Shulman’s Above-Fray IRS Posture to Get Tested by Issa

Former IRS Commissioner Douglas Shulman’s self-portrait of an executive intentionally distanced from political controversy will be tested today by House Republicans eager to uncover details about the tax agency’s scrutiny of small-government groups.

Shulman, who left the Internal Revenue Service in November, returns to Capitol Hill to testify before a congressional panel for the second straight day. This time, before the House Committee on Oversight and Government Reform, he won’t be able to deflect questions to a current IRS official, as Lois Lerner will invoke her Fifth Amendment constitutional right not to speak and potentially incriminate herself.

Shulman insisted yesterday that he didn’t have all the facts about what the IRS did until an inspector general’s report was released last week.

“I didn’t touch individual cases and I certainly didn’t touch cases that involved political activity,” he told the Senate Finance Committee. “I certainly am not personally responsible for creating a list that had inappropriate criteria.”

Given several chances to apologize, Shulman refused, instead expressing regret and dismay at the agency’s screening practices. As one of two presidential appointees at the IRS, he said he tried to stay out of individual cases.

In the Senate yesterday, Shulman directed some questions to Steven Miller, his former deputy, who is being forced out as acting commissioner. Miller, a career IRS employee, once oversaw tax-exempt organizations.

Shulman Criticized

Shulman still encountered criticism from lawmakers in both parties. Senator Orrin Hatch of Utah, the panel’s top Republican, said Shulman should have corrected previous assurances that the agency had acted properly once he found out they were false.

Senator Thomas Carper, a Delaware Democrat, said it was a “disappointment” that Shulman wasn’t accepting more responsibility.

Shulman will have little if any cushion today before the House oversight panel led by Representative Darrell Issa, a California Republican.

Miller won’t be there. Lerner, the mid-level official at the center of the controversy, won’t answer questions, according to a letter her lawyer, William Taylor, wrote to Issa.

“She has not committed any crime or made any misrepresentation but under the circumstances she has no choice but to take this course,” wrote Taylor, a partner at Zuckerman Spaeder LLP in Washington.

Inappropriate Questions

Today’s hearing will be the third since Lerner disclosed May 10 that the IRS had selected “Tea Party” and “patriot” groups applying for tax-exempt status for tougher scrutiny. The groups had long delays and some received what the inspector general described as inappropriate questions about items such as their donor lists.

In addition to the congressional inquiries, the inspector general is reviewing the matter further and the Justice Department has started a criminal investigation.

In a statement yesterday, Ali Ahmad, a spokesman for Issa, said he wants Lerner to change her mind and answer the committee’s questions.

“We want her to be as candid as possible to try to shed some light on the truth, which we haven’t had,” said Representative Jason Chaffetz, a committee member and Utah Republican.

Representative Elijah Cummings of Maryland, the oversight panel’s top Democrat, said Lerner should lose her job.

“I think she has to go, because we have to restore trust,” he told reporters yesterday.

IRS Leadership

Shulman, 46, was appointed by President George W. Bush and confirmed by the Senate in March 2008. He announced in April 2012 that he wouldn’t stay past the end of his term.

President Barack Obama hasn’t nominated a successor to Shulman. Danny Werfel, controller of the Office of Management and Budget, takes over today as acting commissioner.

Several times during yesterday’s hearing, Shulman cited a long list of IRS priorities -- such as policing offshore tax avoidance, updating technology and distributing federal stimulus money -- that were his focus as commissioner.

Lerner found out in June 2011 that employees at the IRS tax-exempt office in Cincinnati had been applying extra scrutiny to small-government groups based solely on their names.

She attempted to stop that practice. According to the inspector general’s report, Cincinnati employees then applied other inappropriate criteria for several months.

May 2012

The IRS inspector general, Russell George, and Miller haven’t identified the employees who first came up with the list or reversed Lerner’s decision.

Miller, who was then deputy commissioner, found out what had happened in May 2012. Shulman said Miller told him.

“This is an issue that when someone spotted it, they should have run it up the chain,” Shulman said. “Why they didn’t, I don’t know.”

Shulman said he didn’t know the details about the number of groups affected and which criteria were used to screen applications, other than the phrase “Tea Party.”

In his testimony, Shulman didn’t undermine statements by the White House and the Treasury Department that no one outside the IRS knew details of the scrutiny of the groups until earlier this year. Shulman said he was unwilling to discuss the matter while the inspector general was reviewing it.

Didn’t Tell

“And so I don’t recall telling anyone about it because I think this is not the kind of information that should leave the IRS,” he said.

Shulman, who told House lawmakers in March 2012 that there was “absolutely” no targeting of small-government groups, didn’t go back to Congress to correct that statement or order his deputies to do so. Republicans had been relaying complaints to the IRS that Tea Party groups had received questions.

Democrats had a different line of questioning, pressing Shulman to explain why the IRS hasn’t set clearer rules for political activity of non-profit groups. The law says groups organized under section 501(c)(4) of the tax code -- such as the ones scrutinized by the Cincinnati office -- must be operated “exclusively” to promote social welfare.

IRS rules allow them to have some political activity, as long as that’s not their primary purpose.

“This is a very hard task given to the IRS,” Shulman said. “If Congress could help clarify the law, that would be very helpful.”

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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