IRS Chief Says 2010 Meeting Under Review Was Unfortunate

A 2010 Internal Revenue Service conference that Congress is looking into was an “unfortunate vestige from a prior era,” said the tax agency’s acting commissioner.

The conference in Anaheim, California, for workers overseeing small businesses and self-employed taxpayers featured an IRS-produced video parody of Star Trek. Agency employees also participated in a “dance party” video, released yesterday, that mentioned plans for the conference.

“Taxpayers should take comfort that a conference like this would not take place today,” Danny Werfel, the acting IRS commissioner, said in a statement yesterday. “Sweeping new spending restrictions have been put in place at the IRS, and travel and training expenses have dropped more than 80 percent since 2010 and similar large-scale meetings did not take place in 2011, 2012 or 2013.”

The Treasury Inspector General for Tax Administration is expected to issue a report next week about the IRS’s spending on the conference. The House Oversight and Government Reform Committee will hold a hearing on the matter June 6.

The conference-spending issue is a new dimension in controversy surrounding the IRS, which faces inquiries from six congressional committees and a criminal probe by the Justice Department regarding scrutiny of some groups seeking tax-exempt status.

The Star Trek video became public earlier this year, as did a parody of the 1960s television show “Gilligan’s Island.”

Line Dancing

The dance party video, which shows employees being instructed in line dancing to prepare for the Anaheim conference, was released by the House Ways and Means Committee.

It ends with an employee dancing and singing, “New Carrollton in the house! Ooh! Ooh!” in reference to an agency operations center in New Carrollton, Maryland.

The IRS said in a statement that the video was “unacceptable and an inappropriate use of government funds.” The agency said it and the entire government have “strict new policies” to ensure taxpayer funds are used properly.

“Clearly this is an agency where abuse and waste is the norm and not the exception,” Representative Charles Boustany, a Louisiana Republican, said in a statement. “It is clear that this is a broken agency that is empowered by a broken tax code.”

Four Employees

Separately, congressional investigators are interviewing four IRS employees as part of a probe into the agency’s scrutiny of groups advocating limited government, according to a spokesman for Representative Darrell Issa.

The IRS is making the four available for transcribed interviews with the House Ways and Means and Oversight and Government Reform panels. The employees work in the Cincinnati office that handles applications for tax-exempt status, said Ali Ahmad, a spokesman for Issa, a California Republican and chairman of the House Oversight panel.

The committee has already questioned Holly Paz. The other four employees are John Shafer, Gary Muthert, Liz Hofacre and Joseph Herr.

Ahmad said in an e-mail yesterday that Issa’s panel will seek to interview more IRS workers. Lawmakers, investigators and IRS officials haven’t identified who began selecting groups for extra attention in 2010 when they sought tax-exempt status.

So far, extensive questioning by lawmakers on three committees directed at the IRS hasn’t revealed who decided to single out the groups applying for tax-exempt status based on their names. It hasn’t explained why the agency kept using what an inspector general called “inappropriate” criteria even after IRS officials tried to stop it in 2011.

Three Controversies

The tax agency’s disclosure earlier this month that it singled out groups with “Tea Party” or “patriot” in their names for the scrutiny before deciding whether to grant tax-exempt status is one of three controversies besetting President Barack Obama.

Also spurring congressional hearings are the administration’s response to the attacks last year on a U.S. diplomatic outpost in Benghazi, Libya, and the Justice Department’s seizure of telephone records and e-mails of journalists.

Issa announced another IRS hearing, this time on the agency’s conferences. The hearing on June 6 will focus on the inspector general’s audit about “excessive spending” at the tax agency, according to the committee.

Missed Deadline

The IRS hasn’t responded to some congressional requests for information and documents. The Senate Finance Committee, which requested documents by yesterday, hasn’t received anything, the communications offices of Chairman Max Baucus, a Montana Democrat, and Orrin Hatch of Utah, the panel’s top Republican, said in a joint statement.

“It’s disappointing that the IRS failed to produce any of the documents requested by the committee,” the statement said. “This is an agency that revolves around making the American taxpayer meet hard deadlines each and every year when they file their taxes, oftentimes penalizing those that are late. The IRS needs to do much better.”

Three IRS officials have left their jobs as a result of the controversy.

Steven Miller, the former acting commissioner, was forced out of that position. Joseph Grant, who oversaw tax-exempt groups and government entities, announced his retirement eight days after being promoted.

Paid Leave

Lois Lerner, who managed the office that handled applications from tax-exempt groups, was placed on paid administrative leave May 23. A day earlier, she gave Issa’s panel a short statement denying wrongdoing and then refused to testify, invoking her constitutional right against self-incrimination.

She disclosed the IRS’s actions on May 10 and apologized, four days before an inspector general’s report was released on the scrutiny issue.

The House Ways and Means panel is set to hold a hearing June 4 where representatives from some of the groups that received the extra attention will testify.

Representative Sam Graves, chairman of the House Small Business Committee, sent a letter to the IRS yesterday asking about the agency’s practices for deciding which small businesses to audit and how much money those audits recover.

Graves, a Missouri Republican, didn’t accuse the IRS of auditing small businesses for political reasons. Still, he wrote, “These investigations have only raised more questions as to the extent these practices may have extended beyond conservative groups.”

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Roxana Tiron in Washington at rtiron@bloomberg.net

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

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