Hatch: Bipartisan Report Finds Unacceptable Mismanagement at IRS

In a speech on the Senate Floor, Utah Senator Says Committee Report, “…spells out in great detail the organizational and personnel problems that plagued the agency and allowed partisan agendas and political tribalism to influence important decisions.”

WASHINGTON – In a speech on the Senate floor today, Finance Committee Chairman Orrin Hatch (R-Utah) outlined how the Committee’s bipartisan investigative report into the Internal Revenue Service’s (IRS) targeting of tax-exempt organizations found the agency’s maze of bureaucracy led to unaccountability, gross mismanagement, and ultimately inappropriate targeting of organizations with conservative views.

“I believe the report we’ve issued today will serve as the definitive account of the personal political biases, management failures, and other factors that led the IRS to unfairly target certain organizations applying for tax-exempt status,” Hatch said.

Hatch went on to detail how the agency was influenced by the White House’s call to further scrutinize tax-exempt organizations.

“We know that the White House’s focus on the activities of tax-exempt organizations intensified after the Supreme Court issued its Citizens United decision in January 2010, culminating, in many ways, with President Obama’s wrongheaded castigation of the Court in his State of the Union address and continuing throughout 2010 until the mid-term elections,” Hatch continued. “The Finance Committee’s report contains clear evidence that the IRS and other agencies heeded the President’s call.”

The complete speech, as prepared for delivery, is below:

Mr. President, earlier today, the Senate Finance Committee finally, and at long last, issued its report on its bipartisan investigation of the IRS’s treatment of organizations applying for tax-exempt status.

As you’ll recall, this investigation began two years and two months ago after we became aware of allegations that the IRS had targeted certain organizations for extra and undue scrutiny based on the groups’ names and political views.

These were serious allegations. Indeed, they struck at the very heart of the principle – one that everyone should agree on – that our nation’s tax laws should be administered fairly and without regard to politics or partisanship.

Despite the inherently political nature of these allegations, the Finance Committee, which has exclusive legislative jurisdiction and primary oversight jurisdiction over the IRS, immediately opened a full bipartisan investigation into this matter.

The investigation officially began on May 21, 2013 under the direction of former Chairman Max Baucus and myself, when I was the Ranking Member. When Senator Wyden assumed leadership of the committee last year, he agreed to continue the bipartisan work we had begun. This bipartisan cooperation has continued unabated since I became chairman in January of this year.

That investigation concludes today with the release of our report.

While much has been reported about the IRS’s political targeting over the last two years, it is important to note that the Senate Finance Committee has conducted the only bipartisan investigation into the matter. Consequently, I believe the report we’ve issued today will serve as the definitive account of the personal political biases, management failures, and other factors that led the IRS to unfairly target certain organizations applying for tax-exempt status.

Once again, the public has a right to expect that the IRS will administer the tax code with integrity and fairness in EVERY context. Yet, for many conservative organizations that applied for tax-exempt status during the last five years, the IRS fell woefully short of this standard. The committee’s bipartisan report examines these events in great detail.

Let’s take a look at what we now know after two years of exhaustive investigation.

We know that the White House’s focus on the activities of tax-exempt organizations intensified after the Supreme Court issued its Citizens United decision in January 2010, culminating, in many ways, with President Obama’s wrongheaded castigation of the Court in his State of the Union address and continuing throughout 2010 until the mid-term elections.

The Finance Committee’s report contains clear evidence that the IRS and other agencies heeded the President’s call.

For example, just a few weeks after the President’s speech before Congress, the IRS made the pivotal decision to set aside all incoming Tea Party applications for special processing – a decision that would subject those organizations to long delays, burdensome questions, and would ultimately prove fatal to some of their applications.

Around that same time, the Department of Justice was considering whether it could bring criminal charges against 501(c)(4) organizations that engaged in political activity. The Federal Election Commission had also opened investigations into conservative organizations that aired political ads.

The IRS met with both agencies, providing input on the Department of Justice’s proposals and information to the Federal Election Commission on organizations that were under investigation. These actions leave little doubt that, when Congress did not pass legislation to reduce spending on political speech, the administration sought alternative ways to accomplish the same goal.

Regardless of whether an explicit directive was given, the President gave the order to target conservative groups at every opportunity – the State of the Union, in press conferences, and in TV interviews. He didn’t send a “smoking gun” email because he did not need to – he gave the order for all to hear. And his political allies at the IRS followed those orders.

The report clearly shows that conservative groups were singled out because of their political beliefs, and gross mismanagement at the IRS allowed this practice to continue for years.

We know that the IRS systemically selected Tea Party and other conservative organizations for heightened scrutiny, in a manner wholly different from how the IRS processed applications submitted by left-leaning and nonpartisan organizations.

