Investigating the President: Barack Obama and the IRS Targetting Controversy
In 2013, the United States Internal Revenue Service revealed that it had selected political groups applying for tax-exempt status for intensive scrutiny based on their names or political themes. This disclosure led to a criminal investigation by the Federal Bureau of Investigation (FBI). The groups targeted were mainly conservative groups with terms such as "Tea Party" in their names. The Occupy movement also attracted attention.
Under the Internal Revenue Code, certain types of nonprofit organizations are exempt from having to pay federal income tax. IRS rules protect nonprofit organizations dedicated to social welfare from having to reveal the names of their donors or the amount of funds the individual donors contributed.
On January 21, 2010, the U.S. Supreme Court decided Citizens United v. Federal Election Commission, which overturned many previous restrictions on political campaign spending and allowed virtually unlimited spending by corporations and other groups to influence elections. Tea Party leaders began forming political action committees and by late September 2010, tax-exempt non-profit groups had spent in excess of $100 million on the mid-term elections, more than twice as much in the last mid-term election. As a result, a number of public-interest advocacy groups complained that the IRS and Federal Election Commission were failing to provide adequate oversight.
The New York Times reported that the biggest players buying television time in House and Senate races were organizations whose purchases have heavily favored Republicans. Senator Max Baucus, Democratic chair of the Senate Finance Committee, asked the IRS to investigate a number of nonprofit organizations engaged in political activity to ensure that they were not abusing their tax-exempt status. Republican senators Orrin Hatch and John Kyl complained to the IRS that they were worried this kind of investigation would violate First Amendment rights.
In a February 2012 Democratic Senator Chuck Schumer asked the IRS to prevent non-conforming organizations focused on federal election activities from abusing the tax code. Democrats also urged the IRS to issue new rules to prevent this type of abuse. These senators planned to introduce legislation to accomplish these aims if the IRS did not do so itself by promptly issuing new administrative rules.
Between 2010 and 2012, the number of applications the IRS received each year seeking this type of tax exempt status doubled. The IRS was hamstrung from investigating the legitimacy of many of these applicants because of budget cut. President Barack Obama requested in 2011 that Congress increase the IRS's $12.1 billion budget by $1 billion to allow the agency to hire 5,100 additional agents. Instead, Congress reduced the IRS budget to $11.8 billion.
Beginning in March 2010, the IRS began to clearly scrutinize certain organizations applying for tax-exempt status by focusing on groups with certain words in their names. In May 2010, some TRS employees began developing a spreadsheet that became known as the "Be On the Look Out" ("BOLO") list. The list, first distributed in August 2010, suggested intensive scrutiny of applicants with names related to a number of political causes, including names related to the Tea Party movement and other conservative causes. Other terms on the "BOLO" list included "Patriots", "9/12 Project", "progressive," "occupy," "Israel," "open source software," "medical marijuana" and "occupied territory advocacy" in the case file.
Over the two years between April 2010 and April 2012, the IRS placed on hold the processing of applications for tax-exemption status received from organizations with these terms in their names. During this period only four such applications were approved.
In early May 2013, the Treasury Inspector General for Tax Administration released an audit report confirming that the IRS used inappropriate criteria to identify potential political cases, including organizations with Tea Party in their names. On May 10, Lois Lerner, Director of the IRS Exempt Organizations division, stated that the IRS was "apologetic" for what she termed "absolutely inappropriate" actions. She claimed that the extra scrutiny had not been politically motivated and was a lower-level idea began in the Cincinnati office. When media reports revealed that IRS officials in two other regional offices were also involved in scrutinizing conservative groups, it was discovered that the program was being overseen by a task force in Washington, D.C. and that Lerner herself had been informed of the policy at a meeting that she had attended on June 29, 2011.
On May 12, Republican and Democratic lawmakers called for a full investigation of the Internal Revenue Service. White House Press Secretary Jay Carney called the IRS's alleged actions "inappropriate". At a May 13 press conference, President Barack Obama called the charges "outrageous" and said that anyone found to be responsible for such actions should be held accountable.
On May 14, the Inspector General's audit report was made public. President Obama released the following statement:
"The IRS must apply the law in a fair and impartial way, and its employees must act with utmost integrity. This report shows that some of its employees failed that test. I've directed Secretary Lew to hold those responsible for these failures accountable, and to make sure that each of the Inspector General's recommendations are implemented quickly, so that such conduct never happens again. But regardless of how this conduct was allowed to take place, the bottom line is, it was wrong."
