looking forward to solutions. You know, arguing here and
    arguing there and not helping taxpayers avoid being victims and
    not addressing the issue of those who will take advantage of a
    system that may have some holes in it, and those who spend day
    in and day out trying to figure out how to maneuver to extract
    something that don't belong to them, those are the issues that
    we have to address. If we can send a man to the moon, we ought
    to be able to resolve these issues.
        And with that, Mr. Chairman, I yield back.
        Mr. Mica. Thank the gentleman.
        Mr. Mica. Mr. Jordan.
        Mr. Jordan. I'm fine, thank you, sir.
        Mr. Mica. Okay. Then we have time to probably get one or
    two of our witnesses in. Let me introduce them. Again, we have
    the Honorable Daniel Werfel, Acting Commissioner of the IRS. We
    have Ms. Nina Olson, the National Taxpayer Advocate at the
    Taxpayer Advocate Service. Mr. Michael McKenney is the Acting
    Deputy Inspector General for Audit at the Treasury Inspector
    General for Tax Administration. And Mr. Douglas MacGinnitie is
    the State Revenue Commissioner of Georgia.
        And we welcome all of you.
        As is customary, we swear in our witnesses. So if you'll
    stand, raise your right hand.
        Do you solemnly swear or affirm that the testimony you're
    about to present to this committee and subcommittee of Congress
    is the whole truth and nothing but the truth?
        The witnesses all answered in the affirmative. We'll let
    the record reflect that.
        Yes?
        Mr. Connolly. I'm sorry, Mr. Chairman. Could I just
    inquire, is it the intention of the chair to hear Mr. Werfel
    first and then break for the----
        Mr. Mica. I think we could do that. We can fit him in
    nicely. We still have 11 minutes, so we could give him at least
    6.
        Mr. Connolly. And I'm informed we have nine votes, Mr.
    Chairman.
        Mr. Mica. And so we will recess for the appropriate time
    and break and then come back, and we will hear the rest of the
    witnesses.
        And also members will have 7 days to submit opening
    statements or extraneous material for the record. Without
    objection, so ordered.
        Mr. Mica. Welcome back, Mr. Werfel. I asked you earlier how
    much longer you'd be there. Till your successor, I guess, was
    just named today. But thank you for coming. And you are
    recognized. And again welcome.

                       STATEMENT OF DANNY WERFEL

        Mr. Werfel. Chairman Mica, Ranking Member Connolly, and
    members of the subcommittee, thank you for the opportunity to
    appear before you today to update you on the actions we are
    taking at the IRS to combat refund fraud and help victims of
    identity theft.
        Refund fraud caused by identity theft is one of the biggest
    challenges facing the IRS today, and the harm it inflicts on
    innocent taxpayers is a problem that we take very seriously.
    The IRS has a comprehensive identity theft strategy focusing on
    preventing refund fraud, investigating these crimes, and
    assisting taxpayers victimized by identity theft.
        The agency's work on identity theft and refund fraud
    touches nearly every part of the organization. The IRS expanded
    these efforts for the 2013 filing season to better protect
    taxpayers and help victims. More than 3,000 IRS employees are
    currently working on identity theft, more than double the
    number at the start of the previous filing season.
        Our ability to detect fraud and stop false returns before
    issuing a refund continues to grow. We have expanded the number
    and quality of our identity theft screening filters and already
    this year we have suspended or rejected more than 4.6 million
    suspicious returns, which approaches the total of 5 million for
    all of 2012.
        Our criminal investigations have increased as well. We have
    opened roughly 1,100 identity theft investigations so far in
    fiscal year 2013, which is already more than all of 2012.
        We are also improving our efforts to assist taxpayers who
    are victims of identity theft. Last year, we made a number of
    programming and procedural enhancements that enable us to move
    faster to identify accounts with a high potential for identity
    theft. Cases generated as a result are reassigned for review
    more quickly than in the past. So far this year we have closed
    more than 565,000 cases. That is more than three times the
    number of identity theft cases resolved at the same time last
    year.
        Other procedural enhancements are helping us reduce delays
    in releasing funds to a legitimate filer in cases where
    duplicate returns are filed. As a result, taxpayers who became
    victims this fiscal year are receiving their refunds and having
    their problems resolved in less than 120 days, far more quickly
    than in previous years. While this is an improvement, we are
    continuing to find ways to shorten this time and to ease the
    burden on these victims.
        But barriers to further progress on identity theft do
    exist. One is the sheer volume and complexity of these crimes.
    Another is the need to further upgrade our technology in order
    to implement improvements, such as more sophisticated filters
    and better taxpayer authentication procedures.
        Yet another barrier to further progress is our difficult
    budget environment. The work we are already doing on refund
    fraud and identity theft involves a difficult balance of
    resources and staffing at a time when our budget has been
    reduced by $1 billion since fiscal year 2010. This includes a
    reduction of $618 million this year alone as a result of
    sequestration. The IRS has responded to these budget reductions
    by becoming more efficient and cost conscious. One result of
    our efforts to reduce costs is that full-time staffing at the
    IRS has declined by more than 8 percent since fiscal year 2010,
    or about 8,000 positions.
        Against this backdrop, our need for additional resources to
    fight refund fraud caused by identity theft has forced very
    critical performance tradeoffs. The progress that the IRS has
    made against identity theft would not have been possible
    without directing resources away from other enforcement
    activities and our service programs. The administration's
    fiscal year 2014 budget request provides for an increase in
    funding that will let us continue to make progress against
    identity theft are also allowing us to continue our enforcement
    activities and maintain reasonable levels of customer service.
        Conversely, without this additional funding, we would face
    difficult choices. And the situation would become even more
    serious if we were to incur additional budget cuts. We would no
    longer be able to sustain our current level of effort on
    identity theft without significantly weakening other programs.
        Chairman Mica, Ranking Member Connolly, members of the
    subcommittee, this concludes my statement. I'd be happy to take
    your questions.
        [Prepared statement of Mr. Werfel follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Mica. What we're going to do, since we have 5 minutes
    before the vote, is we will recess at this time and then there
    will be at least 45 minutes of voting. We have nine votes. That
    brings us up to at least 10:15. So I would expect everyone to
    be back here by then and we will start immediately I hope 10
    minutes after the beginning of the last vote on the floor for
    members' purposes. So with that, the subcommittee stands in
    recess.
        [Recess.]
        Mr. Mica. I'd like to call the Subcommittee on Government
    Operations back to order after our recess.
        The subcommittee has heard from IRS Acting Commissioner
    Daniel Werfel as our first witnesses. We have three remaining
    witnesses. We will go ahead and begin their testimony. And
    again welcome to our panel this morning Ms. Nina Olson. And she
    is the National Taxpayer Advocate at the National Taxpayer
    Advocate Service.
        So welcome, and you are recognized.

                       STATEMENT OF NINA E. OLSON

        Ms. Olson. Thank you, Chairman Mica, and thank you for
    inviting me to testify today about tax-related identity theft.
    Since 2004, I have identified this issue as one of taxpayers'
    most serious problems in nearly every annual report I have
    submitted to Congress, and I have testified at numerous
    hearings on this subject, including seven since the start of
    2012.
        To its credit, the IRS has recognized identity theft as a
    major challenge and has devoted significant resources to
    addressing it. However, while the IRS has improved its ability
    to detect fraudulent returns, our analysis indicates that it
    has not made comparable strides in providing assistance to
    identity theft victims.
        In my testimony and my reports to Congress, I have
    described the devastating impact of tax-related identity theft
    on its victims. Yet despite some recent improvements to cycle
    time, it often takes 6 months to a year or longer before the
    IRS fully resolves identity theft cases and issues refunds to
    the legitimate taxpayers. Thus victim assistance overall
    continues to be inadequate.
        Let me offer three ways of looking at victim assistance.
    First, my organization, the Taxpayer Advocate Service, or TAS,
    assists taxpayers whose cases have not been handled properly
    through normal IRS channels or who are experiencing financial
    hardships. In fiscal year 2011, we received 34,000 cases, by
    far the largest number of cases on any single issue and 11
    percent of our inventory. By fiscal year 2012, we received
    55,000 identity theft cases, which constituted 25 percent of
    our inventory. For the first 9 months of fiscal year 2013, our
    identity theft cases are 32 percent higher than last year,
    suggesting our case receipts in that issue may exceed 70,000
    this year.
        TAS' case inventory is a pretty good barometer of IRS
    problems, so these increases suggest that at least in some
    respects victim assistance may actually be getting worse.
        Second, the IRS processes for identifying and stopping
    returns filed by identity thieves ensnare some legitimate
    returns. For example, during this filing season, more than
    150,000 returns filed by legitimate taxpayers were flagged and
    deemed unpostable. This means they aren't processed and refunds
    aren't issued until someone in the IRS looks at them and acts
    upon them.
        Some returns were stopped because the original identity
    protection personal identification number, or IP PIN, was not
    entered on the return. The IP PIN is the number the IRS gives
    taxpayers when it determines they are victims so their returns
    can go through without stopping. When a taxpayer loses his IP
    PIN, the IRS will issue a replacement IP PIN, but
    confoundingly, the IRS also automatically stops all returns
    with these replacement IP PINs; that is, it deems them
    unpostable.
        Of the over 100,000 returns that were stopped because they
    did not have an IP PIN, more than 90 percent of those, over
    93,000, were submitted by legitimate taxpayers, yet they had to
    wait an average of 6 additional weeks for the IRS to process
    their returns, and some are still waiting. In fact, as of
    yesterday, there are over 21,000 of these returns over 61 days
    old on average waiting to be processed.
        Third, while I am pleased that one IRS unit has reduced its
    processing time this year, that function's processing time is
    only part of the lifecycle of many identity theft cases. In my
    written statement, I describe the progress of a hypothetical
    case that is representative of many of TAS cases in that it
    requires the sequential involvement of multiple IRS units.
    Similarly, in 2012, TIGTA analyzed the files of 17 identity
    theft victims and found that the IRS had opened 58 cases to
    resolve the accounts of those victims, an average of nearly
    three and a half cases per victim. That aligns with what we
    have observed and explains why I regularly hear from
    practitioners and taxpayers that identity theft cases often
    take a year or longer to resolve.
        Lastly, I note that the IRS now has more than 3,000
    employees working identity theft cases, more than double the
    number from the previous year. Given the IRS' broad
    responsibilities and shrinking resources, that level of
    staffing is not sustainable. To make and sustain progress in
    addressing identity theft, the IRS must improve its core
    processes.
        In my written statement, I make six recommendations. The
    most important is to reorganize victim assistance so that a
    centralized unit controls all identity theft cases and each
    case is assigned to an employee who manages the case from start
    to finish and serves as a single point of contact for the
    taxpayer. The IRS may say that this approach will itself
    require more resources. But as the head of an organization that
    operates in exactly that manner, I believe that it is more
    efficient to assign each case to an employee than to require a
    taxpayer to navigate multiple functions, working cases with
    significant rework and time lags occurring along the way.
        I thank the subcommittee for its continued interest in this
    matter.
        Mr. Mica. Thank you for your testimony.
        [Prepared statement of Ms. Olson follows:]

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        Mr. Mica. Our next witness is Michael McKenney, and he is
    the Acting Deputy Inspector General for Audit at the Treasury
    Inspector General for Tax Administration.
