TIME controversy

Emails: Former IRS Official Lois Lerner Called Republicans ‘Crazies’ and ‘—holes’

Former IRS Director Lois Lerner Testifies To A House Oversight Committee On IRS Targeting Scandal
Former Internal Revenue Service official Lois Lerner exercises her Fifth Amendment right not to speak about the IRS targeting investigation before the House Oversight and Government Reform Committee during a hearing in the Rayburn House Office Building on March 5, 2014 in Washington. Chip Somodevilla—Getty Images

House Ways and Means Chairman Dave Camp released new emails from former IRS official Lois Lerner as part of investigation examining potential criminal wrongdoing

Lois Lerner, the former Internal Revenue Service official at the center of a scandal involving that agency’s targeting of conservative groups, called Republicans “crazies” and “assholes,” according to emails released Wednesday.

Lerner’s messages were released by House Ways and Means Chairman Dave Camp as part of an investigation looking into possible criminal wrongdoing at the IRS. The emails released by Camp’s committee were redacted to use the language “—holes,” but a Camp spokesperson confirmed the original emails read “assholes.” Lerner resigned from her post overseeing tax-exempt groups last September.

In work emails exchanged November 2012 with an unidentified person, Lerner knocks the “whacko wing” of the Republican Party and conservative radio shows. Camp said in a statement that he hopes the released emails urge the Justice Department to “aggressively pursue this case” and appoint a special counsel. In May 2013, Lerner acknowledged that the IRS chose groups with “tea party” in their name for additional review in determining their tax-exempt status as social welfare groups.

A spokesman for Rep. Sandy Levin (D-Mich.), the ranking Democrat on the House Ways and Means Committee, did not respond to a request for comment.

 

TIME Campaign Finance

IRS to Rubber-Stamp Tax-Exempt Status for Most Charities After Scandal

Internal Revenue Service Commissioner John Koskinen testifies during a hearing before the Government Operations Subcommittee of the House Oversight and Government Reform Committee July 9, 2014 on Capitol Hill in Washington, D.C.
Internal Revenue Service Commissioner John Koskinen testifies during a hearing before the Government Operations Subcommittee of the House Oversight and Government Reform Committee July 9, 2014 on Capitol Hill in Washington, D.C. Alex Wong—Getty Images

IRS head touts "efficiencies," but some groups fear fraud

Amid ongoing controversy over its scrutiny of nonprofits, the Internal Revenue Service has decided it will no longer screen approximately 80% of the organizations seeking tax-exempt charitable status each year, a change that will ease the creation of small charities while doing away with a review intended to counter fraud and prevent political and other noncharitable groups from misusing the tax code.

As of July 1, any group that pays a $400 fee and declares on a three-page online form that it has annual income of less than $50,000, total assets of less than $250,000 and is in compliance with the tax-code requirements of a charity will automatically be allowed to accept donations that are tax-deductible for the donors. Previously the groups had to fill out a detailed 26-page form, submit multiple supporting documents and provide a narrative description of their intended activities.

In an interview with TIME, IRS commissioner John Koskinen said the change would result in “efficiencies [that] will translate into a faster and better review” of bigger nonprofits, while clearing a 66,000-application backlog that has resulted in yearlong waits for groups seeking to start a charity. He said the new short form comes with 20 pages of instructions that make clear the requirements and limitations of being a charitable organization. Koskinen said that on the new short form, “people certify that they’ve gone through the instructions” under penalty of perjury.

The IRS rejected the idea of the new Form 1023-EZ in 2012, but using an expedited process this year, adopted the new procedure on the recommendation of a small team composed largely of frontline workers from the scandal-plagued division of exempt organizations, according to the IRS.

Some charitable groups worry the IRS has opened the door to abuse of tax-exempt status that will undermine the credibility of legitimate nonprofits, which are allowed to accept deductible donations under section 501(c)(3) of the tax code. “The Form 1023-EZ will increase opportunity for fraud,” said Alissa Hecht Gardenswartz, president of the National Association of State Charity Officials, and will make it harder “to protect charitable assets from fraud and abuse and to ensure that charitable assets are used for the purposes represented to the public.”

