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Obama ousts IRS chief over inquiry

Published: Thursday, May 16, 2013 10:47 a.m. CDT

(MCT) WASHINGTON — President Barack Obama forced out the head of the IRS on Wednesday, seeking to restore the public’s faith in the tax agency while asserting a measure of control over a rapidly growing political problem.

Making a hastily scheduled statement at the White House, Obama denounced the targeting of conservative groups by the Internal Revenue Service as “inexcusable” and pledged to “do everything in my power to make sure nothing like this ever happens again.”

“Americans are right to be angry about it, and I am angry about it,” he said. “I will not tolerate this kind of behavior in any agency, but especially in the IRS, given the power that it has and the reach that it has into all of our lives.”

Steven Miller, a tax lawyer and career IRS official, agreed to resign at the request of Treasury Secretary Jacob J. Lew after coming under fire following revelations that the agency had singled out conservative organizations for special scrutiny. Miller, who has been the acting commissioner since November 2012, will remain at the agency until early June to allow a smooth transition.

Questions mounted about his role this week as it became clear that he had not disclosed the problems to Congress in letters and testimony despite being briefed on it.

Several lawmakers, including Senate Minority Leader Mitch McConnell, R-Ky., and Sen. Marco Rubio, R-Fla., had called for Miller’s resignation.

Obama’s announcement capped a day of growing furor on Capitol Hill over how IRS agents mishandled applications for tax-exempt status by conservative advocacy groups, one of several controversies threatening the White House.

Three congressional committees have scheduled hearings, with Miller set to testify at the first on Friday.

The hearings will build on an audit by a Treasury Department inspector general that found IRS staff in Cincinnati inappropriately flagged conservative organizations, pulling aside applications with keywords such as “tea party” and policy objectives such as “educating on the Constitution and Bill of Rights.”

The organizations were seeking recognition as tax-exempt social welfare groups, which are permitted to do a limited amount of political activity, as long as it is not their primary purpose.

The audit concluded that dozens of advocacy groups were forced to answer exhaustive and intrusive questions about their activities and donors. Their applications languished — some for more than three years. The inspector general blamed poor management and a lack of clarity within the IRS about how much political engagement is allowed of such organizations.

Lawmakers on Wednesday said many questions remained, even after the audit. House Speaker John A. Boehner, R-Ohio, escalated the rhetoric early in the day, telling reporters that his question “isn’t about who’s going to resign” over the controversy. “My question is, who’s going to jail?” he said.

In a statement issued after Miller’s resignation, McConnell said, “More than two years after the problem began, and a year after the IRS told us there was no problem, the president is beginning to take action.

“If the president is as concerned about this issue as he claims, he’ll work openly and transparently with Congress to get to the bottom of the scandal — no stonewalling, no half-answers, no withholding of witnesses,” he said.

A separate criminal investigation is already underway. Testifying on Capitol Hill, Attorney General Eric H. Holder Jr. said the Justice Department investigation would look at possible civil rights violations and false statements.

Most important, he said, “If we have to bring criminal actions to make sure this kind of activity does not happen again,” the department will do so.

Holder did not say whom the Justice Department was targeting in its investigation. Legal experts noted that it was difficult to prosecute false statement cases.

“You see very, very few of these cases ever brought. The standard is very high,” said Nathan J. Hochman, a former assistant attorney general for the tax division at the Justice Department. Hochman, now a partner at Bingham McCutcheon, said a misleading statement was “usually not enough.”

Miller also serves as deputy IRS commissioner for services and enforcement, a role in which he fielded questions from members of Congress who said their constituents were complaining about intrusive questions the IRS was posing to conservative organizations.

According to the inspector general’s report, Miller became aware that there were potential problems more than a year ago. In late March 2012, amid news reports that tea party groups were having difficulty getting their applications approved by the IRS, he asked one of his managers to find out what was going on.

On May 3, 2012, Miller learned that the agency had improperly singled out groups that used conservative terms in their paperwork, the IRS said this week.

But six weeks later, in a letter to the chairman of a key House oversight subcommittee, Miller made no mention of the inappropriate handling of the applications. He wrote that after an increase in filings for tax-exempt status in 2010, the agency “took steps to coordinate the handling of the cases to ensure consistency.”

Miller noted that some applications had lingered “for a longer time than expected.” And he made an allusion to some internal problems, writing that, in early 2012, “issues with respect to these cases were brought to the attention” of top officials who “ensured more timely and consistent handling of the cases.”

He continued to defend the IRS process in letters to Congress in June and September 2012, months after staff attorneys had flagged some of the questions as “troubling” and the agency had decided to destroy some donor information.

And in July testimony before a House Ways and Means subcommittee on oversight, Miller fielded questions from lawmakers who said groups in their districts felt they were being harassed by the IRS. He described the process for evaluating social welfare groups, without mentioning that agents had used inappropriate criteria to screen potentially politically active groups.

Many “are very small organizations and they are not quite sure what the rules are, and so we are working with them to ensure that they understand what the rules are,” he testified.

In a USA Today op-ed published Monday, Miller acknowledged “mistakes were made, but they were in no way due to any political or partisan motivation.”

He said the IRS was ill-equipped to deal with the deluge of applications the agency received starting in 2010. He also blamed ambiguity in the laws governing social welfare groups.

“The new procedures we have implemented ensure the mistakes we made won’t be repeated,” Miller wrote.

Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, plans to hold a hearing with former IRS Commissioner Douglas Shulman and top IRS and Treasury officials to press them on whether other groups were targeted and how tax agents dealt with donor records provided by the groups.

Among those scheduled to testify is Lois Lerner, the IRS director of exempt organizations, another top agency official who did not tell lawmakers that agents inappropriately focused on conservative groups in their reviews after she was made aware of the problems.

“I think the American people want two things,” Issa said. “They want full transparency on what happened. They also want systems put in place to prevent this.”

When she first broke the news of the improper screenings last week, Lerner attributed the problems to missteps by “line workers in Cincinnati.”

The president of the union representing those employees defended the agency’s rank and file Wednesday as “dedicated and committed public servants,” not driven by partisan motives.

“The IRS has stated that no one intentionally did anything wrong, and I believe that to be the case,” Colleen M. Kelley, president of the National Treasury Employees Union, wrote in a letter to members.

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Staff writers Kathleen Hennessey, Michael A. Memoli, Christi Parsons, Richard A. Serrano and Richard Simon in the Washington bureau contributed to this report.

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©2013 Tribune Co.

Visit Tribune Co. at www.latimes.com

Distributed by MCT Information Services

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