        Welcome, Mr. McKenney, and you are recognized.

                    STATEMENT OF MICHAEL E. MCKENNEY

        Mr. McKenney. Chairman Mica, Ranking Member Connolly, and
    members of the subcommittee, thank you for the invitation to
    testify on the important subject of identity theft and its
    impact on taxpayers and tax administration. The Treasury
    Inspector General for Tax Administration, or TIGTA, has
    provided extensive coverage of tax fraud-related identity theft
    by conducting both audits and investigations. My comments today
    will focus on the results of our prior audit work and two
    audits that are ongoing.
        The IRS has made identity theft a priority and has made
    some progress over the past year. However, significant
    improvements are still needed. As of June 30th of this year,
    the IRS reported that during the 2013 filing season it stopped
    the issuance of $4.2 billion in potentially fraudulent tax
    refunds associated with 860,000 tax returns that involve
    identity theft. For the 2013 filing season, the IRS increased
    the number of identity theft filters to 80 from the 11 it used
    in 2012. This enabled the IRS to identify almost twice as many
    identity theft tax returns as the prior year.
        In our follow-up audit report that will be issued next
    month, we determined that for tax year 2011 returns, which are
    filed in 2012, there were approximately 1.1 million undetected
    tax returns with characteristics of identity theft. The
    associated fraudulent tax refunds totaled approximately $3.6
    billion, which is a 30 percent decrease from the $5.2 billion
    of undetected fraud we found for tax year 2010.
        Even with its expanded filters, it will remain a challenge
    for the IRS to detect these fraudulent returns unless it has
    access to third-party income and withholding information before
    the tax returns are processed. In this regard, the IRS is
    currently working with three States to determine how partial-
    year information may be used to identify fraudulent tax returns
    before the refund is paid.
        Another challenging aspect to this problem is the use of
    direct deposit for the fraudulent tax refunds. Most of the tax
    year 2011 returns we identified with indicators of identity
    theft involved the use of direct deposit to obtain tax refunds.
    These totaled approximately $3.5 billion. In some cases, many
    fraudulent refunds are deposited to the same bank account. For
    example, one such bank account received 446 direct deposits,
    totaling over $591,000.
        TIGTA recommended that the limited limit the number of tax
    refunds sent to the same direct deposit account. We also
    recommended that the IRS work with Federal agencies and banking
    institutions to ensure tax refunds are deposited only to an
    account in the taxpayer's name.
        The IRS developed new filters for the 2013 filing season
    which are designed to identify and stop tax returns with
    similar direct deposit characteristics. As of May 30th of this
    year, the IRS indicated that it had identified over 154,000
    such tax returns and prevented approximately $470 million in
    tax refunds with the use of these filters. In addition, as of
    the end of June, over 18,200 refunds were returned from
    financial institutions, totaling more than $60 million.
        The IRS still faces challenges in providing assistance to
    identity theft victims. In a current audit which reviewed cases
    worked in 2012, we found taxpayers have continued to face
    lengthy delays in the resolution of their identity theft cases.
    In addition, tax accounts were not always correctly resolved,
    which resulted in delayed or incorrect refunds.
        One practice that is designed to protect taxpayers from
    being victimized again the following year is the issuance of
    identity protection personal identification numbers. The IRS
    issued almost three times as many of these numbers to taxpayers
    in 2013 as it did in 2012.
        The IRS is continuing to take actions this year to improve
    its ability to expedite assistance to victims and prevent
    fraud. We will continue our work in this area to evaluate the
    IRS' progress. Chairman Mica, Ranking Member Connolly, and
    members of the subcommittee, thank you for the opportunity to
    share my views.
        Mr. Mica. Thank you for your testimony.
        [Prepared statement of Mr. McKenney follows:]

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        Mr. Mica. And we'll turn to our last witness in this panel,
    Mr. Douglas MacGinnitie. And he is the State Revenue
    Commissioner at the Georgia State Department of Revenue.
        Welcome, and you are recognized.

                    STATEMENT OF DOUGLAS MACGINNITIE

        Mr. MacGinnitie. Thank you, Mr. Chairman, Ranking Member
    Connolly, and members of the subcommittee. I am the
    Commissioner of the Georgia Department of Revenue. And I'd like
    to thank you all for having me here today.
        First, I think it's always helpful to start a little bit
    with the big picture. Georgia is the ninth-largest State in the
    Union. We have approximately 9.8 million residents. And in
    2012, we had about 5 million taxpayers; 4.25 million
    individuals and about 750,000 companies.
        In Georgia, the Department of Revenue collects about $20
    billion in taxes each year, which is about 98, 99 percent of
    all State revenue. So we're the tax collector in the State. And
    the vast majority of our revenue is individual income tax and
    sales tax, which comprise about 85 percent of all State
    revenue.
        Last year we processed 4.25 million individual returns. And
    of those, just about 3 million were refund requests, totaling
    about $2 billion. So like all taxing authorities, we're just a
    big data processor, right? We bring in $20 billion a year, but
    then we have to keep and manage all that information related to
    the $20 billion.
        Turning to the fraud issue, several years ago, long before
    my time at the Department, folks at the Department started to
    recognize that there was a problem with fraud and started
    trying to fight it. In 2005 a group was formed within the
    agency called the Office of Special Investigations--it always
    has to sound official and catchy--to fight the fraud. We
    started out by putting some pretty simple rules in place, I
    gather much like the IRS in their filters, to process those
    returns. So, as an example, if too many refunds were going to
    the same bank account or the same address, we would start
    flagging those returns. There might be a good reason that that
    many were going to one address or one bank account, but there
    might not be, and we wanted to take a closer look.
        Well, as we evolved and as the criminals evolved, we began
    to realize that the vast majority of the fraud involved
    identity theft. Some of the fraud was the actual taxpayer
    making fraudulent claims on their own tax return, but more
    often someone was using a legitimate taxpayer's information in
    filing a fraudulent came in their name.
        We also realized that our ability to look at a return and
    tell that the filer was not who they said they were was very
    limited. Just looking at a return doesn't really tell you much.
    And our ability to access all sorts of third-party data was and
    to a great extent still is very limited. Taxing authorities
    don't have all that information most of the time.
        And personal experience showed it could happen to anybody.
    In 2011, after I had started my job, my wife's identity was
    stolen. So when my wife and I filed our joint return, it was
    kicked out. Someone had already used her name and Social
    Security number and filed a return. And if that's not the
    definition of irony, I don't know what is. But we had to
    process paperwork both at the IRS and the State level. So I
    understand this both from an administrative perspective, but
    also as a semi-victim.
        All that said, our rules-based approach made a difference.
    Last year, in 2012, for the 2011 tax year, our program stopped
    114,000 refunds, totaling about $75 million. But as I noted, we
    still knew we had a significant hole around identity theft. And
    in 2011, we were approached by a company call LexisNexis to
    help fight that ID theft. I remember clearly the meeting with
    LexisNexis, thinking not only do they understand what the
    problem is, but also I think they have a program that might fix
    it. Often we're called on by consultants who want to sell us
    something. They can help us identify the problem, which we all
    can see, but much less clear how they're going to fix it.
        So in 2012, we started this program, and it works as
    follows. After all of our systems are done checking a return,
    we think it's okay, we will send that refund request to
    LexisNexis with some very limited information. LexisNexis will
    scrub it through their databases. And based on the filters that
    we've set up along with them, if it seems suspicious, it'll be
    flagged. If a return is flagged, an email and a letter is send
    to the taxpayer asking them to go to a Web site and answer a
    few simple questions that only the taxpayer should know, much
    like if you've ever had your credit card stolen, same kind of
    system. If they can answer those questions online, the refund
    gets put back in the queue and out it goes; nobody has to touch
    it. If they can't answer it or they refuse to try to answer the
    questions, we hold that refund in abeyance and eventually we
    reverse it out and treat it as if it was a fraudulent refund.
        In putting together the program, we attempted to balance
    the various goals of processing refunds as quickly as possible,
    protecting the State's money, i.e., taxpayer money, and
    protecting taxpayer identities. We've run the program now for
    two seasons, and in the first year there was definitely a
    learning curve, but this year it went pretty smoothly.
        From our perspective and from taxpayers' perspectives, the
    results have even excellent. It's added about 1 to 5 days to
    the processing of a refund, and in 2012 it stopped over 44,000
    refunds, totaling over $23 million. It cost the State about
    $2.6 million. So from a business perspective, the program is a
    no-brainer. We spent $2.5 million, $2.6 million, and we stopped
    $23 million in fraudulent refunds.
        At the same time, the agency avoided all sorts of costs
    associated with having to help taxpayers deal with the mess
    when somebody's filed a fraudulent refund, much like my wife
    and I went through.
        So one final thought for you all. Our experience is that
    the tax fraud is a growing and serious problem. Last year, our
    two programs combined stopped 160,000 fraudulent returns,
    totaling $99 million, just shy of $100 million dollars. And if
    you do the math, that means approximately 4 percent of all
    returns that were filed with us and over 5 percent of the
    refund claims were fraudulent. I'll let you do the
    extrapolation from that, but it doesn't take long to get to
    some pretty big numbers when you look at other States and
    obviously at the Federal level.
        So thanks for the opportunity to be here. I'm happy to
    answer any questions that you all might have.
        Mr. Mica. We thank you for your testimony.
        [Prepared statement of Mr. MacGinnitie follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Mica. And each of your witnesses. And we'll turn
    immediately to some questions here.
        Again, I'm conducting the first hearing on this. I heard
    one of our witnesses said she had been involved in seven. And I
    think this subcommittee has done four of those. The problem is,
    though, with the rip-off and refunds that are fraudulent, it's
    spun totally out of control. I mean, we had 456,000 cases in
    2009, we heard up in 2011 we were at 1.1 million; 2013, the
    estimates today are 1.9 million. And some steps have been put
    into place, but obviously we don't have a handle on this.
        Did you testify, Mr. McKenney, that one account received
    446 refunds.
        Mr. McKenney. That's accurate. Yes.
        Mr. Mica. I mean, that's astounding that something wouldn't
    trigger. I just renewed my American Express, and they had a
    series of questions. And then also I found any type of
    financial activity out of the ordinary is immediately
    triggered, I get a call from their security folks.
        Mr. Werfel, can't we put in place some protections? And you
    heard recommendations or some ideas from Georgia. Where are we?
        Mr. Werfel. Yes, we can, and we should. And with respect to
    the situation where money goes to the same bank account, we
    have now effective in filing season 2013 implemented a filter
    in our system to catch it.
        Mr. Mica. So the 446 would be triggered in the multiple----
        Mr. Werfel. Yes. Now it would be triggered. This is part of
    our evolving learning process. As we learn and understand the
    schemes, we make adjustments. For us, the goal is to get ahead
    of them so we can figure out where the schemes are going before
    they emerge. And that's part of our challenge at the IRS.
        Mr. Mica. Well, we've heard the nightmare that was
    described--actually, the ranking member gave his constituent
    experiences and being jerked around by, I think you said, a
    half a dozen different folks. One of the recommendations from
    victims assistance was a central unit, I guess. We have 21
    units or have had, and I think you'd probably have to have some
    enforcement or investigations units. But, Mr. Werfel, what
    about some one stop for the taxpayer who is caught in this
    horrible situation.