Others worry that charities, nominally barred from political activity, will come to serve the same purpose as the powerful nonprofit organizations known as 501(c)(4)s, whose donations cannot be deducted from taxes. This could give an added tax benefit to donors who have recently funneled hundreds of millions of dollars into independent political campaign spending. “What we’ll see is the so-called dark political money that flowed into the (c)(4) world is going to begin to flow into the (c)(3) world,” says Marcus Owens, who was the director of the exempt-organizations division at the IRS from 1990 to 2000, and is now in private practice at the law firm of Caplin & Drysdale.

The change will result in approximately 40,000 to 50,000 fewer (c)(3) applications for the exempt-organizations division to review each year, Koskinen says. The division, whose main office is in Cincinnati, has been at the center of the IRS scandal over alleged political scrutiny of right-wing 501(c)(4) groups under then-head Lois Lerner. That scandal centers on shortcuts the office developed to identify (c)(4) groups for further screening, including screens for groups with the names that suggested an association with the Tea Party movement.

The current legal interpretation of tax regulations allows so-called (c)(4)s to engage in political activities as long as they don’t spend more than 50% of their money on politics. In the 2010 Citizens United ruling by the Supreme Court, those same groups earned the ability to buy campaign ads in federal elections, and tax laws allowed them to conceal the identity of their donors. Since the ruling, the number of applications to become a (c)(4) has doubled, to around 1,000 per year, Koskinen says. In the 2012 campaign, (c)(4)s spent approximately $300 million dollars on politics, according to the Center for Responsive Politics.

Much of that money was spent attempting to motivate voters by advertising positions on specific issues that divide candidates. Owens, the former IRS official, says such activity can be cast under the mission of a (c)(3) devoted to educational, religious or other permitted activities, opening the possibility of deductible dark money. “The candidate links to the issue, and then the tax-exempt organization’s job is to find the voters and make sure they know the message and hear it loud and clear up to election day,” says Owens. “That’s what the (c)(4)s were doing, but that kind of activity could be just as easily in a (c)(3), but it would have the added advantage of having tax deductibility attached to it,” Owens says.

Democratic defenders of the IRS and the exempt-organizations office say both have been deprived of resources, as the overall IRS budget was cut by nearly $950 million, or around 7.8%, from 2010 to 2013, according to the nonpartisan Government Accountability Office. In an April 2014 report, the GAO found the cuts had been offset through savings and efficiencies, and by reducing, delaying or eliminating services. Koskinen says budget cuts didn’t play a role in the change in charity rules. “Obviously we are resource-constrained everywhere across the agency,” he says, but “we would want to do this anyway.”

While charity groups agree the old process for receiving tax-exempt status was too cumbersome, they and others worry that now organizations with no true charitable purpose will seek to become charities. “It’s easier to get tax-exempt status under 1023-EZ than it is to get a library card,” says Tim Delaney, president and CEO of the Council of Nonprofits. As a result, Delaney says, bad actors “will be able to operate in the name of the charity, and the IRS will never be the wiser because they’re not looking at the underlying documentation.”

Koskinen says such worries are overblown. “There’s a faith that if someone has been forced to do more paperwork they’re going to be less nefarious,” he says. He says that to prevent potential abuse, the IRS will take samples of applications to see what percentage are being filled out incorrectly, and will monitor the number of applications to see if it spikes suspiciously as a result of the new rules.

Owens says the IRS may not be able to differentiate between truly small charities and those that knowingly plan to grow beyond $50,000 in annual income. “I haven’t seen any mechanism where the IRS would be legally able to go after an organization that applied within the EZ process but then fortune shined on them,” Owens says. He also says that because of outdated software, the IRS won’t be able to track active charities back from its master file to their originating documents. An IRS official speaking on background acknowledged the software problem.

Charities complain that the change was made with little consultation from their representative lobbying organizations. The IRS sped its enactment this year by routing the change through the White House’s Office of Management and Budget for public comment under the Paperwork Reduction Act, rather than through the normal public-comment process at the IRS, nonprofit officials contend. “I just wish the IRS had used a more inclusive process from the beginning,” says Delaney of the Council of Nonprofits.