Attorney General Eric Holder announced that he had ordered the Justice Department to begin an investigation into whether the activities amounted to criminal behavior. The Treasury Inspector General for Tax Administration found that inappropriate criteria had been used by IRS personnel to select certain applications for tax exemption status for further review and that inappropriate procedures were applied against organizations based on their names or policy positions. According to the audit, front-line IRS agents violated IRS policy by failing to handle tax matters in an impartial manner that would promote public confidence.
The Inspector General concluded: "Although the IRS has taken some action, it will need to do more so that the public has reasonable assurance that applications are processed without unreasonable delay in a fair and impartial manner in the future."
In late September 2017, an exhaustive report by the Treasury Department's inspector general found that from 2004 to 2013, the IRS used both conservative and liberal keywords to choose targets for further scrutiny. Democrats spin this to mean that there had been no targeting of Republican supporters. Democratic Senator Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee, stated “After years of baseless claims and false accusations it is my hope Republicans will finally put an end to this witch hunt and admit that their attacks on the I.R.S. were nothing but political grandstanding on behalf of special interests at the expense of American taxpayers." The Republican chairman of the House Ways and Means Committee, Kevin Brady of Texas, responded by saying that "this report reinforces what government watchdogs and congressional investigators have confirmed time and time again: Bureaucrats at the I.R.S., such as Lois Lerner, arbitrarily and haphazardly administered the tax code and targeted taxpayers based on political ideology.”
Lois Lerner retired effective September 23, 2013. Comedy Central's Jon Stewart stated that the controversy had cast doubt on President Obama's "managerial competence" and had proven correct "conspiracy theorists". ABC News' Terry Moran called the scandal "A truly Nixonian abuse of power by the Obama administration." An NBC News/Wall Street Journal poll conducted May 30 to June 2, 2013, found that 55% of respondents believed that the controversy raises questions about the Obama administration's honesty and integrity. This poll found 33% of respondents blamed Obama directly for the actions underlying the controversy.
In October 2017, the Justice Department settled two lawsuits filed by conservative groups that said they were targeted in the controversy. One of these lawsuits was filed on behalf of 428 groups, and the other was filed on behalf of 41 groups. The settlement included payments of $3.5 million to these groups, an apology, and an admission of wrongdoing from the IRS.
Following the Inspector General's report, the House Committee on Oversight and Government Reform began an investigation into the IRS. Additionally, the House Committee on Ways and Means expanded its ongoing 2011 investigation into possible IRS political targeting to include the BOLO ("be on the lookout") keyword targeting allegations. On May 22, 2013, in her opening statement to the Oversight Committee, Lois Lerner stated: "I have not broken any laws. I have not violated any IRS rules or regulations. And I have not provided false information to this or any other congressional committee." Lerner then invoked her Fifth Amendment right against self-incrimination and refused to testify.
On May 22, 2013, former IRS Commissioner Doug Shulman testified that he had frequently visited the White House during 2010–2011, but he denied having discussed the targeting of conservatives with anyone in the White House. Shulman had visited the White House up to 157 times.
On May 7, 2014, on a near party-line vote (with six Democrats joining all Republicans) the House of Representatives voted to hold Lerner in contempt of Congress for refusing to cooperate with the Congressional investigation. House Republicans dismissed Lerner's invocation of the Fifth Amendment as ineffective, with Issa stating: "You don’t get to use a public hearing to tell the public and press your side of the story and then invoke the Fifth." Democrats characterized the contempt proceeding as a "witch hunt" geared toward the 2014 midterm elections.
On June 13, 2014, the IRS notified Republican congressional investigators that it had lost Lerner's emails from January 2009 to April 2011 because of a mid-2011 computer crash. The emails were under subpoena as part of the congressional investigation. On June 19, the IRS said that the damaged hard drive containing Lerner's missing emails had been disposed of more than two years earlier. On July 9, 2014, Republicans released an April 13, 2013 email from Lerner in which she cautioned colleagues to "be cautious about what we say in emails," citing congressional inquiries.
On September 5, 2014, the Senate Permanent Subcommittee on Investigations released its report on the controversy. The subcommittee's majority report found that inappropriate screening criteria were used but concluded that there was no intentional wrongdoing or political bias in the use of the criteria. The subcommittee's Republican minority submitted a dissenting report authored by ranking member Senator John McCain which accused the majority of minimizing bias against conservative groups, noting that most of the groups targeted for additional scrutiny were conservative. The report did not link the IRS's conduct to coordination with the White House. In January 2015, the United States Senate requested that the White House produce all communications it has had with the IRS since 2010.
In January 2014, the Federal Bureau of Investigation (FBI) announced that it had found no evidence warranting the filing of federal criminal charges in connection with the affair. In October 2015, the Justice Department notified Congress that there would be no charges against the former IRS official Lois Lerner or against anyone else in the IRS. The investigation found no evidence of illegal activity or the partisan targeting of political groups and found that no IRS official attempted to obstruct justice. The DOJ investigation concluded that while there was evidence of mismanagement and Lerner's poor judgement in using her IRS account for personal messages, "poor management is not a crime."
