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




                               before the


                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES


                             FIRST SESSION


                           SEPTEMBER 17, 2014


                           Serial No. 113-145


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                 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
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

                   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 Economic Growth, Job Creation and Regulatory Affairs

                       JIM JORDAN, Ohio, Chairman
PATRICK T. McHENRY, North Carolina       Pennsylvania, Ranking Minority 
PAUL GOSAR, Arizona                      Member
PATRICK MEEHAN, Pennsylvania         TAMMY DUCKWORTH, Illinois
SCOTT DesJARLAIS, Tennessee          GERALD E. CONNOLLY, Virginia
DOC HASTINGS, Washington             MARK POCAN, Wisconsin
CYNTHIA LUMMIS, Wyoming              DANNY K. DAVIS, Illinois
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina

                            C O N T E N T S

Hearing held on September 17, 2014...............................     1


Mr. John Koskinen, Commissioner, Internal Revenue Service
    Oral Statement...............................................     7
    Written Statement............................................    10


Sept. 5, 2014 PSI Report, submitted by Rep. Cartwright...........    44
June 6, 2013 letter to Daniel Werfel from 26 Democrats, submitted 
  by Rep. Horsford...............................................    45
Cause of Action statement for the record.........................    49



                     Wednesday, September 17, 2014,

                  House of Representatives,
      Committee on Oversight and Government Reform,
         Subcommittee on Economic Growth, Job Creation and 
                                        Regulatory Affairs,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:12 p.m. in 
room 2154, Rayburn House Office Building, the Honorable Jim 
Jordan [chairman of the subcommittee], presiding.
    Present: Representatives Jordan, DeSantis, Lummis, Collins, 
Bentivolio, Meadows, Gosar, Cartwright, Connolly, Kelly, 
Horsford and Issa.
    Staff Present: Molly Boyl, Majority Deputy General Counsel 
and Parliamentarian; David Brewer, Majority Senior Counsel; 
Drew Colliatie, Majority Professional Staff Member; Linda Good, 
Majority Chief Clerk; Christopher Hixon, Majority Chief Counsel 
for Oversight; Michael R. Kiko, Majority Legislative Assistant; 
Laura L. Rush; Majority Deputy Chief Clerk; Andrew Shult, 
Majority Deputy Digital Director; Sarah Vance, Majority 
Assistant Clerk; Jeff Wease, Majority Chief Information 
Officer; Portia Bamiduro, Minority Counsel; Aryele Bradford, 
Minority Press Secretary; Donald Sherman, Minority Chief 
Oversight Counsel; and Katie Teleky, Minority Staff Assistant.
    Mr. Jordan. The committee will come to order.
    I want to again welcome our witness, the Commissioner for 
the Internal Revenue Service, Mr. John Koskinen.
    You know how this works, Mr. Koskinen. You have been here a 
few times and we appreciate your coming back.
    We will start with opening statements, as is customary.
    The subcommittee meets today to continue our oversight of 
the IRS and its targeting of conservative groups.
    In an interview in July, Commissioner John Koskinen talked 
about the congressional investigations into the targeting. He 
said, ``There are some people who don't want a straight story; 
they don't want this to end.''
    Commissioner Koskinen went on to say, ``I'm not sure if 
people really want a special prosecutor because that would shut 
everything down. The special prosecutor then would have sole 
domain over this, so you wouldn't be holding all these fun 
hearings every week or two.''
    We will get to this in my questioning, Mr. Koskinen, but I 
can tell you one thing. We do want a special prosecutor. Every 
single Republican voted for it. It is not some fun and games we 
are playing here. Twenty-six Democrats voted for the resolution 
as well.
    It is not about fun; it is not about amusement. We are here 
because of the constant flood of false and misleading 
statements made by the IRS. The reason the American people 
cannot get a straight story is because the IRS will not give 
them one.
    In March 2012, then Commissioner Doug Shulman gave 
assurances to the Ways and Means Committee that the IRS was not 
targeting conservatives. We now know that was not accurate.
    In April 2012, Lois Lerner told our staff that the way the 
IRS was treating conservative groups was part of the ``ordinary 
course of the application process.'' We now know that was not 
true either.
    On May 10, 2013, Ms. Lerner apologized for targeting by 
responding to a planted question at an ABA conference here in 
town. By planting the question, Lerner tried to downplay the 
misconduct and mislead the public.
    That same day, Lois Lerner blamed ``line people in 
Cincinnati for the targeting.'' We know that was not true 
either. We know the targeting went all the way up to 
Washington, D.C.
    President Obama's Press Secretary, Jay Carney, blamed the 
targeting on line employees in Cincinnati. That is not 
accurate. The President, himself, attribute targeting to 
``bone-headed decisions by Cincinnati employees,'' also not 
    When we finally got witnesses before the committee in 
public session, the misleading statements continued. When I had 
the chance to question Mr. Shulman, I asked him how many times 
he went to the White House. He said, ``I don't have a number,'' 
but of course he did remember that he attended the Easter egg 
roll at the White House.
    Imagine that. The IRS Commissioner has no idea how often he 
visited the White House but what stuck out was the Easter egg 
roll, even though he went to the White House 157 times, 
unprecedented for an Internal Revenue Service Commissioner.
    Acting Commissioner Werfel testified on August 2, 2013 that 
the IRS would produce every single Lois Lerner email and that 
he would ``ask the team to prioritize that.'' We now know from 
testimony of IRS employees involved in document production that 
there was no prioritization of those.
    The IRS has told us that it takes Section 6103, the part of 
the Code that protects confidential taxpayer information, 
``very seriously.'' That is what they say. That is why they say 
it takes so long to get the documents. Yet, we have changing 
interpretation of 6103, redacting information when it suits the 
IRS's interest, un-redacting that information when it suggests 
violations of federal law.
    Now we know that in 2010, the IRS illegally sent the FBI 
1.1 million pages of non-profit information, including 
confidential taxpayer information protected by Section 6103.
    Commissioner Koskinen, during your first appearance here on 
March 26 when asked whether you would produce all of Lois 
Lerner's emails, you testified, ``Yes, we will do that.'' 
Obviously we now know you can't possible produce every single 
Lois Lerner email because you have lost some of them.
    Then Commissioner Koskinen, you told Congress that the IRS 
had confirmed that backup tapes no longer existed, but the IG 
has told us the backup tapes do exist and that the IRS did not 
search 760 exchange server drives because you didn't even know 
you had them.
    Commissioner Koskinen, you testified that you remember 
being told in April about Lois Lerner's missing emails. You 
didn't tell Congress, the Justice Department, the FBI, and, 
most importantly, the American people, until June 13 but we now 
know Kate Duvall, Chief Counsel, knew in February. She even 
told the Treasury Department in April.
    The IRS told its political bosses in the Administration 
before telling those of us who were investigating the IRS, 
another effort to mislead the American public.
    Commissioner, you testified that the reason you delayed 
telling Congress was that you went to great lengths, great 
lengths and spent ``a significant amount of money to make sure 
that no email was missing,'' but the Inspector General tells us 
that emails from at least eight employees are missing.
    We learned the IRS does not even archive its office 
communication messages. We learned that the IRS wiped Lois 
Lerner's Blackberry after Congress had started asking questions 
about this issue.
    We learned from an IRS IT employee that Lois Lerner kept a 
large amount of data on her hard drive and he recommended that 
she back it up. He was told that Ms. Lerner did not have time 
to do that and it was not her responsibility.
    Mr. Koskinen, if the IRS was truly trying to ensure that no 
email was missing, you guys did a pretty bad job. That is why 
we have invited you back here today. There has been an ever 
changing story coming out of the IRS about the targeting of 
conservative groups and missing emails.
    Each time you testified, Mr. Koskinen, we later learn 
something you said wasn't right. You have refused to give the 
American people a straight story but we hope today, we hope 
today that they can start to get a straight story, start to get 
at the truth and not get the run around that we have gotten 
before. That is why we have you back today.
    With that, I would yield to the Ranking Member for his 
opening statement.
    Mr. Cartwright. Thank you, Mr. Chairman.
    Thank you, Commissioner Koskinen for testifying before this 
committee yet again. Your appearance before this committee is 
becoming quite a recurring event, kind of like the movie 
Groundhog Day around here.
    I am becoming increasingly concerned at this point that 
committee Republicans are no longer using these hearings for 
the purpose of investigating what happened to the groups that 
were the subject of the IG's May 14, 2013 report.
    What we are doing here seems to be something entirely 
different. What is happening here is we have people desperately 
searching for information about the IRS's response to the 
committee's investigation.
    Counting today, Mr. Chairman, Mr. Koskinen has testified 
four times before this committee in the past several months and 
at least seven times before House committees in total this 
    We all have to agree that the purpose of this committee is 
not publicly to harass federal agency heads. It is to conduct 
responsible oversight on a host of legitimate critical issues 
within our jurisdiction.
    I believe that these repeated hearings continuing again 
today are not only a badgering of witnesses but an abuse of 
authority and a dereliction of this committee's duty in its 
entirety. I think it is abundantly clear that Chairman Issa and 
Chairman Camp are also in some kind of a taxpayer-funded foot 
race to see who can make the most headlines about Lois Lerner's 
lost emails.
    I also, again, want to address Republican claims that the 
alleged targeting of conservative groups is a government-wide 
conspiracy initiated after the Supreme Court's 2010 decision in 
Citizens United, a conspiracy involving the President, the IRS, 
the Department of Justice and every other federal agency.
    This committee has obtained no evidence linking these 
accusations to what we all now know were inappropriate criteria 
used by IRS employees in Cincinnati to screen applications for 
tax exempt status.
    The IRS has fully cooperated and provided congressional 
investigations of the alleged targeting with more than 800,000 
pages of documents. These congressional investigations have 
cost the IRS at least $18 million so far and none of the 
evidence has shown any political motivation or White House 
    Some of my colleagues on the other side of the dais have 
chosen to overlook the funneling of dark money into the 
political system of the United States. Republicans have 
demanded accountability from the IRS but have not demanded the 
same thing from the corporations who influence our national 
    In January 2010, the U.S. Supreme Court, in a five to four 
decision in Citizens United, ruled that political spending is a 
form of protected speech under the First Amendment and that the 
government may not prohibit artificial entities from spending 
money to support or oppose a specific candidate in an election, 
ruling essentially that corporations are not artificial 
entities, that they have First Amendment rights because after 
all corporations are people, my friend.
    Citizens United allowed for profit corporations, unions and 
non-profit groups to raise unlimited funds and register for tax 
exempt status under the 501(c)(4) designation and the IRS 
became flooded with applications for this kind of status. 
Section 501(c)(4) designation is exclusively meant for 
organizations whose primary activity is social welfare defined 
in the Tax Code as making charitable, educational and 
recreational contributions to a community.
    While 501(c)(4)s are not barred from participating in 
political campaigns, it is stated plainly and clearly that 
political participation must be ``an insubstantial amount of 
the group's overall activity accounting for less than 50 
percent of expenditures.''
    The IRS's job was to make sure that these groups were 
following the rules so that they were not taking tax breaks 
meant only for groups contributing to the community, not hiding 
the influence that a select few individuals have on our 
Nation's electoral politics.
    I am also deeply concerned by the recent reports from the 
Senate Permanent Subcommittee on Investigations regarding the 
management failures of the IRS and TIGTA in investigating 
alleged targeting of 501(c)(4)s.
    While the subcommittee's investigation found no evidence of 
IRS political bias, PSI found the Inspector General's exclusion 
of any analysis of how liberal or progressive groups were 
treated distorted the audit's findings and significantly 
damaged public confidence in the impartiality of the IRS.
    Mr. Chairman, I ask unanimous consent to enter the 
September 5, 2014 PSI report into the record.
    Mr. Jordan. Without objection.
    Mr. Cartwright. We must shift our focus toward establishing 
a more objective and transparent set of standards for 
evaluating 504(c)(4) applicants involved in political 
    As I have stated in previous hearings, this is about groups 
doing everything they can do to hide where they get their 
money, obscure their true intentions and have undue influence 
on the political system of our country tax free.
    Anonymous money in politics is something we do not need in 
this country and something I have repeatedly said disrupts the 
normal and natural democratic process and must be changed.
    With that, Mr. Chairman, I yield back.
    Mr. Jordan. Will the gentleman yield?
    Mr. Cartwright. Yes.
    Mr. Jordan. I would just point out that the report the 
gentleman asked be put in the record, which we did, the Ranking 
Member of that committee disagreed strongly and sort of in an 
unprecedented fashion, did not sign onto the report. That, of 
course, is Senator McCain, who I might add is somewhat well 
known for the McCain-Feingold campaign finance law but yet, he 
says that report had significant flaws and would not sign onto 
it as is the custom with that committee in the United States 
    With that, I would recognize the gentleman from California, 
the Chairman of the full committee.
    Mr. Issa. Thank you, Mr. Chairman.
    Commissioner, welcome back.
    It is apparently Groundhog Day and we have a Pennsylvania 
member who knows about these things because he certainly is 
repeating some of the same tired lines we heard from the 
beginning of this investigation. During questioning, I may ask 
you some of these, but I just want to make a couple of quick 
    The Ranking Member uses the words tax exempt, but we have 
already made clear that a 501(c)(4) only has an exemption from 
having to take other peoples' post-tax paid money and pay some 
sort of a tax revenue again.
    Ultimately, if a 501(c)(4) takes $100,000 from 1,000 
people, $100 apiece, and spends it on some common effort and 
exhausts all of it, there really wouldn't be any difference 
whether it was a (c) corp or a 501(c)(3) or 501(c)(4). At the 
end of the day, a 501(c)(4) or a conventional (c) corporation, 
a for profit business, ultimately, at the end of the day, if it 
exhausts all the money and has no profit, there is no tax.
    It is always amazing to me that people want to pretend that 
a 501(c)(4) is a charity. It is not. People don't get a tax 
deduction; they don't get a write-off for giving to it. There 
is no special treatment and every time we establish that, the 
Minority wants to continue to act like the taxpayers are 
funding this. There is no taxpayer funding.
    More importantly, the Ranking Member erroneously, beyond 
all possible evidence, continues to say Cincinnati. Mr. 
Commissioner, you know that Lois Lerner has been referred for 
criminal prosecution for her role.
    The American Bar Association has to look at her. The IG has 
to look at her because ultimately, she was pivotal to denying 
these 501(c)(4)s their rights and her missing emails, although 
deeply wanted, are not completely necessary because the ones 
that we have seen show that she calls conservatives the A word 
with a hole afterwards.
    She refers, with disdain, to conservatives. She is an 
active liberal and it is clear her actions were set out to 
become to the detriment of conservatives.
    You, Mr. Ranking Member, can bash the IG anytime you want 
and you can say Cincinnati as many times as you want, but 
ultimately it was Lois Lerner who violated the law, went before 
the Bar Association and made a speech where she planted a 
question in order to pre-release and try to mislead people as 
to what she had been doing and try to cast the blame on a group 
of innocent people in Cincinnati.
    This committee has interviewed all of the Cincinnati 
people. Some of them very bravely said these things should have 
been approved and they recommended that. Some of them said 
nothing. Some of them might even have been, in fact, in 
agreement with Lois Lerner.
    Lastly, this Chairman is sick and tired of a false 
narrative coming from the Democrats that implies that we keep 
pointing to the President or keep pointing to somebody else. 
The fact is we have followed the trail where it leads and we 
have seen it lead to Lois Lerner, the subject of the missing 
emails, the subject of the emails we have seen and we have made 
that point very clear.
    No one in my key staff and none of my congressional leaders 
here on the committee has made assertions directly about the 
President. Yes, we are interested in seeing why a commissioner 
would endlessly go back and forth to the White House 100 times 
more than historically reasonable and it was not all for an 
Easter egg hunt.
    We don't know who he talked to. What we do care about is 
this. There have been bad things happening before your watch, 
Mr. Commissioner, and you came in to help fix it. That includes 
the leakage of information that should not leak out of the IRS. 
It always claimed to be accidental but it happened.
    It includes that now famous transfer of over a million 
records, if you will, to the Department of Justice under Lois 
Lerner's watch, clearly, in this member's opinion, attempting 
to encourage the Department of Justice to get involved in a 
    We are deeply concerned with over $1 billion spent and we 
cannot maintain a few emails reliably. We are concerned with 
all of these areas.
    I would hope at some point, the Minority would quit acting 
as though they ever were part of this investigation, as though 
they ever thought there was any legitimacy, and start 
recognizing that once a false statement made by the Minority 
has been disproved such as Cincinnati was responsible, that 
they would not expose us to Groundhog Day again by bringing up 
something that is patently untrue and disproven.
    Mr. Chairman, I appreciate your continuing to seek the 
truth. I appreciate the Commissioner continuing to come here, 
sometimes not as the witness we call but as a voluntary witness 
who believes he can answer our questions.
    I am concerned that, Mr. Commissioner, you don't always 
come here with the answers that ultimately seem to be accurate. 
That is not uncommon before this committee. I think the 
Chairman would like to give you an opportunity to correct or 
further enlighten us in a lot of areas and I look forward to 
    I know that your job as part of Article II of the 
Constitution, the Executive Branch, is important. Our job, as 
Article I, is important for oversight and appropriation. I, for 
one, would hope that never again from the dais will I hear 
people who think if the Supreme Court rules, it is open to 
ridicule rather than the recognition that they are the final 
words on what is or is not constitutional.
    With that, Mr. Chairman, I thank you for your indulgence 
and I yield back.
    Mr. Jordan. I thank the chairman for his statement.
    Members may have seven days to submit opening statements 
for the record.
    Mr. Koskinen, you have done this a few times. Would you 
please stand. Pursuant to committee rules, we swear in 
witnesses. Please rise and raise your right hand.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    [Witness responds in the affirmative.]
    Mr. Jordan. Let the record show that the witness answered 
in the affirmative.
    Mr. Koskinen, if you will give your opening statement, we 
will get right to questions. Thank you again for being here.

