Obama Forces Out U.S. IRS Chief in Bid to Contain Damage

May 16 (Bloomberg) -- Bloomberg’s Julianna Goldman reports on the various actions by the White House over IRS actions targeting conservative groups. She speaks on Bloomberg Television’s “Bloomberg Surveillance.” (Source: Bloomberg)

President Barack Obama forced out the head of the Internal Revenue Service over the agency’s selective screening of nonprofit groups, as the administration sought to contain scandals imperiling its second-term agenda.

Steven Miller, the acting IRS commissioner, resigned as lawmakers questioned why the agency used ideological terms such as “tea party” to subject some groups’ applications for tax-exempt status to tougher scrutiny.

“It’s inexcusable, and Americans are right to be angry about it, and I am angry about it,” Obama said as he announced Miller’s departure in televised remarks at the White House yesterday. “It’s important to institute new leadership that can help restore confidence.”

The White House is struggling to respond to simultaneous controversies focusing on the IRS, last year’s deadly assault on a U.S. mission in Benghazi, Libya, and the Justice Department’s subpoena of Associated Press telephone records. Together, the scandals have touched off a fresh round of Republican attacks on the administration.

Obama attempted to regain control yesterday on each of those fronts. In addition to his evening announcement of Miller’s departure, he released e-mails sought by Republicans regarding the Benghazi attack, and he sought to revive legislation to help journalists protect confidential sources.

Photographer: Alex Wong/Getty Images

Steve Miller, former acting commissioner of Internal Revenue Service, is scheduled to testify tomorrow before the House Ways and Means Committee in the first congressional hearing on the subject. Close

Steve Miller, former acting commissioner of Internal Revenue Service, is scheduled to... Read More

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Photographer: Alex Wong/Getty Images

Steve Miller, former acting commissioner of Internal Revenue Service, is scheduled to testify tomorrow before the House Ways and Means Committee in the first congressional hearing on the subject.

The administration’s multiple challenges have the potential to slow or derail Obama’s second-term agenda, which includes seeking a budget agreement with Republicans and revising the nation’s immigration laws.

‘Incredibly Difficult’

Obama didn’t say who will run the IRS in the interim. He hasn’t nominated a permanent commissioner since the term of Douglas Shulman, a George W. Bush appointee, ended in November. Shulman had announced his plans to leave in April 2012, which means Obama has had more than 13 months to choose a replacement. An administration official who requested anonymity to discuss internal personnel matters said today that the president expects to appoint a new acting commissioner this week.

“This has been an incredibly difficult time for the IRS given the events of the past few days,” Miller wrote in a letter to IRS employees. “And there is a strong and immediate need to restore public trust in the nation’s tax agency.”

Republicans have complained since early 2012 about delays in approving Tea Party groups’ applications and the extensive questionnaires sent to the small-government organizations. The targeting started in 2010, and some IRS managers knew by June 2011.

McConnell Statement

“More than two years after the problem began, and a year after the IRS told us there was no problem, the president is beginning to take action,” Senator Mitch McConnell of Kentucky, the chamber’s Republican leader, said in a statement yesterday after Obama’s remarks.

Shulman told lawmakers in March 2012 that the agency wasn’t targeting groups based on their ideology. Miller said in July 2012 that the IRS had grouped applications together without explaining how it was done.

The IRS said Shulman and Miller were informed of the targeting of small-government groups in May 2012. They didn’t inform Congress, a decision the agency said was done to avoid interfering with an inspector general’s report.

The issue exploded into a scandal on May 10, when Lois Lerner, a mid-level IRS official, acknowledged the practice and apologized. She spoke four days before the release of the inspector general’s report.

Criminal Investigation

Attorney General Eric Holder has opened a criminal probe, and four separate congressional committees are investigating the IRS. Holder said the FBI inquiry wouldn’t be limited to IRS employees in Cincinnati, where the applications were handled, and may include Washington employees if the evidence points that way.

