U.S. House of Representatives

Committee on Oversight and Government Reform

Darrell Issa (CA-49), Chairman

The Internal Revenue Service’s Targeting of Conservative Tax-Exempt Applicants: Report of Findings for the 113

th

 Congress

 

Staff Report 113th Congress December 23, 2014

 

 

“I’ve reviewed the Treasury Department watchdog’s report, and the misconduct that it uncovered is inexcusable. It’s inexcusable, and Americans are right to be angry about it, and I am angry about it. I will not tolerate this kind of behavior in any agency, but especially in the IRS, given the power that it has and the reach that it has into all of our lives.”

 — 

 

President Barack Obama, May 15, 2013.

*

 

“If, on the other hand, you’ve got an office in Cincinnati, in the IRS office that – I think, for bureaucratic reasons, is trying to streamline what is a difficult law to interpret about whether a non-profit is actually a political organization, deserves a tax exempt agency. And they’ve got a list, and suddenly everybody’s outraged.”

 — 

 

President Barack Obama, December 5, 2013.

†

 

“[T]here were some bone-headed decisions . . . out of a local office . . . . Not even mass corruption, not even a smidgeon of corruption, I would say.”

 — 

 

President Barack Obama, February 2, 2014.

‡

 

*

 The White House, Statement by the President (May 15, 2013).

†

 

 Hardball with Chris Matthews

 (MSNBC television broadcast Dec. 5, 2013) (interview with President Barack Obama).

‡

 

“Not even a smidgeon of corruption”: Obama downplays IRS, other scandals

, F

OX

 N

EWS

, Feb. 3, 2014.

 

 

i

Executive

 

Summary

 

On October 14, 2010, President Barack Obama stood before a youth town hall in Washington, D.C., fielding questions during the combative midterm election campaign season. When asked about the rising Tea Party movement, the President responded that “what has happened is layered on top of some of that general frustration that has expressed itself through the Tea Party, there is an awful lot of corporate money that’s pouring into these elections right now.”

1

 The President continued: “But you have these innocuous-sounding names, and we don’t know where this money is coming from. I think that is a problem for our democracy. And it’s a direct result of a Supreme Court decision that said they didn’t have to disclose who their donors are.”

2

 Five days later, Lois Lerner addressed a much smaller audience at Duke University. Speaking about the upcoming election, Lerner echoed the President’s sentiments. “The Supreme Court dealt a huge blow,” she said, “overturning a 100-year old precedent that basically corporations couldn’t give directly to political campaigns. And everyone is up in arms because they don’t like it. . . . They want the IRS to fix the problem. . . . I won’t know until I look at their [tax return form] 990s next year whether they have done more than their primary activity as  political or not. So I can’t do anything right now.”

3

 The pressure to “fix the problem,” as articulated by Lois Lerner, originated with President Obama and senior party leadership. The pressure on the IRS to regulate political speech by tax-exempt organizations mounted in the wake of the Supreme Court’s decision in

Citizens United v. Federal Election Commission

. Barnstorming the country, President Obama derided conservative tax-exempt groups as “shadowy,” “phony,” and even “a threat to our democracy.”

4

 Other prominent Democratic leaders joined the President’s call to arms,  pressuring the IRS to take an aggressive stance against political speech by tax-exempt entities.

5

 For twenty-seven months, from February 2010 until May 2012, the Internal Revenue Service systematically targeted conservative tax-exempt applicants for additional scrutiny and delay. The IRS’s targeting of conservative tax-exempt applications was just one symptom of the Administration’s broader response to perceived shortcomings of federal campaign-finance law and the

Citizens United 

 decision. As prominent Democratic politicians and the media condemned conservative non-profit groups, the IRS sought ways to rein in the groups’ political speech. Lois Lerner initiated a “c4 project” – careful to ensure that it was not “

 per se

 political” – and called applications filed by Tea Party groups “very dangerous” because she believed that they could undo existing IRS limits on non-profit political speech.

1

 The White House, Remarks by the President in a Youth Town Hall (Oct. 14, 2010).

2

 

 Id.

 

3

 

See

“Lois Lerner Discusses Political Pressure on IRS in 2010,” Y

OU

T

UBE

 (Dec.. 10, 2013), http://www.youtube.com/watch?v=EH1ZRyq-1iM (transcription by Committee).

4

 

See

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OMM

.

 ON

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VERSIGHT

&

 

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OV

’

T

R 

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H

OW

P

OLITICS

L

ED THE

IRS

 TO

T

ARGET

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ONSERVATIVE

T

AX

-E

XEMPT

A

PPLICANTS FOR THEIR

P

OLITICAL

B

ELIEFS

 (June 16, 2014) [hereinafter “H

OW

P

OLITICS

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ED THE

IRS

 TO

T

ARGET

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ONSERVATIVE

T

AX

-E

XEMPT

A

PPLICANTS

”].

5

 

 Id.