                       WITNESS STATEMENT


    Mr. Koskinen. Chairman Jordan, Chairman Issa, Ranking 
Member Cartwright and members of the subcommittee, thank you 
for the opportunity to update you on the work being done by the 
IRS to cooperate with the investigations into the findings by 
the Treasury Department and the Inspector General for Tax 
Administration regarding the improper criteria used in 
processing applications for tax exempt status.
    I will also discuss the steps we have taken and continue to 
take to remedy the issues discussed in TIGTA's 2013 report and 
in subsequent hearings. The IRS remains committed to 
cooperating fully with the Oversight Committee investigations 
and we continue to make every effort to fulfill information 
requests from Congress and the other investigating entities.
    To date, the IRS has produced more than 1 million pages of 
unredacted documents to the tax writing committees and more 
than 810,000 pages of redacted documents to the House Oversight 
and Government Reform Committee and the Senate Permanent 
Subcommittee on Investigations.
    Related to the IRS document production, I want to take the 
opportunity to clear up a misunderstanding that has arisen 
about our records retention practices. Recently, there were 
erroneous press reports that the IRS backs up information by 
sending it to a government-wide data base.
    I want to clarify there is no system outside the IRS, 
government or otherwise, that the IRS uses to store emails.
    I would also like to clear up some confusion about the IRS 
issued Blackberry device used by former agency executive Lois 
Lerner. Ms. Lerner's Blackberry was replaced in February 2012 
with a newer model as part of an ongoing Blackberry update that 
involved about 5,000 IRS employees.
    Because the old Blackberry was obsolete, it was disposed of 
under standard IRS recycling procedures at that time. This 
included erasing any information on the device to prevent 
dissemination of any taxpayer sensitive information that might 
be on it.
    The information was not transferred to the new Blackberry 
because our Blackberrys only display email that is managed by 
the employee's Microsoft Outlook mailbox which is maintained on 
the IRS's servers. The replacement Blackberry Ms. Lerner 
received in 2012 and used from that point on is in TIGTA's 
    Now that the Permanent Subcommittee on Investigations has 
released the report of this investigation, we look forward to 
the conclusion of other investigations in the very near future. 
We stand ready to receive the recommendations of the 
investigators which we believe will help to ensure that the 
problems that arose never happen again.
    To further guard against such problems as we go forward, 
the IRS has also been implementing managerial and operational 
improvements in the determination process for tax exempt status 
and more broadly, throughout the agency.
    As part of this work, the IRS has completed action on all 
nine recommendations in the TIGTA report. Some of the actions 
taken include improving employee training in the determinations 
area, creating a new procedure for documenting why applications 
are chosen for further review, and establishing a formal 
process for employees in the determination unit to request help 
from our technical experts.
    We have also established an agency-wide Enterprise Risk 
Management Program. This has involved creating risk management 
liaisons in each area of our operation and providing for the 
regular identification and analysis of risks to be eliminated 
and managed across the agency.
    We are working to create a culture where employees are 
encouraged to report any issues or problems that occur. Our 
goal is to have employees understand that the only problems we 
cannot solve are the ones we do not know about.
    As a corollary to that effort, we are encouraging the flow 
of information from frontline employees up through the 
organization as well to frontline employees from senior 
    Another area where the IRS is making improvements involves 
the retention of official records. We have been consulting with 
the National Archives and Records Administration to ensure that 
we are fully aligned with their standards for managing and 
storing emails deemed to be federal records.
    As a first step, we will implement an interim policy that 
requires our executives' email records to be retained on secure 
servers rather than on their hard drives. Our next step will be 
to purchase the necessary equipment and technology to allow us 
to expand this approach to other employees and to extend the 
secure storage periods beyond those stipulated in the NARA 
    Finally, our ultimate goal is to ensure that all email 
records are not only securely saved and stored but also easily 
retrievable. This result would require funds we do not 
presently have but we continue to look for other solutions and 
we are holding discussions with other government agencies with 
similar challenges.

