In washington. Congressman darrell issa chairs this House Oversight hearing. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] the committee will come to order. The Oversight Committee exists to secure two fundamental principles. First americans have a right to know the money washington takes from them as well spent and second americans deserve an efficient and effective government that works for them. Our duty on the oversight and government reform committees protect those rights. Our solemn responsibility is to hold government accountable to taxpayers because taxpayers have a right to know what they get from their government. Its our job to work tirelessly in partnership with citizen watchdogs to deliver the facts of the American People and bring genuine reform to the federal bureaucracy. Todays hearing particularly touches on taxpayers and what taxpayers should expect from the government. It continues the committees investigation into the irss inappropriate treatment of groups applying for taxexempt status. It is now our understanding that some of those groups for 501 c 3 s groups for whom they received a text direction if you give and the vast majority were 501 c 4 s groups for whom he did not receive a Tax Deduction for your contribution but you do not pay the same corporate taxes on that income. This scandal first came to light when a planted question directed at lois lerners request at the American Bar Association in may 10. Prior to the planting of that question designed to obstruct the truth about targeting and break the news to a sympathetic audience friday afternoon this committee had worked with our Inspector General, the treasury for more than 10 months. Multiple committees in the house of representatives had wanted answers, had sought answers and were waiting on those answers. In response to the planted question lois lerner blamed the inappropriate irs activities of lying people in cincinnati. The irs hoped, we believe the irs hoped that this would make the scandal quickly does date could dissipate. It did not an impact today we are going to hear from one of those employees in cincinnati. Our committee do we have also begun hearing from people they reported two works change information with in washington. Sadly the White House Press secretary continues the narrative characterizing it as Inappropriate Conduct by irs officials in cincinnati. Todays hearing needs to dispel that so we can begin following the witnesses and following the testimony and following the truth wherever it leads. We are now convinced and we will hear testimony that as the Inspector General found in his investigation audit what began in cincinnati with one case of a tea Party Application soon was in fact in washington at levels well above line employees. They say that the assertions cincinnati was to blame were absurd and we will hear that today. More importantly, it is now understood that these files, these hundreds of files, or in many many hands most of whom, many of whom were not in cincinnati. As we look for the truth, let us baer in mind that we can debunk many things along the way. We will probably never debunk all accusations nor should we make accusations and less testimony and takes us baer. We can today i believe debunk the accusations that cincinnati was in fact the source or that it didnt go to washington in which it clearly did. Particularly when we hear from the honorable Russell George, the ig who brought us this and his staff. I think we are going to find out more within the limits of his ability to tell us. I certainly want to make sure that the smear stops here today. I want to caution the ladies and gentlemen on both sides of the aisle here, we will work with what we know and we will work to find out what we do not know and i for one and i hope everyone on both sides of the dais will reject categorically assumptions for which there is not evidence. It is difficult to say who should have come forward first. We know one thing. Conservative groups came forward with their accusations more than 10 months ago and they were heard. We know that in fact members of both parties sent letters to the irs and i believe that is an important area that this committee cannot overlook. Everything we have learned of real substance began with mr. Mr. Georges impartial, independent investigation of irs treatment of taxexempt organizations since march of 2010. Our investigation will continue. I hope that both my side of the aisle and the Ranking Member side of the aisle will be very careful and cautious cautious in what we say. When i Say Something goes to the office of the console of the irs , let it not be construed as the office of the president or to the console itself. It is important we understand that words matter and nuances matter and that we not go one step beyond what we know. What we do know today and what i believe we are going to hear is that in fact washington made a catastrophic mistake in taking what would have been in an ordinary course and individual one by one application, its value it at them as mr. Sub five has done for 48 years, accepting them, denying them are asking for more information and not looking at them as a group with some sort of special cynicism. That is not what america expects. America does not expect people to be targeted as groups. One of the questions i will ask today will be if they were fairly evaluated would sum up these cases have been resolved if they were not lumped into a group . I may not get an answer today but i will not cease until i get that answer. Lastly there have been accusations leveled against the Inspector General and the work that he has done and his team has done. This committee is the most important place to resolve that. We have oversight