The IRS studied a simplified tax-exempt form in 2012 but rejected the idea. The group that looked at the idea, made up of outside lawyers and experts in tax-exempt organizations, said that filling out the longer form forced groups to better understand the requirements of being a charity. The group said it “may also be easier to embezzle from a small charity,” so they should be subject to more, not less, oversight.

TIME Congress

House Republicans vs. Lerner: Questions About the IRS Targeting Scandal

A TIME guide to the controversy over IRS targeting

A panel of House Republicans voted on Thursday to hold former IRS official Lois Lerner in contempt of Congress, citing her refusal to answer questions about the agency’s targeting of conservative organizations for special scrutiny.

The 21-12 vote by the House Oversight and Government Reform Committee, which has been probing the alleged abuse since the scandal erupted last spring, broke along party lines: each of the panel’s Republicans voted to censure Lerner, while the Democrats on the committee opposed the resolution. The vote comes a day after Republicans on a separate committee formally requested the Department of Justice to open a criminal investigation of Lerner.

Like most political dramas, the ongoing outrage over the agency’s targeting of conservative groups sits at the intersection of legitimate concern and political opportunism. Since it can be difficult to separate one from the next, here is TIME’s handy guide to the so-called IRS scandal and the woman who has been made its public face:

Who is Lois Lerner?

Lerner, 63, used to run the IRS division in charge of reviewing applications from groups seeking tax-exempt status. Last May, she revealed at a legal conference that the IRS had inappropriately flagged conservative groups for special review, slowing down their application process. Republicans were incensed. Lerner was placed on paid leave as the brouhaha intensified. She retired in September.

What did Lerner do?

According to Republicans, Lerner used her position as head of the relevant IRS division to improperly influence the agency’s policy, singling out conservative groups—including influential outfits like Karl Rove’s Crossroads GPS—for special scrutiny. According to an investigation conducted by the House Committee on Ways and Means, 83% of the roughly 300 organizations whose applications for tax-exempt status were snarled held conservative views. While the division of Exempt Organizations was pursuing conservative groups like Crossroads, it appeared to ignore the actions of left-leaning counterparts like Priorities USA.

The panel alleges that Lerner displayed “extreme bias” toward conservative groups while “turning a blind eye” toward similar liberal organizations, made misleading statements during a Treasury Department investigation of the matter and may have disclosed confidential taxpayer information. Documents disclosed during the probe show that Lerner made a remark (perhaps in jest) in a January 2013 email about finding at a job at a top liberal social-welfare organization.

What does Lerner say about this?

Lerner was the first person to publicly acknowledge that the IRS behavior was “inappropriate.” Since then, she hasn’t said much. Called for testimony before the House Oversight Committee last May, she made an opening statement in defense of her actions. “I have done nothing wrong,” she said. Then she invoked the Fifth Amendment, and has since refused to testify.

Why is she being held in contempt?

Republicans argue that Lerner’s decision to speak in her own defense, albeit briefly, last year waives her Fifth Amendment privileges. Lawyers are split on whether this interpretation of the Fifth Amendment is accurate. But the GOP decided to hold her in contempt of Congress for refusing to comply with a subpoena.

What happens next?

The matter could go before the full House, which would be expected to approve a resolution holding Lerner in contempt.

Will she face criminal charges?

It’s unclear. It is unlikely the Department of Justice will be inclined to prosecute Lerner. It has rarely done so in the past. Democrats believe the campaign against Lerner is a partisan witchhunt, and U.S. Attorney General Eric Holder—who was held in contempt by the House in 2012 in connection with an investigation into the so-called Fast and Furious case—seems particularly unlikely to cave to the Congressional GOP. Congress could also ask a judge to enforce the subpoena. But it would be a time-consuming process that would almost certainly outlast this Congress.

Alternately, House Republicans could resort to a dusty gambit known as “inherent contempt” to put Lerner in jail. According to a Congressional Research Service report:

Under the inherent contempt power the individual is brought before the House or Senate by the Sergeant-at-Arms, tried at the bar of the body, and can be imprisoned or
detained in the Capitol or perhaps elsewhere. The purpose of the imprisonment or other sanction may be either punitive or coercive. Thus, the witness can be imprisoned for a specified period of time as punishment, or for an indefinite period (but not, at least by the House, beyond the end of a session of the Congress) until he agrees to comply.