Although the IRS knew that the Tea Party applications were too dissimilar to be grouped under a common template, it continued to segregate them for screening and processing based on the presence of certain key words or phrases in the applicants’ names or applications like “Tea Party,” “9/12” and “Patriots,” as well as indicators of political views that included being concerned with government debt, government spending or taxes, educating the public via advocacy, lobbying “to make America a better place to live,” or being critical of how the country was being run.

Some have tried to mitigate these facts, claiming that the IRS similarly targeted left-leaning groups. Indeed, this argument is posited in the additional Democratic Views. However, as our investigation made clear, the IRS’s treatment of conservative organizations was without question different from that given to left-leaning and nonpartisan organizations.

True enough, some liberal organizations were also denied tax exempt status during this period. However, with one exception that affected just two organizations, ALL left-leaning organizations that were, according the Democratic Views, improperly treated had participated in activities that legitimately called their tax-exempt status into question.

The IRS did not target these groups based on their names or ideologies. Instead, it evaluated their actual activities that were known to the IRS – activities that, in many cases, properly resulted in denial or revocation of tax-exempt status.

That same deference and attention to detail was not offered to Tea Party groups and other conservative organizations. As a result, many of the Tea Party applicant groups gave up on the process; and some of these groups ceased to exist entirely, based, at least in part, on the failure to obtain tax-exempt status.

Once again, Mr. President, we know all this happened. It is spelled out in great detail in the committee’s report.

On top of all of this, our investigation revealed an environment at the IRS where the political bias of individual employees like Lois Lerner – who was, once again, the Director of the Exempt Organizations Unit – was allowed to influence agency decision-making.

The IRS’s upper management gave Ms. Lerner free rein to manage applications for tax-exempt status.

During our investigation, the Finance Committee found evidence that Lerner’s personal political views directly resulted in disparate treatment for applicants affiliated with the Tea Party and other conservative causes.

Ms. Lerner orchestrated a process that subjected these applicants to multiple levels of review by numerous components within the IRS, thereby ensuring that they would suffer long delays and be required to answer burdensome and unnecessary questions. Lerner showed little concern for conservative applicants, even when members of Congress inquired on their behalf, allowing their applications to languish in the IRS bureaucracy for as long as two years with little or no action. The IRS began to resolve these applications only after some of the problems became public in 2012.

But, of course, by that time, the damage had been done.

Our investigation also uncovered a pattern at the IRS of continually misleading Congress about its handling of applications submitted by Tea Party organizations. Specifically, top IRS officials, including Doug Shulman, Steve Miller, and, of course, Lois Lerner made numerous misrepresentations to Congress in 2012 and 2013 regarding the IRS’s mistreatment of these groups.

As if that wasn’t bad enough, the IRS impeded congressional investigations – including our investigation – by failing to properly preserve a significant portion of Ms. Lerner’s emails and then concealing the fact that the emails had been lost from the committee for months.

Mr. President, long before these allegations surfaced, the IRS was already one of the most feared and loathed agencies of the federal government. Virtually all Americans had some level of either apprehension or animosity toward the IRS, due in large part because of the power it had to impact the lives of everyday hardworking taxpayers.

Then, beginning at least in 2010, if not sooner, the IRS made things even worse, demonstrating a pattern of incompetence, mismanagement, political bias, and obstruction toward congressional oversight. As a result, the agency has, in many respects, lost the public’s confidence. There is a lot of work that needs to be done if the agency is ever going to restore that confidence and regain the public’s trust.

The Finance Committee’s report gives, I believe, the best account we have of how that trust was broken. It spells out in great detail the organizational and personnel problems that plagued the agency and allowed partisan agendas and political tribalism to influence important decisions. I hope all of my colleagues will take the time to examine this report and its findings.

The report itself is over 400 pages long and includes roughly 5,000 pages of additional supporting documents. In other words, all of my colleagues have a lot of reading to do over the August recess.

I hope we can all take a close look at the events detailed in the report and come together to work on legislative solutions that will prevent this kind of misconduct from happening again in the future.

In closing, I want to acknowledge the hard work and countless hours of time spent by the Finance Committee staff who worked on this report. All told, they conducted over 30 exhaustive interviews and reviewed more than 1.5 million pages of documents. They also drafted numerous versions of this report and performed countless other tasks necessary to bring this investigation to a close.

The bipartisan committee staff whose diligence and devotion to duty made this investigation and report possible include the following: John Angell, Kimberly Brandt, John Carlo, Justin Coon, Michael Evans, Daniel Goshorn, Christopher Law, Jim Lyons, Todd Metcalf, Harrison Moore, Mark Prater and Tiffany Smith.

All of them deserve our gratitude for the work they’ve put in.

I also want to thank former Chairman Baucus for his work in starting this investigation, as well as Senator Wyden who, once again, continued to work with us in a bipartisan fashion to get us to this point.

With that, I yield the floor.

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