        Mr. Werfel. I think that's a very important thing. We're
    evolving in that direction. We have what's called the Identity
    Protection Specialization Unit that essentially helps us
    coordinate when you have multiple parts of the IRS involved in
    a single identity theft case to make sure there's coordination.
    But as Ms. Olson points out in her testimony, the Taxpayer
    Advocate has specific recommendations about how we can enhance
    that centralization role and make it even more one stop.
        And for us, my commitment is to evaluate Ms. Olson's
    recommendation. It's a question of making sure, can we do that
    evolution effectively and serve the victim? And can we also do
    it within our resource constraints. So there's a combination of
    things.
        But I think the bottom line is we're very concerned about
    the impact this is having on victims. Obviously, the impact
    it's having on the deficit in Treasury is significant. But the
    impact it's having on victims is significant, and we're
    committed to figuring out what we can do to help.
        Mr. Mica. Well, Mr. Werfel, you've heard of Willie Sutton,
    haven't you? The famous bank robber.
        Mr. Werfel. Yes.
        Mr. Mica. Well, Mr. Connolly, now, I thought you had some
    great testimony there. What was the number you said were
    prosecuted?
        Mr. Connolly. I----
        Mr. Mica. I have to question this witness.
        Mr. Connolly. I believe, Mr. Chairman, that at the last
    hearing we had, I want to say, because I asked, I want to say
    there were four convictions.
        Mr. Mica. Four convictions. We're lucky that Willie Sutton
    isn't around today, because you could scam the IRS and get away
    with it. Can you tell us where we are on prosecution?
        Mr. Werfel. Yeah. I don't have the exact number, but I can
    tell you that in the area of criminal investigation, just like
    in some of the other areas we've described, there is
    significant ramp-up in activity. We had 1,100 investigations
    under way this year. We have convictions----
        Mr. Mica. How many?
        Mr. Werfel. I don't know the exact number. I know that many
    of them were----
        Mr. Mica. Well, again, the ranking member has said it's
    just a handful, and that's disgraceful.
        Mr. Werfel. I can get you the number. I will say that
    some----
        Mr. Mica. People are stealing from the taxpayer and they're
    getting away with it. When the staff told me that some of the
    drug dealers are switching out to scamming and ripping off the
    IRS with, again, these illegal payments, that should raise
    eyebrows because we're talking about billions.
        Mr. Werfel. Yeah. I will get you the number of
    prosecutions. We are seeing sentences now at 20-plus years,
    which we think is a good deterrent. We're getting positive
    feedback.
        Okay. I just received a note that we have 785 indictments
    on identity fraud.
        I just wanted to point out that I was on the phone recently
    with the field directors in Tampa Bay and Miami for the IRS, in
    terms of our work down there. They feel they've really turned a
    corner with local police and local law enforcement, getting
    positive feedback from local law enforcement about how the IRS
    efforts are stepping up in this area. So we have a lot of work
    to do. I think the point is, is that things are trending better
    in terms of our activity in this area.
        Mr. Mica. Well, finally, can you tell me, again, I've heard
    90,000 to 100,000 employees, what's the current number of
    employees with IRS?
        Mr. Werfel. We have roughly 85,000 full-time employees. And
    then when you add in part-time employees, it gets to about
    95,000. And that's, by the way, that's an 8 percent reduction
    from where we were in 2010.
        Mr. Mica. Now, again, but a lot of people who are involved
    in this use the cost-effective means. We heard from Georgia,
    and a limited number of personnel, a lot of electronic
    monitoring that the private industry is doing. And somewhere
    we're doing it in a very expensive, ineffective fashion.
        Let me yield to Mr. Connolly now.
        Mr. Connolly. Mr. Chairman, I see the chairman of the full
    committee is here.
        Mr. Issa. I'm just----
        Mr. Connolly. All right. Because I'd be more than happy to
    yield to the chairman.
        Mr. Mica. I was going to get to him immediately after you.
        Mr. Connolly. Thank you, Mr. Chairman.
        Welcome to our panel.
        I'm glad to hear, Mr. Werfel, that the number of
    investigations, criminal investigations, and the number of
    prosecutions has gone up. I do think we need to know the number
    of convictions.
        Mr. Werfel. Yes.
        Mr. Connolly. Because my recollection, honestly, was last
    time we met in the last Congress was it was in the single
    digits, which was a shocking statistic, given the magnitude of
    the problem.
        Mr. Werfel. Okay, so we have 301 sentences to date in 2013.
    So, again, the numbers are increasing. And I don't know that
    that's the right number.
        Mr. Connolly. Right.
        Mr. Werfel. The trend is improving.
        Mr. Connolly. But I think all of us could agree, and this
    isn't only the responsibility of IRS, nor do I mean to imply
    that, but the idea that there are almost 1.9 million cases of
    identity theft, which then involve the kinds of problems Mr.
    McGuiness--I mean Mister, I'm sorry----
        Mr. MacGinnitie. MacGinnitie.
        Mr. Connolly. MacGinnitie. So it's Irish.
        Mr. MacGinnitie. A little bit.
        Mr. Connolly. All right. And his wife experienced, you
    know, 1.9 million, even the convictions of only 300 and
    something people is not earth-shattering and not reassuring to
    the consumer, to the, you know, the taxpayer.
        So are you getting cooperation from U.S. attorney's offices
    on this? Are they taking this more seriously?
        Mr. Werfel. Yes, as an emerging risk for the IRS and for
    the broader tax community and tax system, there's a lot going
    on. You know, obviously, technologies are changing, we're
    training our employees differently, and we're forging new
    partnerships with U.S. attorneys, local law enforcement,
    States. All of this is happening, it needs to happen quickly
    and effectively, because as the chairman pointed out, this is a
    problem, and that you point out, this is a problem that's
    growing exponentially.
        Mr. Connolly. Right.
        Mr. Werfel. And I think what the IRS is doing is showing
    that we are moving quickly to deal with this emerging risk, but
    it's growing very quickly. And so we need some very
    sophisticated solutions here.
        Mr. Connolly. Yeah, because here's the message. The
    chairman referenced Willie Sutton. If Willie Sutton were in the
    game today, he'd probably focus on the IRS rather than a bank,
    because the chances of your being caught, tried, and convicted
    are minuscule. I mean, if you're looking at probabilities, it's
    a good place to go for a penalty-free crime. And that is of
    great concern I think to this subcommittee.
        And of course one of the things I want to give you, you
    mentioned in your testimony, Mr. Werfel, that some of this has
    to do with resources. A billion dollars of cuts in the budget
    of IRS does circumscribe the IRS' ability to full-throated
    respond to this exponential threat.
        Mr. Werfel. Yes, there's many examples of that. I mean,
    what we are worried about is, as our resources decline, can we
    keep up with the level of service that we need to provide to
    taxpayers and appropriate enforcement activities. And, you
    know, on the positive side, as our resources go down, we become
    more efficient. And I can point to a lot of different areas,
    and I think the chairman mentioned in our conference spending
    we had a significant decline. And right now we're at very low
    levels of travel and training and conference spending as part
    of our efforts to become more efficient.
        But there's only so much efficiencies we can drive before
    the budget cuts start to impact our ability to tackle huge
    issues like identity theft. And, you know, at the appropriate
    setting we can sit down and walk through the President's 2014
    budget request and how we plan to deploy resources in a way to
    get to at identity theft.
        Mr. Connolly. I want to get at two other issues in my
    limited time.
        Mr. McKenney, you talked about direct deposit. So here's
    something presumably to try to make more efficient and more
    immediate the tax refund to the taxpayer. But unwittingly it
    also makes more efficient and in some ways easier for, you
    know, the bad guys to interrupt that flow and redirect it
    somewhere else. What can we do about that? And should taxpayers
    now insist that they want a check and not have it directly
    deposited?
        Mr. McKenney. One of the things we recommended that they do
    and work with Treasury on is to validate that the account that
    they deposit this refund into is an account in the taxpayer's
    name. And the IRS has started a pilot in that regard--or
    Treasury has--and that's starting to show a benefit. So the
    more they can authenticate things before they deposit into an
    account, the better off they'll be.
        Mr. Connolly. Well, but they do have the option of asking
    for it in a check form. Is that correct?
        Mr. McKenney. Yes, that's true.
        Mr. Connolly. And do we find that the incidence of identity
    theft is much higher with direct deposit than it is with, say,
    old fashioned----
        Mr. McKenney. Yes, most of it's direct deposit now. So it's
    so quick for a person to take that and have it put to a prepaid
    debit card or whatever they can accomplish there, whatever
    they're trying to do much faster.
        Mr. Connolly. Mr. Chairman,my time has expired. And I will
    withhold my last question until--unless----
        Mr. Mica. Thank you. No, that electronic thing doesn't
    work, though, because they sent my refund, but my wife got it
    and there was nothing I could do about it.
        Pleased to welcome and recognize the chair of the full
    committee, Mr. Issa.
        Mr. Issa. Thank you, Mr. Chairman. I'll talk to Pat about
    joint account and the benefits thereof, I guess.
        Mr. Werfel, this is an important hearing, and I want you to
    continue working on it. Obviously, the IRS is behind, clearly,
    behind the thieves. They're getting better at it. I think Mr.
    Connolly brought the right point, which is, why rob a bank when
    you can rob Medicare, Medicaid, and the IRS. It's so much
    easier to rob the Federal Government through fraud and identity
    theft, candidly, than it is to walk in with a gun into a bank.
        However, I have some frustrations I'm bringing to you
    today. As you know, a number of months ago the President made
    it clear that the behavior that occurred in an isolated basis
    in Cincinnati was unacceptable, and he charged that we'd get to
    the bottom of it. Well, we've gotten to the fact that it's not
    isolated to Cincinnati, as was said. It's not isolated to
    Washington. It goes to your Chief Counsel's office.
        And as we go to do our discovery, that's where the rub is.
    You promised us full cooperation. And yet the Office of Chief
    Counsel apparently has 70 attorneys, they're delivering four
    documents a day per attorney to us, and they look like this.
    And in minute print it says 6103.
        Now, if a lawyer is working on a document, four pages a day
    per lawyer, are you going to tell me that this is, in fact,
    minimal redaction as required by law?
        Mr. Werfel. Well, there's a couple of statements that I'd
    like to make if I could.
        Mr. Issa. No, I'd just like your answers, please.
        Mr. Werfel. The lawyers take very seriously their legal
    responsibilities to redact information under the law, to redact
    information that is specific to an individual taxpayer. And all
    such information, bottom line, Mr. Chairman, is all such
    information, whether redacted or unredacted, is delivered to
    this Congress. It is delivered----
        Mr. Issa. You have delivered less than 1 percent--excuse me
    for standing, but I kind of have to get over your stack--you
    have delivered less than 1 percent of the documents, actually,
    to the Ways and Means Committee. You are not delivering to the
    Ways and Means Committee.
        Mr. Werfel. I disagree with that conclusion.
        Mr. Issa. I'm afraid that's what Chairman Camp put out, and
    he put it out in writing.
        Mr. Werfel. And I disagree with that conclusion, and if I'm
    allowed to explain, I can provide specific facts that would
    support my disagreement with that conclusion.
        Mr. Issa. Here is my question to you. We produced, I
    believe, 63 search terms. You added some search terms. I'm not
    disagreeing with your adding progressive and looking for
    progressive. That's fine. I want more, not less.