Under the Internal Revenue Code, certain types of nonprofit organizations are exempt from having to pay federal income tax. IRS rules protect nonprofit organizations dedicated to social welfare from having to reveal the names of their donors or the amount of funds the individual donors contributed.
On January 21, 2010, the U.S. Supreme Court decided Citizens United v. Federal Election Commission, which overturned many previous restrictions on political campaign spending and allowed virtually unlimited spending by corporations and other groups to influence elections. Tea Party leaders began forming political action committees and by late September 2010, tax-exempt non-profit groups had spent in excess of $100 million on the mid-term elections, more than twice as much in the last mid-term election. As a result, a number of public-interest advocacy groups complained that the IRS and Federal Election Commission were failing to provide adequate oversight.
The New York Times reported that the biggest players buying television time in House and Senate races were organizations whose purchases have heavily favored Republicans. Senator Max Baucus, Democratic chair of the Senate Finance Committee, asked the IRS to investigate a number of nonprofit organizations engaged in political activity to ensure that they were not abusing their tax-exempt status. Republican senators Orrin Hatch and John Kyl complained to the IRS that they were worried this kind of investigation would violate First Amendment rights.
In a February 2012 Democratic Senator Chuck Schumer asked the IRS to prevent non-conforming organizations focused on federal election activities from abusing the tax code. Democrats also urged the IRS to issue new rules to prevent this type of abuse. These senators planned to introduce legislation to accomplish these aims if the IRS did not do so itself by promptly issuing new administrative rules.
Between 2010 and 2012, the number of applications the IRS received each year seeking this type of tax exempt status doubled. The IRS was hamstrung from investigating the legitimacy of many of these applicants because of budget cut. President Barack Obama requested in 2011 that Congress increase the IRS's $12.1 billion budget by $1 billion to allow the agency to hire 5,100 additional agents. Instead, Congress reduced the IRS budget to $11.8 billion.
Beginning in March 2010, the IRS began to clearly scrutinize certain organizations applying for tax-exempt status by focusing on groups with certain words in their names. In May 2010, some TRS employees began developing a spreadsheet that became known as the "Be On the Look Out" ("BOLO") list. The list, first distributed in August 2010, suggested intensive scrutiny of applicants with names related to a number of political causes, including names related to the Tea Party movement and other conservative causes. Other terms on the "BOLO" list included "Patriots", "9/12 Project", "progressive," "occupy," "Israel," "open source software," "medical marijuana" and "occupied territory advocacy" in the case file.
Over the two years between April 2010 and April 2012, the IRS placed on hold the processing of applications for tax-exemption status received from organizations with these terms in their names. During this period only four such applications were approved.
In early May 2013, the Treasury Inspector General for Tax Administration released an audit report confirming that the IRS used inappropriate criteria to identify potential political cases, including organizations with Tea Party in their names. On May 10, Lois Lerner, Director of the IRS Exempt Organizations division, stated that the IRS was "apologetic" for what she termed "absolutely inappropriate" actions. She claimed that the extra scrutiny had not been politically motivated and was a lower-level idea began in the Cincinnati office. When media reports revealed that IRS officials in two other regional offices were also involved in scrutinizing conservative groups, it was discovered that the program was being overseen by a task force in Washington, D.C. and that Lerner herself had been informed of the policy at a meeting that she had attended on June 29, 2011.
On May 12, Republican and Democratic lawmakers called for a full investigation of the Internal Revenue Service. White House Press Secretary Jay Carney called the IRS's alleged actions "inappropriate". At a May 13 press conference, President Barack Obama called the charges "outrageous" and said that anyone found to be responsible for such actions should be held accountable.
On May 14, the Inspector General's audit report was made public. President Obama released the following statement:
"The IRS must apply the law in a fair and impartial way, and its employees must act with utmost integrity. This report shows that some of its employees failed that test. I've directed Secretary Lew to hold those responsible for these failures accountable, and to make sure that each of the Inspector General's recommendations are implemented quickly, so that such conduct never happens again. But regardless of how this conduct was allowed to take place, the bottom line is, it was wrong."
Attorney General Eric Holder announced that he had ordered the Justice Department to begin an investigation into whether the activities amounted to criminal behavior. The Treasury Inspector General for Tax Administration found that inappropriate criteria had been used by IRS personnel to select certain applications for tax exemption status for further review and that inappropriate procedures were applied against organizations based on their names or policy positions. According to the audit, front-line IRS agents violated IRS policy by failing to handle tax matters in an impartial manner that would promote public confidence.
