H. Rept. 113-414 - 113th Congress (2013-2014)
April 11, 2014, As Reported by the Ways and Means Committee

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[House Report 113-414]
[From the U.S. Government Publishing Office]

113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     113-414


                                                 Union Calendar No. 305



            Mr. Camp, from the Committee on Ways and Means, 
                        submitted the following

                              R E P O R T

                             together with



 April 11, 2014.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
                          LETTER OF SUBMITTAL


                          House of Representatives,
                               Committee on Ways and Means,
                                    Washington, DC, April 11, 2014.
Hon. John Boehner,
Speaker, House of Representatives,
Washington, DC.
    Dear Mr. Speaker: On April 9, 2014, by a vote of 23 to 14, 
the Committee on Ways and Means voted to submit the referral to 
the Honorable Eric H. Holder, Jr., Attorney General, of former 
Internal Revenue Service Exempt Organizations Division Director 
Lois G. Lerner for possible criminal prosecution for violations 
of one or more criminal statutes based on evidence the 
Committee has uncovered in the course of the investigation of 
IRS abuses to the U.S. House of Representatives. Minority views 
are included.
                                                 Dave Camp,

                                                 Union Calendar No. 305
113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     113-414




 April 11, 2014.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


            Mr. Camp, from the Committee on Ways and Means, 
                        submitted the following

                              R E P O R T

                             together with


                          House of Representatives,
                               Committee on Ways and Means,
                                     Washington, DC, April 9, 2014.
Hon. Eric H. Holder, Jr.,
Attorney General, Department of Justice,
Washington, DC.
    Dear Attorney General Holder: The Committee on Ways and 
Means (Committee) of the U.S. House of Representatives has 
discovered information in the course of its ongoing 
investigation of the targeting by the Internal Revenue Service 
(IRS) of taxpayers on the basis of their political views. This 
information suggests willful misconduct by an IRS official, and 
also suggests that she may have violated multiple federal 
criminal statutes.
    Rule X.1(t) of the Rules of the House of Representatives 
for the 113th Congress delegates to the Committee legislative 
jurisdiction over ``[r]evenue measures generally,'' including 
the Internal Revenue Code (IRC or Code) and the Department of 
Treasury (Treasury), which includes the IRS. As a result, the 
Committee is responsible for considering all legislation that 
raises the revenue required to finance the federal government. 
The raising of such revenue depends on voluntary compliance 
with the IRC, which is undermined when taxpayers and exempt 
organizations perceive that the administration of the IRC is 
unfair or, worse, is biased against them. Oversight of the IRS, 
and particularly investigation of IRS activity that could 
undermine voluntary compliance with the IRC, is thus a 
fundamental obligation of the Committee.\1\ It is pursuant to 
this authority and in discharge of this obligation that the 
Committee has investigated allegations that the IRS mistreated 
certain taxpayers and exempt organizations on the basis of 
their political beliefs.
    \1\See also Rule X.2(b)(1), Rules of the House of Representatives, 
113th Congress (vesting Committee with authority to oversee and 
evaluate whether laws written by Committee are being administered 
consistent with congressional intent and whether such laws should be 
changed); cf. IRC 6103 (expressly authorizing Committee review of 
certain material).
    During the course of its investigation, the Committee has 
obtained information that reveals that former IRS Exempt 
Organizations Division (EO) Director Lois G. Lerner, while 
acting in her official capacity, may have violated one or more 
criminal statutes. Specifically, the Committee's investigation 
has uncovered conduct by Lerner that includes the following:
          1. Lerner used her position to improperly influence 
        agency action against only conservative organizations, 
        denying these groups due process and equal protection 
        rights under the law as guaranteed by the U.S. 
        Constitution, in apparent violation of 18 U.S.C. 242;
          2. Lerner impeded official investigations by 
        providing misleading statements in response to 
        questions from the Treasury Inspector General for Tax 
        Administration (TIGTA), in apparent violation of 18 
        U.S.C. 1001; and
          3. Lerner risked exposing, and may actually have 
        disclosed, confidential taxpayer information, in 
        apparent violation of IRC 6103 by using her personal 
        email to conduct official business.
    These findings, supported by the evidence described below, 
suggest that Lerner may have violated multiple criminal 
statutes. The Committee asks that you pursue this evidence and 
ensure that the victims of IRS abuse do not also suffer neglect 
from the criminal justice system.


    As EO Director, Lerner had authority to act on behalf of 
the IRS.\2\ Lerner willfully used her authority to subject 
specific organizations to adverse treatment in defiance of IRS 
controls. Lerner directed subordinates to subject specific 
right-leaning groups to increased scrutiny and audits, and even 
the denial of exempt status.
    \2\See IRC 7803 (setting out the authorities of the IRS 
Commissioner), see also Internal Revenue Manual (IRM) 
(providing that Director of EO reports directly to Deputy Commissioner 
of TE/GE and, among other duties, ``supervises and is responsible for 
the activities of . . . EO Rulings and Agreements and EO Examinations 