In other words, Lerner could theoretically be held until January 2015. Republicans have not publicly ruled out the inherent contempt option, but it seems highly unlikely. The last such case appears to have been in 1935.

So what’s the likeliest option?

House Republicans continue making political hay of the issue in the run-up to November’s elections, in an attempt to highlight what they say is the Obama Administration’s systematic abuse of power. Lerner stays silent. The issue goes nowhere—but doesn’t go away. And the much-needed crackdown on political groups masquerading as social-welfare organizations becomes ever more unlikely.

TIME Congress

Republicans Vote to Hold Former IRS Official in Contempt

Internal Revenue Service official Lois Lerner refuses to answer questions as the House Oversight Committee holds a hearing to investigate the extra scrutiny the IRS gave Tea Party and other conservative groups that applied for tax-exempt status, on Capitol Hill in Washington, D.C., on May 22, 2013.
Internal Revenue Service official Lois Lerner refuses to answer questions as the House Oversight Committee holds a hearing to investigate the extra scrutiny the IRS gave Tea Party and other conservative groups that applied for tax-exempt status, on Capitol Hill in Washington, D.C., on May 22, 2013. J. Scott Applewhite—AP

Lois Lerner has plead the Fifth Amendment to accusations her IRS division targeted conservative groups for tax special scrutiny

House Republicans voted Thursday to hold in contempt of Congress the former IRS official at the center of a scandal over the tax agency’s alleged targeting of conservative groups.

House Oversight and Government Reform Committee voted along party lines to approve a resolution recommending Lois Lerner be held in contempt of Congress. Lerner, who oversaw the IRS division in charge of vetting applications for groups seeking tax-exempt status, came under fire when she admitted the agency had given scrutiny to requests from conservative political groups. The ensuing scandal briefly buffeted President Barack Obama in the early days of his second term, but ultimately fizzled without evidence of a connection to the White House and with revelations that liberal groups were also given scrutiny. Republicans have sought to keep the issue alive, though, and committee chairman Darrell Issa (R—Calif.) has sought to compel Lerner to testify about the matter, rejecting her claim to Fifth Amendment protections.

“We need Ms. Lerner’s testimony to complete our oversight work to bring the truth to the American people,” Issa said Thursday. “Why did she do certain things and who else was involved? … The American taxpayers certainly don’t get to plead the Fifth and escape all accountability when the IRS audits them.”

Rep. Elijah Cummings (D-Md.), the committee’s ranking Democrat, again decried Republicans for what he called a political witch hunt.

“Today this committee is trying to do something even Joe McCarthy did not do in the 1950s, something almost unprecedented,” Cummings said before the vote.

The outcome of Thursday’s vote was all but predetermined, as Issa’s GOP-controlled committee has been divided along the issue along stark partisan lines. The full House will have to vote on the contempt citation, but even if that passes it’s unclear if Attorney General Eric Holder would take any action.

The tax-writing House Ways and Means Committee sent a letter Wednesday recouting Lerner’s alleged crimes and insisting the Justice Department has “a responsibility to act, and Lois Lerner must be held accountable.”

TIME Congress

Emails Point to IRS Official’s Role in Targeting Conservative Groups

Lois Lerner
Internal Revenue Service official Lois Lerner during a hearing by the House Oversight Committee on Capitol Hill in Washington, May 22, 2013. J. Scott Applewhite—AP

Republicans are urging the pursuit of criminal charges of Lois Lerner after releasing documents showing her involvement in the targeting of conservative groups for special IRS scrutiny

The former IRS official at the center of a scandal over the targeting of conservative groups was directly involved in questioning the tax-exempt status of the groups, according to documents released Wednesday.

The release of emails sent by Lois Lerner was the latest attempt by congressional Republicans to keep focus on the scandal, which briefly buffeted President Barack Obama in the early days of his second term when it was revealed the IRS had closely scrutinized conservative political groups applying for tax-exempt status. The scandal ultimately fizzled without evidence of a connection to the White House and with revelations that liberal groups were also targeted, but Republicans have sought to keep it alive and compel Lerner to testify after she invoked her Fifth Amendment right not to do so.