        You came up with this, it added up to a total of about 80
    search terms, and then unilaterally your people, the Office of
    Chief Counsel, reduced that down to a dozen. They are not
    searching on the terms we've asked for.
        Our request is for all information related to this. When
    you eliminate search terms unilaterally, you're obstructing us
    by limiting the scope of discovery. Do you understand that, Mr.
    Werfel?
        Mr. Werfel. I do, but I disagree with the premise of your
    question and the facts that you're offering.
        Mr. Issa. Did you, in fact, did your people limit the
    search terms below the search terms that are delivered actually
    in your response letter today if you have looked at it?
        Mr. Werfel. We are prioritizing searches in order to get
    you more documents more quickly, and that is having an impact.
    In fact, this week alone the amount of document production that
    we have been able to produce has increased dramatically. That
    doesn't mean that we've eliminated search terms permanently. It
    means that we're making modifications in order to make sure
    that we are zeroing in on----
        Mr. Issa. That is not your call, Mr. Werfel.
        Now, let's go into a little quick detail. What's
    interesting about this page, I understand why you've removed
    taxpayer specific. But this is also--this information is being
    delivered without headers. If the names were there, I still
    wouldn't know what those numbers are. Somebody deliberately
    printed out information, or actually created digital, in which
    they stripped out the meaningful data so you know actually what
    these columns are. Even Mr. Connolly would say this doesn't
    look like a spreadsheet he has normally had because
    spreadsheets say what's on top of it.
        Additionally, we asked you for information. We set the
    priority, if you are going to slow roll us, and you are slow
    rolling us.
        Mr. Werfel. That is not true.
        Mr. Issa. Mr. Werfel, you frustrated this committee. You
    promised to do things and you're not. The Office of Chief
    Counsel, as far as we know, have made the decisions to limit
    search terms. Is that correct, or did you?
        Mr. Werfel. I'm working together with the Office of Chief
    Counsel. We are not limiting the search terms in a permanent
    way. We are prioritizing to get the most relevant documents. If
    I can make a point--if I can make a point----
        Mr. Issa. Please. I'd ask unanimous consent for an
    additional 4 minutes to explore this.
        Mr. Connolly. Mr. Chairman, I will gladly give that
    unanimous consent, provided that the Democratic side of the
    aisle be allowed to respond, given the fact that we are now off
    topic with respect to this hearing. I respect the wish and the
    prerogative of the chairman to use this opportunity to query
    Mr. Werfel on a different matter, and I respect that, but I'd
    like an equal opportunity to respond.
        Mr. Mica. I would grant the full committee chair that time,
    and we will grant additional time to the minority.
        Mr. Connolly. I thank the chair for his graciousness.
        Mr. Issa. Thank you.
        Mr. Werfel, let's go through the numbers.
        Mr. Werfel. I thought I was about to----
        Mr. Issa. No, no, I have only been granted additional time.
        Mr. Werfel. Okay.
        Mr. Issa. Since the Democrats seem to be carrying your
    water, I think I'll just use my----
        Mr. Werfel. I think they're just important facts for me to
    get out and hopefully I can get them out.
        Mr. Issa. Yes, they're important facts to get out and
    you're obstructing them. So now----
        Mr. Werfel. I am not. That is not true----
        Mr. Issa. So now----
        Mr. Werfel. --and not supported.
        Mr. Issa. Mr. Werfel, apparently you were put in by the
    administration to run cover until somebody new would come in.
        Mr. Werfel. Again, that is not true.
        Mr. Issa. It is now my time, and I'm going to explain to
    you what this committee has found.
        Mr. Werfel, in 2 months, out of 64 million pages, you have
    delivered 12,100, and this is over 2,500 of them. They are
    completely useless. Your interpretation of 6103 is so broad
    that you are delivering no meaningful information.
        More importantly, we have prioritized a number of
    discovery. Lois Lerner, a woman who did not properly, but did
    attempt to take the Fifth before our committee, we have asked
    for all correspondence. It has not been forthcoming. We have
    asked for correspondence with the White House.
        Mr. Werfel, let's understand something. Correspondence with
    the White House, by definition, had darn well better not
    include 6103, so redaction is not appropriate. We are not
    covered by the Privacy Act. Therefore, even if it includes
    names of individuals like Sheldon Adelson and how you're going
    to target him or something, even if it included that, quite
    frankly, it would not be 6103. It would be communications with
    the outside.
        Additionally, your people have unilaterally chosen to
    redact, according to them, private information. Mr. Werfel, you
    don't have the right to have private communication on
    government time and government equipment. If Lois Lerner or
    others had private communications, they are not subject to
    6103, because if there's 6103 in there, we expect them to be
    immediately referred for criminal prosecution. You can't have
    private conversations and release 6103. That, of course, would
    be wrong.
        So as we go through this discovery and find far excess
    redacting, no question at all, slow rolling discovery, limiting
    search terms, you may call it prioritizing, but you are not
    prioritizing as we need them. It is my expectation that we
    should have already received communications to and from the
    White House. We should have already received communication
    between anyone who was conducting non-6103 business. We should
    have already received Lois Lerner's entire packet.
        These are not my expectations. These are the American
    people's expectations. Your speed of delivery is such that you
    will be long gone, the President will be long gone, Lois Lerner
    will have retired before we would receive a sufficient amount
    of information to be meaningful.
        You're leaving me no choice. I've asked you for
    information. You're not forthcoming. Your own Chief Counsel's
    office appears to be clearly compromised. The lawyers there are
    included in this investigation. The communications to and from
    those lawyers clearly mean that the Office of Chief Counsel, a
    political appointed office, has been compromised. You're
    leaving me no choice, I will be preparing and sending a
    subpoena for these documents to the Secretary of the Treasury,
    who will be remaining on, and our expectation is that the
    Treasury Department will take over the delivery of documents in
    a timely fashion, use such attorneys as they may see fit that
    they believe are not compromised. And I would ask you to
    immediately instruct the Chief Counsel that they, the Chief
    Counsel's office, may not any longer be part of the decision
    making, only attorneys who are not part of our investigation.
        And quite frankly, I'm deeply disappointed. It was my
    expectation with our past relationship and your past work that
    you would come in not just wanting to be a caretaker, but
    actually get to the bottom of this. But as Cincinnati turned to
    Washington, Washington turned to political appointee offices,
    and the President began calling this scandal phony, and
    Secretary Lew began calling this scandal phony, what I can't
    understand is how you can think the American people would
    accept this as phony.
        This is a real investigation. We need real discovery. If
    these documents need to be redacted, then by definition you
    have no reason to deliver them. If you can only deliver me
    blank pages, completely blank pages, deliver them to the other
    committee.
        But I'll tell you one thing, as these pages, which are
    almost impossible to figure out where they came from, are gone
    through by the Ways and Means Committee, you'd better hope,
    you'd better really hope that we don't find something there
    that clearly should not have been redacted, which we expect we
    will.
        Moreover, I'm sad to see you go because I thought you could
    do something. I'm sad to have to issue a subpoena because
    that's not what I thought we were going to have. We did not
    enter this investigation thinking that this was some grand
    conspiracy. We entered this thinking this was something
    fundamentally wrong. My Democratic friends are convinced that
    progressives were targeted, even though your own Inspector
    General has said he found no evidence of it, while he did find
    evidence of other groups, generally called Tea Party groups,
    having been targeted.
        We don't want to find only one side. We want to find anyone
    that's targeted, and we want to hold people responsible. Today
    Lois Lerner is being given full pay and not held accountable.
    Our job is to find out everyone that should be held accountable
    and make sure the American people can trust this will not
    happen again, because I believe if we're thwarted in this
    investigation this will become a pattern of behavior, whether
    by the chief executive of the United States or simply by
    individuals who have power within bureaucracies such as the
    IRS, the EPA, OSHA, and the like.
        Mr. Chairman, I now owe 6 minutes to the Democratic member,
    and I understand. I yield back.
        Mr. Mica. Duly noted. And I recognize at this point the
    ranking member of the full committee.
        Mr. Cummings. I counted 7.
        Mr. Mica. Well, I'll make that determination.
        Mr. Cummings. I'm just looking at the clock.
        Mr. Mica. We started at 4. You weren't here, sir. I will
    make the determination.
        Mr. Cummings. Thank you for recognizing me, Mr. Chairman.
        Mr. Mica. You are recognized for 5 minutes, and then I will
    consult with the ranking member to see how we distribute the
    balance of the time, I promise. Thank you.
        Mr. Cummings. Mr. Werfel, first of all, I want to thank you
    for your service. I listened to what just was said to you, and
    I again thank you for your service. Earlier this week Chairman
    Issa accused you of obstructing the committee's investigation
    because you were not producing documents fast enough, in his
    opinion. You have produced to Congress tens of thousands of
    documents. We have interviewed 18 IRS witnesses. And today is
    the third time you have testified personally before our
    committee in the last 2 months.
        In addition, Mr. Werfel, there's a law, Section 6103 of the
    Internal Revenue Code, that prohibits you from revealing
    information to our committee that identifies specific taxpayer
    information. Is that right?
        Mr. Werfel. Yes, that is correct.
        Mr. Cummings. And you need to review all the documents you
    are producing to our committee to first make sure they comply
    with the law. Is that correct?
        Mr. Werfel. Yes.
        Mr. Cummings. I'm not concerned with your compliance, Mr.
    Werfel, because I have seen it. My concern is the actions of
    the IG was blocking you from providing information about
    progressive groups to this committee.
        Mr. Werfel, 2 weeks ago, on July 17th, you testified that
    some non-Tea Party groups received treatment similar to Tea
    Party applicants and the IRS denied at least one category of
    applicants after a 3-year review. Is that right?
        Mr. Werfel. That's correct.
        Mr. Cummings. In this instance, your career experts
    reviewed these documents and told you this information was okay
    to share with the committee, that it did not reveal specific
    taxpayer information and did not violate Section 6103. But just
    as you were about to produce the documents, this information to
    the committee and the information to the committee, the IG
    personally intervened and claimed that it might reveal specific
    taxpayer information. Is that right?
        Mr. Werfel. That's correct. The IG reached out to me and
    expressed concerns about our pending delivery of the
    information.
        Mr. Cummings. So you were about to hand us documents, the
    same kind of documents Mr. Issa just asked about, but then the
    IG says no. Is that right?
        Mr. Werfel. The IG raised serious concerns.
        Mr. Cummings. When we asked the IG about this, he confirmed
    that his effort to block your disclosure to the committee was
    unprecedented. We don't hear those complaints coming from over
    the other side now. When we pressed him on this, he said he was
    still in: ``ongoing discussions'' with the office, and that he
    would resolve this issue with you: ``sooner rather than
    later.'' The problem is we have not heard a single word from
    the IG since then.
        Can you give us an update? Has he withdrawn his objection?
    Are your discussions still: ``ongoing''?
        Mr. Werfel. They are. I have spoken to him recently about
    it. He reasserted his concern and indicated that he was still
    not convinced that the information was not taxpayer----
        Mr. Cummings. The information about the progressive groups?
        Mr. Werfel. In this case, yes.
        Mr. Cummings. Do your career experts at IRS still believe
    it would be appropriate to provide this information to the
    committee?
        Mr. Werfel. Yes, they do.
        Mr. Cummings. I'm deeply disappointed that the IG continues
    to block the production of information about progressive groups
    to the committee. Representative Connolly and I sent a letter
    to the IG yesterday asking him for an explanation.