a. Lerner's targeting of Crossroads GPS & blind eye to Priorities USA

    On October 19, 2010, Lerner explained to a group of Duke 
University students that 501(c)(4) organizations were spending 
money on campaign activity in the wake of the Citizens United 
decision.\3\ She said, ``[E]verybody is screaming at us, `fix 
it now before the election. . . .'''\4\ At the same time, 
Assistant Senate Majority Leader Dick Durbin, wrote then IRS 
Commissioner Doug Shulman to demand an investigation of 
Crossroads GPS.\5\ Lerner explained to the students, ``I won't 
know until I look at their 990s next year whether they have 
done more than their primary activity as political or not, so I 
can't do anything right now.''\6\ While Lerner's public 
comments seemingly cast a wide, unbiased net across the entire 
501(c)(4) spectrum, her private actions were different.
    \3\See generally, Citizens United v. Fed. Elec. Comm'n, 558 U.S. 
310 (2010).
    \4\Transcribed from http://www.youtube.com/
watch?feature=player_embedded&v=EH1ZRyq-1iM, Exhibit 1.
    \5\See Letter from Assistant Majority Leader Dick Durbin to IRS 
Commissioner Doug Shulman on October 12, 2010. Available at: http://
    \6\Exhibit 1.
    Documents produced to the Committee further link Lerner's 
actions with complaints from Democracy 21.\7\ Those complaints 
chiefly focused on Crossroads Grassroots Policy Strategies 
(Crossroads) and other right-leaning groups, but also cite 
left-leaning groups such as Priorities USA.\8\ On October 5, 
2010, just two weeks before her remarks at Duke University, 
Fred Wertheimer of Democracy 21 and Gerald Hebert of the 
Campaign Legal Center (CLC) wrote to then-Commissioner Shulman 
and Lerner to, ``Request for IRS investigation to determine 
whether Crossroads GPS' is operating in violation of tax 
status.''\9\ Later, on July 27, 2011, Democracy 21 and CLC sent 
the IRS a self-styled, ``Petition for Rulemaking On Campaign 
Activities by Section 501(c)(4) organizations,'' in which they 
raised concerns about the political campaign activities of 
501(c)(4) exempt organizations, including Crossroads and 
Priorities USA.\10\ Finally, on December 14, 2012, Democracy 21 
requested a meeting with Lerner to discuss its July 27, 2011 
    \7\Democracy 21 describes itself as a ``nonprofit, nonpartisan 
organization that . . . promotes campaign finance reform, lobbying and 
ethics reforms . . . and other government integrity measures.'' See 
``Petition for Rulemaking On Campaign Activities by Section 501(c)(4) 
Organizations'' at 10. Available at: http://www.democracy21.org/
    \8\See Democracy 21 ``Letters to the IRS.'' Available at: http://
    \9\See http://www.democracy21.org/wp-content/uploads/2013/05/
    \10\See fn 7.
    \11\IRS00000122502-122505, Exhibit 2. See fn 8 for ``Petition for 
    Lerner quickly organized a meeting for Democracy 21 not 
only with herself, but also with the Office of Chief Counsel 
and the Office of Tax Policy at the Department of the Treasury 
for January 4, 2013.\12\ In preparation for the meeting, Lerner 
asked David Fish, then acting Director of EO's Rulings and 
Agreement Division, and Andy Megosh with EO Guidance, for all 
``letters these orgs sent in asking for c4 guidance. . . 
.''\13\ While Democracy 21's petition raised concerns about 
groups across the political spectrum, documents IRS produced to 
the Committee show an aggressive and improper pursuit of 
Crossroads by Lerner, but no evidence she directed reviews of 
similarly situated left-leaning groups.\14\
    \12\See id.
    \13\See id.
    \14\See Letter from House Ways and Means Committee Chairman Dave 
Camp to IRS Acting Commissioner Daniel Werfel of September 20, 2013 
(requesting returns and return information of right-leaning American 
Crossroads, Crossroads GPS, and Americans for Prosperity, as well as 
left-leaning Priorities USA, Priorities USA Action, and Organizing for 
Action), Exhibit 3. The documents show no special scrutiny of the left-
leaning groups.
    For example, on January 2, 2013, the IRS's Chief for Media 
Relations circulated a ProPublica article to Lerner and Nikole 
Flax, then chief of staff to Acting Commissioner Steve Miller, 
among others, ``FYI--Here is the latest inbound for 
ProPublica.''\15\ Following was an article titled: ``Watchdog 
Groups Again Call on IRS to Deny Tax-Exempt Status to Karl 
Rove's Crossroads GPS, Cite $70 Million in 2012 Campaign 
Expenditures as Prima Facie Evidence Group is Campaign 
Operation, not Social Welfare' Group.''\16\ The ``watchdog'' 
groups to which the article refers are Democracy 21 and 
Campaign Legal Center (CLC). This email prompted Lerner to give 
notice to Flax and others about the meeting scheduled for 
January 4 with these groups:

    \15\IRS0000122515-6, Exhibit 4.
    \16\Available at: http://www.propublica.org/article/watchdogs-to-
irs-reject-rove-groups-tax-application. (The article updates an earlier 
ProPublica story from December 14, 2012 that was based on an IRS- 
leaked copy of Crossroads application for exempt status.)
          Just FYI for everyone's information I received the 
        incoming and will refer it to Exam as we do with any 
        complaint. Ruth Madrigal, Vickie Judson and I are 
        meeting with Democracy 21 and some others regarding 
        their request for guidance on c4. This has been set up 
        for some time. I plan to have David Fish there and 
        begin the meeting by telling them we cannot discuss 
        specific taxpayers. . . . We will be very cautious.\17\
    \17\Exhibit 5. A ``referral'' is, in lay terms, a complaint; 
pursuant to the IRM it means:
      A. A document or other communication, including an electronic 
communication, received by EO Classification-Referrals from a source 
outside the Internal Revenue Service, which alleges possible 
noncompliance with a tax law on the part of an exempt organization, 
political organization, taxable entity, or individual.
      B. An internal document (referral) prepared by an Internal 
Revenue Service employee and forwarded to EO Classification-Referrals, 
which identifies current or potential noncompliance discovered during 
either the processing of an assigned case, or at any other time in the 
performance of official duties.