The Inspector General concluded: "Although the IRS has taken some action, it will need to do more so that the public has reasonable assurance that applications are processed without unreasonable delay in a fair and impartial manner in the future."
In late September 2017, an exhaustive report by the Treasury Department's inspector general found that from 2004 to 2013, the IRS used both conservative and liberal keywords to choose targets for further scrutiny. Democrats spin this to mean that there had been no targeting of Republican supporters. Democratic Senator Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee, stated “After years of baseless claims and false accusations it is my hope Republicans will finally put an end to this witch hunt and admit that their attacks on the I.R.S. were nothing but political grandstanding on behalf of special interests at the expense of American taxpayers." The Republican chairman of the House Ways and Means Committee, Kevin Brady of Texas, responded by saying that "this report reinforces what government watchdogs and congressional investigators have confirmed time and time again: Bureaucrats at the I.R.S., such as Lois Lerner, arbitrarily and haphazardly administered the tax code and targeted taxpayers based on political ideology.”
Lois Lerner retired effective September 23, 2013. Comedy Central's Jon Stewart stated that the controversy had cast doubt on President Obama's "managerial competence" and had proven correct "conspiracy theorists". ABC News' Terry Moran called the scandal "A truly Nixonian abuse of power by the Obama administration." An NBC News/Wall Street Journal poll conducted May 30 to June 2, 2013, found that 55% of respondents believed that the controversy raises questions about the Obama administration's honesty and integrity. This poll found 33% of respondents blamed Obama directly for the actions underlying the controversy.
In October 2017, the Justice Department settled two lawsuits filed by conservative groups that said they were targeted in the controversy. One of these lawsuits was filed on behalf of 428 groups, and the other was filed on behalf of 41 groups. The settlement included payments of $3.5 million to these groups, an apology, and an admission of wrongdoing from the IRS.
Following the Inspector General's report, the House Committee on Oversight and Government Reform began an investigation into the IRS. Additionally, the House Committee on Ways and Means expanded its ongoing 2011 investigation into possible IRS political targeting to include the BOLO ("be on the lookout") keyword targeting allegations. On May 22, 2013, in her opening statement to the Oversight Committee, Lois Lerner stated: "I have not broken any laws. I have not violated any IRS rules or regulations. And I have not provided false information to this or any other congressional committee." Lerner then invoked her Fifth Amendment right against self-incrimination and refused to testify.
On May 22, 2013, former IRS Commissioner Doug Shulman testified that he had frequently visited the White House during 2010–2011, but he denied having discussed the targeting of conservatives with anyone in the White House. Shulman had visited the White House up to 157 times.
On May 7, 2014, on a near party-line vote (with six Democrats joining all Republicans) the House of Representatives voted to hold Lerner in contempt of Congress for refusing to cooperate with the Congressional investigation. House Republicans dismissed Lerner's invocation of the Fifth Amendment as ineffective, with Issa stating: "You don’t get to use a public hearing to tell the public and press your side of the story and then invoke the Fifth." Democrats characterized the contempt proceeding as a "witch hunt" geared toward the 2014 midterm elections.
On June 13, 2014, the IRS notified Republican congressional investigators that it had lost Lerner's emails from January 2009 to April 2011 because of a mid-2011 computer crash. The emails were under subpoena as part of the congressional investigation. On June 19, the IRS said that the damaged hard drive containing Lerner's missing emails had been disposed of more than two years earlier. On July 9, 2014, Republicans released an April 13, 2013 email from Lerner in which she cautioned colleagues to "be cautious about what we say in emails," citing congressional inquiries.
On September 5, 2014, the Senate Permanent Subcommittee on Investigations released its report on the controversy. The subcommittee's majority report found that inappropriate screening criteria were used but concluded that there was no intentional wrongdoing or political bias in the use of the criteria. The subcommittee's Republican minority submitted a dissenting report authored by ranking member Senator John McCain which accused the majority of minimizing bias against conservative groups, noting that most of the groups targeted for additional scrutiny were conservative. The report did not link the IRS's conduct to coordination with the White House. In January 2015, the United States Senate requested that the White House produce all communications it has had with the IRS since 2010.
In January 2014, the Federal Bureau of Investigation (FBI) announced that it had found no evidence warranting the filing of federal criminal charges in connection with the affair. In October 2015, the Justice Department notified Congress that there would be no charges against the former IRS official Lois Lerner or against anyone else in the IRS. The investigation found no evidence of illegal activity or the partisan targeting of political groups and found that no IRS official attempted to obstruct justice. The DOJ investigation concluded that while there was evidence of mismanagement and Lerner's poor judgement in using her IRS account for personal messages, "poor management is not a crime."