        Mr. Chairman, I ask that our letter be included in the
    record.
        Mr. Mica. Without objection, so ordered.
        Mr. Cummings. As I have said throughout this investigation,
    our job is to ensure that all applications for tax-exempt
    status are treated fairly, regardless of whether they are
    conservative, progressive, or in between. If we do not receive
    a satisfactory response from the IG by next week, I would ask
    that you go ahead, Mr. Werfel, and produce these documents.
        You know, the chairman just said, he just told you, he
    wants the documents. So let's get him the documents, even over
    the objection of the IG. We will follow up and let you know if
    we hear from him, but look forward to hearing from us.
        Mr. Werfel. Thank you. And if I can just make a point, you
    know, I'm not exactly familiar with the exact procedures of the
    committee in the hearing, but I would like an opportunity to
    respond to each of Chairman Issa's allegations and questions. A
    lot of them warrant corrections of fact and clarification. I
    wish he was here for me to respond to him directly, but at some
    point during the course of the events today I would appreciate
    the opportunity to respond.
        Mr. Cummings. May I use the other 5 minutes?
        Mr. Mica. If you would like. You have 6 minutes.
        Mr. Cummings. Thank you. Thank you, Mr. Chairman.
        One of the things that I remind my committee members is
    that when people come in here, they come here, these are public
    servants, they are giving their best, and their family,
    everybody is watching them on C-SPAN, employees, accusations
    are made, and they never have an opportunity to respond. And it
    really, really bothers me. And so I want you to respond, if you
    may. Try to leave me a few more minutes, because I need to ask
    you a few more questions. Do the best you can.
        Mr. Werfel. First of all, the notion that we're impeding or
    obstructing is completely false. In fact, the opposite is true.
    We are involved in a thorough, comprehensive effort to fully
    cooperate with all the congressional committees that are asking
    questions, asking for witnesses, asking for documents, and
    there's substantial facts in evidence that demonstrate our full
    cooperation.
        And keep in mind, I have been in seat for 9 weeks, and this
    process is moving forward, and we are getting better and more
    effective at producing this discovery on a day-to-day basis. I
    have more than 100 employees working on the document request
    that Chairman Issa raised a concern about. This includes 70
    attorneys working full-time to review documents. We are
    producing documents on a weekly rolling basis. This committee,
    as of today, will have over 16,000 pages of documents that have
    been delivered. But to Congress as a whole, as of today, there
    will be 70,000 pages of documents delivered.
        Now, what's important about the redaction process here, and
    what's very important to make sure that the public and the
    American people understand is that all of these documents are
    being produced to Congress. We operate within legal constraints
    in terms of what we can deliver to who and to when. We have to
    protect taxpayer information, and there are rules enacted by
    this Congress that require that certain documents can only go
    to the tax communities while other documents can come to----
        Mr. Cummings. And if you violate 6103 what happens, what's
    the penalty?
        Mr. Werfel. It's criminal. It's a criminal violation.
        Mr. Cummings. Jail time.
        Mr. Werfel. Exactly.
        Mr. Cummings. All right. Go ahead.
        Mr. Connolly. Would the gentleman yield?
        Mr. Cummings. Of course.
        Mr. Connolly. Mr. Cummings, the very same chairman who just
    railed against Mr. Werfel in his 9-weeks tenure, did he not say
    on June 18th in defense of the Inspector General, Mr. George,
    that in erring on the side of caution, that was the right
    policy----
        Mr. Cummings. He certainly did.
        Mr. Connolly. --as to 6103? And therefore, the withholding
    of documents was justified.
        Mr. Cummings. That's right.
        Mr. Connolly. Is it also true, Mr. Cummings, that the list
    of search terms submitted to Mr. Werfel and IRS by the majority
    on this committee includes 81 items?
        Mr. Cummings. That's right.
        Mr. Connolly. And is one of the terms ``audit,'' the word
    ``audit''?
        Mr. Cummings. That's right.
        Mr. Connolly. Might that generate, I don't know, a lot of
    paper at IRS, Mr. Cummings?
        Mr. Cummings. Yes.
        Mr. Connolly. Thank you, Mr. Cummings.
        Mr. Werfel. And I'm going to get to that point, but let me
    quickly go through some of the statistics and facts to make
    sure that there is an understanding of the amount of discovery
    that's coming across from the IRS to these committees.
        Mr. Cummings. And intertwined in that, your testimony
    earlier, that you are losing, I think you said, 8,000
    employees, 8,000.
        Mr. Werfel. Yeah. We take this very seriously, and out of
    Chief Counsel's office of 1,600 lawyers, we have 100 lawyers
    working on this; 100 people, 70 full-time. I said there was now
    70,000 pages of documents as of today, by the end of the day
    today, that will be delivered to Congress. These have very
    relevant information on them that were specifically requested
    by the committee. There was a prioritization. You asked for the
    BOLO spreadsheets; we got you them. You asked for the emails
    associated with the BOLO spreadsheets; we got you them. You
    asked for training materials, emails that were self-selected by
    witnesses appearing for interviews. All of those were
    delivered.
        We've responded to 41 different letters from members of the
    committee. Including today's hearing, IRS officials, including
    myself, have appeared in 15 hearings since the IG report was
    issued. We have made 19 employees available for a total of 29
    interviews. Supporting all of this is thousands and thousands
    of work hours as we work to be cooperative.
        And I think the trend here, which is important, is that the
    document production in particular, because that's of concern,
    is increasing. In fact in this week alone we are having
    increases, and the reason is, is because over the last few
    weeks we have made important changes to that process. I have
    added more people. We're making technology enhancements.
        But perhaps most important, to get to one of Chairman
    Issa's most critical concerns, which I think really warrants
    clarification, what happens is when we get 82 search terms it
    produces a large amount of documents, a majority of which are
    nonresponsive. And what happens is you have to look through
    every document. We have a responsibility to look at every page.
    And if you produce an enormous amount of documents to look
    through, it takes longer and longer to find those responsive
    documents and give them to you. Roughly 75 percent of all the
    documents that were being pulled based on the 80-plus search
    terms were nonresponsive, yet staff time was being eaten up
    going through each document.
        So what we did is we tried to help the process along, not
    by permanently saying we're not going to search these search
    terms, but by saying, if we can take the search terms and
    ensure that we have a higher response rate in some of this
    information, then we're going to get the information that this
    committee and other committees want quicker.
        So no unilateral decision has been made to alter the search
    terms in perpetuity, not at all. That's not true. What has
    happened is we have made an adjustment to the search term in
    order to increase the number of documents you get sooner rather
    than later. The fact that I'm able to deliver thousands of
    pages of documents today is because we have made these
    improvements. It doesn't mean that we're not fully committed to
    getting all these documents.
        Mr. Cummings. Before my time runs out, you're trying to
    obey the law, is that what you are telling us?
        Mr. Werfel. I'm trying to obey the law.
        Mr. Cummings. That we made, that this Congress made.
        Mr. Werfel. Yes.
        Mr. Cummings. And finally, I want to just enter in the
    record the letter of August 2nd, 2013, to Chairman Issa, Mr.
    Chairman, from Mr. Werfel. I would like to have that entered
    into the record.
        Mr. Mica. Without objection, so ordered.
        Mr. Mica. That concludes the time of the gentleman. And I
    will recognize then Mr. Jordan.
        And Mr. Jordan, you have 25 seconds in addition to the 5
    minutes.
        Mr. Jordan. That's fine. Thank you, Mr. Chairman.
        Mr. Werfel, you know, 81 search terms, 12 search terms,
    2,500 pages of redacted, you know, blank page, whatever. And
    you have got reasons and you gave your explanation, that's
    fine. But it's been almost 3 months since Lois Lerner had a
    planted question asked where she told the world that this was
    going on. And we have been asking ever since that happened for
    Lois Lerner's emails, and you guys won't give them to us. Now,
    that's not redacted. That's not 61. We just want the
    correspondence from the person at the center of the storm and
    you guys don't give it to us. It seems to me that's a couple
    hours. You got 1,600 lawyers. Why can't you give us her emails.
        Mr. Werfel. I don't know that that's the case. In fact----
        Mr. Jordan. Our staff told me we have not----
        Mr. Werfel. --we've provided all of the emails.
        Mr. Jordan. Our staff told me we have not gotten emails
    from Lois Lerner.
        Mr. Werfel. We should clarify that. In fact, I received a
    letter recently which attached an email from Lois Lerner that
    we produced. I mean, so we are producing these emails. In fact,
    when you make a specific request to us----
        Mr. Jordan. We want the emails from anyone at the IRS
    correspondence with the White House. Why can't we get that?
        Mr. Werfel. We've looked at those, too, and we've searched,
    and in some ways, in some searches, we came up with zero. There
    were no emails between that individual and the White House. But
    this is the point I'm trying to make. If you have a particular
    request, give it to us. We will move it higher in the priority
    list and we'll get you the documents.
        Mr. Jordan. Well, then why are we not getting this?
        Mr. Werfel. I don't know.
        Mr. Jordan. William Wilkins, we're not getting his emails.
        Mr. Werfel. That's also not true. Two things about William
    Wilkins, if I could. One, I think today or this week we are
    producing, because you made a specific request, and as part of
    our cooperation, if you want to put something in the front of
    the line, please, put something in the front of the line
    because that is going to help us. It's about prioritization.
        The other thing about Bill Wilkins is we've offered Bill
    Wilkins to be interviewed by this committee. Last week we made
    that offer. It's a standing offer. At this time, your staff has
    not taken us up on this offer.
        Mr. Jordan. Oh, we will at some point. Trust me.
        Mr. Werfel. I hope do you, because this is not about
    obstruction. This is about offering as much information as we
    can. And the fact is, is that I know you have a lot of
    questions about Bill Wilkins, we want to get you those answers.
    We have offered him to be interviewed by your staff. You
    haven't taken us up on that.
        Mr. Jordan. So I just a want to be clear then. Every single
    email of Lois Lerner's that we have asked for, you have sent to
    us?
        Mr. Werfel. No. But we've provided hundreds of her emails.
    But, again, this is a process.
        Mr. Jordan. No, no, no, no, no, no. It's pretty simple. You
    go to her computer and you get her emails.
        Mr. Werfel. It's not that simple.
        Mr. Jordan. Well, it shouldn't take 3 months.
        Mr. Werfel. Well, the challenge that we have----
        Mr. Jordan. Well, here is the point. Just a little bit ago
    you said you did send us all the information. And then I asked
    you the question, did you send us every single email from Lois
    Lerner, and you said no. So which is it? Did you send them all
    or did you not send them all?
        Mr. Werfel. We sent many Lois Lerner, but not all of them.
        Mr. Jordan. So that's different than you first told me. You
    got to be square with us.
        Mr. Werfel. I'm being square with you.
        Mr. Jordan. We want every single email from Lois Lerner. We
    want every single correspondence from Bill Wilkins. And we
    would like any correspondence between the IRS and the White
    House. And you haven't given it all to us.
        Mr. Werfel. And here's my answer if I could, which is----
        Mr. Jordan. I'm giving you plenty of time to answer.
        Mr. Werfel. This is a process, and we are providing
    information on a rolling basis. We are getting it as quickly as
    we can to you. If you have a specific request, we will do our
    best to put that at the top of the priority ladder and get you
    that.
