Finance Committee Reports on IRS Treatment of Exempt Orgs

Since the inception of our Nation, the United States Committee on Finance (Committee) has conducted vigilant oversight of the Executive Branch agencies and departments under its jurisdiction. Given the significance of tax policy and its administration, the Committee has historically focused a large portion of its time and resources overseeing the activities of the Internal Revenue Service (IRS), the Executive Branch agency charged with tax matters. Two years and two months ago, the Committee became aware of allegations regarding the potential targeting by the IRS of certain tax-exempt organizations, based on the names and political views of those organizations. Serious allegations such as these strike at the very heart of the principal that the Nation's tax laws are to be administered fairly and without regard to politics of any kind. Accordingly, these allegations warranted swift Committee response in the form of an investigation -- an activity the Committee is uniquely positioned to carry out as a result of its oversight authorities and responsibilities with respect to the IRS.

Despite the partisan political nature of these allegations, the Committee proceeded in true bipartisan spirit and initiated a joint investigation on May 21, 2013, under the direction of former Chairman Baucus and then-Ranking Member Hatch. When Senator Wyden assumed the Chairmanship of the Committee in February 2014, he agreed to continue the bipartisan work begun by Chairman Baucus. This bipartisan cooperation has continued unabated since I became Chairman in January 2015. Accordingly, despite several changes in the chairmanship, the Committee has continued its tradition of a bipartisan investigative effort.

While much has been reported about the alleged political targeting over the last two years, it is important to stress that this Committee has conducted the only bipartisan investigation into the matter. Consequently, this report will perhaps serve as the definitive account of events transpiring at the IRS and the management failures and other causes that were at the root of the IRS's actions. Hopefully, this report will provide a roadmap for how Congress and the public can act to make sure this type of conduct does not happen again.

We want to acknowledge the hard work and countless hours of time spent by Committee staff who conducted over 30 exhaustive interviews, reviewed more than 1.5 million pages of documentation, drafted numerous versions of this report, and performed countless other tasks necessary to bring this investigation to closure. The Committee staff whose diligence and devotion to duty made this investigation and report possible include the following: John Angell, Kimberly Brandt, John Carlo, Justin Coon, Michael Evans, Daniel Goshorn, Christopher Law, Jim Lyons, Todd Metcalf, Harrison Moore, Mark Prater and Tiffany Smith.

This bipartisan investigation of the Senate Finance Committee examined the Internal Revenue Service's (IRS) handling of applications for tax-exempt status submitted by political advocacy organizations, following allegations that the IRS discriminated against some of these organizations based on their political views.

Our investigation found that from 2010 to 2013, IRS management was delinquent in its responsibility to provide effective control, guidance, and direction over the processing of applications for tax-exempt status filed by Tea Party and other political advocacy organizations. IRS managers either failed in their responsibility to keep informed about the very existence of the applications, or failed to recognize the sensitivity of these applications. In the case of the former, IRS managers forfeited the opportunity to shape the IRS's response to the influx of political advocacy applications by simply failing to read reports informing them of the existence of those applications. In the case of the latter, IRS managers did not take appropriate steps to ensure that the applications were processed expeditiously and accurately.

Our investigation focused particularly on the Exempt Organizations (EO) Division of the IRS, which is responsible for administering the tax code provisions related to tax-exempt organizations, including processing and deciding applications submitted by organizations seeking tax-exempt status. Lois Lerner served as the Director of the EO Division from January 2006 to May 2013. Lerner first became aware that the IRS received applications from Tea Party groups in April or May 2010. For the next two years, Lerner failed to adequately manage the EO employees who processed these applications. Moreover, Lerner failed to inform upper-level IRS management of the serious delays in processing applications for tax-exempt status from Tea Party and other politically sensitive groups. Consequently, it was a year before the IRS Office of Chief Counsel became involved, and nearly two years before Lerner's superiors in the IRS management chain were aware of the gross mismanagement of Tea Party and other sensitive advocacy applications.

While under the leadership of Lois Lerner, the EO Division undertook a number of initiatives aimed at finding a way to process the Tea Party and other political advocacy applications. Each of these initiatives was flawed in design and/or mismanaged. In one example, EO management sanctioned the use of the Be On the Lookout (BOLO) list, which improperly identified the Tea Party and other organizations by name and policy position. The IRS used the BOLO list to subject applications received from Tea Party groups to heightened scrutiny, even when that scrutiny was unwarranted because the applications gave no indication that the organizations would engage in political campaign intervention. Other initiatives to process political advocacy applications sanctioned by EO management were under-planned, under-staffed and under-executed. In each case, these poorly formed initiatives ended in predictable failure and each failure resulted in applicant organizations enduring inexcusably long delays in receiving decisions on their applications. Those delays often proved to be harmful or fatal to the organizations by undermining the very purposes for which they were formed.

The workplace "culture" prevalent in the EO Division was one in which little emphasis was placed on providing good customer service, a fact inconsistent with the IRS's promise to provide "top quality service." Indeed, the EO Division operated without sufficient regard for the consequences of its actions for the applicant organizations. Not only did those organizations have to withstand delays measured in years, but many also were forced to bear a withering barrage of burdensome and inappropriate "development letters" aimed at extracting information the IRS wrongly concluded was necessary to properly process the applications.

Factors further contributing to the dysfunctional "culture" of the EO Division included the office structure of the Determinations Unit that placed managers in offices located in geographic locales far from the employees they supervised, and employees and managers who frequently teleworked, in some cases up to four days a week. The confluence of remote management and a dispersed workforce undoubtedly impaired coordination and communication within the Determinations Unit. Moreover, acrimony typified the relationship between various organizations within the EO Division and served to further embitter the workplace "culture."

In the wake of the Citizens United decision in 2010, the IRS received an increasing number of allegations that tax-exempt organizations were engaged in political campaign intervention inconsistent with their exempt status. Recognizing the importance of having a process to evaluate these allegations, IRS management, including the Commissioner and Acting Commissioner, focused their efforts on devising a workable process that would allow the IRS to evaluate and investigate these allegations. Management's efforts proved fruitless, and as a consequence, the IRS performed no examinations of 501(c)(4) organizations related to political campaign intervention from 2010 until 2014.

The Committee's investigation included a review of more than 1,500,000 pages of documents and interviews of 32 current and former IRS and Treasury employees. Issuance of this report was delayed for more than a year when the IRS belatedly informed the Committee that it had not been able to recover a large number of potentially responsive documents that were lost when Lois Lerner's hard drive crashed in 2011.

At the Committee's request, the Treasury Inspector General for Tax Administration (TIGTA) investigated the circumstances behind the loss of data and other related issues, and was ultimately able to recover 1,330 emails that had not been produced to Congress. TIGTA's findings are described below in Section II(C). Overall, the IRS's less than complete response to these circumstances cast doubt about the thoroughness of their efforts to recover all relevant records related to the investigation, as well as their candor to this and other Congressional committees.

Although it was not possible to completely produce the records that were lost, the Committee exhausted all available measures to mitigate the amount of missing information by collecting additional information from the IRS, other executive agencies, and outside sources. This report accurately summarizes the facts known to the Committee, and we believe that our conclusions are supported by the record.

Committee staff have agreed on numerous bipartisan investigative findings. Some of these findings are highlighted below, along with corresponding recommendations to address the underlying problem. Greater discussion of these and other findings related to the determination process are contained in Section III, and ancillary findings are in Section IX.¹

Finding #1: The IRS's handling of applications from advocacy organizations may affect publicconfidence in the IRS. To avoid any concerns that may exist that IRS decisions about particular taxpayers are influenced by politics, the following recommendations are made.

• The extent, if any, to which political bias of IRS employees, including Lois Lerner, affected the IRS's processing of applications for tax-exempt status.

• Whether the IRS used improper methods to screen and process applications for tax-exempt status submitted by progressive and left-leaning organizations.

• The involvement, if any, of Treasury Department and White House employees, including President Obama, in directing or approving the actions of the IRS.

II. BACKGROUND ON BIPARTISAN INVESTIGATION BY THE SENATE FINANCE COMMITTEE

On May 10, 2013, Lois Lerner, IRS Director of EO, disclosed at a panel for the Exempt Organizations Committee of the Tax Section of the American Bar Association that IRS employees had selected certain 501(c)(4) tax-exempt applications that contained the words "Tea Party" and "Patriots" for further review simply because the applications had those terms in the title.²

On May 14, 2013, TIGTA released a report finding that the IRS "used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention."³

At the time of the IRS and TIGTA disclosures that groups with the words "Tea Party," "9/12" or "Patriot" in the name were selected for additional scrutiny, there was speculation and concern expressed that the singling out of conservative organizations by name may have been a consequence of political bias or motivation on the part of IRS employees. There was further speculation concerning the role of political appointees at the IRS, Treasury Department or the White House in the selection of these conservative organizations for heightened scrutiny.

On May 20, 2013, the Committee sent a detailed letter to the IRS requesting that the IRS answer questions and turn over internal documents relating to the targeting controversy.⁴ Simultaneously, the Committee began an in-depth bipartisan investigation to determine the facts surrounding the controversy. This investigation was prompted by the serious nature of allegations that political considerations may have driven the IRS's heightened scrutiny of conservative-leaning organizations applying for tax-exempt status.

The Committee held a hearing to publicly explore these issues on May 21, 2013, with Steven Miller, then Acting Commissioner, Internal Revenue Service; Douglas Shulman, Former Commissioner, Internal Revenue Service; and J. Russell George, Treasury Inspector General for Tax Administration, United States Department of the Treasury. The primary purpose of this report is to examine the IRS's handling of applications for tax-exempt status from 2010 through 2013, but it also covers other topics related to the IRS's oversight of tax-exempt organizations. Committee staff did not investigate the IRS's administration and enforcement of other parts of the Internal Revenue Code, including individual taxpayers and corporate for-profit entities; nor did it investigate the potential imposition of the gift tax for contributions made to tax-exempt organizations. Accordingly, these and other divergent topics are not covered by this report.

