[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE IRS'S TARGETING SCANDAL: CHANGING STORIES OF THE MISSING EMAILS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ECONOMIC GROWTH,
JOB CREATION AND REGULATORY AFFAIRS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 17, 2014
__________
Serial No. 113-145
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
91-126 PDF WASHINGTON : 2014
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia PETER WELCH, Vermont
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan Vacancy
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Economic Growth, Job Creation and Regulatory Affairs
JIM JORDAN, Ohio, Chairman
JOHN J. DUNCAN Jr., Tennessee MATTHEW A. CARTWRIGHT,
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
KERRY BENTIVOLIO, Michigan
RON DeSANTIS Florida
C O N T E N T S
----------
Page
Hearing held on September 17, 2014............................... 1
WITNESSES
Mr. John Koskinen, Commissioner, Internal Revenue Service
Oral Statement............................................... 7
Written Statement............................................ 10
APPENDIX
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
THE IRS'S TARGETING SCANDAL: CHANGING STORIES OF THE MISSING EMAILS
----------
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
accurate.
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
year.
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
involvement.
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
elections.
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
activities.
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
Senate.
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
points.
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
prosecution.
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
that.
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
STATEMENT OF JOHN KOSKINEN, COMMISSIONER, INTERNAL REVENUE
SERVICE
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
possession.
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
managers.
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
standards.
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
questions.
[Prepared statement of Mr. Koskinen follows:]
[GRAPHIC] [TIFF OMITTED]
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.
Commissioner?
Mr. Koskinen. No.
Mr. Jordan. Two hundred and twenty-four. Which one of those
224 Republican members does not really want a special
prosecutor?
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
question.
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
it.
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
Punxsutawney.
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
talking?
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
time.
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
again.
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
that?
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
systems.
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
welfare.
Mr. Horsford. The regulation states primarily?
Mr. Koskinen. The regulation established in 1959 said
primarily.
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
recommend?
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,
right?
Mr. Koskinen. Correct.
Mr. Issa. Any tax difference?
Mr. Koskinen. There are complicated tax issues but
basically----
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,
zero?
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
expense.
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
reelection?
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
reauthorization.
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
all----
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
system.
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
you.
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
correct?
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
you.
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
exclusion.
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
used.
Mr. Gosar. I agree. We are going to go through this kind of
quickly.
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,
right?
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
violation?
Mr. Koskinen. A violation of a law?
Mr. Gosar. Yes.
Mr. Koskinen. There is a referral in the Justice
Department----
Mr. Gosar. So I think you have to be recalcitrant in what
you just said there, anybody. You would have to eliminate Ms.
Lerner?
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,
right?
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
destroyed.
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
emails----
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
subpoena?
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
primarily.
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
want.
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
us.
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
$20,000.
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
ago.
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
bonuses?
Mr. Koskinen. There is a statutory limit. You cannot make
$220,000 and get a $20,000 bonus but I am coming here and
asking----
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
asking.
Mr. Koskinen. I am just telling you that the people who run
our online services program, the people who run the IT
department----
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
taking.
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
can.
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
Pennsylvania.
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
celebration.
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
IRS?
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.
Koskinen?
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
issued.
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
recommendations?
Mr. Koskinen. All of those recommendations have been
implemented.
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
consider.
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
recognized.
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
termination.
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
government.
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
happened.
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
recognized.
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
accountable.
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
statement.
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
advertising.
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.]
APPENDIX
----------
Material Submitted for the Hearing Record
[GRAPHIC] [TIFF OMITTED]