        Mr. Jordan. We have a specific request. We want every bit
    of correspondence from Lois Lerner and you won't give it to us.
    Here is the lady who broke the story with the planted question.
    Here is the lady who took the Fifth. Here is the lady who is at
    the center of this storm. And we want every bit of email from
    her, and you won't give it to us.
        Mr. Werfel. I will tell you I'm committed to.
        Mr. Jordan. And you have had 3 months to do it.
        Mr. Werfel. I will tell you what we're committed to. We're
    committed to reviewing every one of Lois Lerner's emails, and
    providing the response. Some of it has to be redacted for 6103.
    Some of it be reviewed for relevance and----
        Mr. Jordan. Why would Lois Lerner have 6103 information in
    her emails? She is the policy person. So she's got specific
    taxpayer information that she's sending all over the place?
        Mr. Werfel. It might be very normal for Lois Lerner to
    email someone inside the IRS who is authorized to have taxpayer
    information.
        Mr. Jordan. Well, let me ask you to do this for us.
        Mr. Werfel. A lot of her emails----
        Mr. Jordan. When you go back to the office today----
        Mr. Werfel. Yes.
        Mr. Jordan. --can you tell those 70 lawyers, amongst the
    1,600 you have at the IRS, can you tell them to focus on one
    thing: Every single bit of correspondence Lois Lerner has sent
    to anyone on the planet, we want that information given to this
    committee so we can get to the bottom of the story. Can you do
    that?
        Mr. Werfel. I will go back and I will ask the team to
    prioritize that over other document requests that we've
    received, because you've asked, and that's part of the
    partnership.
        Mr. Jordan. If the President wants to work hand in hand
    with Congress and you guys want to get to the bottom of this
    story, why wasn't that done back in May when this story broke?
    Here is the lady who has taken the Fifth, who broke the story
    with the planted question, who tried to blame it on two rogue
    agents, which you know isn't true. Here is the lady at the
    center of this storm. Why wasn't that done the very first day
    you came on the job where you said, you know what, here is the
    lady at the center of this whole thing, let's get every bit of
    correspondence and let's get that to the committee.
        If the President really wants to work hand in hand with
    Congress to get to the truth, I would have expected that would
    be the very first action you would take, Mr. Werfel, and here
    we are 3 months later and you are telling us in this committee,
    we have only sent you some of Lois Lerner's emails. Why wasn't
    that done day one?
        Mr. Werfel. I think the process----
        Mr. Jordan. Don't you think the American people would have
    liked to have that information from day one?
        Mr. Werfel. Yeah, I know. A couple of other responses.
    First, Lois Lerner's emails are on the top of our list and we
    are working through it. But we're also producing----
        Mr. Jordan. That's not good enough. That's not. We want
    them and we wanted them in May and you still haven't got them
    to us. Here it's August.
        Mr. Werfel. And as I've demonstrated, we've produced a lot
    of information to you that's highly relevant to your
    investigation.
        Mr. Cummings. Mr. Chairman? Mr. Chairman?
        Mr. Mica. Okay, wait a second. Okay. So we got 10 seconds.
    Go ahead.
        Mr. Cummings. Mr. Chairman, may I have 10 seconds just to--
    --
        Mr. Mica. The gentleman is recognized.
        Mr. Cummings. The gentleman just said that we hadn't
    received documents with regard to William Wilkins. We have
    received, I know we haven't received all of them, but I have
    got them right here. If the gentleman would like to have them,
    I will give them to him.
        Mr. Mica. The gentleman yields back.
        Okay, I think we've got even time now. And I think Mr.
    Turner, the gentleman from Ohio, is to be recognized.
        Mr. Turner. First off, let me join my colleagues, Mr.
    Jordan, of course the chairman, being outraged to the fact that
    the IRS in the beginning didn't tell the truth on this. We're
    not dealing with the IRS coming forward and saying this is what
    has happened, either to the American public or to this
    committee. The IRS came forward first with a fiction that this
    was something that was done by rogue agents down in IRS in
    Cincinnati. Now we are learning, of course, that it's not. Now
    they are not being forthcoming with information. And it's just
    astounding to have both members of this investigative
    responsibilities of this committee and certainly yourself, Mr.
    Werfel, defend not giving us, the American public, information.
    But the chairman has said, luckily, you know, we're not
    dependent upon your good graces to get this information. The
    chairman is issuing subpoenas. And we certainly have the full
    ability to use the Federal Government's authorities to compel
    your answers since you have not chosen to. And I look forward
    to the fact that that is coming. I think it is hysterical that
    you keep saying we are doing this on a rolling basis because
    the only thing that's rolling is that you're rolling the
    American people and you're rolling this committee and it is
    going to stop.
        Now, getting us back on topic. The issue of identity theft
    is certainly a very important one, and it's one that of course
    the IRS and its processes can have an effect upon where people
    have vulnerabilities. Commissioner MacGinnitie--did I pronounce
    that correctly--I appreciate your testimony. You mentioned
    LexisNexis. They're actually in my community, and I appreciate
    you working directly with them. I think it's important for us
    to look to industry and the ways in which some of the data
    processing, data mining efforts can be used to be able to
    detect issues of identity theft.
        Now, Mr. Werfel, the financial industry and commercial tax
    software manufacturers have made recommendations to the IRS to
    improve its detection and prevention of identity theft.
    Additionally, the IRS has started two task forces to address
    fraud in tax preparation and bank settlement products. One
    positive step is the IRS' issuance of guidance that allows tax
    preparers to run algorithms that identify fraudulent returns
    and report that fraud to the IRS. The American Coalition for
    Taxpayer Rights has also worked with the IRS to ensure members
    of ACTR can send real-time reports of fraud to the IRS.
        Mr. Werfel, the financial industry has important expertise
    and has taken steps to combat identity theft. How is the IRS
    working with the tax software companies on the issues of this
    problem? Also, we are aware that the State of Georgia has
    utilized the private sector to help identify potential fraud
    through third-party information. We understand the IRS has a
    program to receive information from industry. Could you
    describe this? And how have you worked with companies to help
    them identify consumer fraud and identity theft?
        Mr. Werfel. Well, we have a very critical partnership with
    private industry. They often are developing and are at the
    cutting edge of sophisticated solutions to deal with fraud or
    error. There are companies that we have working at the IRS
    right now that help inform on our filters, help inform on
    trends and schemes that we can help capture, help us, provide
    us information. We also benchmark and see what other companies
    are doing that can face similar challenges, whether it's a
    credit card company or other types of entities in the financial
    services industry.
        So I think that we have a robust partnership with private
    companies and experts, and I think if we're going to tackle
    this issue effectively we're going to have to stay very close
    with our corporate partners because they are very----
        Mr. Turner. Mr. Werfel, one thing I'm interested in
    specifically is the interface between the private sector and
    the IRS. And obviously, there's a huge amount of communication
    that's going back and forth that includes opportunities for
    discovery of identity theft. Not just looking to how industry
    can be applied to your internal bureaucratic operations, but
    how also, through that collaboration, identity theft might be
    more easily identified.
        Mr. Werfel. Yeah, I completely agree. There is a lot of
    dimensions to this problem, and very often technology is going
    to be a solution that helps us stay ahead of it. I mean, what
    we have been describing in this hearing is a problem that's
    emerging quicker than the solutions are to tackle it.
    Technology is the key.
        Mr. Turner. Mr. Werfel, now turning back to the IRS
    scandal, I want to say this. You know, when you first came on
    and sat in front of these committees and gave everybody and the
    American public your statement that you were going to get to
    the bottom of this, you don't get to just decide that. You have
    to actually prove it. And the fact that you're not standing in
    front of the committees and readily disclosing the information
    that would establish both what happened, that you're stopping
    it and correcting it, is a tremendous amount of arrogance. And
    I certainly hope that you will become forthcoming.
        Mr. Werfel. It's not true. It's just simply not true. We
    are providing the information. We are doing it----
        Mr. Turner. I yield back.
        Mr. Werfel. We are doing it in a robust and legally
    appropriate way. But any indication that we are standing in the
    way of discovery is just not true.
        Mr. Mica. Thank the gentleman.
        Recognize now the gentleman from North Carolina, Mr.
    Meadows.
        Mr. Meadows. Thank you, Mr. Chairman.
        Thank you, each one of you, for being here.
        Mr. Werfel, and Mr. McKenney, if I could direct your
    attention. As we look at tax preparation and the industry and
    addressing this issue of tax fraud, you know, what are the
    recommendations that have been made that have not been
    addressed or that we're failing to address with regards to the
    IG, with areas--because we're seeing that it's growing.
    According to Mr. Werfel's testimony, it says that it's growing.
    So what have we not addressed?
        Mr. McKenney. At least from our perspective, the main
    concerns the IRS needs to be in a position to be able to do is
    authenticate kind of in three areas. One, as the tax return
    comes in the door, make sure they authenticate that it's from
    the right taxpayer. When they validate the income and
    withholding, they need to run that against income and
    withholding to verify that. And then on the end of where they
    deposit into a bank account, that also needs to be
    authenticated so that they deposit to a bank account that's in
    the name of the taxpayer. So those are the three areas where we
    believe it needs improvement.
        Mr. Meadows. So, Mr. Werfel, why do you think we have not
    been more successful in addressing that? Is this a lack of
    working with the tax preparers?
        Mr. Werfel. I think, you know, we want to achieve more than
    we can given time and resources. The schemes emerge, the
    identity theft problem grows quicker than we want.
        I'll give you an example. You know, one of the things that
    the IG has pointed out is that we can do more to use the
    standard authentication procedures that are using credit cards.
    Like if you are authenticating yourself, they might ask for
    your mother's maiden name or something that potentially the
    identity thief might not know about you. They might, but they
    might not. It improves the chance. So we've developed this
    program we call our out-of-wallet program, where we are
    implementing those very types of procedures, but we are finding
    that it takes resources. The more people----
        Mr. Meadows. So this all gets down to money, is that what
    you're----
        Mr. Werfel. No, no, I'm just giving you an example.
        Mr. Meadows. Okay.
        Mr. Werfel. It's a combination of knowing about the
    solution and having the resources to effectively implement it
    and make sure that it is going to have the most positive return
    on investment. So there's a lot of factors at play.
        Mr. Meadows. All right. So let me go with this, because
    we've got an issue. You've said that this is increasing, this
    problem is increasing, and yet what we have is we have--and
    I've talked to some of the groups that are actually working to
    try to solve this in the private sector. And so if it's
    increasing, and they are making recommendations on how to fix
    it, the private groups that you work with, where is the
    problem? Is it that they are making ineffective recommendations
    or we're just not implementing it at the IRS? Who's at fault?
        Mr. Werfel. I don't know if I want to say it's a fault.
    It's an inherent reality that the problem grows quicker than
    our solutions can track it.
        Mr. Meadows. So if it's growing bigger, and they're
    identifying, because I've talked to some of the stakeholders,
    and they have a lot of recommendations, and they would indicate
    that you all are not acting on a lot of their recommendations.
    Would you agree with that? Or are they just not telling me the
    truth.
        Mr. Werfel. I'd want to take some time before I would
    concur with that. I mean, I think we are looking at----
        Mr. Meadows. Are you aware of any times where they've made
    good recommendations that you have not implemented at the IRS?
    In preparation for this hearing, did you see, my gosh, we
    should have done that?
