IRS Inquiries Multiply With Spock Video Next Focus of Ire

The Internal Revenue Service controversy is far from over, say Republican members of Congress who are just at the start of their investigations.

An opening flurry of hearings hasn’t uncovered the origins of the tougher scrutiny the IRS gave Tea Party groups applying for tax-exempt status. Also, the inquiries into the agency are spreading beyond the focus on how the groups were treated.

Today, the House Oversight and Government Reform Committee is examining the IRS’s spending on employee conferences. The toughest questions are being directed at Faris Fink, commissioner of the IRS’s small business and self-employed division.

Fink portrayed Spock in an agency Star Trek parody created for a 2010 conference in Anaheim, California. At the $4.1 million event, he stayed in a presidential suite that typically costs about $1,500 a night, though it was obtained at the government’s $135 rate.

The videos “at the time they were made, were an attempt in a well-intentioned way to use humor,” Fink told committee members today. “It’s embarrassing and I apologize.”

Committee Chairman Darrell Issa, a California Republican, said the IRS’s spending on conferences was “at best, maliciously self-indulgent.”

As the investigations continue, here’s a look at what’s known and what isn’t:

What have we learned about the IRS’s actions in the hearings by four separate congressional committees since the controversy erupted last month?

In considering applications for tax-exempt status, the IRS paid extra attention to groups with “Tea Party” and “patriot” in their names and to groups focused on government spending and debt. Those groups experienced delays that stretched beyond three years in some cases, and some received what the IRS acknowledged were unnecessary questions, such as information about the activities of other groups.

Did the hearings identify who ordered the IRS to do this?

No, that remains a mystery. J. Russell George, the Treasury Inspector General for Tax Administration, told a House committee June 3 that, at the Cincinnati office where applications were processed, “no one would acknowledge who, if anyone, provided that direction.”

Steven Miller, then the acting IRS commissioner, said May 17 that workers were trying to find a shortcut to sort groups seeking tax-exempt status. They were seeking to put groups with potential political involvement into their own pile, so the agency could apply a consistent approach in considering their applications.

How many groups were affected?

The IRS said last month that it “centralized” 470 cases, meaning those that received the additional scrutiny.

What was the IRS trying to do?

The tax code gives the IRS responsibility for determining whether groups meet the requirements for tax-exempt status under section 501(c)(4). Such groups must be operated “exclusively” for social welfare, the law says. The IRS interprets that to mean groups can’t have politics as their primary purpose. As a result, the IRS must determine what is political and whether political involvement is a group’s predominant activity, both of which can be subjective questions.

Were any Democratic-leaning or nonpartisan groups affected?

Yes. A review by Tax Notes of the 176 groups that had been on the delayed list and then were approved found 48 “nonconservative” organizations. So far, however, there is no indication that ideologically loaded terms -- equivalents to “Tea Party” -- were the reasons those groups ended up in the pile of delayed applications. The composition of the total pool of applications is unknown.

Why do these groups want to be tax-exempt?

It’s often not the tax exemption itself that matters. Unlike political groups, social welfare groups don’t have to disclose their donors.

Did the groups even need to apply?

No. Groups can assume 501(c)(4) status by starting operations. Then, they file an annual tax return that the IRS can choose to audit.

Was the White House or the top of the IRS involved?

So far, no one has offered evidence that links the tougher scrutiny to top IRS officials or to anyone outside the agency. Issa alleged June 2 that the targeting was “coordinated in all likelihood from Washington.”

What was Issa’s proof?

He offered excerpts from interviews with an IRS employee who said the purpose was to focus on Republican groups and that direction was coming from technical experts in Washington. Those excerpts were partial, anonymous and didn’t say who in Washington did anything. Representative Dave Camp, chairman of the House Ways and Means Committee, said June 4 that it was too early to draw conclusions from those interviews.

How will officials attempt to determine the origin of the IRS scrutiny?

The search for the starting point -- through congressional interviews with IRS workers, document requests and inquiries by the Justice Department and an inspector general -- will dominate the weeks and months ahead.