    Notwithstanding Lerner's apparent careful adherence to the 
rule against discussing specific cases with people outside of 
the IRS, emails with her subordinates show a focused interest 
in Crossroads immediately following the meeting. Again, these 
emails show no apparent interest in left-leaning groups.
    Lerner's calendar shows the January 4, 2013 meeting with 
Democracy 21 blocked off for 11:00 AM-Noon and, based on 
Lerner's subsequent actions, it is clear that the meeting went 
forward as planned.\18\ Before or soon after the meeting, 
Lerner apparently contacted Tom Miller (EO Technical) to ask 
about the status of Crossroads (whether the group had been 
audited or selected for audit) because he replied by email at 
1:55 PM the same day that the group had twice been before the 
Political Action Review Committee (PARC), in November 2010 and 
June 2011, but was not selected for audit.\19\
    \18\IRS0000378449 (displaying calendar entry), Exhibit 5. See also, 
Complaint of Van Hollen et al. v. IRS (D.D.C. August 21, 2013) at 41 
(noting that ``On January 4, 2013, representatives of Democracy 21 and 
the Campaign Legal Center met with Ms. Lerner and other IRS officials 
regarding the petition for rulemaking.''). Available at: http://
    \19\IRS0000122549-122551, Exhibit 6. The PARC is responsible for 
determining whether allegations of improper political activity by an 
exempt organization merit an audit. See IRS0000378444-378446, IRS 
Memorandum to Congress, ``IRS Exempt Organizations Processes with 
Respect to Examinations,'' Exhibit 7. At the direction of Lois Lerner, 
Nanette Downing created a special process for reviewing complaints of 
political activity by exempt organizations following the Citizens 
United decision. See Subcommittee on Oversight, Committee on Ways and 
Means, U.S. House of Representatives, Interview of: Nanette Downing, 
December 6, 2013 at 33-37, Exhibit 8.
    Following Tom Miller's response, Lerner sent an email to 
Nanette Downing, the Director of the EO Examinations Unit in 
Dallas, TX, demanding to know why Crossroads had not been 

          I had a meeting today with an organization that was 
        asking us to consider guidance on the c4 issue. To get 
        ready for the meeting, I asked for every document that 
        (sic) had sent in over the last several years because I 
        knew they had sent in several referrals. I reviewed the 
        information last night and thought the allegations in 
        the documents were really damning, so wondered why we 
        hadn't done something with the org. The first complaint 
        came in 2010 and there were additional ones in 2011 and 
        2012. . . . The organization at issue is Crossroads GPS 
        . . . I know the org is now in the ROO--based on 
        allegations sent in this year, but this is an org that 
        was a prime candidate for exam when the referrals and 
        990s first came in.\20\
    \20\Exhibit 6.

           *       *       *       *       *       *       *

          You should know that we are working on a denial of 
        the application, which may solve the problem because we 
        probably will say it isn't exempt. Please make sure all 
        moves regarding the org are coordinated up here before 
        we do anything.\21\
    \21\See id.
    On the following Monday, January 7, 2013, Lerner sent a 
follow-up email to Downing which states, ``As I said, we are 
working on the denial for the [Crossroads] 1024, so I need to 
think about whether to open an exam. I think yes, but let me 
cogitate a bit on it.''\22\ Interviews of IRS personnel and a 
review of Crossroad's file shows that Lerner was in fact 
actively seeking to ensure a denial of the group.
    \22\See id.
    In a transcribed interview of Victoria Judson, Associate 
Chief Counsel (Tax Exempt & Government Entities), Committee 
staff asked Judson about Lerner's interest in Crossroads:

          Q: I think you said that it was in the spring of 2012 
        that you discussed with Ms. Lerner a Crossroads GPS 
        case and she gave you advance notice that that might be 
        a denial. Is that correct?
          A: That's the best of my recollection. And I don't 
        know if I would characterize it as ``discuss'' as 
        opposed to ``she told me that . . .''\23\
    \23\Subcommittee on Oversight, Committee on Ways and Means, U.S. 
House of Representatives, Interview of: Victoria Ann Judson, Wednesday, 
September 11, 2013, at 57 (quotation marks added), Exhibit 9.

    Lerner's plan to deny the Crossroad application is evident 
from the work log for the Cincinnati-based revenue agent 
assigned to the case, as after her January 4, 2013 meeting with 
Democracy 21, the agent sprung into action. In the seven 
business days following her meeting, the revenue agent Joseph 
Herr, logged more time on the application than the entire year 
preceding.\24\ But more, the log shows that Herr was directed 
to reach a particular result with Crossroads. Herr's log shows, 
in part:
    \24\See IRS00071224-71226, Exhibit 10.

          On January 4, 2013, Herr notes a conference call with 
        EOT [Exempt Organizations Technical Division] in DC 
        where specific guidance is given to him on ``how to 
        best proceed with the [Crossroads] case.''
          On January 7, this guidance from EOT was memorialized 
        in Herr's time sheet, ``[b]ased on conference begin 
        reviewing case information, tax law, and draft/template 
        advocacy denial letter, all to think about how best to 
        compose the denial letter.''\25\

