The man who led the Internal Revenue Service when it was giving extra scrutiny to tea party and other conservative groups seeking tax-exempt status told Congress on Tuesday that he knew little about what was happening while he was still commissioner.
Douglas Shulman, who vacated his position last November when his five-year term expired, told the Senate Finance Committee he didn't learn all the facts until he read last week's report by a Treasury inspector general confirming the targeting strategy.
In his first public remarks since the story broke, Shulman said: "I agree this is an issue that when someone spotted it, they should have brought it up the chain. And they didn't. I don't know why."
Shulman testified at Congress' second hearing on an episode that has largely consumed Washington since an IRS official acknowledged the targeting and apologized for it in remarks to a legal group on May 10. Shulman and the two officials who testified at Tuesday's three-and-a-half hour session — the outgoing acting commissioner, Steven Miller, and J. Russell George, the Treasury Department inspector general who issued the report — were all sworn in as witnesses, an unusual step for the Finance panel.
Shulman said he first learned about the targeting and about the inspector general's investigation in the spring of 2012, during the presidential election. He said that in a meeting with Miller, he was told that IRS workers were using a list to help decide which groups seeking tax-exempt status should get special attention, that the term "tea party" was on that list and that the problem was being addressed. But he said he didn't know what other words were on that list or the scope and severity of the activity.
Pressed by committee Chairman Max Baucus, D-Mont., on how the improper screening system could have occurred in the first place, Shulman said, "Mr. Chairman, I can't say. I can't say that I know that answer."
Shulman said he took what he thought were the proper steps — making sure the inspector general was looking into the situation. He said he did not tell Treasury officials about the improper activity.
"I don't recall talking to anyone about it," Shulman told the committee. "This is not the kind of information" that, with an inspector general's probe underway, "should leave the IRS."
That was a reference to a list of words IRS workers looked for in deciding which groups to screen, a list that included the terms including "tea party" and "patriot."
"I very much regret that it happened and that it happened on my watch," Shulman said.
The testimony by Shulman and Miller drew skepticism from lawmakers of both parties, including critical remarks from people who have been unhesitant to say anything negative about the IRS since its activities were revealed nearly two weeks ago. Republicans openly rejected George's assertion that he has no evidence that the decision to target conservative groups was politically motivated.
George's report blamed ineffective management for allowing agents to inappropriately target conservative groups for more than 18 months during the 2010 and 2012 elections. Shulman was appointed by President George W. Bush and served from March 2008 until last November.
At a separate hearing, Treasury Secretary Jacob Lew said the IRS's actions against conservative groups were "unacceptable and inexcusable."
Lew told the Senate Banking Committee that he has directed the agency's incoming acting director, Daniel Werfel, to hold people accountable and to fix any flaws in IRS management to make sure there is no recurrence of the problems.
Lew said he first learned about the inspector general's investigation in March but that he was unaware of the findings until they became public this month. Lew became Treasury secretary in February, and was White House chief of staff before that.
For more than a year, from 2011 through the 2012 election, members of Congress repeatedly asked Shulman about complaints from tea party groups that they were being harassed by the IRS. Shulman's responses, usually relayed by a deputy, did not acknowledge that agents had ever targeted tea party groups for special scrutiny.
At one House hearing on March 22, 2012, Shulman was adamant in his denials, saying, "There's absolutely no targeting."
On Tuesday, Republicans expressed anger that Shulman and Miller didn't reveal the screening of conservative groups to Congress, despite lawmakers' repeated inquiries. Miller learned of the situation in early May 2012.
"Mr. Miller, that's a lie by omission," said Sen. Orrin Hatch of Utah, top Republican on the Finance committee. "There's no question about that in my mind. It's a lie by omission and you kept it from people who have the obligation to oversee this matter."
President Barack Obama has forced Miller to resign, and he is leaving office this week.
Shulman said he didn't later tell lawmakers about the targeting because he didn't have full information about the situation.
"I had a partial set of facts," Shulman said. "Sitting there then, sitting here today, I think I made the right decision" to let George, the inspector general, conduct his audit of the targeting.
Shulman said that when he did finally read about the details of the targeting in the inspector general's report, "I was dismayed and I was saddened."
Hatch and Baucus both criticized the agency and said they would investigate how and why the improper screening occurred.
"I intend to get to the bottom of what happened," Baucus said.
George, the Treasury inspector general, has said he told Shulman on May 30, 2012, that his office was auditing the way applications for tax-exempt status were being handled, in part because of complaints from conservative groups. However, George said he did not reveal the results of his investigation.
The IRS agents were conducting the screening to determine whether the groups were engaged in political activity. Certain tax-exempt groups are allowed to engage in politics, but politics cannot be their primary mission. It is up to the IRS to make the determination, so agents are supposed to look for clues when reviewing applications for tax-exempt status.
In March 2010, agents starting singling out groups with "Tea Party" or "Patriots" on their applications. By August 2010, it was part of the written criteria for identifying groups that required more scrutiny, according to George's report.
Agents did not flag similar progressive or liberal labels, though some liberal groups received additional scrutiny because their applications were singled out for other reasons, the report said.
Meanwhile, a conservative organization that says its tax-exempt status is being unfairly held up by the IRS filed a federal lawsuit in Washington against the agency. True the Vote, a Houston group that watches for voting irregularities, is seeking damages and asking to immediately be granted tax-exempt status.
Citizens for Responsibility and Ethics in Washington, a campaign finance watchdog, also sued the IRS on Tuesday, seeking to force it to write new rules clarifying restrictions on political spending by some non-profit groups. The law says some groups qualify for tax-exempt status if they engage "exclusively" in social welfare projects, but IRS regulations allow the status if they are "primarily engaged" in social welfare — giving them leeway for some political activity as well.