Section 6103 contains a set of narrow exceptions, which allow the IRS to disclose taxpayer information in certain limited circumstances and with appropriate safeguards. For example, there are exceptions for disclosure to federal or state law enforcement officials in certain circumstances and for disclosure to various federal agencies for the purpose of compiling government statistics.

One of the exceptions, in section 6103(f), requires the IRS to provide taxpayer-specific information requested by the Congressional tax committees (Senate Committee on Finance, House Committee on Ways and Means, and the Joint Committee on Taxation),⁸ and it authorizes the chairmen of the tax committees to designate staff members to "inspect returns and return information at such time and in such manner as may be determined by [the] chairman." This allows the committees to have access to taxpayer-specific information for the purposes of undertaking policy analyses or investigations.

As a general matter, staff who are designated by the chairman to review taxpayer-specific information are themselves subject to the confidentiality requirements of section 6103. In other words, they are required to keep the information confidential, subject to criminal and civil penalties. However, section 6103(f)(4)(A) goes on to provide that "[a]ny return or return information obtained by or on behalf of such committee . . . may be submitted by the committee to the Senate or the House of Representatives, or to both." Thus, taxpayer-specific information reviewed by the Finance Committee under section 6103(f) may be disclosed to the full Senate in open session, and, hence, to the public,⁹ but only through the formal and careful process of a Committee vote to make a submission to the Senate.

In the course of this investigation, the Finance Committee has received extensive information under section 6103(f). For example, Committee staff examined, in detail, how specific applications for 501(c)(4) status were reviewed, to understand the decision-making process that the IRS applied. It also was important to consider whether particular applications were from "conservative" or "progressive" organizations, in order to determine whether the IRS was taking an even-handed approach.

In preparing this report of the investigation, the Finance Committee has decided, after careful consideration and after consultation with the Senate Legal Counsel's office, to include limited taxpayer information available to the Senate and the public, by making a formal submission to the Senate under section 6103(f)(4)(A). We have decided to do so for several reasons.

First, this approach is clearly permissible under section 6103. Although the principal purpose of section 6103 is to protect taxpayer-specific information, section 6103 also clearly contemplates the need for the public disclosure in compelling circumstances, and it establishes a formal and carefully considered process for a release: a submission by one of the tax committees to the House or Senate.

Second, the disclosure of limited taxpayer information facilitates a fully informative report. There has been a great deal of speculation about exactly what happened during the IRS review of 501(c)(4) organizations, and this has important implications for our governmental and political institutions. Under Supreme Court and IRS interpretations of section 6103, it would be difficult to provide a comprehensive review of the facts without making a formal submission to the Senate and thereby allowing disclosure notwithstanding section 6103.¹⁰ In light of this, we have included some of the names of specific organizations, both conservative and progressive, who submitted section 501(c)(4) applications during this period, along with details about the handling of the applications which are essential to understanding the underlying facts.

Third, we have limited the disclosure to the minimum necessary to provide an informative report. We have omitted material, redacted material, and summarized wherever appropriate, and we have disclosed no personal names, financial information, or other details that are not necessary to understanding the essential facts. We have also, wherever possible, relied on information that already is in the public record.

Accordingly, the Committee has decided, on a bipartisan basis, to submit this report, including limited material covered by section 6103, to the full Senate in open session. We expect that, in the future, the Committee will only disclose section 6103 material in similarly compelling circumstances and with similar safeguards.

In spite of these limitations, the large volume of information we have reviewed gives us a high degree of confidence in the accuracy of the conclusions reached during our investigation, as described in this report.

In the course of this investigation, Committee staff reviewed approximately 1,500,000 pages of documents, the majority of which were produced by the IRS and TIGTA:

• In response to the Committee's May 20, 2013, document request letter and subsequent requests, the IRS provided the Committee with approximately 1,300,000 pages of documents.

• TIGTA provided the Committee with work papers and related documentation that were used in the compilation of the audit report they released on May 14, 2013. TIGTA also produced other materials requested by the Committee.

In its June 13 letter, the IRS stated that "Ms. Lerner's computer crashed in mid-2011" and despite "multiple processes to recover information . . . the data stored on her computer's hard drive was determined at the time to be 'unrecoverable' by the IT professionals."¹² As a result, the IRS concluded that "[a]ny of Ms. Lerner's email that was only stored on that computer's hard drive would have been lost when the hard drive crashed and could not be recovered."¹³ The IRS further explained that IRS employees, including Lerner, had limited storage space on the network drive and therefore had to save messages on their personal computers. Thus, the IRS's revelation about Lerner's hard drive meant that an unknown quantity of emails sent and received by Lerner had not been retained by the IRS or produced to the Committee. These emails were particularly significant since they included messages transmitted during 2010 and the first half of 2011 -- the period when many of the most critical events in this matter occurred.

Based on the IRS's June 13 letter and subsequent meetings with Commissioner Koskinen, Senators Hatch and Wyden quickly determined that the full extent of data loss was not known. Accordingly, by letter dated June 23, 2014, then-Chairman Wyden and then-Ranking Member Hatch asked Inspector General George to investigate six issues, enumerated in the letter and reproduced below.¹⁴ The Committee suspended release of this report until TIGTA completed its work.

In response to the Committee's request, TIGTA commenced a thorough investigation that included interviews of 118 witnesses and processing and reviewing more than 20 terabytes of data. On June 30, 2015, TIGTA issued its final report of investigation. TIGTA's principal findings are as follows, and its full report of investigation is attached as an exhibit to this report.¹⁵

At that point, an IRS IT Specialist was assigned to respond to Lerner's work ticket. He told TIGTA that "he was unable to recover any data from the hard drive, and following normal protocol, he replaced the hard drive in Lerner's computer with a new hard drive."²¹ The IT Specialist "did not observe any indications of tampering or physical damage to Lerner's laptop."²² After replacing the hard drive, the IT Specialist noted that Lerner's computer also "needed a new fan system and possibly a heatsink due to overheating."²³

The IRS requested technical support from Hewlett-Packard. A Hewlett-Packard employee then "worked on Lerner's laptop to replace the keyboard, trackpad, heat sink, and fan due to an overheating issue[.]"²⁴ When interviewed by TIGTA, the Hewlett-Packard employee did not specifically recall working on Lerner's computer and "did not recall, or note in his records, any damage to the laptop."²⁵ When asked for his opinion about the failure, he stated many different things, including the environment, can cause damage to a computer, and opined that "it was unusual for so many components to fail at the same time."²⁶ He also stated that "there are many causes for hard drive failures, although overheating causing a hard drive failure" is uncommon.²⁷ The Hewlett-Packard employee further told TIGTA that "[i]f there was severe impact to a computer or hard drive, it could internally damage the mechanical components of the hard drive making it unusable."²⁸

An IRS Criminal Investigation Division technician later examined the hard drive in an attempt to recover data. He "noted concentric scoring of the hard drive platters, opining that the drive had failed because the drive heads had impacted the platters while in operation[.]"²⁹ When TIGTA asked Hewlett-Packard employee "what scenario could have caused hard drive heads to impact the platter of the disk, [he] opined an impact to the laptop or hard drive was the most likely cause."³⁰

During her interview with TIGTA, Lerner "denied hitting or damaging the hard drive intentionally" and "did not recall any incidents that could have damaged her laptop." Moreover, Lerner "was not aware of anyone who might want to destroy the data on her computer."³¹

Ultimately, TIGTA did not reach a conclusion about the cause of Lerner's hard drive crash.

Regardless of the cause, Lerner's hard drive crash erased data relevant to Lerner's job. Lerner told TIGTA that she regularly received a large volume of email that exceeded the amount of network storage. To keep her email functioning, Lerner and her assistants, Dawn Marx and Diane Letourneau, regularly moved messages to folders on her hard drive that were organized by subject.³² Lerner said that her June 2011 computer crash "resulted in a significant amount of data being lost" and told TIGTA that it "cost her 'a lot of time' because so much of her current work was lost."³³

Neither TIGTA nor the IRS could determine the exact number of records that were lost, and not subsequently recovered, when Lerner's hard drive crashed. Using an email transaction log maintained by the Treasury Department, TIGTA calculated that "as many as 23,000 to 24,000 email messages may not have been provided to Congress," although TIGTA noted that this estimate "could be high" because TIGTA was unable to compare these logs to documents that the IRS was able to recover from other custodians and produced to Congress.³⁴ The IRS's efforts to recover Lerner's emails through alternate means as described below likely yielded some, but not all, of these emails.

TIGTA correctly noted that for three of these employees (Adigun, Drexler and Palmer), the IRS did not produce responsive emails or documents to Congress.⁴¹ Based on the Committee's review of IRS records, it appears that their involvement with this matter was minimal, at most.