over all the Inspector Generals. We control the legislation that created the position and we take seriously accusations about their independence. We will investigate it and as of right now we stand solidly behind the best efforts of all our Inspector Generals and a credible accusation occurs we will take it up. Lastly mr. Ranking member want to make sure that i make something clear. You are frustrated about 6103 and its interpretation you have made that clear. I am frustrated about it. I believe this committee must ensure that the fair interpretation of this law designed to protect taxpayers confidential information is in fact not used to revictimize people who have previously been victimized and i will work with the Ranking Member and anyone else to make sure we protect victims from being kept from finding out what actually happened to them and the public is appropriate appropriate and with that i recognize the Ranking Member. Thank you very much mr. Chairman. Let me be very clear. We come today to seek the truth, the whole truth and nothing but the truth so help me god. Eight weeks ago on may 22, we met in this room to give testimony about a report from the Inspector General about the irss review of rules applying to taxes and status. At the time there was justifiable outrage including from me about the inappropriate search terms used to screen these groups and the unacceptable delays they endured on this side of the aisle and i know the other side of the aisle we are not only concerned about conservative groups, we are concerned about all groups, all individuals who have anything to do with the irs. Since that hearing republican politicians have engaged in a sustained and coordinated campaign to accuse the president a white house of targeting tea party grooves for partisan political purposes without any evidence to support these claims. Our chairman led the charge saying this was quote targeting the president s political enemies end of quote. Other republicans followed suit inside a quote. [inaudible] they argued that president obama quote doesnt have clean hands and a quote. They invoked to disgraced former president richard nixon. The fact is that there is no evidence before for this committee to support these claims, none. Two days ago what i entered a memo finding that since the chairman and other republicans began making these accusations that they identified no evidence whatsoever documentary, testimonial or otherwise, to substantiate them. I ask that this memo be entered into the record at this time mr. Chairman. Without objection so ordered. Committee staff that is conducted a bipartisan staff have now conducted 16 transcribed interviews of irs employees in cincinnati and washington. We did another one just to stay and none of them reported in a white house involvement or political motivation including six who identify themselves as republicans and to the chairman chose not to invite today. To the contrary these employees indicated that they sought guidance on how the process of these applications in a consistent manner according to the law. For example, a tax law specialist in washington d. C. One who identifies herself as a republican called the accusations made by the chairman of quote laughable. She explained, this is purely cases that unfortunately cincinnati didnt have enough guidance on, that the c4 area is a very difficult area and there is not much guidance is what she said. And so the length of time unfortunately was just trying to apply the law to the specific facts of each case. I didnt say that. She said it. Yet even today this very morning the chairman is still claiming this. In an oped appearing in usa today he asked a question, was the targeting of the tea party applicants a record from the white house or somewhere else outside the irs . As our investigation is ongoing the responsible answers that judgment should be withheld. End of quote. This is unsubstantiated nonsense. It undermines the committees integrity and every member of this bodys integrity and it destroys the committees credibility. The chairman certainly did not withhold judgment. He rushed to it with no evidence whatsoever. The responsible answers that we have no evidence at all to back up that claim. Since our previous eight weeks ago, hearing a weeks ago we have obtained new documents that raise serious questions about the Inspector Generals report and im led to hear that the chairman stands by the Inspector General and i do too. I am very interested as he would be to know certain questions that we will be asking and im encouraged that he is free to come back in order to address him directly. I want to thank you mr. Chairman at my request for bringing him back. We must have an independent, transparent attorney general. I mean ig. Its so very important because we all depend on his word. For example the Inspector General fay to disclose mr. Chairman to this committee that he passed his top investigator with reviewing 5500 emails from irs employees. After conducting its this review this official concluded quote there was no indication that pulling these selected applications was politically motivated and of quote. I want to ask the Inspector General by he did not disclose the specific information when he testified on may 22. Just as i railed against mr. Shulman for not coming back to this committee to let us know what he may have found out. I also want to ask the Inspector General why he was unaware of documents we have now obtained showing irs employees were also instructed to screen for progressive applicants and why his office did not look into the treatment of leftleaning organizations such as occupy groups. I want to know how he plans to address these new documents. And again, we represent