        Mr. Werfel. I didn't see any, so let me go back and talk to
    the team about whether there are any such situations, and I can
    make you aware of them.
        Mr. Meadows. Okay. Let me go on a little bit further. In
    recent years, we have seen and you talked about instances of
    hundreds of direct deposits going to banks----
        Mr. Werfel. Yes.
        Mr. Meadows. --and going to the same bank account. What
    steps are we taking? I mean, that seems like that would be a
    very easy programming issue to deal with in working with
    financial institutions, and yet I have heard of one that had
    400. I have heard of another that had 1,000 going to the same
    bank account, you know.
        Mr. Werfel. Yeah.
        Mr. Meadows. How can you not address this?
        Mr. Werfel. We are absolutely addressing it. And as I
    mentioned earlier----
        Mr. Meadows. You mean you are going to be addressing it?
        Mr. Werfel. No, we are, effective with filing season 2013,
    we have put in place new filters to help us identify redundant
    bank accounts. And as Mr. McKenney testified earlier, he gave
    some of the facts of what an impact that's having. So I would
    have liked to have caught that before. This is one of those
    things where a scheme emerges, and we can hit it as soon as it
    emerges, or we can be out in front and----
        Mr. Meadows. I would encourage you to work closer with
    those stakeholders to do this. I have a few other questions
    here, but I'm running out of time, so let me finish with this
    one. Do you not see a problem with Obamacare coming in and with
    the subsidies that are about to be asked for under just, you
    know, in terms of just saying, well, I qualify, do you not see
    schemes that could come out of that that would make this pale
    in comparison?
        Mr. Werfel. We're certainly focusing on potential risk of
    fraud in the----
        Mr. Meadows. Yes or no? Do you see the potential for great
    schemes?
        Mr. Werfel. I see it. But there is one point I want to make
    about the Affordable Care Act which is important, is when
    people get tax credits under the Affordable Care Act to help
    subsidize their premiums, they don't get the money. The money
    goes to the insurance company. So if I'm an identity thief or
    someone who is looking to defraud the government, I'm going to
    prioritize a place where I'm actually going to get cash----
        Mr. Meadows. So what you're saying is we should just get
    rid of where we pay people when they haven't paid any taxes,
    that would get rid of all of this, all the tax credits that we
    give to people when they haven't paid taxes?
        Mr. Werfel. No, what I'm suggesting is, is that because the
    Affordable Care Act is structured such as if you get the
    economic benefit, you don't get the money, it goes directly to
    the insurance company, that that is a disincentive for identity
    thieves and other fraudsters to come in and try to defraud that
    program, because there is never a point in the process where
    they are going to get cash in hand when they're doing that type
    of premium tax credit application.
        That doesn't mean that in the entire lifecycle of the
    Affordable Care Act we aren't concerned about certain
    vulnerabilities that we're working on. I'm just suggesting that
    that's a critical part of IRS' role, and there you have
    something in place that's going to disincentivize tax frauds
    from leveraging.
        Mr. Meadows. Well, I thank the chairman for his indulgence.
        Mr. Mica. Well, they haven't called a vote yet. They are
    going to call a couple of vote in a few minutes. So I guess
    with agreement with the ranking member, we'll just divide
    remaining time, 6 minutes a side.
        And, Mr. Connolly, you can divide your 6 minutes. I'll
    recognize you at this time.
        Mr. Connolly. I thank you, Mr. Chairman, and I thank you
    for being fair in allocating time.
        Let me just say, speaking for myself, Mr. Werfel, I
    apologize for the treatment you have gotten here today. One can
    stand up on a pile of paper, and that act could be construed,
    I'm sure it was not intended, to be an intimidating act. One
    can use those histrionics to hide the fact that, in fact, if
    anybody has blocked the issuance of documents that counter a
    narrative, it's the Inspector General, Mr. George, who is not
    here today.
        Mr. George testified under oath in response to questioning
    to me that the 202 unidentified entities he was looking at, he
    could not--there was no way of ascertaining whether progressive
    groups could be included in their number. And yet,
    subsequently, I believe on the 18th, under oath again, in
    response to questioning from Mr. Cartwright of this committee,
    he said he had indeed been apprised that there were BOLOs for
    progressive titles as well before the 22nd hearing. And in my
    view, that is at best, most charitably, an elusive answer under
    oath.
        We now have the Inspector General blocking documents being
    made available to this committee in an abundance of caution
    with respect to 6103, according to your own testimony. And it's
    been described as an unprecedented intervention by an IG on the
    eve of producing documents. I don't hear any outrage about
    that. That's just perfectly fine. It's the General Counsel
    who's the problem.
        I say it's the Inspector General who's the problem. I say
    the Inspector General has not provided objective and
    independent analysis before this committee. I say he has
    compromised his integrity and his credibility as a witness in
    this trumped-up so-called scandal.
        The fact of the matter is, based on everything we know, the
    IRS messed up in Cincinnati. They created so-called Be On the
    Look Out, BOLO's, to try to screen an avalanche of tax-
    exemptions applications, some of which were clearly triggered
    by the Citizens United decision by the Supreme Court. And
    overwhelmed, they tried to create a filter. They did it badly.
    They were cautioned not to do it and they persisted. Wrong. And
    my colleagues on the other side of the aisle are right, as are
    we on our side, to criticize the IRS.
        You came in, in the midst of that, to help try to clean up
    that and get to the bottom of it, and I congratulate you in
    trying to do so. And I have no evidence in front of me that you
    have done anything to obstruct or block. And I will say it is
    unfortunate that we could not go forward on this committee on a
    bipartisan basis and understand that both progressive and
    conservative groups apparently were targeted, and that's wrong.
    It's wrong if it's conservative. It's wrong if it's
    progressive. It's wrong if it's both.
        But the idea that there is some underlying scandal here
    that is political and goes all the way to the top was indeed
    the narrative before any facts were even known. And it was
    wrong.
        So I'm not surprised at the drive-by shooting nature of
    some of what's taken place here. And I regret it, because I do
    not think it's worthy of this committee. I think we could have
    and should have had a bipartisan analysis of what went wrong.
    But that narrative just won't plow.
        And, Mr. Cummings, I'd be glad to yield to you the balance
    of my time.
        Mr. Cummings. Thank you very much. Thank the gentleman for
    yielding.
        Going back to the letter of August 2nd, 2013, Mr. Werfel,
    that I introduced a few minutes ago, and it states--because I
    need to this be--I need the folks to hear this--and it states
    that as of today you have provided more than 16,000 pages of
    documents to the committee and more than 70,000 pages of
    documents to those committees that are authorized to receive
    taxpayer-specific information. Is that correct?
        Mr. Werfel. Yes.
        Mr. Cummings. Given the importance of protecting the
    confidentiality of taxpayer information, can you explain what
    additional steps are required before the IRS can produce
    responsive documents to our committee and what you have done to
    assure this process is expedited?
        Mr. Werfel. Yeah. So under the law we are required to make
    sure that no information that's specific to a taxpayer can be
    disclosed to anyone that's not authorized to receive it. And
    under the law, the tax committees, in particular Chairman Camp,
    Chairman Baucus, and their designees, under the law are the
    only entities that can receive that type of information in
    Congress.
        And if I could offer an example----
        Mr. Cummings. Quickly, because I want to address something
    Mr. Jordan said. Go ahead.
        Mr. Werfel. Just the one example I want to give, it's easy
    to pick up a document with a bunch of black on it and say
    you've redacted everything, this is unacceptable. But the
    reality is, some of the documents requested by the committees
    are taxpayer case files. They say, I'm going to pick taxpayer
    X. I want their file. I want their application for tax-exempt
    status. I want everything associated with it. So we grab a file
    and give it to them and it might be a bunch of pages, but
    because it's a taxpayer file, the entire file is protected
    under 6103 and it would be a crime for us to disclose that to
    any unauthorized sources.
        So we can have someone, you know, kind of indicating, look
    at all these pages that are completely blacked out. But what I
    want to make sure is we get the facts out. The facts are, those
    documents are coming to the Congress. We are working furiously
    to get them up here. But just the fact that they're blacked out
    is not in any way an obstruction. It's a legal responsibility
    that we have. And if there are concerns about the way in which
    we are redacting, I've said it before, we should talk to
    Chairman Camp, we should talk to Chairman Baucus. They have
    authorities to provide that information as well to other
    Members of Congress.
        There's a checks and balances program here in place to make
    sure that the right discovery receives to the right hands. And
    I just want to make sure that we are leveraging those checks
    and balances and understanding the facts.
        Mr. Cummings. Again, thank you for your service. I see my
    time has run out.
        Mr. Mica. Thank the gentleman.
        Let's see, we have 6-1/2 minutes left now. I'll yield 4
    minutes to Mr. Meadows, and I think he is going to yield some
    of that time to Mr. Jordan.
        Mr. Meadows. For each one of you that have come here today,
    I thank you. We have a number of questions that we will give to
    you. We ask that you respond in terms of for those particular
    information.
        Mr. Meadows. Mr. Werfel, I want to give you a chance to
    change what you just responded to with Ranking Member Cummings.
    You said that we have 16,000 documents at this particular time
    in Oversight, and that's----
        Mr. Werfel. Let me clarify that.
        Mr. Meadows. Because we have 12,000.
        Mr. Werfel. Right. Today, as of today, we are scheduled to
    produce by the end of the day today, you know, it's on
    schedule, I hope--that's my goal, that by the end of the
    business day today we have additional pages of documents that
    will put you at about 16,500 pages for the total.
        Mr. Meadows. Will those be any more meaningful than what we
    have already gotten?
        Mr. Werfel. They are responsive to the documents that you
    have asked for.
        Mr. Meadows. Will they be any more meaningful? You're an
    educated individual. Will they be any more meaningful?
        Mr. Werfel. I don't know how to respond to that because
    they're the documents that you requested. We are trying to
    provide you responsive documents, so they will be meaningful in
    some way if they are responsive. I don't know how----
        Mr. Meadows. Well, you're sending a very clear message.
    It's just not one, I don't think, that----
        Mr. Werfel. I will say, if I can respond, you said any more
    meaningful than the documents that we provided. We provided you
    BOLO lists. We provided you emails associated with BOLO lists.
    We provided you training materials. We furnished for you 19
    witnesses that have been interviewed 29 different times by
    committees. That's meaningful information. I think it's very
    meaningful information. So the notion that we're providing you
    information that's not meaningful I don't think is correct, and
    I want to clarify the record on that.
        Mr. Meadows. Well, I'll yield to the gentleman Mr. Issa.
        Mr. Issa. Thank you. I didn't plan on coming back, but I
    just want to go through a couple of things.
        Mr. Werfel. Please.
        Mr. Issa. According to you, nothing on this page is
    anything but 100 percent taxpayer-specific information,
    taxpayer identity information. Identity.
        Mr. Werfel. It may be. And as I was just explaining, I
    think you missed it, right before you came in, if I could
    explain----
        Mr. Issa. No, no, look, I've gone through the 6103 and I'm
    going to get to my point very quickly, because Mr. Cummings
    made a point, and it's a good one. Except he made a point
    trying to disparage a long-serving government servant, the IG.