    This concludes my testimony. I would be happy to take your 
    [Prepared statement of Mr. Koskinen follows:]
    Mr. Jordan. Thank you, Mr. Koskinen.
    Commissioner, I plan to do my round of questioning on the 
fact that you had confirmed there were no backup tapes and we 
subsequently learned there are backup tapes. You did not tell 
us about the servers. We have learned there are now servers 
that contain this information and a host of other things.
    The staff pointed out to me just recently, just yesterday, 
and I re-read it as I walked in. I want to go to a statement 
that you made in an interview a couple of months ago. In fact, 
let us put it on the screen.
    Mr. Koskinen. Do you have a hard copy of that?
    Mr. Jordan. We can give you a hard copy too, although we 
have a slide that is big enough that we can read. If we could a 
copy to the Commissioner, that would be great.
    Let us go to the highlighted one. Is this a statement that 
you made, Commissioner? Can you look at it and see if you made 
this statement? It is reported that you did.
    Mr. Koskinen. Yes, I recognize it.
    Mr. Jordan. I want to go to the underlines. ``There are 
some people who don't want a straight story, they don't want 
this to end.'' Who is the ``they''? Who are you referring to?
    Mr. Koskinen. Just talking generally about the fact that a 
year and a half ago, the IG issued a report noting that there 
were management issues at the IRS that needed to be addressed 
and since then, we have, certainly in the last several months, 
with regard to that basic issue, have not furthered the 
discussion very far. We have, as I said, taken all the actions 
the IG recommended.
    Mr. Jordan. You did not answer my question, Mr. 
Commissioner. Who is the ``they''?
    Mr. Koskinen. It is a general statement. I did not have 
anybody in particular in mind.
    Mr. Jordan. Let me go back to the one before that. Who is 
the ``some people'' in the sentence before, the clause before--
``there are some people who don't want a straight story.'' Who 
is the ``some people''?
    Mr. Koskinen. That is just a general statement.
    Mr. Jordan. This is what I cannot understand. What people 
would not want the truth--what straight story? Who are the 
people who don't want a straight story thereby meaning who are 
the people who want a false story? Do you know who they are?
    Mr. Koskinen. There have been examples. An example would be 
that a claim is made as a result of passing conversation with 
the Justice Department.
    Mr. Jordan. Mr. Commissioner, look, look, look.
    Mr. Koskinen. Can I answer the question?
    Mr. Jordan. You can answer the question. You cannot just 
talk. ``There are some people who do not want a straight 
story.'' All I am asking you is--you said this, I did not, so 
you should know who the ``some people'' and the ``they'' are in 
the two sentences you said. Who are these ``some people,'' who 
are the ``they'' who do not want the truth? I want to know who 
those people are.
    Mr. Koskinen. They are the people who issue information 
without a substantial basis that turns out to be erroneous.
    Mr. Jordan. Is the ``some people'' in that paragraph--go 
down to the next paragraph where it says ``I'm not sure people 
really want a special prosecutor.'' Are the ``people'' in that 
sentence the same as the ``some people'' in the sentence above?
    Mr. Koskinen. Not necessarily, they are two different 
statements. If you like, I would like to explain the first one.
    Mr. Jordan. Who are you referring to who do not want a 
special prosecutor?
    Mr. Koskinen. I am referring there to the fact that, as I 
say, that a special prosecutor----
    Mr. Jordan. Are you referring to the people who actually 
voted for a special prosecutor, is that who you are referring 
to because that is the context of the special prosecutor? Do 
you think the individual member of the Congress who sponsored 
the legislation, the resolution for a special prosecutor does 
not want a special prosecutor?
    Mr. Koskinen. I think that is right, although I think----
    Mr. Jordan. You do not think I want the special prosecutor 
to happen? I happen to be the guy who sponsored the resolution. 
Do you know how many Republicans voted for it, Mr. 
    Mr. Koskinen. No.
    Mr. Jordan. Two hundred and twenty-four. Which one of those 
224 Republican members does not really want a special 
    Mr. Koskinen. I am sure they all think they do.
    Mr. Jordan. That is not what you said. You said some of 
them do not. I am asking you which ones do not.
    Mr. Koskinen. I did not refer to any Republicans. I just 
said as a conceptual matter, there are people----
    Mr. Jordan. Let me ask you about the other party then. Do 
you know how many Democrats voted for the special prosecutor?
    Mr. Koskinen. There are a whole series of----
    Mr. Jordan. Twenty-six, I know.
    Mr. Koskinen. Good.
    Mr. Jordan. Twenty-six of them. Twenty-six of them said it 
is so important, we are willing to go against what our attorney 
general has recommended. We want a special prosecutor. Are you 
saying some of those 26 Democrats are the same people who do 
not want a special prosecutor even though they voted for it?
    Mr. Koskinen. I am just saying that a special prosecutor 
would, in effect, take total jurisdiction over all of this and 
that would----
    Mr. Jordan. Oh, and that is the point and then your point 
is if there is a special prosecutor, we would not be able to 
have these ``fun hearings.'' That is the part that just bothers 
me and more importantly the American people. The American 
people do not think this is fun, they want the truth.
    So far, what has happened every single time you have come 
in front of this committee is you have told us something that 
later turned out not to be accurate. You said you could confirm 
there were no backup tapes and the IG says, in fact, there are 
backup tapes.
    Mr. Koskinen. Do you want to have a discussion about that?
    Mr. Jordan. We will but unfortunately, I am out of time 
because we spent so much time on two sentences you made that 
you cannot even tell us who you are referring to. I would love 
to get into that but I am out of time.
    I have to recognize the Ranking Member because you cannot 
tell me who ``they'' is you are referring to and you cannot 
tell me who the ``some people'' are you are referring to and 
you cannot tell me who would not want the truth even though you 
allege that there are members of Congress who do not want the 
truth and do not want the special prosecutor they voted for.
    You alleged all those things and you could not tell me the 
answer to any of that and now, unfortunately, I have to 
recognize the Ranking Member.
    Mr. Koskinen. Could I just note I cannot tell you because 
you will not let me answer the question.
    Mr. Jordan. I gave you plenty of time to answer the 
    Mr. Koskinen. I think the record will show I was not given 
plenty of time to answer the question.
    Mr. Jordan. The record will show you were given plenty of 
time to tell me who the ``they'' is in the sentence you said, 
who the ``some people'' were in the sentence you said, ``who 
doesn't want a straight story, who doesn't want the truth,'' 
you were given ample time to answer those and you did not do 
    The gentleman from Pennsylvania is recognized.
    Mr. Koskinen. I would be happy to look at the record with 
you and demonstrate that as I started to answer that question, 
you said, ``I want an answer. I don't want you to talk on'' and 
I was going to give you examples and then you cut me off.
    I am happy to have you cut me off but I am not happy to 
have you misrepresent what my statement was.
    Mr. Jordan. The gentleman from Pennsylvania.
    Mr. Cartwright. Thank you, Mr. Chairman.
    Once again, I will reiterate that we are not in Washington 
and we are not in Cincinnati today. We are back home in 
    Let me ask you this, Mr. Koskinen. Would you like to 
amplify your answer to the slew of questions you just got from 
the Chairman?
    Mr. Koskinen. I would appreciate that opportunity.
    Mr. Cartwright. Go ahead.
    Mr. Koskinen. With regard to the statement that I come up 
here and then say things that are not true, for instance, about 
the backup tapes, it is not yet clear whether there are any 
backup tapes that have any information on them.
    In all of my hearings, I have testified at some length 
about the fact that we have disaster recovery tapes and that we 
keep them for six months. We have actually kept them all now 
since December 2012. Then those backup tapes are recycled. 
Never did I say they disappeared. I said they were recycled.
    I have not talked to the IG. He does not give me regular 
updates about this but I do understand----
    Mr. Jordan. Would the gentleman yield just to clarify?
    Mr. Koskinen. Do I get to answer or do you want to continue 
    Mr. Cartwright. He is still answering the whole raft of 
questions you gave him so far.
    Mr. Jordan. Go ahead.
    Mr. Koskinen. The IG, as I understand it, and I understand 
some of that from releases out of this committee, the IG has 
taken a series of tapes to see if there is anything on them but 
the tapes he has taken are tapes that, in fact, we have talked 
about. They are the six month disaster recovery tapes that are 
recycled, stored and available until they are not usable.
    There are no new tapes that are out there that the IG has 
found. He is simply looking at that supply of tapes. I have 
encouraged him to do that. I have told him if he can find more 
emails, that would be terrific because we would support that.
    With regard to the issue of the truth, I started to explain 
that there are people who quickly put out information that does 
not turn out to be true that they could have checked. The issue 
about whether the IRS has some participation in some 
government-wide backup system, which immediately led to press 
reports and comments from other people that there were somehow 
now emails from Lois Lerner that existed that we just did not 
either want to spend the money or the time to go find turned 
out to be totally untrue.
    Somebody could have called us and we would have made it 
clear to them that whatever the conversation was, which I am 
not privy to obviously, in passing with the Justice Department 
turning was with regard the disaster recovery tapes that we 
have talked about in at least three different hearings.
    Thank you for the opportunity.
    Mr. Cartwright. Certainly.
    Mr. Koskinen, you were also given a number of questions 
about the remarks you made in July 2014. Do you want to further 
explain the gist of those remarks?
    Mr. Koskinen. Just to those remarks, as I say, there are 
some people who rather than calling us and saying, do you have 
a government-wide backup system you participate in or you 
forgot about, could have been told, no, we do not have one. The 
only thing we have are disaster recovery tapes that I have 
provided all the accurate information I can.
    Somebody could have called us and said, do the backup 
tapes, disaster recovery tapes exist and I would have repeated 
for them, sure, we keep them now from December 2012 and the 
ones that we recorded over get recorded over several times, so 
there is a big stack of them.
    I do not know where they are but we have never said that 
they all disappeared. In fact, I had a long conversation and 
exchange with somebody about the fact that we use them over and 
over until they are unusable and then we destroy them at that 
    The fact that the IG, which we have supported--I have told 
the IG anything you want, you can have and anyplace you can 
find more emails, I would be delighted. The fact that the IG 
has taken some of those is not new news unless you decide you 
want to put it out as new news.
    Mr. Cartwright. Let me get this straight, Mr. Koskinen. You 
are here trying to comply with all the requests for 
information, is that correct?
    Mr. Koskinen. Yes.
    Mr. Cartwright. You are here to be helpful in this 
investigation, right?
    Mr. Koskinen. To the extent we can.
    Mr. Cartwright. You are also saying that you are willing to 
be helpful and all I have to do is call your office and say, 
can you clarify this response, can you clarify that, can you 
give us more information and you are willing to put up with 
that as well, is that correct?
    Mr. Koskinen. It is not putting up. In fact, the chairman 
was very thoughtful and sent me a letter in advance of the 
hearing with some questions that he gave me the opportunity to 
provide the answers to and I appreciated that. We tried to get 
it back as quickly as we could.
    Mr. Cartwright. But if they don't like one of your answers, 
instead of working it out over the telephone, they bring you 
back up here, High Dudgeon, and then act outraged and suggest 
that you have not been straight with the American public.
    I want to give you the chance to say categorically, Mr. 
Koskinen, every time you have testified, have you testified to 
the truth to the very best of your ability and recollection?
    Mr. Koskinen. I have.
    Mr. Cartwright. How interested are you that the American 
public get the straight story?