    \25\See id.
    In the next journal entry from Herr, he notes,``[w]rite-up 
summary of idea on how I plan to make denial argument and share 
with Sharon Light, the Special Advisor to EO Director in 
Washington DC, for her opinion on whether the idea seems 
valid.''\26\ Nowhere in his 2012 log entries is there any 
discussion of denial. In fact, in an analysis of the Crossroads 
application in November 2011, among many others, EO Technical 
lawyer Hillary Goehausen makes no recommendation for 
    \26\See id.
    \27\IRS0000063029, Exhibit 11.
    The Committee subsequently learned that the agency was in 
the process of denying Crossroads' application for exempt 
status and selecting them for audit. Judson informed staff the 
organization would be receiving a proposed denial letter.\28\ 
An IRS representative separately told staff that Crossroads had 
also been selected for audit.\29\ The evidence shows that 
without Lerner's intervention, neither adverse action would 
have been taken against Crossroads. Again, the Committee has 
found no record of Lerner pursuing similarly situated left-
leaning groups, despite receiving similar public 
    \28\Exhibit 9.
    \29\Telephone briefing by IRS staff to Oversight Subcommittee staff 
of September 3, 2013.
    \30\See http://www.democracy21.org/wp-content/uploads/2013/05/
    In fact, during the same time period Lerner was engineering 
a denial and audit of Crossroads, documents show Lerner had a 
favorable disposition toward left-leaning groups, including 
considering future employment with one. In response to a news 
story about the formation of Organizing For Action, a 
501(c)(4), Lerner remarked to EO Senior Technical Advisor 
Sharon Light, ``Oh--maybe I can get the DC office job!''\31\ 
Light then forwarded Lerner's comment to Holly Paz wondering if 
Lerner was considering retirement to pursue a potential job 
opportunity at this left-leaning group.\32\
    \31\See Email from Lois Lerner to Sharon Light of January 24, 2013, 
IRSC007157-60, Exhibit 12. N.b. Democracy 21 is highly critical of 
Organizing For Action. See, e.g., `` Statement by Fred Wertheimer'' 
January 22, 2013 (stating with reference to the formation of Organizing 
For Action that, ``In taking this step, the President has opted for the 
ends justify the means' approach that is fraught with danger. It opens 
the door to opportunities for government corruption.'') Available at: 
ends-justify-the-means; see also, ``Is Organizing For Action Too Close 
To The White House?'' National Public Radio (March 19, 2014) (quoting 
Democracy 21's Fred Wertheimer, ``The best thing the president of the 
United States could do is shut [Organizing for Action] down. This is a 
danger to the integrity and credibility of his presidency.'') Available 
at: http://www.npr.org/2014/03/19/291312006/is-organizing-for-action-
    \32\See Exhibit 12.

b. Evidence suggests Lerner targeted other right-leaning groups

    Evidence discovered by the Committee also suggests that 
Lerner targeted other right-leaning groups. On January 2, 2013, 
ProPublica separately published an article titled, 
``Controversial Dark Money Group Among Five That Told IRS They 
Would Stay Out of Politics, Then Didn't'' that was circulated 
within the IRS.\33\ Forwarding the ProPublica article, Lerner 
asked Holly Paz, David Fish and Sharon Light to ``meet on the 
status of these applications please. Can we talk Friday?''\34\ 
The five groups named in the article are:
    \33\See http://www.propublica.org/article/controversial-dark-money-
    \34\IRS0000122510, Exhibit 13.
           Americans for Responsible Leadership
           Freedom Path
           America is Not Stupid
           A Better America.\35\
    \35\fn 33.
    Information later provided to the Committee regarding IRS 
EO examinations processes showed that four of the five groups 
were subject to extra-scrutiny; two of the groups were placed 
in the IRS' surveillance program, called a ``Review of 
Operations,'' and two were selected to be put before the 
Political Activity Review Committee, which determines whether a 
group will be audited.\36\ Ultimately three of the groups were 
selected for audit.\37\
    \36\Telephone briefing by IRS staff to Oversight Subcommittee staff 
of September 3, 2013.
    \37\Telephone briefing by IRS staff to Oversight Subcommittee staff 
of March 27, 2014.

c. Lerner's defiance of internal controls and abuse of authority

    The evidence demonstrates Lerner acted in defiance of IRS 
internal controls. Internal IRS policies and procedures, which 
would be well known to Lerner, deter any one person from 
deciding the disposition of a group based on political or 
personal animus. Joseph Grant, former Commissioner of the Tax 
Exempt and Government Entities Division, and former boss of 
Lerner, told the Committee in a transcribed interview that it 
would be ``completely'' inappropriate for a manager to target a 
specific organization for exam or adverse determination.\38\ 
The IRS put in place these safeguards ``in the 1990's to ensure 
equity and transparency and that no one individual could select 
organizations within certain classes for examination.''\39\
    \38\See Subcommittee on Oversight, Committee on Ways and Means, 
U.S. House of Representatives, Interview of: Joseph H. Grant, Sept. 20, 
2013, at 39, Exhibit 14. Under questioning:
    Q: Would it be appropriate for a manager at IRS to refer a specific 
taxpayer to Exams or to intervene on their own on--I mean, their own 
volition to Determ[ination]s?
    A: I believe it would be completely--it would not be appropriate to 
intervene on their own. So--and I'm not aware of that occurring.
    See also, Testimony IRS Commissioner Douglas Shulman before the 
U.S. House Committee on Appropriations Subcommittee on Financial 
Services and General GovernmentHearing on the FY 2013 Internal Revenue 
Service Budget, March 21, 2012. Per Shulman:
    [W]e have the safeguards built in to this process so that no one 
person can decide to examine an organization based on political 
activities. So you've got your peers watching. You can't just get a 
case, go off in the corner, and run with your own agenda. Available at: 
    \39\IRS, FINAL REPORT, PROJECT 302 Political Activities Compliance 
Initiative at 3 (emphasis added). Available at: http://www.irs.gov/pub/
    These safeguards are reflected in current EO Examinations 
Unit procedures adopted during Lerner's tenure that she 
nonetheless circumvented. From the FY2013 EO work plan:

          EO will have a PARC (Political Action Review 
        Committee) operating at all times comprised of three 
        experienced career civil servant employees. . . . PARC 
        operations are overseen by the Managers of EPR and 
        EOCA; however, they shall not override or influence any 
        case selection decision of the PARCs.\40\
    \40\IRS0000410461-62, Exhibit 15. ``EPR'' refers to Examinations 
Programs & Review and EOCA to Exempt Organizations Compliance Area. See 
also, IRS Exempt Organizations FY 2012 Annual Report & FY 2013 Work 
Plan at 2. Available at: http://www.irs.gov/pub/irs-tege/