The tax-writing House Ways and Means Committee on Wednesday sent a formal letter to the Department of Justice detailing what it called Lerner’s wrongdoings and urging prosecutors to pursue criminal charges. Committee Chairman Dave Camp (R-Mich.) said in a statement that the Department of Justice has “a responsibility to act, and Lois Lerner must be held accountable.”

“It is also important that the American people know what really occurred at the IRS, so this powerful agency cannot target American taxpayers ever again,” Camp added.

In 2013, Lerner admitted several conservative groups seeking 501(c) (4) status—which is reserved for social welfare groups that engage in political activity—got special scrutiny, but she denied she was directly involved with the decision making. She instead faulted employees in a IRS office in Cincinnati. But emails released Wednesday show Lerner acted to ensure denials for groups with conservative leanings, particularly Crossroads Grassroots Policy Strategies, a conservative group co-founded by political strategist Karl Rove.

In the emails, Lerner inquired why Crossroads had not been audited by the IRS and later detailed her plans to deny the organization tax-exempt status.“The organization at issue is Crossroads GPS, which is on the top of the list of c4 spenders in the last two elections. It is in the news regularly as an organization that is not really a c4,” one email dated Jan. 4, 2013 reads. “You should know that we are working on a denial of the application, which may solve the problem because we will probably say it isn’t exempt.”

Republicans say this proves that despite a finding by the IRS Administrative Review Board that Lerner didn’t act inappropriately, she is guilty of wrongdoing. The letter, which all Republicans on the committee voted to send, also says Lerner may have exposed taxpayer information by using her personal email to conduct business and providing “misleading statements” to questions from the Treasury Inspector General for Tax Administration.

The committee’s Democrats, 14 of whom voted against sending the letter, dismissed the latest Republican rhetoric as a political ploy. Ranking Democrat Sandy Levin (D-Mich.) said Republicans want to “declare this a scandal and keep it going until November.” The Department of Justice is already investigating the matter.

“I wish I could come up with some other rationale for what you are doing, but I cannot,” Levin said.

TIME Controversies

WATCH: House Hearing On IRS Scandal Descends Into Shouting Match

Heated debate between Reps Elijah Cummings and Darrell Issa during hearing

Tempers flared during a House hearing on the IRS scandal Wednesday, as a top Democrat and Republican found themselves entangled in an impassioned dispute after former IRS official Lois Lerner refused to testify.

Lerner invoked her Fifth Amendment rights once again Wednesday, refusing to answer questions from the the House Oversight and Government Reform Committee about her role in allegedly singling out Tea Party and other conservative groups for extra scrutiny when they applied for tax-exempt status. Lerner pleaded the Fifth at a hearing last year and did so again when she was called back to testify this week.

Committee Chairman Rep. Darrell Issa (R-CA) then quickly adjourned the hearing, but as his gavel struck the lectern, ranking Democratic Rep. Elijah Cummings (D-MD) said he had a procedural question.

Issa ignored Cummings and got up to leave, but not before the two got into a heated argument.

“Mr. Chairman, you cannot run a committee like this,” Cummings said.

Issa spoke over him, and gestured for the microphone to be turned off.

“I am a member of the Congress of the United States. I am tired of this,” Cummings continued as the microphone switched off.

Cummings later told TIME he wasn’t surprised at Issa’s behavior. “It’s not unusual, not with him,” he said. “He has shut off the mic before, not my mic but other members of the committee. I can think of at least one time within the last month where he has shut off somebody’s mic, and this is on national T.V.”

“I think people are shocked that members of Congress would be treated that way,” Cummings added.

Issa later accused Cummings of slandering him. “The fact is Mr. Cummings came to make a point of his objections to the process we’ve been going through,” he told Politico. “He was actually slandering me at the point that the microphone went off by claiming that this had not been a real investigation.”

The IRS has been accused by Republican lawmakers of unfairly targeting Tea Party and conservative groups who have applied for tax-exempt status, but others counter the IRS rightly applies additional scrutiny to politically-affiliated groups, which are not supposed to be tax-exempt if political activities are their primary purpose.

Watch the debate between Issa and Cummings here:

[Fox News]

Additional reporting by Alex Rogers

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