    Mr. Koskinen. I think it is critical. As I said from the 
start, we take the basic issue seriously. Improper criteria 
should not have been used. We should do whatever we can to 
prevent it from happening again.
    The American public needs to and deserves to be confident 
that they will be treated fairly no matter who they are, 
whatever organization they belong to, or whoever they voted for 
in the last election. People have to be confident if they hear 
from the Internal Revenue Service, it is because of an issue 
either in their tax return or their application and if someone 
else had the same issue on their tax return or their 
application, they would get treated the same way.
    It is critical to the integrity of the tax collection 
administration process for the American public to be confident 
about that.
    I have never minimized the problem. I have always said we 
treat it seriously. The reason I spent time in my testimony 
today was to try to reassure everyone that we are taking all 
the actions that we can to make sure this does not happen 
    Mr. Cartwright. Thank you so much, Commissioner.
    I yield back.
    Mr. Jordan. I thank the gentleman.
    The gentleman from North Carolina is recognized.
    Mr. Meadows. Thank you, Mr. Chairman.
    Thank you for being back with us.
    I think there are three things that the American people 
want. First is the whole truth. The dribbling out of 
information, whether it be in the press or with this particular 
story or another, is troubling.
    Most recently, you mentioned the Blackberry that actually 
was wiped after indeed an investigation had been started not 
just here congressionally, not just with the IG, but also an 
internal investigation, according to testimony given in this 
room, that had taken place within the IRS. That is troubling.
    I also know that this did not happen on your watch. You 
have been given a task of cleaning up a mess. You are now the 
fourth Commissioner of the IRS that we have had the opportunity 
to hear.
    I think the people want two things beyond the whole truth. 
They want the people that were responsible for this to be held 
accountable. They do not understand why people have not been 
fired or lost their jobs.
    Would you agree that this was not just relegated to a 
couple of rogue agents in Cincinnati? Would you agree with 
    Mr. Koskinen. That is right. I think it is clear that there 
was a management failure on the part of the agency that needs 
to be corrected.
    Mr. Meadows. I am going to bring us to the third point 
which is really what they want to make sure of is that what can 
we do to make sure this does not happen again so we can start 
to rebuild that trust and foundation?
    You mentioned IT failures. I know we have had a few 
conversations. Yesterday, we had, on the House Floor, a number 
of bills that were passed out of the House that are now being 
sent to the Senate that would address missing emails and senior 
level executive folks in terms of those who maliciously will 
use their private devices to get around the Records Act, 
whether it be the federal records Act or the presidential 
records Act.
    Those pieces of legislation are designed to make sure that 
it does not happen again. Is that something that you can 
support at least in principle? It sounded like from your 
testimony that you are already going there.
    Mr. Koskinen. Yes, in principle. I have not seen the 
language of the bills but clearly we already have a policy. One 
of the things we are doing is making sure everybody understands 
that you cannot use your personal email for IRS business. That 
has been a policy. We need to reinforce that.
    Mr. Meadows. You would agree that has at least occurred on 
a few occasions within the IRS?
    Mr. Koskinen. People do it inadvertently. They will send 
something to their own computer so they can print it out while 
they are working at home. We are trying to make it clear to 
everyone, even that simple issue should not be taken. We have 
trained people. We are going to retrain everyone to make sure 
they understand that.
    Mr. Meadows. In your testimony, you talked about not having 
the resources to do some of the things. As I understand, there 
is this authorization that the IRS needs to pay some of their 
IT people above the normal GS levels. That authorization is 
about to expire.
    Is that something you need reauthorized in terms of trying 
to address some of these IT needs? My understanding is a lot of 
those people are IT people, is that correct?
    Mr. Koskinen. People working on it. In fact, Chairman Issa 
has been a strong supporter over time of the fact that we need 
to have what is called streamlined critical path authority to 
make sure we can get the best people to come and work on those 
    We are trying to improve our IT system, to learn from this 
lesson and make sure that we store emails and ultimately, that 
we have a searchable database that makes it easier. We should 
not have to spend $18 million to get the information you want.
    I said, I hope to talk to Chairman Issa about this. The 
streamlined critical path only applies to a handful of people, 
25 right now. Virtually all of them are technical or analytical 
people. That authority would be very helpful.
    Mr. Meadows. If this body does not act, you are saying that 
authority will disappear at the end of the calendar year?
    Mr. Koskinen. The authority will disappear at the end of 
this calendar year and starting in January in a phased process 
because they are in various stages of their four year 
contracts, we will lose people. In January, we will lose the 
head of our Compliance Analytics Unit as we go forward.
    Mr. Meadows. Let me close with this final question. If we 
were to give you this authority, can you assure the American 
people that anyone who is getting paid under this authority was 
not directly or indirectly involved in any of the targeting 
work that is going on? Can you assure the American people that 
is the case?
    Mr. Koskinen. I can assure you of that. It is 25 people and 
none of them were involved in any of the use of improper 
criteria, any of the discussions that went on at that time.
    Mr. Meadows. I thank you.
    I yield back, Mr. Chairman.
    Mr. Jordan. I thank the gentleman.
    The gentleman from Nevada is recognized.
    Mr. Horsford. Thank you, Mr. Chairman.
    I want to follow up to my colleague, Mr. Meadows, who I 
think just laid out a very reasonable set of objectives. I 
agree with him that the majority of Americans want the truth, 
accountability and the agency to restore trust with the 
American people out of this unfortunate situation with the IRS.
    I think that because of his questions, you were able to 
outline a number of specific recommendations that you need from 
Congress to do your job and the tools that you need, as well as 
things that you as the IRS need to do specifically to improve 
the management of the IRS.
    I think that is more the tone we should be working from, 
not the abusive tone that we continue to have from the chairman 
of this subcommittee or the full committee that turns this into 
something that it is not.
    I want to ask you, Commissioner, about a letter that I and 
26 of my other colleagues sent to the Acting Commissioner, Mr. 
Werfel, relating to the discrepancy between the agency's 
regulatory interpretation of the law dealing with 501(c)(4)s 
and what the U.S. Code actually enumerates in statute.
    Are you familiar with the request that I made, along with 
26 of my colleagues, on June 6, 2013?
    Mr. Koskinen. I am not familiar with the specific language 
but I do know a number of people have been encouraging us that 
when we look at the regulations under the 501(c)(4) to start 
with the statute which says that social welfare organizations 
under 501(c)(4) should be exclusively involved in social 
    Mr. Horsford. The regulation states primarily?
    Mr. Koskinen. The regulation established in 1959 said 
    Mr. Horsford. Isn't that problematic?
    Mr. Koskinen. It has been around for a long time and we 
have over 150,000 comments about how to deal with that issue 
which we are seriously taking a look at but it is the issue. 
One end of the spectrum is it should be exclusive, i.e., no 
activity and at the other end of the spectrum is there should 
not be any limitations at all. A third in the middle is 
primarily some percentage close to 50 would be a good number. 
We are looking at that entire range of possibilities.
    Mr. Horsford. Until you make that final determination, this 
ambiguity remains. Because of the recent Citizens United 
decision, which created the huge influx of the number of 
organizations that were applying for tax exemption status, has 
contributed to this problem, has it not?
    Mr. Koskinen. You are right. We are still dealing with 
facts and circumstances. It is interesting. I have been reading 
and I asked for the most thoughtful comments on both sides of 
each of these issues--what the definition should be, how much 
you should be able to do and to whom it should apply.
    There is a consensus across the political spectrum, as well 
as the organizational spectrum, that nobody thinks the present 
facts and circumstances test gives anybody any guidance as to 
how it should be.
    Mr. Horsford. In addition to the critical path authority, 
the searchable database and some of the internal policies, 
having a review and to get a standard that is clear on this 
exclusive requirement would be an additional area you would 
    Mr. Koskinen. I think if the Congress wanted to take a look 
at this and pass a law.
    Mr. Horsford. The law has already been passed.
    Mr. Koskinen. Right, and if you wanted to look at it, that 
would be fine. We view it as our responsibility.
    Mr. Horsford. To follow the law?
    Mr. Koskinen. To follow the law and to provide a 
regulation. As I said when I first started, any regulation 
needs to be clear, needs to be fair to everyone and needs to be 
easy to administer.
    Mr. Horsford. I will add one more. It needs to be in 
compliance with federal law.
    Mr. Koskinen. It should comply with the federal law.
    Mr. Horsford. Do we have any idea how much taxpayer money 
is lost on granting tax exemption to groups that would 
otherwise be ineligible for 501(c)(4) status?
    Mr. Koskinen. I do not have that information.
    Mr. Horsford. I think that is another area I would ask that 
this committee look into.
    Mr. Issa. Would the gentleman yield?
    Mr. Horsford. Mr. Chairman, I would like to ask with 
unanimous consent to enter into the record my letter dated June 
6, 2013 along with my colleagues be entered in the record 
without objection.
    Mr. Jordan. Without objection.
    Mr. Horsford. Thank you.
    My time has expired. I yield back.
    Mr. Jordan. I will recognize the gentleman from California 
for his five minutes.
    Mr. Issa. Commissioner, this might be a good time to follow 
up on the gentleman from Nevada.
    A 527 versus 501(c)(4), 527 can do 100 percent political, 
    Mr. Koskinen. Correct.
    Mr. Issa. Any tax difference?
    Mr. Koskinen. There are complicated tax issues but 
    Mr. Issa. No.
    Mr. Koskinen. Basically, no.
    Mr. Issa. There is no tax money lost at all. If a 501(c)(4) 
was suddenly not able to do what they are doing because we take 
the political free speech portion of what they can do in 
addition to social welfare to zero and they became 527s, there 
would be no tax ramification. Isn't that clear and simple?
    Mr. Koskinen. Not quite.
    Mr. Issa. Revenue to the taxpayers would be de minimis, 
    Mr. Koskinen. Might be. Some organizations spend their 
money every year and if it is a legitimate expenditure as a 
business expense, there is some question what is a business 
    The second issue is if they have funds and invest them, 
some organizations have capital and they keep it for a while, 
the earnings on those investments would be taxable if they were 
not a (c)(4).
    Mr. Issa. But a 527, which the gentleman from Nevada runs a 
527 if he thinks about it right, he has a PAC for his 
    Mr. Koskinen. There are significant differences between the 
527s and the 501(c)(4)s.
    Mr. Issa. The canard that somehow the taxpayers are funding 
this is simply not true. For all practical purposes, if you 
raise money and spend it each year and do not invest it and 
make a whole bunch of secondary money off your investments, the 
taxable event on a 527 is zero?
    Mr. Koskinen. That is right. As long as your expenditures 
are deductible and there is some question about the nature of 
some expenditures.
    Mr. Issa. But a 527's expenditures can be a slam against 
the gentleman from Nevada and it is okay. They can do an ad 
that says he is awful and should not be re-elected or they can 
do one that says I am awful and should not be re-elected.
    Mr. Cartwright. Will the gentleman yield for a moment?
    Mr. Issa. No. The gentleman from Nevada chose not to yield.
    The fact is there is no tax consequence and I hope we can 
put that to rest that although there is a hypothetical, that 
would not be the reality.
    Let me get to one question and I think it is an important 