    The PARC determines whether organizations about which 
referrals are made are to be subject to audit.\41\ The PARC had 
twice refused to target Crossroads, yet Lerner stated to the 
head of EO Examinations that, ``we are working on the denial 
for the [Crossroads] 1024, so I need to think about whether to 
open an exam. I think yes, but let me cogitate a bit on it,'' 
in defiance of IRS policy.\42\ Lerner makes clear that she 
believes she is entitled to approve or disapprove an 
application or subject an organization to an audit based on her 
say so alone and irrespective of the PARC's decision.
    \41\Exhibit 7.
    \42\Exhibit 6.

d. Lerner Seeks to Influence the IRS' Independent Appeals Process

    In addition to IRS safeguards against interfering in the 
determinations and exams functions, there are internal controls 
in place with regard to the IRS's Appeals Division that Lerner 
sought to circumvent. If EO Determinations reaches the 
conclusion that an application for exempt status does not 
satisfy the requirements under the Code, the IRS generally will 
issue a proposed adverse determination letter to the applicant 
and give notice of the opportunity to appeal.\43\ The Appeals 
Division is independent of the EO Division and thus outside of 
the EO Director's chain of command.\44\ Furthermore, as a 
matter of law and not just IRS policy, ex parte communications 
between appeals officers or settlement officers and other IRS 
employees, to the extent that those communications appear to 
compromise the independence of Appeals, are prohibited.\45\
    \43\Internal Revenue Bulletin: 2013-2, Jan. 7, 2013, Rev. Proc. 
2013-9, sec. 7.01.
    \44\See Section 1001(a)(4) of the Internal Revenue Service 
Restructuring and Reform Act of 1998, Pub. L. No. 105-206, 112 Stat. 
685, 26 USC 7801 note. The provision requires:
      The Commissioner of Internal Revenue shall . . . ensure an 
independent appeals function within the Internal Revenue Service, 
including the prohibition in the plan of ex parte communications 
between appeals officers and other Internal Revenue Service employees 
to the extent that such communications appear to compromise the 
independence of the appeals officers.
    \45\See id.
    An email from Lerner to the Chief of IRS Appeals, Chris 
Wagner, on January 31, 2013, shows she sought to influence the 
independent appeals process notwithstanding a prohibition 
against such contact. Lerner offers unsolicited advice about 
how to handle incoming c4 denials:

          I gave [your people] a heads up that, in the next few 
        months we believe they will get a lot of business from 
        our [taxpayers] regarding denials on 501(c)(4) 
        applications. I explained the issue is whether they are 
        primarily involved in social welfare activities and 
        whether their political intervention activities. . . I 
        explained the issue was very sensitive and visible and 
        there is a lot of interest--Congress, press, political 
        groups, you name it. . . . I offered a general tutorial 
        session (noncase-related) on the law and the 
        complexities because--as I pointed out. . . . I told 
        them this is a place where we have worked very hard to 
        be consistent and have all our cases worked by one 
        group, and suggested they might want to do something 
        similar. (PS we are under audit by TIGTA because of 
        allegations of political bias on these cases). . . . If 
        you think it would be useful to have a meeting on 
        this--let me know.\46\

    \46\IRS0000122863-122864, Exhibit 16.
    Ironically, Lerner's communication closes with, ``Hope this 
doesn't [sound] like I'm trying to run your shop.'' The purpose 
of this email could not be clearer. Lerner explained that her 
team worked very hard both to get what Lerner characterized as 
a highly technical law right and also to apply it consistently 
to the circumstances of each applicant. She further 
characterized the cases as ``sensitive and visible'' and 
suggested that Wagner should consult her.\47\ Notwithstanding 
agency safeguards, the message from Lerner to the Appeals chief 
was unequivocal: EO got these denials right and Appeals should 
affirm them.
    \47\See Exhibit 16. The applicable Revenue Procedure allows Appeals 
to seek technical advice from EO, but that request for advice would 
come from Appeals in the first instance and would be documented, not 
behind the scenes.


    The Committee has found documents that suggest Lerner's 
written statement to TIGTA, submitted during the course of 
TIGTA's audit, was knowingly misleading (Reference Number: 
2013-10-053). The document titled, EO Director's responses to 3 
questions asked by Director Paterson, which Lerner drafted and 
submitted to TIGTA on November 2, 2012, contained specific 
statements that are contradicted by the documentary evidence 
reviewed by the Committee.\48\
    \48\EO Director's responses to 3 questions asked by Director 
Paterson, produced to the Committee by the Treasury Inspector General 
for Tax Administration, Exhibit 17. See also, telephone briefing by 
TIGTA staff to Oversight Subcommittee staff of September 12, 2013.
    TIGTA asked:

          When did you become aware the IRS was targeting 
        applications for tax exemption that mention: 1) the 
        ``Tea Party,'' ``Patriots,'' or the ``9/12 Project'', 
        2) government spending, government debt or taxes, 3) 
        education of the public by advocacy/lobbying to ``make 
        America a better place to live'', or 4) criticizing how 
        the country is being run?

    Lerner began her response with the statement:

          In early 2010, EO Determinations witnessed an uptick 
        in the number of applications for 501(c)(3) or 
        501(c)(4) status that contained indicators of 
        potentially significant amounts of political campaign 
        intervention (``advocacy organizations'').''\49\
    \49\Exhibit 17.

    Lerner here seeks to establish that there was an increase 
in the number of applications received in Cincinnati that 
contained political campaign activity to minimize her 
responsibility for the targeting. However, the statement is the 
first of a compilation of misleading half-truths.
    Just a few months before, on July 17, 2012, Lerner sent an 
email to Holly Paz and Nikole Flax offering comments on a 
talking point drafted for then-Deputy Commissioner for Services 
and Enforcement Steve Miller about a perceived uptick in 
political advocacy cases:

          Only one comment--I know we don't have published SOI 
        stats for the uptick, but our Cincy folks saw it 
        happening--can we get Nikole whatever ``inside'' info 
        we have that led to that conclusion--she can then 
        figure out how to use it.\50\
    \50\IRS0000179271, Exhibit 18.