Kindell's hard drive crashed on August 11, 2010, which resulted in a loss of "all of her archived email and work documents."⁴² Kindell recovered some of the lost emails by asking coworkers to resend them to her; she was unable to recover other electronic documents.⁴³ The IT Specialist who worked on Kindell's computer told TIGTA that he could not remember the circumstances of Kindell's crash, the cause, or if there were any indications that it may have been intentional.⁴⁴

On March 4, 2011, Shoemaker's hard drive crashed, resulting in the loss of "all of his archived emails and saved files for the years 1994 through 2010," including Shoemaker's "managerial files[.]"⁴⁵ IRS IT was unable to recover the lost documents. When interviewed by TIGTA, the IT Specialist who worked on Shoemaker's computer stated that he was not sure if he had "ever determined what caused Shoemaker's hard drive to fail."⁴⁶

Efforts to recover data from Lerner's computer were more substantial than for the other employees identified above. After the IT Specialist who initially responded was unable to recover data, Lerner contacted former IRS Associate Chief Information Officer Carl Froehlich to say that "some documents in the files that [were lost] are irreplaceable" and asked him to take further efforts to recover the files.⁴⁷ Additional efforts to recover data by the IRS IT support and several Hewlett-Packard technicians were unsuccessful, so the hard drive was then sent to IRS Criminal Investigation Division's forensic lab. The IRS Criminal Investigation Division was unable to recover any data from the hard drive.⁴⁸

The IRS Criminal Investigation Division returned the hard drive to the IRS's IT depot in Washington, D.C. The IRS CI technician believed that "data could still potentially be recovered using a third party donor hard drive or [by] hiring an outside vendor."⁴⁹ The IRS IT manager "confirmed data may have been recoverable by an outside vendor, but . . . decided the expense was not justified due to financial constraints[.]"⁵⁰ At this point, the IRS ceased attempts to recover data from Lerner's hard drive. Lerner told TIGTA that she "was 'surprised' that IRS IT could not do more to recover her email[.]"⁵¹

After the IRS Office of Chief Counsel became aware of Lerner's hard drive failure in February 2014, the IRS took additional measures to recover and produce Lerner documents to this Committee, other Congressional committees and the Department of Justice. The IRS summarized these steps in its June 13, 2013 letter to the Committee:

• "Retraced the collection process for Ms. Lerner's computer to determine that all materials available in May 2013 were collected;"

• "Located, processed, and included in [the IRS] production email from an earlier 2011 data collection of Ms. Lerner's email;"

• "Confirmed that back-up tapes from 2011 no longer exist because they have been recycled (which not uncommon [sic] for large organizations in both the private and public sectors);"

• "Searched email from other custodians for material on which Ms. Lerner appears as an author or recipient, then produced such email."⁵²

• After the IRS ended its 2011 efforts to recover data from Lerner's hard drive, the IRS grouped it with other failed hard drives and gave the failed hard drives to the IRS's vendor in charge of disposing of electronic media. TIGTA determined that Lerner's hard drive was "more than likely destroyed" at a shredding facility in Marianna, Florida on April 16, 2012.⁵⁵

• "TIGTA was able to locate and take possession of Heagney's failed hard drive, but was unable to recover any information from the drive using standard forensic tools."⁵⁶ TIGTA will see if an outside vendor can recover any information.⁵⁷

• Chen's failed hard drive was sent to an IRS facility in Covington, Kentucky in 2012.⁵⁸

• It is unclear if TIGTA determined the ultimate disposition of Kindell and Shoemaker's failed hard drives. It does not appear that TIGTA located either of them.

• Backup (disaster recovery) tapes from the IRS's email server;

• Decommissioned exchange server hard drives and associated backup tapes;

• Lerner's Blackberrys and the Blackberry network server;

• Loaner laptops used by employees while waiting for resolution of IT problems; and

• Network transaction logs.

Finally, TIGTA examined the IRS's instant messaging system (called the Office Communicator Server (OCS)) to see if they could recover records related to the Committee's investigation. These messages were of particular interest to the Committee, as Lerner had asked an IT employee in April 2013 if OCS conversations were searchable and could be produced to Congress:

• In her interview with TIGTA, Chen noted that she disclosed the hard drive crash at the time when she received an IRS litigation hold in May or June 2013. It is unclear what, if anything, the IRS did in response.⁶³

• In his interview with TIGTA, Shoemaker said that during at least one interview with a Congressional committee, DOJ, or TIGTA, he mentioned that his hard drive had crashed. (He did not disclose this issue during his interview with the Finance Committee.) It is unclear if the IRS was aware of this disclosure and what, if anything, the IRS did in response.⁶⁴

• TIGTA's report did not include information about when the IRS first learned that Kindell and Heagney lost data potentially relevant to this investigation.

• February 2 or 3, 2014 -- While the IRS was preparing a production of Lerner emails, former Counselor to the IRS Commissioner Catherine Duval "noted a gap" in the number of Lerner emails sent before July 2011. Duval brought the gap to the attention of Thomas Kane, Deputy Associate Chief Counsel for Procedure & Administration.⁶⁵

• February 3, 2014 -- Duval and Kane mentioned the gap in Lerner emails at an internal meeting with Christopher Sterner, Deputy Chief Counsel for Operations, and Stephen Manning, Deputy Chief Information Officer. The group decided to further investigate.⁶⁶

• February 4, 2014 -- After investigation by attorneys under Kane's supervision, "it was determined that Lerner experienced a hard drive failure in June 2011."⁶⁷

• February 5 or 6, 2014 -- Kane, Sterner, Duval and Manning met again to discuss the issue. Kane noted that IRS Chief Counsel William Wilkins "was included in the discussion at some point." According to Kane, the discussion "included whether to notify Congress or whether more information was needed. The discussion also included how much of Lerner's emails could be located elsewhere." In his interview with TIGTA, Kane noted that "one or two Congressional committees" were planning to release reports around that time, including the Senate Committee on Finance. Kane told TIGTA that it was decided to "not to report half or part of the story as Lerner emails were expected to be produced for some time in the future."⁶⁸

• March and April 2014 -- The IRS searched electronic records of other IRS employees for emails to and from Lerner. The IRS located a total of 24,000 emails.⁶⁹

• April 2014 -- Koskinen told TIGTA that he was "first told about Lerner's hard drive failure in April 2014 by Duval, but was advised that a hard drive failure did not necessarily mean a loss of data." Koskinen explained to TIGTA that at this point, "Duval was leading an effort to validate that email were actually missing; and, not that the gap in email was attributable to something like an error in the backup system" or some other error. Koskinen noted that this error checking "was completed in April 2014."⁷⁰

• Mid-April 2014 -- Duval informed Treasury attorney Hannah Stott-Bumsted that "there was an issue they (the IRS Office of Chief Counsel) were looking into regarding Lerner's emails."⁷¹

• April, May, and June 2014 -- Led by Duval, the IRS prepared a "white paper" that would be used to "notify Congress of the problem identified regarding the Lerner emails, how it was discovered and what steps were taken to fill in the apparent gap in her emails."⁷² Koskinen told TIGTA that he "wanted to secure as many emails that the IRS could locate . . . in order to provide a more complete reporting to Congress. . . . "⁷³

However, several of TIGTA's other findings cast doubt on the thoroughness of the IRS's efforts to recover all relevant records related to this investigation, as well as its candor to this and other Congressional committees.

First, less than two weeks into its investigation, TIGTA identified 744 backup server tapes that were likely to contain Lerner documents.⁷⁷ The IRS did not attempt to recover data from these tapes, errantly determining that they had already been recycled, or believed that they did not contain relevant data. Indeed, until May 22, 2013, the IRS practice was to reuse and recycle old backup tapes every six months as a cost-saving measure.⁷⁸ Thus, with this practice in place, prior to the beginning of Congressional investigations the IRS should have already recycled any backup tapes containing Lerner emails lost when her hard drive crashed in June 2011. This would prove to be incorrect, and TIGTA was able to recover approximately 1,007 emails that had not been previously provided by the IRS to the Committee, although most of those messages were sent after Lerner's June 2011 hard drive crash.⁷⁹

A second troubling finding is that in 2014, the IRS may have unwittingly destroyed a separate batch of relevant backup tapes. TIGTA discovered that in March of 2014 -- after top IRS officials learned that Lerner's hard drive had crashed -- IRS employees at a storage facility in West Virginia "magnetically erased 422 backup tapes that are believed to have contained Lerner's emails that were responsive to Congressional demands and subpoenas."⁸⁰

The email server housing these backup tapes was located in New Carrollton, Maryland, and around May 2011, the IRS migrated to a new location in order to consolidate data centers.⁸¹ The New Carrollton server was then decommissioned and disassembled, and in April 2012, the majority, but not all, of the equipment was destroyed.⁸² Several hard drives and backup tapes from the decommissioned server continued to be stored in New Carrollton until December 2013, when the IRS had them removed in order to renovate the space.⁸³ These components, server hard drives and backup tapes, were shipped to a storage facility in West Virginia.⁸⁴ According to TIGTA, the employees "did not degauss the server hard drives that were shipped with the backup tapes because their interpretation of the CTO's May 22, 2013, e-mail directive was that it was meant to preserve hard drives only."⁸⁵ However, the IRS employees did degauss the server backup tapes. Ultimately, TIGTA identified an additional 422 backup tapes which were used to back up Lerner's email between January 1, 2008 and December 31, 2011, but were errantly erased on March 4, 2014.⁸⁶

Although it took TIGTA extensive time and resources to locate, identify, and process these tapes and produce relevant records, this type of effort was justified given the extent of data lost and the interest in this matter by Congress, the DOJ and the public. The IRS should have exhausted this possibility before it informed the Committee that "back-up tapes from 2011 no longer exist," which proved to be wholly incorrect.⁸⁷

TIGTA noted that it "did not uncover evidence that the IRS and its employees purposely erased the tapes in order to conceal responsive e-mails from the Congress, the DOJ and TIGTA."⁸⁸ Instead, the decision to erase these tapes appeared to be the result of employees being unaware of, or misinterpreting, several IRS directives to preserve documents:

• The IRS issued litigation holds in May and June 2013 for records related to this matter.