question. I realize you are not here as a constitutional 
scholar. You told me one time you gave up being a lawyer for 
Lent one year and never went back. It is still the best reason 
to give up being a lawyer that I can think of.
    Before many people on the dais were born, the NAACP v. 
Alabama, do you know that case?
    Mr. Koskinen. I am not sure I do.
    Mr. Isssa. That case was fairly simple. It said the NAACP 
had a right to animus free speech under the First Amendment. It 
did so because, in fact, contributions to the NAACP support 
were being sought by people who objected to what they were 
involved in. That freedom of association and freedom of free 
speech was founded.
    If we look at that case, Citizens United is not so 
different. The fact is people's ability to lets say support 
conventional marriage and not have the IRS leak the list of the 
donors so they can be targeted, in reality, that is something 
pretty much engrained in the Constitution and repeatedly, the 
Supreme Court has set up.
    I want to digress a little bit, just one quick one, from 
this because you did mention your need to for a 
reauthorization. I just want to touch on some areas we are 
going to be talking about in reauthorization.
    Do you remember the name Stephen Manning?
    Mr. Koskinen. Yes.
    Mr. Isssa. Stephen Manning's job was he was a CIO, 
Enterprise Networks, a very appropriate person to look at to 
try to make sure that we kept him if we wanted to get to I 
guess better email retention and so on, right?
    Mr. Koskinen. Right.
    Mr. Isssa. A critical person. Manning has had two job 
titles but his total period of service was 2010 but with a 
small change from Associate CIO, Enterprise Manager, no pay 
change, to Deputy CIO for Strategic Modernization. He managed 
to have his four years extended, isn't that true?
    Mr. Koskinen. The IG has just actually issued a report or 
is in the process of issuing a report where they looked at all 
that. They looked at everybody on the critical path, thought 
they had been appropriately appointed and where they had new 
jobs or extensions, they found no problem with that.
    Mr. Isssa. This member finds a potential one because the 
current statute intends that you hire people for four years and 
they leave at the end of four years, not that you move the same 
people around and give them different titles. Let me go into 
one that concerns me more and it will be a subject for any 
    Jonathan Davis, do you remember that name?
    Mr. Koskinen. I do remember that name, yes.
    Mr. Isssa. Jonathan Davis was Chief of Staff to the Office 
of the Commissioner. He changed when he ran out of his time to 
Chief of Staff, Executive Director of Strategic and 
Organizational Development, Office of the Commissioner, 
$215,000 increased to $227,000 for essentially a political 
choice person to work as Chief of Staff to the Commissioner.
    Do you believe that the intent of Congress was to have the 
technical expertise of being chief of staff be one of them that 
we pay a quarter of a million dollars nearly and that they 
change from being chief of staff to some subtitle chief of 
staff, the seemingly lower position coming second isn't 
anything other than a circumvention of the intent of the four 
year limit?
    Mr. Koskinen. As I said, the Inspector General looked at 
    Mr. Isssa. No, no. Commissioner, you are talking about 
people that have to say did you live up to the intent of 
Congress in our opinion and should we reauthorize it and should 
we allow somebody who was deeply involved with the Commissioner 
potentially in targeting has left, should we allow somebody to 
be the chief of staff for more than four years make over 
$200,000 as part of this reauthorization?
    Mr. Koskinen. I would not do that. If it were up to me, my 
chief of staff and the selection would not be a critical pay.
    Mr. Isssa. That is part of what this committee is going to 
have to be part of in reauthorization, to make sure it is 
limited to four years and technical unless they choose to make 
it longer.
    I will tell you Jonathan Davis, to me, is a poster child 
for somebody, mostly prior to your coming in, abusing the 
    Thank you, Mr. Chairman. I yield back.
    Mr. Jordan. I thank the chairman.
    The gentleman from Virginia is recognized.
    Mr. Connolly. Thank you. I would ask the chairman to be 
accommodated to the tune of one minute and 40 seconds.
    Mr. Jordan. I have done that thus far and I will continue.
    Mr. Connolly. Pardon me?
    Mr. Jordan. I have done that thus far.
    Mr. Connolly. You are always fair about time and I thank 
    Mr. Koskinen, welcome back.
    Mr. Koskinen. I am happy to be back.
    Mr. Connolly. I want to join with the Ranking Member in 
thanking you for your service. You were in retirement, a 
comfortable life and did not have to come and do this. You did 
it because there was a problem at IRS and you wanted to respond 
to the request to help.
    It is true, is it not, that your predecessor, Mr. Werfel, 
actually discovered the problem of recordkeeping and actually 
issued new guidelines for how it should be done, is that 
    Mr. Koskinen. I was not aware of that actually.
    Mr. Connolly. Looking at the IG's report, are you familiar 
with the report that came out by Mr. Levin of the Senate 
Permanent Subcommittee?
    Mr. Koskinen. I am.
    Mr. Connolly. Have you had a chance to review it?
    Mr. Koskinen. I have reviewed it.
    Mr. Connolly. Do you agree with the findings? Are you 
taking action with respect to the findings?
    Mr. Koskinen. At this point, a significant part of the 
recommendations go to the earlier discussion about the 
501(c)(4) regulations. As I said, we got 150,000 comments and 
those suggestions and comments from the committee will be 
included in our consideration.
    Mr. Connolly. One of the issues with respect to that has to 
do with the disclosure donors, is that not correct?
    Mr. Koskinen. That is correct. Ultimately, the difference 
between the 527s and the 501(c)(4)s is 527s have to review 
their donors, the 501(c)(4)s do not.
    Mr. Connolly. In order to qualify for 501(c)(4) status, 
what must one do? What does one have to prove in order to 
qualify for that status?
    Mr. Koskinen. You have to prove that under the present 
status that your primary purpose is social welfare.
    Mr. Connolly. What does the law say with respect to social 
welfare? What is the adverb?
    Mr. Koskinen. The adverb in the law is exclusively.
    Mr. Connolly. Right. How did we manage to go from 
exclusively to primarily?
    Mr. Koskinen. When it was reviewed in 1959 by the Internal 
Revenue Service, the decision was made, and I have not been 
able to have anyone tell me exactly how they came to it, that 
primarily would be an appropriate measure of activity.
    Mr. Connolly. We have used the example before. If you have 
a couple dating, there is a difference between telling each 
other this is an exclusive relationship versus this is my 
primary relationship--primarily, I am going to be faithful to 
you as opposed to exclusively, I am going to be faithful to 
    The words really do mean different things, do they not, 
even just to common sense?
    Mr. Koskinen. They do. I think in a number of areas in the 
Code, there are issues where it says something like exclusively 
or only and the regulations have allowed for some leeway so 
that people did not inadvertently end up in violation of the 
    Section 501(c)(3)s basically have a standard that basically 
says you have to virtually everything but if you actually 
inadvertently spend some portion of your money and time on an 
otherwise not allowed activity, it will not cause you to lose 
your certificate.
    I think probably what they had in mind with primarily was 
to not have people inadvertently get caught up in ex post facto 
review of what they were doing.
    Mr. Connolly. One might suggest it is time to return to 
that subject and the meaning of those two adverbs because I 
think there are organizations that I do not think anybody in 
the public would agree are primarily or exclusively social 
welfare organizations. They are primarily political 
organizations. That is fine but that is not what the law called 
for and the interpretation is very liberal.
    In the time remaining to me, I want to go back to the TIGTA 
report. The IG was informed or the IG office was made aware as 
early as January 2012 that the IRS should use BOLOs but 
included the words occupy and others that could be associated 
with progressive groups. Are you aware of the fact that they 
were notified as early as January 2012?
    Mr. Koskinen. I did not know that until I read the report.
    Mr. Connolly. Assuming that is corroborated, can you 
explain why the audit, knowing that back in January 2012, 
nonetheless would only look at conservative trigger words in 
its audit on BOLOs?
    Mr. Koskinen. I do not know the background of what the IG 
was doing. I think the IG would have to answer that question.
    Mr. Connolly. Is it true that since the release of the 
TIGTA report, the IRS has eliminated BOLO listing for 
conservative as well as progressive groups?
    Mr. Koskinen. That is correct. Those lists and anything 
that looks like those lists is no longer used. As I said, we 
have taken the problem seriously and are anxious to make sure 
it never happens again.
    Mr. Connolly. If the problem was exclusively targeting 
conservative groups such as the Tea Party or Patriot, why would 
you eliminate BOLOs for progressive groups?
    Mr. Koskinen. Again, I think judging an organization as to 
whether it is subject to more review or whether it qualifies 
simply by the name of the organization is improper, whatever 
the name of the organization is.
    Whether it has progressive or some other liberal sounding 
name, Tea Party or some other conservative sounding name, the 
name itself should not be the criteria.
    Mr. Connolly. Mr. Chairman, thank you for the extra time.
    Thank you, Mr. Koskinen, for your service to your country.
    Mr. Jordan. I thank the gentleman.
    The gentleman from Arizona is recognized.
    Mr. Gosar. Thank you, Mr. Chairman.
    Can you put up your original slides from your original 
testimony, please?
    Mr. Koskinen, there is a lot of debate back and forth so I 
would like to get your take. Mr. Shulman denied any targeting. 
Would you agree with that?
    Mr. Koskinen. I am sorry?
    Mr. Gosar. Would you deny or confirm number one up there?
    Mr. Koskinen. There has been this long debate as to whether 
the use of improper criteria is targeting or not. Clearly, the 
IG report made a finding that none of us have disagreed with 
that improper criteria were used.
    To move to the next step and say whether there was 
targeting or not is, in fact, the basis of a lot of the 
discussion back and forth. Clearly, improper criteria were 
    Mr. Gosar. I agree. We are going to go through this kind of 
    Mr. Koskinen. Okay.
    Mr. Gosar. Lerner denies any targeting, the second one. Can 
you confirm or deny that second one?
    Mr. Koskinen. Again, there is this issue so that clearly 
improper criteria were used and it was applied to organizations 
when it shouldn't have been.
    Mr. Gosar. Once again, you are upholding number one and 
number two, right, they are false and misleading statements?
    Mr. Koskinen. I am saying targeting is not a word that I 
use as a matter--the IG didn't use.
    Mr. Gosar. Semantics, semantics.
    Mr. Koskinen. Some people attach a lot of significance to 
semantics. If the question is, were those misleading to the 
extent that they maintained improper criteria, were not used, 
then that was not true. The improper criteria were used.
    Mr. Gosar. Let us go to three, this makes it easy. Lerner 
apologizes for line people in Cincinnati, true or false?
    Mr. Koskinen. Apologizes for?
    Mr. Gosar. That this happened because of line people in 
Cincinnati, true or false?
    Mr. Koskinen. I think that probably, from what I 
understand, is not true.
    Mr. Gosar. That is what I thought. Jay Carney also blamed 
line people, so that is a false statement as well?
    Mr. Koskinen. I think on the basis of what everyone now 
knows, this was not a problem only in Cincinnati.
    Mr. Gosar. That is what I thought.
    If we go down to number five, Mr. Werfel commits to 
producing all the Lerner emails, we know that is not possible, 
    Mr. Koskinen. That is not because he didn't try or we 
didn't try but that is right, we do not have all of her emails. 
We have produced all the emails that we have and probably all 
of us, when we say we are going to produce everything, should 
say everything that we have.
    Mr. Gosar. Number six, the President in his Sunday address 
in front of the mainstream media with Bill O'Reilly, talks of 
not even a smidgen of corruption here. Would that have been a 
wise comment to say?
    Mr. Koskinen. As I said at one of these hearings or early 
on back and forth, there have been a lot of people making 
judgments and statements before all the investigations are 
done. Generally, I think people are well advised to see what 
goes on.
    I do not think there has been any evidence at this point, 