    Holly Paz sought assistance from Nanlee Park,\51\ who 
responded later that evening and included Lerner on the 
    \51\IRS0000179269-179270, Exhibit 19.

          [A]s Holly pointed out in her comment, we do not have 
        a reliable method for tracking data by issue such as 
        political activity. This is consistent with our 
        congressional responses where we had explained we would 
        have to manually go through each application, etc.
          Because of the above points, the first bullet that 
        presently reads as: Starting in 2010, EO observed an 
        increase in the number of section 501(c)(3) and section 
        501(c)(4) determination applications from organizations 
        that appeared to be potentially engaged in political 
        advocacy activities.
          Recommend it be revised (i.e., along the lines of the 
        following): For about the past five years [alternative 
        verbiage: From FY 2008 through June 30th of FY 2012], 
        EO has observed an increase in the number of section 
        501(c)(4) determination applications filed, as well as 
        a general upward trend in section 501(c)(3) application 
    \52\IRS0000179389-179390, Exhibit 20.

    Despite being told that ``political advocacy activities'' 
could not be substantiated in her proposed talking point, 
Lerner used almost the exact same words in her response to 
federal law enforcement. Lerner knew her answer could not be 
substantiated, and yet provided it in response to TIGTA's audit 
in an attempt to minimize her role in the agency's management 
    Lerner then answered the question of when she first learned 
``the IRS was targeting applications . . . that mention . . . 
the `Tea Party,'' by saying that she:

          First became aware that the BOLO referenced `tea 
        party' organizations and EO Determinations was using 
        the above criteria to determine what organizations met 
        that description when I was briefed on these cases on 
        June 29, 2011.\53\
    \53\Exhibit 17.

    This half-truth appears calculated to obscure her knowledge 
that ``Tea Party'' cases were being treated differently, in 
part, at her direction, and far earlier than she acknowledged. 
A series of emails show that Lerner knew as early as April 2010 
that tea party cases were being flagged and held in Cincinnati.
 On April 28, 2010 Lerner was told by email, 
``there are 13 tea party cases out in EO Determinations.'' The 
attached spreadsheet even identifies the issue involved 
``whether a tea party organization meets the requirements under 
501(c)(3) and is not involved in political intervention'' and 
notes that there is a grouping of tea party cases.\54\
    \54\IRS0000141809-141811, Exhibit 21.
 On May 13, 2010, Lerner responded to a detailed 
summary of the tea party cases and even inquires about the 
status of the cases. Upon review of the email, she asked 
follow-up questions regarding the tea party cases, ``[Are the] 
tea party cases--applications for c3? What's their basis?'' In 
response, she is explicitly told ``[w]e have tea party cases 
here in EOT in Cincy. In EOT, there is a (c)(3) application. In 
Cincy there are 10 (c)(4)s and a couple of (c)(3)s.''\55\
    \55\IRS0000167872-167873, Exhibit 22. Pursuant to the Internal 
Revenue Manual (IRM) (07-14-2008), Sensitive Case Reports are 
written for the benefit upper management.
 In an email dated August 3, 2010, Lerner 
specifically asked her assistant to print out a Sensitive Case 
Report (SCR) on the handling of the tea party cases, for her 
review. The SCR noted that the cases were being held due to the 
likelihood of attracting media attention, contrary to Lerner's 
assertion that the targeting was prompted by the ``uptick in 
applications'' with these characteristics.\56\
    \56\IRS0000163358-163359, Exhibit 23.
 On January 1, 2011, Lerner received an SCR that 
flagged issues with ``tea party organization[s].''\57\ The next 
day, Lerner responded, ``Tea Party Matter very dangerous. . . . 
Counsel and Judy Kindell need to be in on this. Cincy should 
probably NOT have these cases.''\58\ Less than hour later, 
Lerner appeared to be directing staff to find a way to deny 
both c3 and c4 applications--``[I]t would be great if we can 
get there without saying the only reason they don't get a 3 is 
political activity.''\59\
    \57\IRS0000147507-147509, Exhibit 24.
    \58\IRS0000147510-147513, Exhibit 25.
    \59\Exhibit 25.
    These email exchanges memorialize Lerner's knowledge that, 
as early as April 2010, the IRS was targeting applications for 
tax-exemption involving the name ``Tea Party'' and holding 
these cases pending review from EO Technical in Washington, 

                        UNAUTHORIZED DISCLOSURE

    In an email dated October 29, 2012, Lerner sent TIGTA's 
draft chronology containing confidential return information of 
taxpayers, protected by 26 U.S.C. section 6103, to her personal 
email address:

        From: Lerner Lois G
        Sent: Monday, October 29, 2012 10:51 AM
        To: 'tobomatic@msn.com'
        Subject: Fw: Revised timeline
        Attachments: Long Political Advocacy Timeline HOP 
        Lois G. Lerner-------------------------- Sent from my 
        BlackBerry Wireless Handheld\60\
    \60\IRS0000062811-28, Exhibit 26.

