Ousted Acting IRS Head Faces Lawmaker Grilling in Scandal

Photographer: Alex Wong/Getty Images

Steve Miller, former acting commissioner of Internal Revenue Service, having already lost his job and any chance of becoming the permanent commissioner, will testify amid a Justice Department criminal investigation in which his statements could become evidence against himself or others. Close

Steve Miller, former acting commissioner of Internal Revenue Service, having already... Read More

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Photographer: Alex Wong/Getty Images

Steve Miller, former acting commissioner of Internal Revenue Service, having already lost his job and any chance of becoming the permanent commissioner, will testify amid a Justice Department criminal investigation in which his statements could become evidence against himself or others.

Steven Miller, forced out as acting Internal Revenue Service commissioner, will be questioned today by U.S. lawmakers on what he knew about scrutiny of small-government groups and why Congress wasn’t told.

Miller is set to appear before the House Ways and Means Committee at 9 a.m. in Washington. Lawmakers on the panel, particularly Republicans, say they’ve been misled by Miller over the past year. They will demand an accounting of what the IRS did and why senior managers failed to act.

“We repeatedly asked what was going on and they were evasive,” said Representative Charles Boustany, a Louisiana Republican and chairman of the Ways and Means oversight subcommittee. “We’re going to follow the trail and we have to start somewhere.”

Today’s hearing marks a turning point in the IRS scandal, because Miller and lawmakers will confront each other in public for the first time since the IRS acknowledged its actions and apologized May 10. The IRS investigation, along with inquiries into the attack on a U.S. mission in Benghazi, Libya and the government’s seizure of Associated Press reporters’ phone records, risk distracting the Obama administration from its second-term agenda.

Miller, having already lost his job and any chance of becoming the permanent commissioner, will testify amid a Justice Department criminal investigation in which his statements could become evidence against himself or others.

‘How Bad’

“There’s no way for him to come out of this hearing looking good,” said Robert Kelner, a partner who leads the congressional investigations practice at Covington & Burling (1175L) LLP in Washington. “It’s only a question of how bad he looks.”

Four congressional committees are investigating the IRS. The Justice Department has begun a criminal probe that could ensnare senior officials for lying to Congress and lower-level workers for other potential offenses. Joseph Grant, who had been appointed to oversee tax-exempt groups and government entities on May 8, announced he would retire as of June 3.

House Speaker John Boehner yesterday cited a section of the tax code that provides criminal penalties of up to five years in prison for people who commit “extortion or willful oppression under the color of law.”

The IRS inspector general, which already released one report May 14, will be recommending another investigation, President Barack Obama said yesterday. Karen Kraushaar, a spokeswoman for the inspector general, said she was prohibited by law from confirming the existence of an investigation.

Obama pledged to implement changes at the IRS. He announced yesterday that he has appointed Danny Werfel, controller at the Office of Management and Budget, as acting IRS commissioner starting May 22.

‘Equally Outraged’

“It doesn’t matter whether you’re a Democrat or a Republican, you should be equally outraged at even the prospect that the IRS might not be acting with the kind of complete neutrality that we expect,” the president said at the White House yesterday.

Obama hasn’t nominated an IRS commissioner. Miller’s predecessor, Douglas Shulman, was appointed by President George W. Bush. He announced in April 2012 that he wouldn’t seek a second term and left in November.

Today’s hearing will feature two witnesses: inspector general Russell George and Miller, a 25-year IRS veteran who was a deputy commissioner until he became acting chief in November 2012.

‘Completely Unacceptable’

“We need to know how and why and certainly try to restore the faith that’s been broken,” Representative Dave Camp, the chairman of the Ways and Means Committee, said yesterday during an interview with Bloomberg Television. “People have been targeted for their political beliefs, which is completely unacceptable,” the Michigan Republican said.

According to the inspector general’s report, IRS employees in Cincinnati who review applications for tax-exempt status used criteria such as “Tea Party” or “patriot” in groups’ names to determine which should receive tougher scrutiny.

Lois Lerner, who oversees tax-exempt organizations in Washington, learned of the practice in June 2011. The agency didn’t restart the screening process and began sending out lengthy questionnaires to groups in January 2012.

The IRS has insisted that the efforts weren’t politically motivated and that the use of those terms didn’t come from senior officials in Washington. Republicans find those claims questionable and will ask Miller about that.

“Common sense would tell me that it was an orchestrated effort,” said Representative Devin Nunes, a California Republican on Ways and Means.

Political Motives

The inspector general’s report found no evidence that employees had partisan or political motives. The IRS said that use of the words “Tea Party” and “patriot” was an inappropriate shortcut.

Miller learned of the selective scrutiny in May 2012 and didn’t tell Congress, including during testimony in July 2012. Miller last testified before Congress May 8, and he wasn’t asked about the issue.

Today’s hearing will be different.

“If he’s smart about this hearing, he will cut his losses by just answering the questions directly and then getting out with his hide basically intact,” Kelner said. “If he instead chooses to hem and haw and avoid direct answers, then it’s going to be a really brutal hearing.”

Republican Donors

Camp and other Republicans are broadening the scope of the inquiry to include allegations about donors to their party being audited and private information about Republican-leaning groups being obtained by outsiders.

Senate Republicans yesterday called on the IRS inspector general to investigate how confidential paperwork of the National Organization for Marriage, which opposes same-sex marriage, ended up in the hands of some of its opponents.

“We’ve had donors who were targeted,” Camp said during a joint interview with Senate Finance Chairman Max Baucus that will be broadcast on Bloomberg TV’s “Capital Gains” on May 19. “We’ve had obviously confidential information leaked.”

Democrats, for their part, are trying not to minimize what happened at the IRS while seeking to shift the focus to the underlying law. The groups in question were applying for a tax exemption under section 501(c)(4).

That status lets them avoid disclosing their donors. To qualify, the IRS must determine that they aren’t primarily political.

‘Minimal Standard’

“Transparency ought to be the minimal standard that’s applied to campaign giving,” said Representative Richard Neal of Massachusetts, a senior Democrat on Ways and Means. “We need to have a conversation about groups that can give untold hundreds of millions of dollars without any accountability.”

Representative Sander Levin, the top Democrat on Ways and Means, who has joined with Camp in peppering the IRS with questions, said lawmakers shouldn’t politicize the issue.

“This needs to be based on facts, not conjecture,” said Levin, of Michigan.

Boustany told reporters yesterday that he wants to conduct a “full review” of the IRS.

“We want to keep this fact-based,” he said, “and we don’t want to sensationalize.”

-- With assistance from Peter Cook in Washington. Editors: Jodi Schneider, Robin Meszoly

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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