• In May 2013, IRS Chief Technology Officer Terence Milholland "sent an e-mail to his senior managers responsible for destroying media and asked them to preserve media that might contain e-mail or data related to 'investigations' that were occurring."⁸⁹

• On February 3, 2014, Duval sent a message to Deputy CIO Manning confirming a previous conversation with him about an "apparent lack of Lois Lerner email from before May 9, 2011." Per their earlier discussion, Duval asked Manning to take several steps, including to "ensure that the earliest possible network back-up tapes are available for review" and "[c]onfirm that no back-up tapes have been recycled since the hold on recycling was instituted last spring[.]"⁹⁰

Finally, TIGTA's report shines light on the IRS's failure to notify Congress of the missing documents in a timely fashion. It is understandable that the IRS would take some amount of time to assess the information gap and possible solutions before contacting Congress. But the IRS's decision to wait more than four months is inexcusable, particularly in view of the following:

• Duval and other senior employees believed the information gap to be significant enough to raise with Chief Counsel Wilkins in early February 2014, and with Commissioner Koskinen no later than April 2014.

• Based on testimony from Kane, it appears that the IRS was unconcerned with the possibility that this Committee or any other Congressional committee may have issued a report before the IRS disclosed the problem.

• Duval informed the Treasury Department about this issue in April 2014, which in turn informed the White House shortly thereafter.⁹²

• During the period when the IRS knew about the data loss but did not tell the Committee, Committee staff were routinely in contact with the IRS -- including Duval and other employees who had direct knowledge of the data loss -- about issues related to production of documents. During these conversations, Committee staff informed Duval that the Committee would require Commissioner Koskinen to sign a statement attesting to the completeness of the IRS's productions. Committee staff first raised this issue to Duval on March 27, 2014, and raised it repeatedly in April, May and early June. Neither Duval nor any other IRS employee gave any indication that the IRS had lost documents, a fact that would materially affect the IRS's ability to provide the required statement.

• The IRS disclosed the data loss only when Committee staff informed Duval that release of the report was imminent, and placed a deadline on receipt of Commissioner Koskinen's signed statement of Friday, June 13, 2014 -- the date when the IRS finally informed the Committee of the data loss.

• Even after the IRS disclosed Lerner's hard drive crash, it failed to provide a full account of what it knew to the Committee. When IRS senior staff briefed Committee staff on June 16, they informed the Committee only of Lerner's hard drive crash. Just hours later, the IRS told staff of a House committee that the IRS may have lost records of several other IRS employees who were relevant to this investigation. As a result, the Chairman and Ranking Member did not get a complete account of what the IRS knew until later that week.

By failing to locate and preserve records, making inaccurate assertions about the existence of backup data, and failing to disclose to Congress the fact that records were missing, the IRS impeded the Committee's investigation. These actions had the effect of denying the Committee access to records that may have been relevant and, ultimately, delayed the investigation's conclusion by more than one year. Without the IRS's candor, this Committee cannot fulfill its charge of overseeing the administration of the tax code.

• As described above, the Committee asked TIGTA to search for and recover documents, which resulted in the discovery and production of 1,330 records that had not been previously produced to the Committee.

• The IRS took remedial steps to recover and produce emails for Lerner, Chen, Heagney, Kindell, and Shoemaker, as described in the letter of September 5, 2014.⁹⁴ On July 1, 2015, Commissioner Koskinen signed a declaration attesting to the completeness of the IRS's productions, and promising that the IRS will promptly produce any additional relevant records if they are discovered.⁹⁵

• After a review of Lerner's communications, Committee staff determined that Lerner had sent and/or received emails from employees of the Treasury Department, the DOJ, and the FEC during the relevant period. Senator Hatch requested that these agencies search for communications between their employees and Lerner. In response, each agency produced documents to the Committee.

• On June 18, 2014, the White House produced emails between its employees and Lerner.⁹⁶

• Based on a review of Lerner's communications, Committee staff determined that Lerner frequently sent and received messages from a friend who used his corporate email address. Some of these messages were relevant to the Committee's investigation. Senator Hatch requested that the employer produce all messages between this employee and Lerner, and the company complied.

Although it was not possible to completely reproduce the records lost by the IRS, the Committee exhausted every possibility for obtaining copies of relevant records. We are satisfied that these efforts have enabled the Committee to issue as comprehensive of a report as possible under the circumstances, and we believe that our conclusions are supported by the record.

An organization may qualify for exemption under section 501(c)(3) of the Internal Revenue Code if it is organized and operated for religious, charitable, educational and certain other specified purposes.⁹⁷ These organizations may not directly or indirectly "participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office."⁹⁸ This prohibition is absolute.⁹⁹ Thus, if a 501(c)(3) organization engages in any amount of prohibited campaign intervention, the IRS may revoke its tax-exempt status and impose an excise tax.¹⁰⁰

Section 501(c)(4) provides tax-exempt status for organizations operated "exclusively for the promotion of social welfare."¹⁰¹ In 1959, the Treasury promulgated regulations that interpreted "operated exclusively" to mean "primarily engaged" in social welfare activities.¹⁰² As a result, the IRS considers an organization to qualify for tax-exemption under section 501(c)(4) if its primary activity is "promoting in some way the common good and general welfare of the people of the community."¹⁰³ The regulations provide that political campaign intervention is not a social welfare activity,¹⁰⁴ but a group recognized as tax-exempt under section 501(c)(4) may engage in unlimited issue advocacy related to its exempt purpose and some political campaign intervention, as long as the group is primarily engaged in social welfare.¹⁰⁵

Section 501(c)(3) organizations must apply to the IRS to be recognized for tax-exempt status.¹⁰⁶ Although the tax law allows section 501(c)(4) organizations to operate as tax-exempt without applying for IRS recognition of their status, most organizations apply for an IRS determination.¹⁰⁷ Another important distinction is that donors to 501(c)(3) organizations may generally take a tax deduction for the amount of their donation, while donations to 501(c)(4) organizations are not tax-deductible.¹⁰⁸

Generally, the tax laws do not require 501(c)(3) public charities or 501(c)(4) organizations to publicly disclose the identity of their donors.¹⁰⁹ By contrast, the identity of donors to section 527 political organizations are made public, as well as periodic reports of contributions and expenditures filed by such organizations.¹¹⁰

The EO Division within the IRS reviewed all applications for tax-exempt status. As described below, revenue agents in the Cincinnati EO Determinations office resolved approximately 85% of incoming applications after reviewing the initial application with little or no additional follow-up. On some occasions, EO Technical or the Office of Chief Counsel, which are both located in Washington, D.C., reviewed applications. The IRS routinely elevated "sensitive" issues within the EO Division and to higher-level IRS management, sometimes up to the Office of the Commissioner.

At all times relevant to the Committee's investigation, the EO Division had the following basic structure and management:

 

 

Most applications for tax-exempt status that were received by EO Determinations were processed to completion by EO Determinations employees without outside assistance. Certain applications, such as those that raised complex or novel questions or that contained sensitive or high-profile issues, were sent to EO Technical. Typically, applications that were received in EO Technical were assigned to a highly-graded Tax Law Specialist in one of the four EO Technical Groups. The Tax Law Specialist could either assume full control of the application or continue to work on the application in conjunction with an EO Determinations revenue agent. The Tax Law Specialist was responsible for developing the facts of the application, applying the law to those facts, reaching a conclusion, and preparing a proposed determination on the application for tax exemption. The Tax Law Specialist then submitted the proposed determination to a "reviewer" within the Tax Law Specialist's Group. The Group Manager could also decide to review the proposed determination at this time, or could allow the Tax Law Specialist and the reviewer to make the final determination. A final determination was made on a majority of applications at the Group level.

The Internal Revenue Manual (IRM) also specified certain issues that should be elevated within the IRS organization, including "sensitive" issues, issues that impact a large number of individuals, issues involving significant dollar amounts, issues that were or could become newsworthy, and issues requiring coordination with the Office of Chief Counsel or Treasury. The primary way of elevating these issues was through a Sensitive Case Report (SCR), which was usually prepared by the manager in charge of the issue. The SCR contained a summary of the facts, why the issue was important, and the proposed resolution.¹¹³ SCRs about tax-exempt issues were periodically distributed to EO management, including Lerner and her advisors, and certain reports were also sent to top-level IRS management, including the Office of the IRS Commissioner. As discussed in greater detail below, the Committee determined that SCRs had little practical value as a tool for guiding difficult issues to resolution, as they were routinely ignored -- and sometimes not even read -- by top management.

Once EO Technical placed an application on an SCR, additional procedures were followed before a final determination could be made. A proposed determination made at the Group level could not be effectuated without first providing the Manager of EO Technical with an opportunity to review the proposal. After the Manager of EO Technical completed his/her review, then the proposed determination was sent to the Director of Rulings and Agreements for additional review. Accordingly, including an application or other matter on an SCR meant that at a minimum, the proposed determination would undergo two additional levels of review (EO Technical Manager, Director, Rulings and Agreements). These additional levels of review invariably required more time to complete, thereby delaying the ultimate disposition of the application.

In limited circumstances, pending applications were referred to the Office of Chief Counsel in Washington, D.C. The only cases that required mandatory review by the Office of Chief Counsel were proposed denials of tax-exempt status under section 501(c)(3).¹¹⁴ All other applications could be sent to the Office of Chief Counsel for discretionary reasons specified in the IRM, including applications that presented novel issues of law or the possibility of litigation.¹¹⁵

III. FINDINGS OF THE SENATE FINANCE COMMITTEE AND SUMMARY OF SUPPORTING FACTS

Koester's immediate managers, up to and including Cindy Thomas, EO Determinations Program Manager, agreed with Koester's assessment that the application was "high profile." Thomas elevated the application to EO Technical in Washington D.C. Shortly thereafter, Steve Grodnitzky, Acting Manager for EO Technical, concluded that the application, as well as all other applications received from Tea Party groups, met the criteria for the preparation of a SCR. The purpose of an SCR is to apprise upper management of applications that warrant their attention because they present a significant issue or raise a notable concern.¹¹⁶ In the case of the Tea Party applications, the issue was that the applications could attract significant media and Congressional attention. Carter Hull, a Tax Law Specialist in EO Technical, was assigned the Tea Party cases and prepared the first SCR on them in April 2010. Thereafter, either Hull or Hilary Goehausen, another Tax Law Specialist in EO Technical, prepared an SCR on these applications every month until 2013.