    A review of the redacted chronology shows that nine of the 
17 pages contain section 6103 material.\61\
    \61\Exhibit 26.
    The next evening, Lerner sent this material back to her 
official email address and to others in the IRS with her 

        From: Toby Miles <tobomatic@msn.com>
        Sent: Tuesday, October 30, 2012 9:16 PM
        To: Paz Holly O; nancy.marks@irs.gov; Lerner Lois G
        Subject: Long Timeline from LOIS
        Attachments: Long Political Advocacy Timeline HOP 
        Looks pretty good--a couple questions/comments\62\
    \62\IRS0000062829, Exhibit 27. ``Miles'' is Lerner's husband's, 
Michael R. Miles, last name. The source of the name ``Toby'' is not 

    More recently on May 4, 2013, EO Senior Technical Advisor 
Meghan Biss, apparently at Lerner's request, sent a summary of 
One Fund Boston's 501(c)(3) application, which consisted almost 
entirely of section 6103 material, to Lerner's personal email 
    \63\IRS0000322610, Exhibit 28. The application has since been 
approved and is available for public inspection.
    Sending confidential taxpayer information to a personal 
email address is prohibited by IRS policy, but is not 
illegal.\64\ However, it is a crime to disclose taxpayer return 
information.\65\ If persons other than Lerner had access to her 
personal email account, tobomatic@msn.com, and accessed this 
protected section 6103 material, then Lerner may have violated 
a criminal statute for which the penalty is up to $5,000 fine 
and/or up to five years in prison.\66\
    \64\See IRM Mail and Secure Messaging [Last 
Revised: 03-07-2008]
      (1) a. Employees may not use E-mail to transmit SBU [(Sensitive 
but Unclassified)] data unless they use the IRS Secure Messaging (SM) 
system . . . Both the sender and recipient must have SM in order for 
the E-mail to be protected.
      b. SBU information includes taxpayer data, Privacy Act protected 
information, some law enforcement information, and other information 
protected by statute or regulation . . .
      d. SBU data may not be sent to parties outside of IRS, including 
other government agencies , taxpayers, or their representatives . . . 
Employees cannot send E-mails containing SBU data outside the IRS 
network, even if specifically authorized by the taxpayer. (emphasis 
    \65\See IRC Sec. 7213. Unauthorized disclosure of information.
    \66\See id.

                             IV. CONCLUSION

    Contrary to reports that IRS' Administrative Review Board 
found no political bias or willful misconduct by Lois Lerner, 
the Committee's investigation has uncovered such evidence.\67\ 
After reviewing these same emails, Acting Commissioner Danny 
Werfel himself conceded that there was evidence that raised 
questions about wrongdoing at the agency. At a September 18, 
2013 hearing, Oversight Subcommittee Chairman Charles Boustany 
asked Werfel whether Lerner acted in violation of internal 
agency controls:
    \67\Stephen Ohlemacher, ``IRS official at heart of tea party 
scandal retires,'' Associated Press, Sept. 23, 2013. Available at: 

          Chairman Boustany. Did Lois Lerner seek to intervene 
        in the examinations process or audit process?
          Mr. Werfel. I am not sure that I can fully answer 
        that question because all those documents in Lois' 
        email file need to be further reviewed. I will say 
        this, that there were emails that we turned over to you 
        . . . that I thought raised questions, [which] I 
        provided directly to TIGTA and I also provided them to 
        the Accountability Review Board.\68\
    \68\U.S. House Committee on Ways and Means Oversight Subcommittee 
Hearing on the Internal Revenue Service's Exempt Organizations Division 
Post-TIGTA Audit, September 18, 2013.

    Werfel's testimony is the first public admission by an IRS 
official that evidence may show intentional wrongdoing; this 
concession is wholly consistent with the Committee's 
    Notwithstanding the Werfel Report and other IRS statements, 
the foregoing sets forth evidence that tends to show 
intentional wrongdoing, including targeting specific taxpayers 
for adverse treatment, making misleading statements to law 
enforcement, and the possible disclosure of confidential 
taxpayer information. The Committee requests that you act on 
the findings within this letter and the attached documentation 
to ensure the rights of law-abiding taxpayers are protected. 
Please contact Committee staff at (202) 225-3625 if you have 
any questions.
                                                 Dave Camp,