that I know of, of corruption as most people would think of it. 
Mistakes were made.
    Mr. Gosar. Ms. Lerner's activities would not constitute a 
    Mr. Koskinen. A violation of a law?
    Mr. Gosar. Yes.
    Mr. Koskinen. There is a referral in the Justice 
    Mr. Gosar. So I think you have to be recalcitrant in what 
you just said there, anybody. You would have to eliminate Ms. 
    Mr. Koskinen. You are right. There is a question about Ms. 
Lerner, exactly right.
    Mr. Gosar. That brings me to my point. Are you familiar 
with the term, trust is a series of promises kept? Have you 
ever heard that? Trust is a series of promises kept.
    Mr. Koskinen. No, but I like that.
    Mr. Gosar. Isn't it nice? I think that is what the American 
people deserve in regards to the IRS. Mr. Meadows and a number 
of others on that dais want the facts and right now, we have 
seen this play out over and over again, brought up that there 
is not a smidgen of corruption in the IRS.
    There is a reason why the people are scared of the IRS, 
right? The power to tax is the power to destroy.
    Mr. Koskinen. We don't tax, we simply collect, but people 
do worry that if you don't pay your taxes, we are not going to 
be happy. That is true.
    Mr. Gosar. How do you feel about the law? We are a law 
abiding country, right?
    Mr. Koskinen. I personally feel everyone should follow the 
law. The IRS follows the law. I think the law of the land 
should be obeyed.
    Mr. Gosar. You are familiar with the Federal Records Act, 
    Mr. Koskinen. Yes.
    Mr. Gosar. Everyone should be, particularly if they have 
spent any time in the Federal Government, right?
    Mr. Koskinen. Correct.
    Mr. Gosar. Do you believe the IRS violated that Act in any 
way, shape or form?
    Mr. Koskinen. To my understanding, NARA reviewed our 
recordkeeping Act for 2011 and 2012 or 2012 and 2013 and rated 
us over 95 percent each year. NARA said that if are new records 
had been destroyed in Lois Lerner's email loss, we had an 
obligation to advise NARA but there is no evidence yet as to 
whether those were records that were destroyed or not.
    If they were and we did not advise NARA, then that was, in 
fact, not consistent with the law but thus far, there is no 
evidence that we knew records were destroyed. We have advised 
NARA and are working with them, as I said, to try to make sure 
none of this happens again to the extent we can prevent it.
    Mr. Gosar. You will notify us at the same time as the White 
House and the DOJ?
    Mr. Koskinen. Yes. I would just note that we have not 
passed any of this information on to either the White House or 
the Department of Justice.
    Mr. Gosar. When we review this philanthropic aspect or 
501(c)(3) narratives, are you going to be equal opportunity and 
review the Tides Foundation?
    Mr. Koskinen. I am going to review them all. As I said, the 
most thoughtful comments on both sides of the issue are what is 
the definition of political activity, how much of it should be 
allowed and to whom should that apply.
    My goal is whatever regulation comes out should not only be 
clear, it should be fair to everyone and should be easy to 
administer. I am committed to trying to make that happen.
    Mr. Gosar. I appreciate the gentleman's answers.
    Mr. Jordan. I thank the gentleman.
    The gentleman from Georgia is recognized.
    Mr. Collins. Thank you, Mr. Chairman.
    My alarm clock went off this morning, I woke up and it was 
Groundhog Day. You were back on the schedule, back on the dime, 
coming here under the same similar kind of situations. We had 
conversations, I am going to talk to you about it, on September 
5, 2014 that disclosed that there were more emails received by 
five other employees in addition to Ms. Lerner had been 
    Now we find out about 760 IRS exchange drives which have 
never been discussed because you thought they had been 
destroyed but they have not been. There is no way we can say 
everything has been complied with.
    I agree, at one point, with my gentleman friend from 
Virginia. I believe exclusively and primarily do have meanings. 
I believe exclusively and primarily can have a similar meaning 
because I believe exclusively and primarily the IRS is a tax 
collection agency that should be above reproach, should have 
truth and honesty with the American people, and fidelity to do 
their job. We have talked about this before.
    I take extreme pressure, however you want to put it, with 
those two words in my own faithfulness to my wife and others 
but you seem to be following me around.
    I went home to August recess and spent several townhalls, 
went everywhere and everywhere I went, there was a question, 
what about the IRS? What is going on? They lost the emails? If 
they were serious about it or not laughing about it or saying, 
are you kidding me, it was a continual breakdown of trust 
everywhere we went. Now we are getting ready to go home in 
October and we find out more.
    Before I ask a specific question, I asked you this last 
time so as I said, we are experiencing Groundhog Day again as 
we go through. What is the problem that we cannot seem to not 
have something else come out?
    We are going to leave in October, come back in November and 
December. I expect to see you back here. I hope not to have 
another discovery that there are computers missing again. Tell 
me the truth.
    Mr. Koskinen. Congressman, I have tried to tell you the 
truth every time I have been here.
    Mr. Collins. Somebody is undermining you. You may be trying 
but it keeps coming out.
    Mr. Koskinen. It keeps coming out. What came out and has 
come out on September 5 is somehow an implication that there 
are emails out there that we did not find. No one has found a 
single email that I know of.
    Mr. Collins. Have you looked in these areas? It was already 
stated that you did not know they were because you thought they 
had been destroyed.
    Mr. Koskinen. Okay. Would you like to know what the story 
with the servers is?
    Mr. Collins. At this point, yes.
    Mr. Koskinen. The story with the servers is they were not 
looked at because when we changed in 2010 and 2011 and upgraded 
our Microsoft Office, all the data in the old servers was put 
on the new servers. When people were searching for servers, 
they thought the old ones were destroyed. Even if we knew they 
were there, there was no data on them that was not on the 
servers we had.
    If someone found new emails, I would be delighted but it is 
not as if someone is finding more emails at this point. What we 
have is an implication for the public like the mysterious 
backup system that is government-wide that has Lois Lerner 
emails on it. There has been a continual implication that 
suddenly new emails are being found or it is possible they 
might be found.
    Thus far, no one has produced another email although, as I 
said, if they could, I told the IG it would be terrific but 
thus far, no one has.
    Mr. Collins. At this point, like I said, it continually 
goes back to this exclusion from what is the role and the trust 
factor that is completely gone.
    Mr. Koskinen. I agree with your statements about trust and 
people should have confidence in us, they should view us as tax 
administrators only and should feel they are going to get 
treated fairly. We should do that for them and I totally agree 
with that.
    Mr. Collins. I want to go back to our previous meeting on 
July 23, 2014. I asked you if IRS had produced all the emails 
from Holly Paz, William Wilkins and Jonathan Davis as required 
by the subpoena which is here. Not surprisingly, your answer 
was no.
    Today, 56 days later, I am going to ask you the exact same 
questions. Have you produced all emails to and from Chief 
Counsel William Wilkins as required by this subpoena?
    Mr. Koskinen. No.
    Mr. Collins. Have you produced all emails to and from Holly 
Paz as required by this subpoena?
    Mr. Koskinen. At this point, you have about 7,500 emails 
from her. We expect that there are another 45,000 we are going 
through and any of those that are not duplicates, we will 
provide to you. We hope to do that before the fall is out. That 
is what we are focused on now.
    The answer to the other parts of the subpoena below Lois 
Lerner and Holly Paz, we have not gotten to those yet. We look 
forward to continuing to work with the committee. Some of those 
requests are to search 90,000 email hard drives to find 
    Mr. Collins. I am going to stop you right there. As an 
attorney who did not give up being an attorney for Lent, your 
answer is eloquent but the answer would be no?
    Mr. Koskinen. I said no, I agree. Holly Paz you have 7,500 
and we are working through the next 45,000.
    Mr. Collins. Again, if I included that word all, as you 
said a few moments ago, words do have meanings and I do place 
meaning on it, all would be no?
    Mr. Koskinen. All would be no.
    Mr. Collins. Jonathan Davis, all as required by the 
    Mr. Koskinen. No.
    Mr. Collins. I wish you the best, I do, but the problem is 
it comes back to this every single time. As I said, you follow 
me and I think follow many members of both parties around 
because of the agency which you head now and the issues that we 
keep developing over trust, fidelity, clarity exclusive and 
    We can go down every adverb in the world but it all bottoms 
down to trust. Right now, others on this committee would like 
to talk about what is the new definition for how you are going 
to examine the tax status. That is all great for another 
hearing. This has nothing to do with that. Are we getting to 
the bottom of what did happen so that we can move forward.
    I am sure we will see you again. I hope it is not a 
Groundhog Day moment in which here we go again and something 
else is out there that undermines the very trust.
    Mr. Koskinen. If I could add, in March we notified the 
investigative committees that we had produced all the emails we 
could find and were identified as being relevant to the 
determination process.
    Mr. Collins. Stop right here. Let us just hold this right 
here. The subpoena does not ask for all and relevant. I know 
there is some discussion about let us clarify this. We were 
almost to the end here. I was actually going to yield back and 
go from here. By definition, all is all.
    Mr. Koskinen. All is all.
    Mr. Collins. Thank you.
    Mr. Koskinen. My only point is the all that we are getting 
is a lot of stuff that does not have anything to do with the 
determination process but we are happy to provide. We are 
committed to continuing to work to provide you with all those.
    Mr. Collins. The subcommittee chairman and the Chairman 
have said all. I know Mr. Jordan has asked for all, not 
filtered. As I like to hear from my wife and kids, if you have 
bad news, give me all, don't just send it out in small streams.
    This is the problem we are having. It is a subpoena.
    Mr. Koskinen. You are going to get them all. Some of them 
are going to take a while because you want them from 90,000 but 
you will get them all.
    Mr. Collins. Whether that is an issue for you and I, all is 
all. That is what the committee has asked for. I am asking for 
the committee.
    Mr. Koskinen, have a good day.
    Mr. Jordan. I thank the gentleman.
    The gentlelady from Wyoming is recognized.
    Mrs. Lummis. I thank the gentleman.
    I was at another hearing and am scooting off to yet another 
hearing today.
    Mr. Koskinen. It is a busy day.
    Mrs. Lummis. It is a busy day.
    Thank you for being here.
    I am going to yield my time to the Chairman, Mr. Jordan.
    Mr. Jordan. I thank the gentlelady.
    We will finish here and then do a quick second round. We 
have votes probably in 30 minutes.
    Mr. Koskinen, earlier you said, all we have to do is ask. 
Get on the phone and call you and you will give us whatever we 
    It seems to me there is some information that frankly you 
should volunteer that is of such a critical nature, you should 
give that to us. We should not have to learn, for example, that 
there are 760 backup servers from the IG. That is something you 
should have told us.
    We should not have to learn from the IG that there is a 
separate OCS chat system at the IRS that Ms. Lerner was pleased 
was not recorded and kept. We should not have to learn that 
from the IG, we should have learned that from the IRS.
    We should not have to learn from a deposition that there 
were nine backup tapes. That is something you should have told 
    We should not have to learn from a judge, based on Judicial 
Watch's FOIA action, that Ms. Lerner's Blackberry was wiped 
clean. You should have told us that.
    We should not have to learn from Judicial Watch's FOIA 
request that the IRS gave 1.1 million pages of information, 21 
disks of information, some of it containing 6103 confidential 
information, to the Justice Department. You should have told us 
those kinds of things. Those are critical facts pertinent to 
the investigation.
    No, no, no, you make us come get it. When we do ask you, 
you do not answer our questions; you do not help us out because 
we ask repeatedly. We wanted to interview certain witnesses and 
