[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

                               __________

Printed for the use of the Committee on Oversight and Government Reform




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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:]

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    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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