conservative groups on both sides of the aisle and progressives and others, so all of them must be finally i want to ask the Inspector General but some very very troubling testimony we heard yesterday from the acting head of the irs daniel werfel. Mr. Werfel testified the irs is about to produce unredacted documents to the Committee Last week that include references to additional categories of nonTea Party Groups but the Inspector General personally, personally intervened to block the irs from producing this information to this committee. According to mr. Werfel no irs irs ever recalled such an unprecedented intervention. We need to know why that was. Finally, i am not here to attack anyone. Im here to get to the truth. Not a partial or selective truth but the whole truth. I believe that there should be the goal of everyone in this room. We do need to stop making tasteless accusations and we need to get full information and i emphasize full, but the treatment of all businesses, conservatives, liberals and everyone in between and i sincerely hope that we can do that today. Without mr. Chairman i go back. I think the gentleman. All members will have until the end of the day to submit their written statements. And we now welcome our first panel of witnesses, ms. Liz hofacre Quality Assurance and the Cincinnati Office of the Internal Revenue service. That is a mouthful for any chairman. And mr. Carter hull was a senior tax law specialist at the exempt organizations technical unit in washington d. C. And was with the Internal Revenue service for an astounding 48 years of service and we want to thank you for your service. Or so into the Committee Rules i would ask that you please rise to take the oath. Raise your right hands. Do you solemnly swear or affirm that testimony youre about to give up a the truth the whole truth and nothing but the truth . Please have a seat and let the record reflect that both witnesses answered in the affirmative. I know that sometimes prepared statements are the best way to go and i am not going to dissuade you from it but use your five minutes in any way you want to abbreviate your statements if it makes it appropriate in light of Opening Statements for any other reason to add to me. I will not hold you to exactly five minutes but when you see the countdown getting close please wrap up. Ms. Hofacre. Chairman issa Ranking Member cummings and members of the committee since 1999 i have been an irs employee in the office of exempt organizations in cincinnati. As of april 2010 my position was in a eulogy termination specialist. At the time i have been assigned to serve as the emerging issues coordinator. In this role as test with handling applications and identified issues. In late april i was assigned by my supervisor to handle all applications that have been identified as applications by Tea Party Groups applying for 501 c 3 or 501 c 4 exemption status. Initially around april 302010 approximately 20 tea Party Applications were assigned to me. Subsequently received a steady flow tea Party Applications. There were occasions when other agents and applications from liberal or nontea party type groups. When that occurred pursuant to the instructions i have been given i would send those applications of general inventory since they were not within the scope of the tea party issue. Around the same time these applications were assigned to me i also learned that to tea Party Application that ben assigned to carter hull pedestal that was the too quickly. It is applications assigned to me with mr. Sub by. I called mr. Hull in the simulators see prepared assigned to him to use as examples for my applications. Mr. Hove requested i send him drafted Development Letters and he subsequently asked me to send them copies of applications as well. At the beginning of the process when i semidressed Development Letters to mr. Hu he suggested edits to the letters. I would make the edits and send them to the applicants. When i received responses i notified mr. Hull. Do not remember how many responses i received. I would estimate 15 to 25. No point did i receive guidance from anyone as to what to do with these responses. Similarly beginning sometime in the summer of 2010 for when i sent dressed Development Letters to mr. Hull i received no guidance from him or anyone else. In my experiences it was a highly initial process and i never had [inaudible] and i never before edison copies of applications assigned to me for technical review. I was frustrated because what i perceived as micromanagement with respect to these applications. Received numerous calls from applicants asking about the status of their applications. I was only able to tell the applicant applications were under review. I became very frustrated because until i receive guidance i was unable to process these applications. I expressed my concerns to both mr. Hull and my supervisor at the time. As a result of this frustration and july of 2010 i applied for a transfer to Quality Assurance and in october 2010 i received a requested transfer. When that occurred these cases that that i had have assigned for reassigned to another agent. To the best my recollection i have a total of 40 to 60 tea party cases assigned to me at that time. In july and august of 2000 i attended several meetings with mr. Bowling and another manager in which i was informed that the creation of the bolo list. They told me the purpose of list was to consolidate into a single document the instructions that agents received about certain applications. The bolo list was a new tab added to an existing spreadsheet that had other discussions of groups of agents. Mr. Waddell told me the language that should be added to the bolo list with respect to Tea Party Groups