Bloomberg News

IRS’s Lerner Under Scrutiny as Issa Builds Contempt Case

March 11, 2014

Former IRS Director of Exempt Organizations Lois Lerner

Lois Lerner was the IRS’s director of exempt organizations until last year, overseeing the enforcement of rules that limit political involvement by nonprofits that seek tax-exempt status under section 501(c)(4) of the tax code. Photographer: Pete Marovich/Bloomberg

Lois Lerner, who oversaw the U.S. Internal Revenue Service’s scrutiny of Tea Party groups, was looking for someone from every branch of government to help resolve the issue that eventually cost her job.

In e-mails released today by a congressional committee, Lerner wondered why Congress wasn’t getting more criticism, hoped that the Federal Election Commission would “save the day” and wrote that political nonprofit groups “itching for a constitutional challenge” might file a court case that leads the IRS to accelerate the release of specific information about groups denied tax-exempt status.

The e-mails are part of a 141-page report from the House Committee on Oversight and Government Reform. The panel is building a case designed to lead to a vote to hold Lerner in contempt of Congress for refusing to answer the panel’s questions and for providing false and misleading information in prior questioning.

“She led efforts to scrutinize conservative groups while working to maintain a veneer of objective enforcement,” the report said of Lerner. “Her unwillingness to testify deprives Congress the opportunity to have her explain her conduct, hear her response to personal criticisms levied by her IRS coworkers, and provide vital context regarding the actions of other IRS officials.”

Lerner has refused to answer lawmakers’ questions, twice invoking her constitutional right not to testify.

Microphones Cut

When she did that March 5, Committee Chairman Darrell Issa, a California Republican, adjourned the hearing and cut off the microphones before Democrats could speak. Issa later apologized.

“As we have said, the majority has no interest in the facts,” William Taylor, Lerner’s attorney, said in an e-mail last night. “The facts interfere with keeping the conspiracy theory alive through the election cycle.”

Lerner was the IRS’s director of exempt organizations until last year, overseeing the enforcement of rules that limit political involvement by nonprofit groups that seek tax-exempt status under section 501(c)(4) of the tax code. In response to a question last May at a tax conference, she said the IRS had singled out groups for extra scrutiny based solely on their names, including those related to the anti-tax Tea Party.

Multiple Investigations

That disclosure led to multiple congressional investigations, which are still continuing, along with a Justice Department criminal probe.

President Barack Obama forced out the acting IRS commissioner, Steven Miller. Several other senior officials, including Lerner, left the tax agency.

Republicans contend that Lerner’s actions were part of a pattern of politically motivated steps that included disclosure of groups’ information and audits of individuals and businesses involved with small-government groups.

Democrats counter that some groups supporting their party were also scrutinized and that Republicans haven’t produced evidence of political motivation. They contend that the IRS was clumsily trying to set up procedures for applying unclear rules to address the growth of politically oriented nonprofits.

The report includes some previously unreleased information, including e-mails showing that Lerner was trying to figure out her eligibility for retirement benefits in January 2013, more than three months before she disclosed the agency’s actions.

Lerner Retirement

The e-mails show that Lerner was considering retiring effective Oct. 1, 2013. Her retirement, which followed a suspension, was effective Sept. 23.

The report also quotes a senior IRS official, Nikole Flax, telling congressional investigators that Lerner was too “emotional” and “unpredictable” to be an effective witness at a July 2012 congressional hearing on tax-exempt groups. Flax was chief of staff to Miller, the acting commissioner.

The committee is attempting to build a case for contempt of Congress by showing that Lerner provided what the committee called false or misleading information. Such actions could also be grounds for criminal charges.

For example, on Feb. 24, 2012, she told committee staff members that the criteria for evaluating applications hadn’t changed. She also told the committee in May 2012 that questions the groups had received were ordinary, a contention the IRS rejected in 2013 when it said some questions were inappropriate.

Personal E-Mail

The report also mentions her use of a personal e-mail address in apparent violation of IRS policy and accuses her of disclosing confidential taxpayer information.

The report portrays Lerner as having an agenda in line with Democrats and concentrating enforcement on Republican-leaning groups.

It highlights a September 2010 e-mail chain -- after the first Tea Party groups had been selected for extra scrutiny -- in which Lerner wrote that the IRS should focus on 501(c)(4) groups because of concerns aired in news articles that groups were being set up to engage in politics.

“We need to have a plan,” she wrote. “We need to be cautious so it isn’t a per se political project. More of a c4 project that will look at levels of lobbying and pol. activity along with exempt activity.”

The report shows her staff circulating news stories about their work, including a Politico article in October 2012 that was critical of the IRS’s enforcement of rules governing political nonprofits.

‘Never Understand’

Lerner responded in an e-mail: “I never understand why they don’t go after Congress to change the law!”

Lerner’s “save the day” reference, which had been previously disclosed, was her response to a National Public Radio story in 2012 about Senate Democrats’ complaint to the FEC that politically oriented nonprofits were violating election law.

Officials from the IRS and the Obama administration have said their actions weren’t politically motivated.

Instead, they said, the agency was clumsily enforcing the law. Groups organized under section 501(c)(4) must be operated “exclusively” for promoting social welfare. The IRS has interpreted that to mean that groups can’t be primarily political.

Because 501(c)(4) groups don’t have to disclose their donors, that status is an attractive vehicle for anonymous involvement in politics by donors to groups such as Crossroads Grassroots Policy Strategies, coordinated by Karl Rove, a former political aide to President George W. Bush.

The IRS is considering rules that would broaden the definition of political activity and disqualify social welfare groups from being tax-exempt.

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

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


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