you said, no, cannot do it, there is an ongoing investigation. 
You cannot have it both ways.
    You cannot sit here and say all you have to do is call us 
and then when we call you and try to get witnesses, nope, you 
cannot interview them. We had to subpoena them. You cannot have 
it both ways.
    Here is where I really want to go. Mr. Meadows earlier said 
you spoke to him, I want to make sure I say this right, about 
reauthorizing the streamline critical pay authority, is that 
right, Mr. Koskinen? Is that something you are looking to do?
    Mr. Koskinen. Yes.
    Mr. Jordan. This is to pay people more than the top level 
of the federal employee pay scale, something higher than the 
top level and requires statutory authority to do that, correct?
    Mr. Koskinen. That is correct. It was granted to the IRS in 
1998 and has been granted and operated until 2013.
    Mr. Jordan. I understand.
    We did a little investigation looked at the people who are 
currently, over the last five years, getting paid more than the 
top employees under the normal and customary federal employee 
pay scale. We are going to put that up on the screen if we can.
    Our calculation was 83 different folks are paid above this 
level. We can probably scroll through the pages.
    Mr. Koskinen. There are 25 right now on the program.
    Mr. Jordan. I am talking about the last five years, 83 
different people over the last five years, frankly, the 
relevant time frame that we have been looking at when this 
targeting started to roll and took place.
    There were 83 different people and 56 of them, the business 
unit says are information technology, so 56 of them are IT 
folks making $202,000, $227,000, getting performance bonuses of 
$28,000, $19,000, $19,000, $20,000, making in some cases as the 
chairman said, almost a quarter of a million dollars. You think 
this should continue?
    Mr. Koskinen. Those people, not all of them make $220,000; 
some are at $160,000 or $170,000. For instance, the guy who 
runs our IT system worked in the private sector probably making 
four times that amount.
    If you go through all those, in fact, one of the 
requirements is that they have to have made multiples of what 
they are making here which is part of the reason they get hired 
under the streamline authority.
    They are primarily technical people, primarily modeling and 
our analytical people, all of whom should have, if the 
programmers run them, the IG just completed a review of it and 
said we did fine. All of them should have been making 
significantly more.
    Mr. Jordan. Fifty-six out of 83 are making higher than the 
highest employees are supposed to make in the federal employee 
pay scale, many making $250,000, many getting bonuses of over 
    Mr. Koskinen. I would stress again there are only 25 now. 
The program is limited to 40 at any time and we have never had 
40 at any time. Over five years, it means people have been 
moving in and out which is what the program is supposed to do.
    Mr. Jordan. Here is my question. Fifty-six of them are IT 
people. You are asking us to reauthorize this at a time when IT 
people making a quarter of a million dollars at a time when you 
lost Lois Lerner's emails, that is what you are coming forward 
to do?
    Mr. Koskinen. Ms. Lerner's email crash occurred three years 
    Mr. Jordan. At a time when you did not tell us there were 
any backup tapes; at a time when you did not tell us there were 
760 servers but there are; at a time when you did not tell us 
that her Blackberry was wiped clean but it was; at a time when 
you tell us you had trouble retaining the records, you had a 
duty to keep the records and disclose them, all this was going 
on and yet you still think it is appropriate to come to 
Congress and say, in spite of all this, all these problems with 
our information technology and the fact that we lost emails 
from the key person in this investigation, you come to Congress 
and say you know what, I need special statutory authority to 
keep paying IT people over $200,000 and give them $20,000 
    Mr. Koskinen. There is a statutory limit. You cannot make 
$220,000 and get a $20,000 bonus but I am coming here and 
    Mr. Jordan. I see right here.
    Mr. Koskinen. These are the senior people running us. If we 
do not have the ability to keep them or replace them in the 
course of the program, it runs a real risk of crippling the 
agency. I think that is important for people to understand.
    I would not ask for it willy-nilly. It is a small program.
    Mr. Jordan. I am not saying you asked for it willy-nilly. I 
am saying it takes a lot of gumption to come to Congress and 
say we just lost her emails but we need special authority to 
pay IT people more than anyone else in the Federal Government 
can make and give them $20,000 bonuses. That is what I am 
    Mr. Koskinen. I am just telling you that the people who run 
our online services program, the people who run the IT 
    Mr. Jordan. Maybe you should switch. Maybe you need to hire 
a few more people at a lower salary who are actually going to 
do the job and would not lose Lois Lerner's emails. Maybe you 
should think about that approach versus the approach you are 
    Mr. Koskinen. We have, as I said, taken the approach that 
we are going to fix that problem. We are actually going to have 
our senior executives immediately store on a separate shared 
drive rather than on their hard drives. I agree with you 
destroying emails on hard drives----
    Mr. Jordan. The taxpayer might say we are giving $20,000 
bonus, paying people over $200,000 and it takes a special law 
to do this, are we getting our money is worth here? They lost 
Lois Lerner's emails.
    Mr. Koskinen. If you go on our website, 200 million people 
have pushed an app that says where is my refund and immediately 
you can find it. That is what these people did. You can run an 
app from our website, push an app and get your transcript for 
the last year only. That is what these people did.
    We are actually trying to make life easier for taxpayers 
through technology. To do that, we have to have the best we 
    Mr. Jordan. What remedy are you telling people who were 
systematically targeted, had their First Amendment rights 
abused and the person at the center of the scandal, we cannot 
even find her emails, what do you say to them? What button do 
they push?
    Mr. Koskinen. You have 76,000 of her emails.
    Mr. Jordan. I am not asking about that. I am asking what 
button do they push? You lost her emails. You are paying people 
a quarter of a million dollars and giving them bonuses. What 
button do they push? That is a question.
    Mr. Koskinen. You can ask that question. I am just telling 
you that the 25 people on that program are critical across the 
agency. If you want to deny us----
    Mr. Jordan. When you find that button, that is a button we 
are trying to find, that is a button we are trying to push to 
get to the bottom of that, how people's First Amendment rights 
were abused.
    With that, I would recognize the gentleman from 
    Mr. Cartwright. Thank you, Mr. Chairman.
    Mr. Koskinen, just so it is clear, when did you start as 
Commissioner of the IRS?
    Mr. Koskinen. December 23, 2013, part of my holiday 
    Mr. Cartwright. What were you doing before that?
    Mr. Koskinen. I was on two publicly-traded company boards 
and basically semi-retired.
    Mr. Cartwright. You were not even working at the IRS in any 
capacity before December 23, 2013?
    Mr. Koskinen. Correct.
    Mr. Cartwright. When you talk about, for example, computer 
hard drive crashes, were those things happening after you 
started at the IRS?
    Mr. Koskinen. Hard drive crashes continue as we speak.
    Mr. Cartwright. I am talking about Lois Lerner's Blackberry 
exchange. Did that happen before or after you started at the 
    Mr. Koskinen. It was all before I was there. All of the 
issues that we have been holding hearings about occurred before 
I came.
    Mr. Cartwright. You are the one coming here to get hollered 
at for all of that. Are you here under subpoena today, Mr. 
    Mr. Koskinen. No, I come voluntarily.
    Mr. Cartwright. You have come voluntarily to do that. It 
has been said before, but I thank you for your service to the 
United States. This is an amazing act of selflessness that you 
do this for our Nation and that you look into ways that we can 
improve our systems with transparency and accountability in the 
way we collect taxes in this country.
    To that end, much of your testimony today talked about 
looking forward, going forward and making sure these things get 
better as time goes on with the IRS. First of all, to the point 
about whether you pay people, what happens if you do not pay 
the market rate, the going rate for IT people? What happens to 
those people?
    Mr. Koskinen. In fact, we will not be able to make the 
improvements we want. We have an antiquated Model T we are 
running. Some of the applications we run were running when John 
F. Kennedy was President. We are trying to upgrade all of that.
    If we do not have the appropriate leadership, that is not 
going to happen and we are going to have an IT system that 
makes no more progress.
    Mr. Cartwright. I understand this is beyond the 
comprehension of some of the members here, but if you do not 
pay people the going rate, the market rate, for what they are 
worth, they wander off and find better jobs, don't them?
    Mr. Koskinen. All of these people, as I said, made three to 
four times what we are paying them. All of them have options to 
go elsewhere. These are people, as the chairman noted, who 
rotated through the program. They have been here and then have 
gone back out.
    None of the people working for us will have a problem. They 
will not be unemployed for a day.
    Mr. Cartwright. Commissioner Koskinen, last May the 
Inspector General issued a report finding that ``ineffective 
management'' at the IRS allowed inappropriate criteria to be 
developed and stay in place for more than 18 months and 
resulted in substantial delays in processing certain 
applications and allowed unnecessary information requests to be 
    The IG has repeatedly testified that his audit did not 
uncover any evidence of political motivation behind the 
inappropriate handling of these applications by IRS employees. 
You are familiar with that report, I take it?
    Mr. Koskinen. I am.
    Mr. Cartwright. The IG report also contained several 
recommendations to address the IRS management failures that led 
to the inappropriate handling of applications for tax exempt 
status, am I correct?
    Mr. Koskinen. That is correct.
    Mr. Cartwright. Has the IRS implemented all of the IG's 
    Mr. Koskinen. All of those recommendations have been 
    Mr. Cartwright. Can you describe what additional steps the 
IRS has taken to ensure that the management failures that led 
to the inappropriate handling of applications for tax exempt 
status do not occur again?
    Mr. Koskinen. Included in my oral statement and my full 
statement is a discussion of some of the other actions we are 
taking because I do think it is important for the committee as 
well as for the American public to understand that we take the 
problem seriously, including the difficulties with both saving 
and finding emails.
    We are doing our best to make sure none of these problems 
happen again and that we take them seriously. I think it is 
important. As I say, I want the committee members as well as 
the public to know we have done everything anyone has 
recommended thus far to make sure it does not happen again.
    I am looking forward, as I said from the start, to reports 
from the various investigative bodies, their finding is factual 
and most importantly, their recommendations that we should 
    Thus far, we have taken the recommendations we found we 
were able to implement and I think we have made major progress 
in ensuring it is important for the public to feel confident 
and comfortable about that, ensuring we do not have this 
problem again.
    Mr. Cartwright. I want to take the opportunity to thank you 
for your public service and also for your testimony. This is 
the kind of testimony where you are required to answer our 
questions and you are also required to anticipate what 
questions might be important to us so that you volunteer the 
answers to those questions even without being asked.
    It is a tough job and I do not envy you. Thank you for 
coming, Mr. Koskinen.
    Mr. Jordan. The gentleman from North Carolina is 
    Mr. Meadows. Thank you, Mr. Chairman. I will be brief.
    I guess one of the issues here is using federal tax dollars 
for political targeting. We know about the Hatch Act and the 
Politico ran a story. This came home to me just a couple of 
days ago where we had federal employees in my district that had 
been sharing actually with people who were supporters of mine 
to make sure that they do not vote for me.
    I had a choice to either make a big deal of it, which I did 
not, or to try to just ignore. When you run for office, you get 
thick skin. If not, you really need to have thick skin.
    Your choice in December 2013 is the closest thing I can 