“The facts will take us wherever they take us,” Holder told the House Judiciary Committee yesterday as he pledged that the investigation would be “dispassionate” and nonpartisan. “Anybody that has broken the law will be held accountable.”

The American Center for Law and Justice will be filing civil lawsuits next week on behalf of affected tea party groups, said executive director Jordan Sekulow.

The IRS targeting of tea party groups shows “it cannot be trusted” to enforce the 2010 health-care law, said Representative Michele Bachmann of Minnesota, a former IRS attorney.

‘Intimate Information’

She said it is fair to wonder whether the IRS would use “intimate information” to delay or deny health care or use those details to blackmail or embarrass opponents of the administration. Such questions, she said at a news conference today, “would have been considered unreasonable a week ago.”

The White House also has been pushed by Republican lawmakers to explain the basis for its public statements on the Benghazi attack in the days after the assault that killed U.S. Ambassador Chris Stevens and three other Americans.

The Benghazi e-mails released yesterday by the Obama administration capture two days of internal debate over how to describe the Sept. 11 incident. The final talking points, with six bullet points pared down to three, led then-CIA director David Petraeus to suggest they be discarded.

CIA Revisions

The e-mails reveal a process where the Central Intelligence Agency made major revisions to the talking points after receiving input inside the CIA and objections from the State Department before they were delivered to Congress and supplied to United Nations Ambassador Susan Rice.

An initial assertion that “Islamic extremists with links al-Qaeda” were involved was changed to a suggestion that “extremists participated in the violent demonstrations.”

The e-mails show how the drafting of a document originally requested by Congress quickly involved several U.S. agencies. Roughly six hours after the first draft was sent from the CIA to the White House on Sept. 14, one CIA official wrote to another that coordination had run “into major problems.”

“A number of agencies have been looped in,” reads the e-mail, sent at 9:52 from the CIA official, whose name is redacted in the documents. “The White House has cleared quickly, but State has major concerns.”

‘Heavy Editing’

While administration officials said that final changes were made by Mike Morell, the deputy CIA director, after a brief discussion at a deputies’ meeting on Sept. 15, an e-mail from an unidentified official in Rice’s office suggests otherwise.

“Morell noted that these points were not good and he had taken a heavy editing hand to them,” read an e-mail from an official whose name was redacted for security reasons.

That contention was disputed by officials at a White House briefing yesterday. Morell didn’t discuss the talking points in detail at the meeting, according one administration official.

Under pressure from lawmakers and media organizations after the Justice Department’s subpoena of Associated Press telephone records, Obama’s staff yesterday asked the Senate’s No. 3 Democrat, Charles Schumer of New York, to reintroduce legislation designed to limit the circumstances in which the federal government could compel journalists to reveal confidential sources.

‘Profoundly Concerned’

The move came amid criticism of Holder by House lawmakers for his department’s decision to obtain AP telephone records as part of an inquiry into national security leaks without notifying and attempting to negotiate with the news service.

Holder, who recused himself from the inquiry that led to the subpoenas, did little to calm lawmakers. Representative Jim Himes, a Connecticut Democrat, took to the House floor to say he was “profoundly concerned” about the department’s actions.

“It’s time for the Department of Justice to stand back,” said Himes, who questioned whether the actions would chill whistle-blowers in the government.

On the IRS controversy, the Obama administration’s response will soon come under lawmakers’ direct scrutiny.

Miller, the ousted IRS chief, is scheduled to testify tomorrow before the House Ways and Means Committee in the first congressional hearing on the subject. The Senate Finance Committee will hold a hearing May 21 and the House Oversight and Government Reform Committee will follow on May 22.

The oversight panel has requested transcribed interviews with five mid-level and lower-ranking IRS employees: Holly Paz, John Shafer, Gary Muthert, Liz Hofacre and Joseph Herr.

Yesterday, the IRS sought to provide a clearer explanation for why employees started using “tea party” to screen applications for tax-exempt status.

Some employees had noticed applications from tea party groups that had presented concerns that they were too political to qualify as a social welfare group, the agency said in a questions-and-answers document.

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

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

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