During the summer of 2010, Tax Exempt and Government Entities (TE/GE) Division Executive Assistant Richard Daly sent monthly emails to senior IRS management that contained SCRs about important pending issues within the TE/GE divisions. The SCRs transmitted by Daly were a subset of all SCRs that had been prepared by divisions within TE/GE, and included only the issues that were deemed most necessary for elevation to upper management.¹¹⁷ Included in Daly's messages were the SCRs about the Tea Party applications prepared by Hull on May 24, 2010, June 22, 2010, and July 26, 2010.¹¹⁸ These SCRs identified three Tea Party organizations by name; discussed the legal issue as "whether these organizations are involved in campaign intervention"; enumerated how many similar applications had been received; and explained how employees in Cincinnati and Washington were processing the applications.¹¹⁹

Although the Tea Party SCR was sent multiple times directly to IRS upper management in 2010, the SCR went unnoticed:

• Division Commissioner of TE/GE, Sarah Hall Ingram, received all three of Daly's messages containing the Tea Party SCR in 2010. Ingram had no memory of reviewing any of the Tea Party SCRs sent to her, asserting that "I did not read these [Tea Party SCRs]."¹²⁰ She explained that this was not out of the ordinary; Ingram routinely disregarded SCRs as she did "not personally [find] them particularly useful documents."¹²¹ Instead of reading the SCRs herself, Ingram "relied on [the TE/GE] directors to bring me the ones they thought they were worried about."¹²²

• Deputy Commissioner of TE/GE, Joseph Grant, also received all three of Daly's messages containing the Tea Party SCR in 2010. Grant viewed SCRs as "a heads up or an awareness of something that was going on," but, like Ingram, Grant did not routinely read them.¹²³ Although he received three Tea Party SCRs in 2010, Grant claimed that he was not aware of the Tea Party applications in 2010.¹²⁴

• Assistant Deputy Commissioner for Services & Enforcement (S&E), Nikole Flax, received two of Daly's messages containing the Tea Party SCR. One of Flax's duties was to review incoming SCRs and inform the Deputy Commissioner for S&E, Steven Miller, of the most significant issues.¹²⁵ Flax had no recollection of reviewing either of the Tea Party SCRs sent to her in summer 2010 or discussing them with Miller.¹²⁶ Miller also had no memory of reviewing these SCRs in 2010 or discussing them with Flax.¹²⁷ Flax noted that she never met with Miller to discuss SCRs.¹²⁸

Other managers like Lois Lerner, Rob Choi, Director of Rulings and Agreements, and Holly Paz, EO Technical Manager and later Director of Rulings and Agreements, all were aware of the Tea Party SCRs early in 2010.¹²⁹ Yet they simply failed to recognize the sensitivity of the applications and the potential for adverse media and Congressional reaction if those applications were not resolved in a reasonable period of time. Perhaps this failure to appreciate the sensitivity of the political advocacy applications was best summarized by Nikole Flax, who was asked by Committee Staff if the IRS was looking at the issue of political campaign intervention by 501(c)(4) organizations in 2010. Flax responded that "I wasn't aware that this was, like, a big issue at the time; that that was a bigger issue than all of the other sensitive issues that EO was dealing with."¹³⁰

The volatility of these applications appears to have been better understood by staff-level employees than by their managers. For example, Elizabeth Hofacre, an EO Determinations agent, stated to Committee Staff that "because of the nature of these cases, the high profile characteristics, that it could really have, you know, imploded."¹³¹ Hofacre likened working with the Tea Party cases during the period in 2010 when no determinations were being made on the applications to "[w]alking through a mine field."¹³²

In the context of the Tea Party and other political advocacy applications, the identification of applications as "sensitive" or "high profile" and the preparation of SCRs proved to be no more than a paper exercise. The managers who had the responsibility and the authority to oversee the processing of the applications and who were the intended recipients of the information in the SCRs, either elected to ignore the SCRs and thus missed the opportunity to ensure that the IRS properly managed this workload, or failed to recognize the sensitivity of the applications and take steps early in the process to develop a plan to address their resolution.

Moreover, placing the Tea Party and other political advocacy applications on the SCR subjected those applications to further delays by requiring that they undergo additional levels of review. (See Section VI(A)(5).) The managers -- who either did not recognize the sensitivity of the applications or who did not make the effort to keep informed of issues that could adversely impact taxpayers or the IRS -- effectively nullified the salutary effects of the SCR process, while leaving in place those parts of the SCR process that could delay resolution of the applications.

 Tab Name                    Tab Characteristics/Purpose

A managerial failure occurred when the initial BOLO spreadsheet was distributed in August 2010 containing a "Tea Party" entry that TIGTA found to be "inappropriate," because the mere use of the words "Tea Party" should not have been enough to trigger review. At that time, EO Determinations managers up to, and including, Cindy Thomas were aware of the "Tea Party" entry.¹³⁴ The problematic "Tea Party" entry under the Emerging Issues tab of the spreadsheet read as follows: "[t]hese cases involve various local organizations in the Tea Party movement [that] are applying for exemption under 501(c)(3) or 501(c)(4)."¹³⁵ The BOLO spreadsheet directed agents to send Tea Party applications to Group 7822 and specified that Elizabeth Hofacre was the coordinator. A similar "Tea Party" entry remained on every subsequent version of the BOLO spreadsheet until July 2011.

During that time, EO Determinations employees also screened incoming applications using words related to the Tea Party, such as "Patriots" and "9/12." As a result of these practices, every incoming application from a Tea Party or related conservative organization was sent to Group 7822 for further review -- whether or not it reflected potential political campaign intervention -- which ultimately resulted in heightened scrutiny and extended delays.

The versions of the BOLO spreadsheet that were circulated in 2010 and 2011 also contained entries describing "Progressive" applicants on the TAG Historical tab of the spreadsheet, as well as "ACORN Successors" on the Watch List tab of the spreadsheet. (See Section V(C).)

Paz and Lerner, who comprised upper-level EO management in Washington, D.C., claimed that they were unaware of the "Tea Party" BOLO spreadsheet entry until July 2011. As managers who were ultimately responsible for how the approximately 300 employees in EO Determinations reviewed incoming applications, this represents another significant management failing. Lerner, in particular, demonstrated a lack of understanding about how EO Determinations employees performed their day-to-day jobs, which hampered her ability to effectively manage EO.¹³⁶

Following a meeting in July 2011, Lerner directed that the "Tea Party" BOLO criteria be changed to neutral language that identified activities of applicants, instead of policy positions or names of specific organizations. Although this successfully removed the inappropriate criteria that had been on the BOLO spreadsheet for almost a year, as discussed below, this ultimately resulted in a broader class of applicants across the political spectrum being flagged, delayed, and scrutinized.

The neutral criteria did not last for long. In January 2012, EO Determinations Group Manager Steve Bowling modified the BOLO spreadsheet to include policy terms intended to capture incoming applications from Tea Party organizations, and organizations affiliated with the Occupy Wall Street movement. Thomas approved these changes, as they did not identify any organizations by name. However, TIGTA determined -- and we agree -- that the January 2012 BOLO spreadsheet entry was also inappropriate.¹³⁷

Lerner and Paz again claimed that they were not aware of the problematic change on the BOLO spreadsheet until several months later. At that point, Lerner and Paz corrected the criteria and implemented new procedures that required all BOLO spreadsheet changes to be approved by Thomas. These events illustrate yet another failing of management: neglecting to oversee a process that they knew was wrought with problems, and only implementing controls after more damage had been done.

Carter Hull developed the two test cases, but took eight months to draft memos containing his findings. Those findings were then subjected to a variety of reviews from Elizabeth Kastenberg, a Tax Law Specialist in EO Technical, in January 2011, Judith Kindell, a Senior Technical Advisor to the EO Director, in April 2011, and eventually staff of the Office of the Chief Counsel in August 2011. By the time Kindell reviewed Hull's recommendations in April 2011, the initiative to work the two test cases was already more than one year old. Kindell expressed neither agreement nor disagreement with Hull's views, but simply recommended an additional round of review by the Office of the Chief Counsel. The Office of the Chief Counsel, in turn, recommended further factual development of the organizations' activities. Consequently, the IRS was not much closer to reaching resolution on the two test cases in August 2011 than it had been in April 2010.

It appears that only Cindy Thomas recognized that reliance on development of the two "test cases" alone was misplaced and that a more comprehensive plan was needed to move the applications that were forming a backlog in EO Determinations. Thomas told Paz in October 2010 that "we are just 'sitting' on these applications" and that "we need to coordinate these cases as a group . . ."¹³⁸ Thomas asked Paz to meet with her "to discuss the approach that is being used and come up with a process so we can get these cases moving. . . ."¹³⁹ Instead, Paz assured her that the test cases would be resolved soon, since Kindell would review Hull's recommendations.¹⁴⁰

Thomas's concerns, coupled with a lack of results from Hull's efforts to resolve the test cases, and the mounting backlog of undecided applications, should have prompted Paz, at some point in the continuum between April 2010 and August 2011, to look for another solution for developing the guidance required by EO Determinations to resolve the political advocacy applications. Instead of heeding the call sounded by Thomas in October 2010, Paz simply elected to press on with development of the test cases. As an added measure, Paz enlisted the assistance of yet another reviewer, Kindell, who was generally regarded as a slow worker. Indeed Paz herself told the Committee that Kindell "had a reputation of having difficulty with deadlines and taking a lengthy period of time on cases."¹⁴¹ Paz's decision to continue with the test cases and involve Kindell caused months of additional delays and never yielded any useful guidance that could be passed on to EO Determinations.

