IRS’s Lerner Pursued Karl Rove Group, Republicans Allege

Photographer: Pete Marovich/Bloomberg

Lois Lerner, then the director of the Internal Revenue Service's exempt organizations office, during a House Oversight and Government Reform Committee hearing in Washington, D.C., on May 22, 2013. Close

Lois Lerner, then the director of the Internal Revenue Service's exempt organizations... Read More

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Photographer: Pete Marovich/Bloomberg

Lois Lerner, then the director of the Internal Revenue Service's exempt organizations office, during a House Oversight and Government Reform Committee hearing in Washington, D.C., on May 22, 2013.

Former Internal Revenue Service official Lois Lerner engaged in an “aggressive and improper pursuit” of Crossroads Grassroots Policy Strategies, a nonprofit political group advised by Republican Karl Rove, according to the House Ways and Means Committee.

Lerner’s intervention should be investigated by the Justice Department as a crime because she treated Republican-leaning groups unfairly, the committee said in a letter published after a two-hour closed session today. Some of the information in the letter had been kept secret until now under taxpayer-privacy laws.

“This is so important that the public has a right to know,” Ways and Means Committee Chairman Dave Camp, a Michigan Republican, told reporters after the party-line vote to send the letter. “What do we have as Americans if we don’t have our constitutional rights?”

Lerner, who retired last year, has denied wrongdoing and said she committed no crimes. Democrats dismissed the letter as political theater and said Camp could have taken his concerns directly to prosecutors without the rare step of going public.

Under section 501(c)(4) of the U.S. tax code, groups such as Crossroads must be operated exclusively for social welfare. IRS rules say they can’t make politics their primary purpose.

Donors Secret

Crossroads GPS, which doesn’t have to disclose its donors, pumped more secret money into the 2012 election than any other group, according to the Center for Responsive Politics, a Washington-based group that tracks political spending.

The nonprofit group spent about $71 million of the $180 million it raised on TV ads and other activities it was required to report to the Federal Election Commission.

It also distributed about $35 million in grants that year, according to its tax forms. The largest grant recipient was Americans for Tax Reform, whose president is Grover Norquist, the tax documents show.

Crossroads applied for nonprofit status in September 2010, telling the IRS that its involvement in politics would be “limited.” Approval or denial of that application would be public. As is allowed under the law, the group operated under 501(c)(4) while its application is pending.

The Ways and Means letter uses Lerner’s e-mails to argue that she circumvented the agency’s procedures to deny Crossroads tax-exempt status, select them for an audit and interfere in the agency’s appeals process.

‘No Record’

According to the documents released today, the IRS began drafting a letter denying Crossroads tax-exempt status two days before the scrutiny of Tea Party groups became public in May 2013. The documents don’t make it clear if the letter was sent. It was still in draft form on May 30, after Lerner had been suspended.

“The evidence shows that without Lerner’s intervention, neither adverse action would have been taken against Crossroads,” the letter said. “The committee has found no record of Lerner pursuing similarly situated left-leaning groups, despite receiving similar public complaints.”

Crossroads GPS President Steven Law said in an e-mailed statement today that the committee “confirms that there was an organized high-level effort within the IRS to subvert the agency’s own standards and procedures in order to harass law-abiding conservative advocacy groups like Crossroads GPS.”

Extra Scrutiny

Lerner vaulted from obscurity as the IRS’s director of exempt organizations in May 2013 when she disclosed that the tax agency had given extra scrutiny to some Tea Party groups seeking tax-exempt status solely because of their names. The ensuing controversy forced leadership changes at the Internal Revenue Service, triggered congressional investigations and made Lerner the target of House Republicans’ ire.

Until today, the investigations have focused on the IRS’s treatment of smaller Tea Party groups. The agency’s inquiry into Crossroads had been kept secret under confidentiality laws.

Lerner’s attorney, William Taylor of Zuckerman Spaeder LLP in Washington, said in a statement today that “the timing of today’s vote is odd. We have not heard from the House Ways and Means‎Committee. Nor has the committee previously issued a report of its findings.”‎

Attorney General Eric Holder and the Justice Department will decide whether to prosecute Lerner. Justice Department spokeswoman Emily Pierce said in an e-mailed statement today that the investigation “remains a high priority of the department. We will review the letter once we receive it and take it under consideration.”

No Details

Pressed during a hearing yesterday by Representative Jim Jordan of Ohio, Holder wouldn’t provide details about the status of the Justice Department’s IRS inquiry.

“I am not going to talk about an ongoing investigation,” he said. “You don’t understand the nature of what it is that we’re doing. You can’t, because you’re not a part of the investigation.”

Representative Sander Levin, the top Democrat on the Ways and Means panel, said Republicans were taking an unnecessary action for political gain.

“It now seems clear that Republican members of the Ways and Means Committee have decided that they do not want to be left behind in the Republican campaign to declare this a scandal and keep it going until November,” Levin of Michigan was prepared to say in the meeting, according to remarks distributed to reporters. “Making this committee an arm of any campaign committee does a deep disservice to the proud traditions and legacy of this committee.”

The Justice Department has already been investigating the IRS controversy. No charges have been filed.

Taxpayer Information

The laws Lerner may have violated include one that prohibits false statements, another that prohibits the use of official positions to deprive people of their rights and a U.S. tax code section that limits disclosure of taxpayer information.

The letter said Lerner misled investigators about when she became aware of the scrutiny of Tea Party groups. It also cited her use of a private e-mail address to which she sent some taxpayer information. If someone other than her accessed this information, that may be a crime, the letter said.

Separately, the House Oversight and Government Reform Committee is scheduled to vote tomorrow on whether Lerner should be held in contempt of Congress for refusing to answer lawmakers’ questions.

Republican Representative Darrell Issa of California, who released a March 11 report criticizing Lerner’s actions and has held repeated hearings on the IRS controversy, is chairman of the oversight committee.

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

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

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