                             MINORITY VIEWS

    Our opposition to this letter and to this process is not 
about any of us condoning the mismanagement in the Internal 
Revenue Service (IRS) Exempt Organizations division (EO). 
Democrats were among the first to call for Lois Lerner to 
resign and for her to be relieved from her duties.
    Indeed, the Department of Justice (DOJ) is investigating 
the entire matter to determine whether there should be criminal 
charges. They are working with the IRS and with the Treasury 
Inspector General for Tax Administration (TIGTA) to gain access 
to documents, conduct interviews and compel testimony.
    Nearly a year ago, the investigation by this committee 
started with a bipartisan request for documents on May 14. 
However, the investigation quickly went off those tracks with a 
declaration by Chairman Camp on May 17 that the IRS matter was 
the ``latest example of a culture of cover-ups and political 
intimidation in this Administration.'' That end to bipartisan 
efforts started a year-long pursuit of a failed effort to prove 
White House involvement, pursuit of a non-existent enemies 
list, and a search for non-existent evidence that the IRS 
targeted only conservative groups.
    The selective release of taxpayer information by the 
Republicans to make political points contradicts the very 
reason these taxpayer protections were enacted in the first 
place. The provision under which this information is being 
released--Section 6103(f)--was enacted in response to the 
inappropriate use of taxpayer information by the Nixon 
Administration. The very disclosure that is being made in this 
report violates the spirit of the taxpayer protections this 
Committee created.
    The Chairman claimed in the executive session that the only 
way he could notify the Attorney General of specific evidence 
of criminal activity by Ms. Lerner that the Chairman had found 
was to make all of this material--previously considered 
protected taxpayer information--public.
    But that is just not accurate. The DOJ has access to all of 
the same information. If the Chairman was afraid they might 
have missed something, he could have designated the Attorney 
General or a designee with his 6103 authority as Chair of the 
Ways and Means Committee--just as he did for the other Members 
of this Committee--for the Attorney General to review it.
    The Ways and Means Committee has never used this authority. 
In 1974, Chairman Mills, along with Ranking Member Schneebeli, 
acting on behalf of the Joint Committee on Taxation, filed in 
the House and made public the audit of President Nixon's tax 
returns, which had been requested by the President himself. 
That process was a public service, letting the nation know that 
the President, like other Americans, would be paying his fair 
share of tax for the years under audit. This new action by the 
Committee serves no such purpose.
    After a year of investigation, $14 million spent, 15 
Congressional hearings held, more than 60 staff interviews of 
IRS employees conducted and the review of over 660,000 internal 
IRS documents, it is now clear that Republican members of the 
Ways and Means Committee have decided that they do not want to 
be left behind in the Republican campaign to keep this so-
called ``scandal'' going until November.
    This entire investigation has arisen from a fundamentally 
flawed report issued by the Inspector General which failed to 
indicate that progressive groups were selected for additional 
screening alongside ``Tea Party'' groups. The report also 
failed to mention that the Head of Investigations at TIGTA 
reviewed 5,500 internal IRS emails and concluded that ``there 
was no indication that pulling these selected applications was 
politically motivated.''
    The Republicans have hand selected information that they 
claim proves their case from the over 660,000 documents 
provided during this investigation. The Chairman gave Members 
only 24 hours to look at the evidence he selected to back up 
the assertions in the letter. Most egregiously, the Republicans 
have not provided all Committee Members with the necessary 
authority to look at any other documents beyond what they were 
provided so that Members could reach a conclusion on their own.
    However, the materials released to the public today confirm 
our position from the very beginning--that Democratic-leaning 
and progressive groups were subject to the same scrutiny as 
``Tea Party'' and other Republican-leaning groups. Exhibit 21 
(attached to the referral letter) contains a list of tax-exempt 
applications that were subject to additional review.
    Among that list are a group of Democratic-leaning 
organizations with the term ``Emerge'' in their name. According 
to a New York Times story dated July 20, 2011, Emerge Maine, 
Emerge Nevada and Emerge Massachusetts were all denied tax-
exempt status after their applications were pending for over 
three years. These denials happened during the period of 
TIGTA's audit, but they were not disclosed by the Inspector 
General in the audit report or during his testimony before 
Congress. These applications were processed in the same manner 
as the Tea Party cases as outlined in TIGTA's audit report:
 The cases were identified and screened for 
        political activities;
 They were transferred to Exempt 
        Organizations Technical Unit;
 They were the subject of a Significant Case 
        Report (included in Exhibit 21 of the Republicans 
 They were subject to multiple levels of 
        review within the IRS; and
 They were reviewed by IRS Chief Counsel.
    Now that the documents have been made public, many relate 
to the application for 501(c)(4) status by Crossroads GPS. It 
is an organization operated by Karl Rove that spends tens of 
millions of dollars on political activities while claiming to 
be a tax-exempt ``social welfare'' organization. This 
Committee's action has the effect of assisting campaign 
organizations like Crossroads. Crossroads GPS reported to the 
Federal Election Committee having spent $71 million during the 
2012 election cycle, according to the Center for Responsive 
    Questions about Crossroads GPS status as a 501(c)(4) have 
been around since 2010. If Republicans can shut down those 
questions, Crossroads GPS can continue to pour hundreds of 
millions of dollars into advancing Republican candidates 
without having to disclose their contributors, as can others 
like Americans for Prosperity and American Future Fund.
    We all share the objective of a thorough investigation and 
prosecution by the U.S. Justice Department, if justified, of 
any person who violated the law. We all share the objective of 
ensuring that the IRS is effectively administering procedures 
to protect every taxpayer from discrimination. Were these the 
Majority's only objectives, today's unprecedented political 
theatre would never have occurred.
    Making this Committee an arm of any campaign committee does 
a deep disservice to the proud traditions and legacy of the 
Committee on Ways and Means.
                                   Sander Levin.
                                   Charles Rangel.
                                   Jim McDermott.
                                   John Lewis.
                                   Richard E. Neal.
                                   Xavier Becerra.
                                   Lloyd Doggett.
                                   Mike Thompson.
                                   John B. Larson.
                                   Earl Blumenauer.
                                   Ron Kind.
                                   Bill Pascrell, Jr.
                                   Joseph Crowley.
                                   Allyson Schwartz.
                                   Danny K. Davis.
                                   Linda Sanchez.

                            DISSENTING VIEWS

    On Wednesday, April 9, 2014, the Ways and Means Committee 
took unprecedented action to refer Lois Lerner to the U.S. 
Department of Justice for possible criminal charges.
    I am very disappointed that for the first time in 40 years, 
the Republicans on this Committee decided to release taxpayer 
information to the public. I feel very strongly that this 
action flies directly in the face of the taxpayer protections 
which the Ways and Means Committee not only created, but also 
worked in a bipartisan manner to protect and uphold.
    As the Ranking Member of the Oversight Subcommittee, I take 
tax policy and the importance of congressional oversight very 
seriously. It is unfortunate that I was previously committed to 
participate in the Lyndon B. Johnson Presidential Library Civil 
Rights' Summit with the current and former U.S. presidents and 
civil rights leaders on the day of this unprecedented Committee 
action. I even tried, unsuccessfully, to rearrange my schedule 
in order to attend this last-minute markup.
    Before departing, however, I was one of the first Members 
to review the tax documents when the Republicans made them 
available to the Committee. Had I been present at the hearing, 
I would have joined my colleagues in opposing this unnecessary 
political maneuver.
    To be clear, I do not support federal mismanagement or 
potential criminal activity, and I share the bipartisan 
sentiment supporting a thorough investigation by the U.S. 
Department of Justice. Yet, there are a number of ways to 
conduct responsible oversight, without political theatre, and I 
am disappointed that politics are taking center stage over the 
compelling issues of fairness, privacy, policy, and process.
                                                        John Lewis.