        The IG has been consistent, as far as I can tell, in a
    highly, highly limited release under 6103. In other words, the
    ranking member is upset because he's not getting progressive
    groups that under oath the IG said were not targeted in his
    evaluation looking at the information. The amazing thing is,
    you didn't defend him, and I'm shocked. I'm shocked that you
    would not at least say that the Office of the Inspector
    General, which includes key lieutenants, one of whom was the
    Democratic deputy staff director here, that they are above
    politics, they are above partisanship, that they have a level
    of consistency. Instead, you let him imply that he was
    basically trying to thwart an investigation on progressives.
    Will you----
        Mr. Werfel. That was not my intent.
        Mr. Issa. Will you make it clear today----
        Mr. Werfel. I will.
        Mr. Issa. --that as far as you know he has been consistent
    in what he has said; that his office, although it includes
    people that at certain times worked for Republicans or
    Democrats, that it is considered to be nonpartisan, and their
    actions to this day, to the best of your knowledge, have been
    above question?
        Mr. Werfel. I will respond in this way: I have a deep
    respect for Russell George and his office. I have had a
    longstanding relationship with him and other members of the IG
    community. In my short tenure here, there have been moments
    along the way where we have disagreed. We have disagreed on the
    nature of whether something is 6103 protected. We have
    disagreed on the nature of some of the facts and data
    associated with the 501(c)(4) backlog, et cetera.
        But to your point, I have no basis to challenge his
    integrity in any way, shape, or form. I think he is an
    individual of great integrity, and I'm glad you asked the
    question.
        Mr. Issa. Well, then, his integrity was challenged by the
    ranking member.
        Mr. Cummings. That's not true.
        Mr. Issa. Well, I'm afraid----
        Mr. Cummings. There you go again.
        Mr. Issa. --that the record will speak for itself.
        Mr. Chairman, I haven't done my second round. The ranking
    member has. Could I have my 5 minutes.
        Mr. Mica. Well, okay, we had divided time up. We have 2-1/2
    minutes left on our side.
        Mr. Issa. If I could have that I will be brief. Thank you.
        Mr. Mica. The gentleman is recognized.
        Mr. Issa. I'm asking you today as we send a subpoena--I
    have signed it now.
        Mr. Werfel. Okay.
        Mr. Issa. --to Secretary Lew--who, by the way, I'm hoping
    he can get above his statements on a phony scandal about this
    and realize this scandal is real. Real Americans were really
    victims.
        Now, those victims, I'd love you to sit down, look at the
    law, and make the appropriate decision, which is withholding
    details on people who were victimized is not the intent of 6103
    and that the clear intent can be recognized. When you hand--oh,
    people are smiling and smug behind you. I just wish the camera
    could see there. Sort of, oh, well, we're going to get past
    that.
        The fact is, Chairman Camp is looking at a lot of this
    information. Today you've talked about how fast you're
    delivering things. All you had to do was hand his people
    basically the keys to the search, and they could have looked
    online over your shoulder. They have complete right to 6103.
    You don't have any redacting capability. They have the right to
    everything you see, they can see. And still he's received a
    fraction of the documents. You continue to essentially slow
    roll. He is getting documents in the order that you choose to
    give them, and that's wrong. That's just plain wrong. So we
    can----
        Mr. Werfel. That's not true.
        Mr. Issa. No, no, it's my limited remaining time. I was
    with Chairman Camp earlier today. I've looked at his releases.
    I'm up to date. He is frustrated and said so in a letter to you
    with the speed of the release, with the fact that you don't
    have a reason to do anything other than comply and turn over.
        The fact is the American people need answers and people who
    have been victimized need it. So I'm joining with the ranking
    member in one sense, not that you invent out of thin air and
    help support this progressives were victimized, when in fact we
    have a sworn statement that they weren't, but that you make
    available every possible piece under a uniform interpretation
    of 6103. And if you want to go to the level that Mr. Cummings
    wants on what 6103 is, great. Be consistent, lower it to lowest
    level, and more importantly, go back and soul search with that
    legion of attorneys and say, how in the world can we keep
    victims a secret? And that's what you are doing today. You are
    keeping victims a secret standing behind this.
        I do not believe that this is minimum redaction under 6103.
    I don't think you believe it either. And as you go off into
    your private life, I want you to think about the legacy of
    whether you helped victims or hindered this investigation.
        I thank the chairman and yield back.
        Mr. Cummings. Thank you very much, Mr. Chairman.
        Mr. Mica. Okay. We could probably get 2 minutes in a side.
        Mr. Cummings, 2 minutes.
        Mr. Cummings. Let me be very clear. With regard to the IG,
    there were things that were left out of his report that he
    admitted--that he admitted. There was disagreement, Mr. Werfel,
    with regard to documents, 6103, and what came under 6103. And
    clearly you had, based on the testimony that we had in the last
    hearing, you had career folk whose job it was to determine what
    was or was not 6103 to say that these documents could be
    released. Is that right?
        Mr. Werfel. That's correct.
        Mr. Cummings. And there was disagreement. The mere fact
    that one disagrees with someone does not mean you question
    their integrity. I disagree with my wife a lot, but I love her
    to life and I trust her. But what we have said is that we want
    the truth, the whole truth, and nothing but the truth, so help
    me God. That's what we want. Whether it's progressives, whether
    it's liberals, whether it's conservative, anything in between,
    we simply want the whole truth.
        And so, you know, on the one hand they say in one hearing,
    oh, we've got to be real careful with 6103. Then in the next
    hearing they said, dammit, we don't like the way you're dealing
    with 6103. Give us everything as fast as you can.
        Seventy lawyers--70 lawyers--working full-time going
    through documents. Let me tell you something. On the one hand,
    if you release information about taxpayers they'd be all over
    you. I'm just saying, I mean, you're damned if you do and
    you're damned if you don't. And I think the best thing to do is
    to obey the law, period.
        And, Mr. McKenney, you have got recommendations. Mr. Werfel
    talked about 8,000 employees, losing 8,000 employees,
    sequestration. How does that affect your recommendations, the
    loss of employees?
        Mr. McKenney. As it relates to identity theft?
        Mr. Cummings. Yeah.
        Mr. McKenney. Well, obviously, when they have a problem
    they have to deal with they have to draw from their existing
    employee base, which affects their other operations. That's the
    concern, and it would be a concern of ours also.
        Mr. Mica. Okay. Let's see, you have 2-1/2 minutes. Mr.
    Jordan, you are recognized.
        Mr. Jordan. Thank you, Mr. Chairman. I would just say this:
    They did release 6103 information, the Inspector General said
    so four different times, and one of those cases was referred to
    the Justice Department for prosecution, and this Justice
    Department won't prosecute. So they did exactly what--I want
    all the information. So we have the IRS releasing 6103
    information, but they can't give us Lois Lerner's emails. I
    don't care, you said 70,000 pieces, you know, you can make it a
    million pieces of information, but if you don't give us her
    emails, what does it mean?
        I want the emails. Here is an example. We got some limited
    emails regarding Mr. Wilkins. Here is an email from Janine
    Cook, who I think works in the Chief Counsel's office, an email
    she sent to Mr. Wilkins. And she says, ``Bill, thought you
    might be interested in this''--it deals with the Tax Code,
    Citizens United--she says, ``Bill, thought you might be
    interested in this in light of your earlier email.'' So we get
    that email, but we don't get the earlier email. We want all the
    emails.
        I mean, this is a great example of, you know, you keep
    saying, well, we are sending you some. Mr. Werfel, we want them
    all. And let me ask you this: Why have you limited the search?
    Why have you limited the search to May 10th, 2013? There are
    still all kinds of cases pending. People still haven't got a
    resolution to their tax-exempt status. Why are you limited to
    that day?
        Mr. Werfel. I can answer all those questions. First, let me
    just point out that this process moves forward. It's not like
    it's over today. There is a cooperation that can exist. And if
    you have particular documents that you're not seeing coming
    through in the midst of all these tens of thousands of pages,
    you bring it to our attention----
        Mr. Jordan. You told me earlier, Mr. Werfel, that you have
    not sent us all Lois Lerner's emails.
        Mr. Werfel. We have not. We're reviewing them. And I can
    explain to you the subject of that review. As they're ready
    they come over. But they're being reviewed for responsiveness.
        Mr. Jordan. All right.
        Mr. Werfel. And as an example, we might get an email that
    we pull down that's an email exchange between a worker and
    their spouse about an upcoming medical appointment that they
    might have, or day care arrangements. And we're not going to
    send that over, it's nonresponsive. And if we did send that
    over, you'd say you're loading these documents with things that
    are, you know, not helpful to our review.
        So these are just, I think, standard procedures that a
    government agency would go through to make sure that we're
    giving you----
        Mr. Jordan. Well, you can't have it both ways. You can't
    brag about 70,000 pieces of information and documents you've
    sent over and then say, oh, but we don't want to send you too
    much, we want to just--we want to have----
        Mr. Werfel. We want to be responsive. That's the key. So if
    you have a particular email----
        Mr. Jordan. I'll tell you what. I'll tell you what. We'll
    take all Lois Lerner's emails, we'll take all Bill Wilkins'
    emails, and we'll take all the emails from IRS staff to the
    White House. We'll take all those, and we'll be the judge if
    you're being--if you're sending us too much information.
        Mr. Werfel. I'm going to review them for responsiveness,
    because that's a standard procedure that's done. But let me
    make one point. You picked up a piece of paper that we've
    provided to you, discovery, and you've said, this is
    interesting, I have an additional question based on this email.
    That's great. Tell us that, and we'll look for the very
    document that you're asking for, because this is a cooperative
    process.
        Mr. Jordan. We will do that.
        Mr. Werfel. This is cooperation. This is not impedement,
    this is cooperation. And that's my commitment.
        Mr. Mica. I thank the gentleman, both the witnesses and
    members of the panel for participating today. As we conclude,
    just let me say that we started out, of course, on the issue of
    identity fraud and the way IRS is dealing with it and the
    revelations that the IRS is being used somewhat as a piggy bank
    for fraudulent tax returns right now.
        As I said when we started, we are trying to look at some of
    the problems within IRS, and we've looked at the conference
    spending, we've looked at the contracts in another hearing, and
    today the fraudulent returns. We'll continue that. We want to
    correct the situation. And we do have these scandals to deal
    with.
        We diverted a bit to the, I guess, the frustration by
    members on our side. And when you have, you know, thousands of
    pages, you did in fact provide the pages, and then the
    President and others orchestrating the phony scandal title to
    these investigations.
        Just in closing, I'll put in the record the statement of
    the President in May when this became public about the scandal.
    ``I've reviewed the Treasury Department watchdog report. The
    misconduct that it uncovered is inexcusable. It's inexcusable.
    And Americans are right to be angry about it, and I'm angry
    about it and will not tolerate this kind of behavior by any
    agency, but especially IRS.'' These are the words of the
    President. And then he directed Secretary Lew of Treasury to
    follow up with the IG to see who is responsible. We're trying
    to find out who's responsible, too, and we'll do that, and
    continue to do that.
        So I thank you for being with us and participating as
    members of the panel. There being no further business before
    the Subcommittee on Government Operations, we'll leave the
    record open a total of at least 7 days for additional questions
    may be submitted to the witnesses.
        Mr. Mica. Again, thank you for participating, and this
    hearing is adjourned.
        [Whereupon, at 12:10 p.m., the subcommittee was adjourned.]

                                    APPENDIX

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                   Material Submitted for the Hearing Record

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