think of to anybody running for political office. With that 
being said, Politico ran a story about an IRS worker who was 
suspended for urging people to re-elect Mr. Obama. Are you 
aware of that, a violation of the Hatch Act?
    Mr. Koskinen. I am aware of that.
    Mr. Meadows. Let us play the recording. I think it gets to 
the underlying point on some of this that we have to come clean 
and restore it.
    [Video shown.]
    Mr. Meadows. When you have these kinds of things that 
happen, you are a big agency, I understand that but this 
gentleman, as I understand it, was suspended, is that correct?
    Mr. Koskinen. I do not know the details and the privacy 
laws do not allow me to testify. I am happy to have someone 
give you all a briefing.
    Mr. Meadows. Is he working for the IRS today?
    Mr. Koskinen. That I do not know but we will find out that 
information for you.
    Mr. Meadows. You do not know whether this guy is employed 
today and working for you today?
    Mr. Koskinen. No. All I can say is, we take these 
situations very seriously. There is an image somehow that in 
the Federal Government nobody ever gets terminated for cause. I 
would say in the determination issue, the top five people, 
starting with the Commissioner on down, are not there anymore 
in terms of accountability.
    Without getting into the details and numbers, we have a 
significant number of employees every year who are terminated. 
They are terminated either because they take actions like this, 
they are terminated because they willfully do not pay their 
taxes regularly.
    Although we have a great work force, we have the highest 
tax compliance rate, over 99 percent, but we take it very 
seriously and the employees understand that. I think it is 
important and we continue to reinforce that with regard to 
politics, no IRS employee during their official hours should do 
anything that sends any signal, one way or the other, about 
their political beliefs.
    We need to be non-political. We are in the tax 
administration business. People have to understand that is our 
business. If people on their own time on weekends want to do 
whatever they want, that is fine. The law is clear and we take 
that very seriously.
    Mr. Meadows. When we hear things like this, the more you 
dig, the more you feel like you have to dig because when you 
start to hear these kinds of things and if they were not 
terminated, it gives me great concern that this kind of 
environment will foster more people to do it if there is really 
no repercussion.
    Mr. Koskinen. I am happy to get you that but I feel very 
strongly, as you do, that if people are going to engage in 
political activity while they work, that is cause for 
    Mr. Meadows. We have a couple seconds left and I think we 
will go to the gentleman from Nevada. You have counsel here 
with you. Can they inquire and get you the answer so we can 
have that before the hearing is over today?
    Mr. Koskinen. As I said, on an individual matter, I cannot 
publicly give you the answer but we can give it to you----
    Mr. Meadows. All I know is his first name and his ID. I 
have no idea what his last name is. I just need to know is he 
still working for the IRS?
    Mr. Koskinen. We will do our best to check on that and if 
we cannot get it to you before this is over, we will get it to 
you promptly.
    Mr. Meadows. Thank you.
    I yield back.
    Mr. Jordan. The gentleman from Nevada is recognized.
    Mr. Horsford. Thank you, Mr. Chairman.
    Mr. Meadows, you had me at the first round. I just find the 
second round interesting that we would use one example of one 
employee when there are some 90,000 employees.
    Mr. Meadows. If the gentleman will yield, this came 
personally to me. I actually had a VA employee who was 
campaigning against me just the other day and I found out. We 
all know that whether they are a Democrat or a Republican, the 
federal tax dollar is not anyplace that needs to be promoting, 
I would not want them campaigning against you and vice versa.
    I appreciate the gentleman.
    Mr. Horsford. Reclaiming my time, I believe that there are 
certain staff, including Ms. Lerner, who have not served this 
Administration well, that due to poor management, poor 
decision-making, we are in a position to have to have these 
types of hearings.
    I am not going to defend every action or every decision 
that certain former staffers of the IRS have taken, but I also 
think it is inappropriate for members of this committee to 
apply such a broad brush to all staff or all management of the 
IRS or other federal agencies.
    I also think it takes a lot of gumption of certain members 
of Congress to question the request for critical pay authority 
when this is the least productive Congress in the history of 
Congresses. Hardworking people cannot get a raise but members 
of Congress continue to get paid whether they do their job or 
get anything done around here or not.
    At the same time that we are having this hearing, which is 
the 15th hearing, there is debate on the Floor right now that 
is crucial to our country's safety, to international relations 
and is one of the most serious issues that this Congress is 
being confronted with.
    Instead, this chairman has decided to have the 15th hearing 
on the same issue trying to assert the same allegations and 
never getting to the point of action on anything.
    Mr. Chairman, either we get on with the business of the 
American people, that they have sent us here for or we need to 
stop wasting time and taxpayer resources. There are important 
issues that we need to be tackling but unfortunately, this 
committee's time has been wasted, in large part.
    Commissioner, I will take you at your word that you are 
working in earnest on this regulation because I think this is 
part of the problem. We had nearly 200,000 applications filed 
for tax exempt status between 2010 and 2012, 73,319 
applications in 2012 alone. Your agency at that time did not 
approve about 22,000 of them.
    This is the world after Citizens United. My colleagues on 
the other side, the chairman of the full committee, may want to 
say this has nothing to do with it but it has everything to do 
with it. Just because someone decides to make a donation to a 
501(c)(4) does not necessarily guarantee that tax exempt status 
should apply if they are not meeting the standard of the law, 
the federal law.
    For us to not get a clear answer from the agency as to why 
since 1959, the agency has been out of compliance with the 
federal law, is the basis of the problem.
    I am not here to attack individual members of the IRS, I am 
not here to cast aspersions on every action that has been taken 
but I am here to hold you guys accountable. One thing that I 
will do every hearing is to ask you what is the status of you 
coming into compliance with the federal statute that requires 
the exclusive benefit to the social welfare, not primarily 
benefiting social welfare.
    I will take you at your word that is something you are 
earnestly working on and I await your action and 
recommendations to this Congress.
    Thank you.
    Mr. Jordan. We will just finish with a quick closing 
statement from myself and the Ranking Member.
    I would say this. The previous member offered a critique of 
Mr. Meadows for bringing up this example. This was brought to 
light by the Office of the Special Counsel. It is entirely 
appropriate. This whole thing is about politics.
    The gentleman from Nevada said to use this political 
example, he did not feel was appropriate. That is what this is 
all about.
    Mr. Horsford. Would the gentleman yield?
    Mr. Jordan. In just a second.
    People were systematically targeted for their political 
beliefs. That is what took place here. Because conservative 
groups around the country disagreed with the President, they 
were systematically harassed and targeted. That is as political 
as it gets. That is a violation of the most fundamental aspect 
of the First Amendment, your right to speak out against your 
    This example is one where you are supporting violating the 
Hatch Act. What took place at the IRS was targeting of the Bill 
of Rights' First Amendment. The member said it is a waste of 
time to dig into that? Are you kidding me? This is why we 
should have hearing after hearing to find out exactly what 
    Again, I will repeat, if the IRS would be a little more 
forthcoming and give us straight answers that would be a lot 
more helpful. That would help us get to the truth a lot sooner 
and hopefully protect people's most fundamental liberties as we 
move forward.
    I will yield to the gentleman if he still wants to be 
    Mr. Horsford. Thank you, Mr. Chairman.
    The issue of a political nature is the fact that these 
hearings continue to make the political accusations even though 
after 15 hearings, there is nothing to substantiate that 
accusation. The wrongdoing that did occur needs to be held 
    One of the ways to hold that accountable is by making sure 
that the regulation, which is not in compliance with the 
federal law--do you agree there is----
    Mr. Jordan. Reclaiming my time, the reason we are bringing 
Mr. Koskinen back is because on March 25, 2014, he told this 
committee, the full committee actually, Mr. Cummings actually 
asked the question, he would get us all of Ms. Lerner's emails 
even though at that time his Chief Counsel already knew they 
could not. His Chief Counsel knew in February there was a 
problem with Ms. Lerner's hard drive but they waited until June 
to tell us.
    Then he told us he could confirm there were no backup 
tapes. We have learned that is wrong. Those are just a couple 
of examples. We have a bunch more that I cited in my opening 
    The reason we keep bring Mr. Koskinen back is because when 
he tells us something, we later learn it is not accurate. In 
the interest of good government and the truth, we give him a 
chance to fix the record time and time again.
    This will come as no surprise to anyone. I am going to keep 
bringing him back every time he says something that turns out 
not to be true. You had a guy violate the Hatch Act that has 
been reported in the press and he cannot even tell us if he 
still works at the IRS.
    I know there are lots of employees there but there are not 
many who get referenced in the paper for violating the Hatch 
Act for political activity. You would think he would know if 
that guy still works there. He does not so we are going to give 
him a chance to give us that answer at some point.
    I yield to the gentleman from Pennsylvania.
    Mr. Cartwright. Thank you, Mr. Chairman.
    I will keep coming to these hearings too. I will keep doing 
what we are expected to do. Many of these things we agree on. 
We need to protect accountability of our government and need to 
protect legal responsibility. We need to make sure our laws are 
not violated by people who are unrepentant and are not 
chastised, fired, fined, or imprisoned for it.
    We need to protect the First Amendment rights of the 
people. We need to protect people's rights to engage in 
politics in a fair and forthright manner.
    Above all, we need to protect our American democracy and 
protect it so that it is not stolen away from us in the dark of 
night. That is what I am really worried about. I am worried 
about the difference.
    Anyone listening to these hearings, we talk a lot about the 
difference between the 529s, the chairman of the full committee 
brought this up. The difference between the 529s and the 
501(c)(4)s. This whole fist fight going on right now is about 
501(c)(4)s. What is the difference between 529s and 501(c)(4)s? 
Both of them are tax statuses for outfits that people put money 
into and are they going to use it for political purposes in 
    The difference is not in the taxation, the difference is in 
the disclosure, the transparency and the accountability because 
the 501(c)(4)s do not have to disclose their donors. That is 
why this is so important. That is why so many applications were 
put in for 501(c)(4) status by outfits and people that wanted 
to contribute to politics and not be identified.
    We are talking about people and entities that wanted to go 
undisclosed. They wanted to remain secret. They wanted to be 
hidden from the American people and put in all this money and 
direct American politics and distort American democracy with 
this money.
    I do not apologize because I call it dark money because 
nobody knows where it came from, from whom it came, or even 
whether it came from foreign countries and foreign nationals. 
We do not know that with 501(c)(4)s.
    That is why, Mr. Koskinen, it is so vital that we go back 
to exclusively engaging in social welfare as opposed to 
primarily. The difference between those words is vast. If we go 
back to only granting 501(c)(4) status to outfits that 
exclusively engage in social welfare, we do not have to worry 
about dark money wrecking our American democracy.
    With that, I yield back, Mr. Chairman.
    Mr. Jordan. I thank the gentleman.
    The committee will be adjourned.
    [Whereupon, at 4:00 p.m., the subcommittee was adjourned.]



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