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Bad News Piles Up for IRS With Hearings Aside Report

June 04, 2013

Bad News Piles Up for IRS With Hearing Alongside Critical Report

Daniel "Danny" Werfel, acting commissioner of the Internal Revenue Service (IRS), speaks during a House Appropriations subcommittee hearing in Washington, D.C. on June 3, 2013. Photographer: Andrew Harrer/Bloomberg

The Internal Revenue Service is headed for another public pounding today as multiple controversies are combining to besiege the U.S. tax agency.

The House Ways and Means Committee will air complaints from small-government groups that received extra scrutiny when applying for tax-exempt status, received inappropriate questions or had confidential information revealed.

Meanwhile, an inspector general’s report will detail about $50 million in spending on IRS employee conferences.

Daniel Werfel, the acting IRS commissioner, tried to blunt the growing criticism yesterday, saying he wants to identify the IRS’s deficiencies and repair broken public trust. In turn, he got an earful of complaints along with some sympathy from House members who showed few signs of easing up in their probe.

“I don’t know whether to admire you or pity you, because you have the weight of the United States Constitution on your shoulders,” Representative Steve Womack, an Arkansas Republican, said at a House Appropriations subcommittee hearing in Washington.

The controversy that erupted last month pushed the IRS from disliked to despised, especially by Republicans who see a pattern of misdeeds against their allies. Six congressional committees have opened investigations, the Justice Department is pursuing a criminal probe and the inspector general continues its inquiry.

$1 Billion Increase

The tax agency is seeking a 9 percent, or $1 billion, budget increase, in part to handle its enhanced responsibilities under the 2010 health care law.

That funding request, already in jeopardy because of budget constraints, is now imperiled. Werfel, who was much more deferential to lawmakers than his predecessors were in previous hearings, talked about working with lawmakers to make changes and improve oversight of the agency.

Representative Hal Rogers, a Kentucky Republican and chairman of the House Appropriations Committee, said he was considering fresh restrictions on the IRS’s budget.

“The power of the purse rests in Congress,” Rogers said. “We’re prepared to use that purse to get to the truth.”

Werfel said he supported the budget request. He also said he wouldn’t seek additional money right now for the exempt organizations’ office at the center of the controversy.

“If you start with more money, it’s the wrong starting point,” he said.

Extensive Delays

The IRS, rarely popular with lawmakers, revealed May 10 that it had subjected groups with the words Tea Party and patriot in their names to tougher scrutiny when they applied for tax-exempt status. Those groups, according to an inspector general’s audit, had extensive delays and some received inappropriate questions. The IRS apologized.

Werfel, who has replaced several senior IRS executives, said he has asked for a plan by the end of the week for processing the remaining delayed applications.

J. Russell George, the inspector general, said he has been unable to determine who first came up with the idea of tougher questioning for these groups based solely on their names. Employees in the Cincinnati office where the applications were processed didn’t identify who had begun the practice.

“I’m frustrated too,” Werfel said. “I want these facts to emerge quickly.”

Representatives of small-government groups from South Carolina, Alabama, Tennessee and California are scheduled to testify at the Ways and Means hearing today.

Parody Video

Also set to speak is Sue Martinek of the Coalition for Life of Iowa, which was asked by the IRS not to picket at Planned Parenthood Foundation of America as a condition of receiving tax-exempt status. John Eastman, chairman of the National Organization for Marriage, is scheduled to talk about confidential documents from the anti-same-sex marriage group that were sent to the IRS and then released.

The anticipated release today of a report on IRS conference spending -- including on a Star Trek parody video -- is adding to the ire directed at the agency. The report is expected to show $50 million in such spending over three years, including $4 million for a 2010 California conference at which some IRS employees stayed in presidential suites and listened to a $17,000 speech on “leadership through art.”

The House Oversight and Government Reform Committee, which will hold a hearing on the conferences June 6, released those details.

Werfel said in a statement May 31 that the IRS has restricted conference spending and that the 2010 event couldn’t happen again.

George said yesterday that a whistle-blower within the IRS alerted his office to the conference spending.

“It seems we have a new misstep every day at the IRS,” Rogers said. “I’m very troubled at what may come to light next.”

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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