At the time of the July 2011 meeting, many of the Tea Party applications were nearly a year-and-a-half old. Furthermore, the two test cases were nowhere near completion after 15 months of effort by Hull, Kastenberg and Kindell. Amid this backdrop, Lerner concluded, and Paz concurred, that the IRS should continue with the plan to develop the test cases. Lerner also concurred with Kindell that the recommendations on the test cases should be reviewed by the Office of the Chief Counsel, an organization known for taking substantial periods of time to respond to requests for assistance.¹⁴²

Additionally, Lerner agreed with her staff's recommendation that EO Technical prepare a guidesheet containing information and directions that would help EO Determinations agents process the potential political advocacy applications. Lerner also directed that the name "Tea Party" be removed from the BOLO list, a move that did nothing to help get the political advocacy applications resolved. In fact, the Lerner-directed name change in the BOLO from "Tea Party" to "Advocacy Orgs." only exacerbated the backlog by enlarging the universe of applications being systematically selected and placed on hold in the advocacy inventory from just Tea Party applications to organizations of every political (and in some cases non-political) stripe.

Lerner's decisions belie a lack of concern over the mounting numbers of political advocacy applications and their increasing age. Her decision to proceed with a guidesheet was, at best, a band-aid solution for the escalating number of unresolved political advocacy applications.

Committee staff found little evidence of further active involvement by Lerner in the matter of the political advocacy applications until February 2012. This may have reflected Lerner's belief that her July 2011 management directives were sufficient to resolve the mounting backlog and alleviate the long delays endured by many groups. In February 2012, the media started reporting on Tea Party and other political advocacy groups that received burdensome development letters. Spurred by these media reports and by complaints from constituents, Congressional interest in the IRS's handling of Tea Party and political advocacy applications also began to collect momentum. (See section IV(C).)

Both Lerner and Paz were caught unaware by these media reports and Congressional inquiries. Paz told Committee staff that "[e]veryone I think sort of became aware of it at the same time because of the press coverage. We all saw the letters through the press coverage."¹⁴³ The fact that Lerner and Paz were made aware by media reports that EO Determination employees were sending inappropriate and sometimes intrusive development letters to Tea Party and other political advocacy groups demonstrates their lack of management oversight regarding the processing of these applications, a serious abdication of their responsibilities as the senior managers within EO.

Thomas asked that Paz assign someone knowledgeable to triage the nearly 160 backlogged political advocacy applications then awaiting development and decision in EO Determinations. While the idea to perform a triage of the applications was a precursor to the 2012 "bucketing" exercise that actually resulted in the resolution of a number of applications, unlike that later effort, this one was seriously under-supported by EO management.

Paz determined that Hillary Goehausen would perform the triage with assistance from Justin Lowe, a Tax Law Specialist in EO Guidance, and would review the applications in an electronic repository referred to as "TEDS" (Tax Exempt Determination System). At the time of this determination, Hillary Goehausen was relatively new to the IRS, having been hired as a Tax Law Specialist in EO Technical in April of that year. Accordingly, Paz assigned a relatively junior employee to undertake this important review. Unfortunately, the entire application package with supporting documents was not in TEDS so, for many of the applications, Goehausen reviewed an incomplete record. While Goehausen appears to have done a credible job with the limited information that she had to work with, her recommendations on the applications did not carry the level of certainty that Thomas required to actually begin rendering decisions. Paz described Goehausen's recommendation to Committee Staff as follows: "[s]o I believe her advice was caveated that before Determinations . . . issued a letter they should look and see if there was anything that had come in subsequently that . . . could perhaps change that answer."¹⁴⁴ Accordingly, Thomas found the recommendations to be of little or no use.

Had this triage been properly supported with additional staff to assist Goehausen, and had she reviewed the entire record instead of just a part, the recommendations for each application would have been more useful to Thomas. The triage presented Paz with a prime opportunity to bring some of these applications to resolution months, and in some cases years, before they were ultimately decided. Instead, Paz allowed the opportunity to slip away by inadequately staffing the initiative and further limiting the review to an incomplete set of records. Failure of this initiative contributed to the growing backlog of political advocacy applications and the mounting delays experienced by applicants.

It does not appear that management made any attempt to resume the process of completing the guidesheet again until February 2012. At that time, Lerner was called to Capitol Hill to explain to Congressional staff concerns about inappropriate and sometimes intrusive development letters received by constituents of a Congressman. During her meeting with Congressional staff, Lerner offered that EO had developed a guidesheet. Congressional staff requested a copy. Since development of the guidesheet had effectively ceased in November 2011, Lerner sought to expedite its completion so that she could comply with the request by Congressional staff. However, the guidesheet was never completed, as it was eventually superseded by a decision to instead train EO Determinations staff in May 2012 on processing political advocacy applications. Allowing development efforts on the guidesheet to simply stop in November 2011 represented yet another serious lapse in oversight by EO management.

Development of the guidesheet itself was an abject failure and again demonstrated the seeming indifference of EO management to finding a processing solution that would bring the political advocacy applications to resolution. As noted above, development of the guidesheet commenced in July 2011 and was terminated in May 2012. Over that period of time, and despite numerous attempts, staff of EO Technical with assistance from staff of the Office of Chief Counsel was unable to deliver a written guide on processing political advocacy applications that could be used by non-attorney EO Determination agents. EO management's inability to harness its resources to produce a solitary deliverable on a subject for which EO is a source of authority further demonstrated its lack of competence.

While Thomas's idea to form the Advocacy Team was well-intentioned, unfortunately, she failed to properly manage its activities. Instead, she entrusted that responsibility to Steve Bowling, a first-line manager, and Stephen Seok, an EO Determinations employee, who both proved wholly inadequate for the task. Under the direction of Bowling and Seok, the Advocacy Team failed to bring a single case to resolution until the "bucketing" exercise of May 2012. However, the Advocacy Team will be most remembered for its attempts to extract extraneous information from applicants through incredibly burdensome and onerous development letters. A share of the blame for the failure of the Advocacy Team must also go to EO Technical, which was responsible for providing technical guidance to the Advocacy Team. It is unclear to what extent, if any, EO Technical actually provided guidance to the Advocacy Team. What is clear is that EO management exercised little or no coordination and oversight over the activities of the Advocacy Team, thereby allowing it to issue oppressive development letters until that practice was halted in February 2012 by Lois Lerner.

Upon getting a report back from Marks, Miller approved her suggestion to perform a "bucketing" exercise where a team of EO Technical Tax Law Specialists and EO Determinations agents scrutinized each application and its supporting documents to identify the applications that could be readily approved, those that required minor development before approval, and those that required further development. As a consequence of the bucketing exercise, a significant number of the Tea Party and other political advocacy applications were finally decided.

While the bucketing exercise was the first successful attempt to process some of the political advocacy applications, it came too late for many groups that had waited years and eventually ceased operating because they lacked approved tax-exempt status from the IRS. Moreover, the "bucketing" exercise did not resolve all backlogged political advocacy applications, as the IRS informed Committee Staff that 14 percent of the 298 political advocacy cases identified by TIGTA remained unresolved in March 2014. As of April 2015, 10 of these applications were still pending resolution. A number of those applications date back to 2010. Indeed, the Albuquerque Tea Party, one of the original test cases assigned to Carter Hull in April 2010, was still awaiting a determination as of April 2015. Accordingly, while substantial progress has been made since 2010 to reduce the backlog of political advocacy applications, IRS management has not yet been able to bring all of these applications to closure.

Indeed, Committee Staff found little to suggest that EO management was concerned with the concept of customer service. Rather, EO management's focus was steadily centered on taking whatever actions it felt necessary to develop applications with the goal of obtaining sufficient information to support decisions (a goal that it has yet to achieve for some applications), even if that goal took years to achieve. While no one can fault EO management's desire to "get it right," the difficulty was that EO management struggled to find a method of doing so, even with multiple rounds of detailed development letters spanning over a number of years. Moreover, other than Cindy Thomas, EO management did not appear to be concerned with how its processing of applications might adversely affect the operations of the organizations awaiting the IRS's determination.

The IRS's treatment of the two test cases illustrates its customer service failings. The application for American Junto was closed in 2012 for failure to respond to a development letter. More accurately, the IRS sent American Junto three sets of development letters over a two-year period which caused its founders to give up on the notion of securing tax-exempt status and dissolve the organization. In an interview with a news agency, one of the founders of the group stated that "[w]e never got it off the ground . . . and the IRS is a large reason for that."¹⁴⁶ As of April 2015, the second test case, Albuquerque Tea Party, was still awaiting a decision from the IRS on its application which it first filed in December 2009.

EO Technical Group Manager Steven Grodnitzky told Committee Staff the following:

Cindy Thomas told Committee Staff that the work plan goal for closing applications for exemption under 501(c)(4) was 158 days, or approximately 5 months.¹⁴⁸ Holly Paz was asked if three or four years between receipt of an application and decision was normal. Paz stated to Committee Staff that "[i]t's not the norm."¹⁴⁹ However, Paz also told Committee Staff that she was aware of instances in which applicants waited four or five years for a decision on their applications for tax-exempt status.¹⁵⁰

EO managers and employees routinely ignored the established IRM guidelines, which specify deadlines at various stages throughout the application process. For example, when an EO Determination employee decides that more information is needed about an application, the IRM allows five workdays to prepare and mail a development letter to the applicant.¹⁵¹ Numerous Tea Party and political advocacy organizations heard nothing from the IRS for a year or more while their applications were pending, and then received a lengthy development letter seeking more information. This is but one example of EO employees failing to follow established deadlines and managers failing to enforce them.