Why are lawmakers so angry?

There are plenty of reasons, including some that go beyond the scrutiny of tax-exempt groups. Senior IRS officials, including then-commissioner Douglas Shulman and deputy commissioner Steve Miller, knew by May 2012 what the agency had done. Even recognizing that Congress was interested, they didn’t tell lawmakers. Members of Congress say they were misled and have lost trust in the IRS.

How did this become public?

Once the IRS started sending lengthy questionnaires to the groups in early 2012, their representatives started complaining. Republicans including Senator Orrin Hatch of Utah began asking for information. Those requests led George, the inspector general, to begin an audit, which was released May 14, 2013. Lois Lerner, then director of exempt organizations, answered a planted question at a May 10 tax conference, acknowledging the agency’s actions and apologizing.

Did President Barack Obama know this was going on?

So far, no evidence has emerged that Obama was aware of the IRS’s actions until news reports on May 10, 2013. Other White House officials, including his chief of staff Denis McDonough, were told of the inspector general’s findings before the report’s release.

What else isn’t known?

It’s still unclear what happened between June 2011 and January 2012. The inspector general’s report notes that Lerner became aware in June 2011 that Tea Party groups were receiving extra scrutiny. She ordered that stopped. The cases already selected with improper terms remained in that centralized group. IRS workers reverted to using other inappropriate search terms and began sending out the questionnaires. The hearings so far haven’t explained who made those decisions and why.

What investigations are taking place and what happens next?

Six congressional committees have opened inquiries. Investigators from the House Ways and Means and House Oversight panels are working through a list of five IRS employees to interview and plan to do more. The Justice Department has opened a criminal probe and is “actively” working on it, said Danny Werfel, the acting IRS commissioner.

The IRS sent an initial response to the Ways and Means Committee June 4 that said it had collected 646 gigabytes of information, equivalent to 64 million pages.

Is anyone going to jail?

It’s possible. At lower levels, IRS workers could be charged with misusing their government positions or violating the groups’ civil rights. Senior officials could be charged with lying to Congress, and Issa wrote a May 14 letter listing several statements by Lerner that he said were false. She refused to testify May 22, saying she had done nothing wrong and then invoking her constitutional right against self-incrimination.

Did anyone lose their jobs?

Yes. Steven Miller was forced out as acting commissioner and retired. Joseph Grant, who had been promoted May 8 to commissioner of tax-exempt and government entities, retired. Lerner was placed on paid administrative leave.

Additionally, two IRS officials were placed on administrative leave for accepting $1,100 in free food and other items at the Anaheim conference.

Who’s in charge at the IRS now?

Werfel, who was the controller at the Office of Management and Budget, is acting commissioner. He has chosen a new chief of staff, chief risk officer and deputy commissioner. Obama has known since April 2012 that the top job at IRS would become vacant; he hasn’t nominated anyone.

Did other Republican-friendly groups have complaints?

Yes. Congress is investigating two separate disclosures of information -- the release of confidential information belonging to the National Organization for Marriage and the release of some groups’ still-private applications to ProPublica, a news organization. The IRS says the inspector general found that both disclosures were inadvertent. The inspector general’s office won’t comment.

Also, the hearings have revealed that anti-abortion groups were asked about their prayers and asked not to protest at Planned Parenthood as a condition of getting tax-exempt status.

Republicans, including Camp, see these issues as part of a pattern of targeting their allies.

What about IRS conferences and parody videos?

In an unrelated report released June 4, the inspector general found that the IRS spent $49 million on employee conferences between 2010 and 2012, including $4.1 million on the 2010 event in Anaheim that included a Star Trek parody video and a $17,000 speaker who made paintings of Michael Jordan and U2 singer Bono. The IRS says it already has changed its policies on conferences and videos and that those events couldn’t happen today.

What’s next?

The IRS is responding to congressional requests for documents and interviews. Werfel said he expects to develop a plan soon for processing backlogged applications and deliver a report on broader agency changes by the end of June.

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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