When asked about the long delays experienced by Tea Party and other political advocacy groups seeking tax exemption, Nikole Flax stated her views as follows:

      Disposition of Centralized Political Advocacy Applications

While the EO Determinations offices were geographically dispersed, so was the management chain. For example, Sharon Camarillo, an EO Determinations Area Manager from 2002 to 2010, had responsibility in 2010 for eight Groups, five of which were located in Cincinnati, two of which were located in El Monte, California, and one of which was located in Sacramento, California. For a portion of the time Camarillo was an Area Manager, she was located in Los Angeles. In 2010, she was located in El Monte, California, together with two of the eight Groups that she supervised. Camarillo reported to Cindy Thomas, Program Manager of EO Determinations, who was located in Cincinnati. In 2010, Camarillo oversaw Group 7822 located in Cincinnati -- the Emerging Issues Group managed by Steve Bowling, which was responsible for the processing of Tea Party and other political advocacy applications.

In addition to the dispersal of offices, staff and managers located throughout the country and time zone variances between offices, communications and coordination within EO Determinations may also have been affected by telework. For example, Gary Muthert, a screener in the Screening Group headed by John Shafer, told Committee Staff that he worked from home four days a week. Shafer, his manager, also worked from home two days a week. Steve Bowling, another Group Manager told Committee Staff that he worked from home 2 to 3 days a week. Shafer indicated that every one of the 13 screeners who worked in the screening Group worked from home up to a maximum of four days per week, in accordance with the terms of a collective bargaining agreement. Regarding all other employees in EO Determinations, Shafer told Committee Staff the following:

 

Location of EO Determinations Employees

 

Who Processed and Supervised Tea Party

 

Applications in 2010

 

 

 

Telework unquestionably serves a legitimate purpose. However, the pervasiveness of it in an office as fractionated as EO Determinations could only impede communications and coordination among the staff and managers.

Sharon Camarillo was an area manager in EO Determinations for 8 years before she retired in December 2010. In that role, Camarillo oversaw several Groups of EO employees who evaluated applications for tax-exempt status that were submitted to the IRS, including the Technical Screening Unit, which was responsible for making the initial assessment of incoming applications. Yet Camarillo told Committee Staff that she "had no technical training in the area of Exempt Organizations, so I was not able to address technical issues."¹⁵⁸

As a result of her lack of technical training, Camarillo was unable to provide feedback on substantive issues and instead deferred to other managers within EO. An example of Camarillo's deference occurred in February 2010, when the manager of the Technical Screening Unit, John Shafer, brought the first Tea Party application to her attention. Camarillo explained that she "simply reiterated what John had said and forwarded it on" to her manager, Thomas, "[b]ecause I was so untechnical, I did not have the EO background."¹⁵⁹

In the culture of the IRS organization, it was not only acceptable for an employee who had no technical knowledge to be elevated to a managerial position, it was also acceptable for an employee to remain in that position for nearly a decade without completing any meaningful technical training.

Lerner grew more concerned about the Tea Party applications in early 2011. On February 1, 2011, Michael Seto, the Acting Manager of EO Technical, sent an updated SCR table to Lerner. She responded, "Tea Party Matter very dangerous -- This could be the vehicle to go to court on the issue of whether Citizen's United overturning the ban on corporate spending applies to tax exempt rules." Lerner indicated that Chief Counsel and Judy Kindell needed to be involved with these applications and that they should not be handled by Cincinnati.¹⁶⁵

The following day, Paz advised Lerner that Carter Hull was supervising the applications handled by Cincinnati at every step and that no decision would be made until EO Technical completed the review of the 501(c)(3) and 501(c)(4) applications. Lerner noted that "even if we go with a 4 on the Tea Party cases, they may want to argue they should be 3s, so it would be great if we can get there without saying the only reason they don't get a 3 is political activity."¹⁶⁶

A few months later, Lerner convened a meeting to further discuss the Tea Party and other advocacy applications. In preparation for the meeting, Justin Lowe developed a briefing paper for Lerner.¹⁶⁷ The paper indicated that EO Determinations Screening identified as an "emerging issue" a number of 501(c)(3) and (c)(4) applications by organizations "advocating on issues related to government spending, taxes and related matters." These applications were being sent to a specific group if they met any of the following criteria:

• "Tea Party," "Patriots," or "9/12 Project" is referenced in the case file.

• Issues include Government spending, Government debt, or taxes.

• Education of the public via advocacy/lobbying to "make America a better place to live."

• Statements in the case file criticize how the country is being run.

• More than 100 cases that meet these criteria have been identified so far, but only two 501(c)(4) organizations have been approved.

• EO Technical is assisting EO Determinations by reviewing files and editing development letters; and

• EO Determinations requests guidance on how to process the cases to ensure uniformity.¹⁶⁸

Although Grant directly supervised Lerner from December 2010 through May 2013, they had "relatively minimal interaction" with each other.¹⁷⁴ Grant first became aware of the allegations that the IRS was treating Tea Party applications differently than other applicants in February or March of 2012, when the IRS began receiving letters from Congress.¹⁷⁵ He also asserted that Lerner did not tell him about the July 5, 2011 meeting about Tea Party applications until April of the following year.¹⁷⁶

Lerner's second level of management was the Deputy Commissioner for Services & Enforcement, a position held by Steven Miller from late 2009 through November 2012, when he became Acting Commissioner of the IRS. As Deputy Commissioner for Services & Enforcement, Miller oversaw the IRS's four primary operating divisions, including the TE/GE Division, and reported directly to the IRS Commissioner.¹⁷⁷ Lerner worked closely with Steven Miller on issues related to exempt organizations, sometimes bypassing Ingram and Grant, as Miller had previous experience in that area and had served as the Director of EO in the early 2000s.¹⁷⁸

Miller generally found that Lerner was "pretty good about elevating" important issues to him.¹⁷⁹ But he claims that he did not become aware of how the IRS was handling Tea Party applications until early 2012, when he saw accounts in the press of the IRS asking overly burdensome questions of these applicants, including requests for donor information.¹⁸⁰ Miller discussed these issues with Commissioner Shulman while Shulman was preparing to testify before Congress in March 2012. Around that time was also the first point when Shulman became aware of the pending Tea Party applications.¹⁸¹

Miller became increasingly concerned with how the applications were being handled and, as Ingram explained, during a meeting with senior staff "express[ed] great frustration, and I'm putting that mildly, that . . . he wasn't . . . getting a complete description of what was going on[.]"¹⁸² Based on the information he received from Lerner, Miller "was not comfortable responding to the congressional [requests] that he had at that point."¹⁸³ To alleviate these concerns, in April 2012 Miller ordered Nancy Marks to visit Cincinnati and find out what was going on, then report to him directly. Lerner was notably absent from the group of employees sent to Cincinnati. Around that time, Miller informed Shulman of Marks' planned visit and also told Shulman that TIGTA was starting a review.¹⁸⁴

On May 3, 2012, Marks briefed Miller on the key findings from her trip to Cincinnati, which included:

• The use of inappropriate and sometimes intrusive development questions resulted from a lack of guidance and training by EO Technical to EO Determinations;

• There were 250-300 political advocacy cases in the queue;

• EO Determinations agents used a "BOLO" list with "Tea Party" and "9/12" on it as screening criteria but that the problem with using such criteria had been "fixed" earlier;

• Among the political advocacy cases in the queue were cases on both sides of the political spectrum;

• TIGTA was reviewing EO's treatment of the cases; and

• Marks found no evidence of political bias.¹⁸⁵

After May 2012, Miller asked for periodic updates about the status of political advocacy applications and monitored their processing, keeping track of the number of applications that were still open. Miller "periodically" gave Shulman updates about the political advocacy applications, telling Shulman, "[W]e've got people on it, we're moving cases, we're putting determinations out; and [giving] the impression that, you know, the lag issue of approval was being worked on."¹⁸⁸

Upon reflection, Miller believes that Lerner "under-managed" the political advocacy applications and should have made him aware of them sooner: "Certainly, before May [2012] I should've been aware that she found [problems with the handling of political advocacy applications]."¹⁸⁹

The issue first rose to Wilkins when the Office of Chief Counsel was asked to review a guidesheet that was initially prepared by EO Technical.¹⁹⁰ Wilkins skimmed the guidesheet but never provided substantive comments or edits. He understood that EO Determinations employees would use the guidesheet to decide if applicants were engaging in political campaign intervention, but he did not know that the guidesheet was spurred by uncertainty over how to handle the Tea Party applications.¹⁹¹ By that point, other attorneys in the Office of Chief Counsel had been assisting with political advocacy applications for nearly a year -- but no one had informed Wilkins of their work.¹⁹²

As the most senior attorney available to IRS management, Wilkins could have perhaps assisted with the legal questions posed by the political advocacy applicants if Lerner -- or any other manager within the TE/GE chain -- sought his help. Instead, Wilkins first learned that Tea Party organizations had applied for tax-exempt status, and that the IRS had screened organizations for full development based on their names, when he read the draft TIGTA report in April 2013.¹⁹³

Cindy Thomas, who oversaw EO Determinations, explained that some types of applications were still sent to particular groups of employees for processing, even in the absence of a formal BOLO:

High-level IRS managers, including Miller, Lerner and Downing, spent the next three years attempting to devise a new approach that would enable the IRS to effectively evaluate allegations related to political campaign intervention of tax-exempt organizations. Although these managers understood the importance of the issue and devoted significant time and resources to the project, they failed to put a new approach in place. As a result, from the end of 2010 until April 2014, the IRS did not perform any examinations of 501(c)(4) organizations related to impermissible political campaign intervention.

Lerner and others then prepared a few draft Q&As that could be posted to the IRS website to explain the effect of the holding on the IRS's enforcement of its regulations.²⁰⁵ The Q&As restated established law regarding the activities of tax-exempt organizations and explained that Citizens United did not address the requirements that Congress imposed on organizations as a condition of being tax-exempt.²⁰⁶ Ultimately, the IRS decided not to post any guidance about the case on its website though, as Ingram believed "it was sort of hard to explain why the IRS would be commenting on the FEC case in an affirmative way and also because all the other answers [in the Q&As] were already up on the Web in one format or another."²⁰⁷ Lerner also observed that "[t]his is the danger zone no matter what we say."²⁰⁸ The Q&As were provided to Commissioner Shulman and Steve Miller, so they could be prepared if the issue came up at a public event.²⁰⁹

Line employees in the EO Division were also aware of the Citizens United decision, independent of any notification by management. On the day after the decision was issued, an EO employee in Cincinnati forwarded Politico's analysis of the case to several of his colleagues, noting that it "[l]ooks like yesterday's Supreme Court ruling is going to result in more (c)(4)s engaging in political activities and the death of 527s."²¹⁰

Two EO Determinations employees in Cincinnati assessed the potential impact of Citizens United on incoming applications for tax-exempt status. In August 2010, a screener in EO Determinations noted that an incoming application "appears to be using a recently decided Supreme Court case, 'Citizens United v Federal Election Commission' which loosened some of the limits on for profit and nonprofit organizations with regard to political activities and expenditures."²¹¹ The screener then recommended forwarding the case to upper management based on "the current political climate and possible sensitivity of the application".²¹² The following month, an EO Determinations employee alerted a colleague about political contributions made by a potential applicant for tax-exempt status, which the employee believed were possible because of the Citizens United ruling.²¹³

The impact of the Citizens United ruling on the IRS would remain a topic of discussion throughout the agency during the next several years, as noted below.

At times, the IRS helped reporters understand the tax law and agency processes. The following examples occurred during the height of the 2010 election cycle:

• In August 2010, The Washington Post reporter Tim Farnam had contacted the IRS about campaign-related activity by 501(c)(4) and 527 organizations.²¹⁴ An employee in the media relations branch notified Ingram, Miller and Jonathan Davis, Commissioner Shulman's Chief of Staff, that employees in TE/GE provided existing data to Tim Farnam.²¹⁵The Washington Post published Mr. Farnam's story a few days later, which discussed how Citizens United "has indirectly thrust the Internal Revenue Service into the more prominent role of overseeing [campaign] expenditures."²¹⁶ The published article was circulated among IRS managers, including Lerner and Ingram.²¹⁷

• In September 2010, a reporter from the New York Times contacted the IRS about the operations of 501(c)(4) organizations after the Citizens United decision, and specifically, Crossroads GPS.²¹⁸ IRS press staff alerted Commissioner Shulman, Miller, Ingram, Lerner, and others about the expected story, noting, "One area raised as a concern are those groups that set up and function for a short period of time, and we are not aware of them until they file their return, well after their potential lobbying efforts and other activities are complete."²¹⁹ Ingram, Lerner and senior EO employee Judy Kindell spoke with the reporter on background, and Ingram provided a statement on the record that was drafted by Miller, Lerner, Ingram, and others.²²⁰ The reporter subsequently published an article focusing on political spending by 501(c)(4) organizations in the 2010 election, focusing on Crossroads GPS.²²¹ Ingram stated that the article "came out pretty well" and she opined that "the 'secret donor' theme will continue."²²²

Employees outside of IRS management also followed the media's coverage of this topic. Indeed, some staff-level employees in EO Determinations monitored the news and shared among themselves many of the same articles noticed by upper managers -- particularly the EO Tax Journal, which often compiled relevant stories from other media sources.²²⁴ A number of the EO Determinations employees who shared articles were responsible for reviewing and deciding incoming applications for tax-exempt status. Thus, employees at every level of the IRS were aware of the media's coverage of spending by tax-exempt organizations in the wake of the Citizens United ruling.

In addition to these 35 formal requests, members of Congress also spoke about political spending in floor speeches²²⁸ and made informal requests to the IRS, sometimes through staff.²²⁹ The continued interest by Congress ensured that the IRS -- and particularly its top managers -- stayed focused on these issues.

• In February 2011, Citizens for Responsibility and Ethics in Washington wrote to Commissioner Shulman asking the IRS to revoke the tax-exempt status of American Future Fund, Inc. The request was circulated among EO managers.²³⁰

• In March 2011 and September 2012, Lerner, Kindell and Treasury employee Ruth Madrigal corresponded directly with attorneys from the law firm of Adler & Colvin about proposed changes to the regulations for 501(c)(4) organizations. Lerner considered the possibility of meeting with the outside firm to discuss their proposals.²³¹

• In September 2011, Democracy 21 and the Campaign Legal Center wrote to Lerner to request an IRS investigation of the tax-exempt status of four organizations, including Crossroads GPS, alleging that the groups conducted impermissible amounts of political campaign intervention. Lerner forwarded the request to EO Exam and instructed that it be treated as a referral for examination. Lerner also informed the TE/GE Acting Commissioner, Joseph Grant, and Nikole Flax about the request and noted that it "also went to the Commissioner."²³²

• In February 2012, a tax practitioner contacted a local IRS office about an article titled "Is the IRS Attempting to Intimidate Local Tea Parties?" The request was flagged as practitioner "noise" and forwarded to management for their awareness, and was ultimately sent to Miller.²³³

• In December 2012, Democracy 21 and the Campaign Legal Center requested to meet with the IRS about its petition for rulemaking on candidate election activities by 501(c)(4) organizations. On January 4, 2013, the groups met with Lerner, Victoria Judson from the Office of Chief Counsel and Treasury employee Ruth Madrigal to discuss the proposal.²³⁴

By April 2013, EO and the Office of Compliance Analytics had prepared a detailed presentation on political spending in 501(c)(4) organizations.²⁴¹ As background information for the report, the authors noted:

In May 2013, EO and the Office of Compliance Analytics revised the presentation in advance of a May 7 briefing for then-Acting Commissioner Miller.²⁴⁴ The revised presentation, which was sent to Miller's office, made the following findings:

• The number of 501(c)(4)s reporting political campaign activities almost doubled from tax year 2008 through tax year 2010; and

• The amount of political campaign activities for large filers (defined as organizations with total revenue of more than $10 million) almost tripled from tax year 2008 through tax year 2010.²⁴⁵

The IRS took a step to address concerns about political campaign intervention by tax-exempt organizations on November 29, 2013, when it proposed regulations that would provide guidance to 501(c)(4) organizations on the types of political activities that would not be considered social welfare. After receiving more than 150,000 comments on the proposed regulations, on May 22, 2014, the IRS withdrew the regulations and stated that it planned to re-propose them after a thorough review of the submitted comments.²⁴⁷

As of the issuance of this report, the IRS has not proposed additional regulations or issued further guidance on this topic. However, the statements of Lerner and Miller, as well as the analytical work performed in 2013, make clear that the IRS has been working since 2010 to determine an appropriate response to external pressure following the Citizens United ruling.

V. THE IRS IMPLEMENTED A SPECIAL PROCESS FOR HANDLING CERTAIN TYPES OF APPLICATIONS

The "Touch and Go" or "TAG" Group (Group 7830) worked on applications that involved:

Over the course of time, the IRS identified many applications that met the TAG criteria. In an effort to catalog those applications so that screening agents could properly identify them, around 2002 or 2003, EO Determinations developed a TAG spreadsheet.²⁵³ The TAG spreadsheet identified the various TAG applications, explained the tax law issue presented in each application and provided further processing guidance to the EO Determinations agents.²⁵⁴ The TAG spreadsheet eventually was expanded to include a second tab that referenced TAG issues that were no longer encountered, but were of historical significance.²⁵⁵ When new entries were made to the spreadsheet, a "TAG alert" email was sent to EO Determinations agents. Starting in April 2007, copies of TAG alert emails were also sent to Thomas, EO Quality Assurance Manager Donna Abner and Washington D.C. EO attorney Ted Lieber, who was, "responsible for disseminating the information to others in D.C. should he deem it necessary."²⁵⁶

The TAG spreadsheet was used not only by the screeners but also by all EO Determinations agents.²⁵⁷ On occasion, an application presenting a TAG issue might slip through screening and not be identified as a TAG application.²⁵⁸ Ultimately, the application would be assigned to an EO Determinations agent who, in developing the facts surrounding the applicant's activities, would determine that those facts involved a potential fraudulent transaction, or a tax avoidance scheme, or that the applicant might have terrorist connections.²⁵⁹ In identifying the application as a TAG application, the agent would be guided by the descriptive information contained in the TAG spreadsheet. The agent would then send such an application to the TAG Group for work-up. Accordingly, it was considered important for all agents, not just the screeners, to have access to the TAG spreadsheet.²⁶⁰

Accordingly, Jon Waddell and Joseph Herr, Group Managers in EO Determinations (Groups 7830 and 7825 respectively), began creating a "Joint TAG/Emerging Issues Spreadsheet."²⁶⁷ The spreadsheet contained a tab for TAG applications encountered over the past 2-3 years, as well as tabs for Emerging Issues and a Watch List.²⁶⁸ Emerging Issues were defined as follows:

• Groups of applications for which there is no established case law or precedent

• Issues arising from significant current events (not disaster relief); and

• Issues arising from changes to tax law or other significant world events.²⁶⁹

In April 2010, Thomas determined that the joint issues spreadsheet then under development should also contain a tab for "consistency cases," which she described as applications "where we want to ensure consistent treatment . . . (these cases are not TAG or Emerging Issues). For example, a group ruling disbands and subordinates decide to apply for individual exemption -- we need to make sure they are worked/treated the same."²⁷² She also decided that EO Determinations agents and managers would be informed about the new spreadsheet during the June/July 2010 Continuing Professional Education (CPE) training sessions that they would be attending, and asked that the draft spreadsheet be completed and presented to her for review by the end of April 2010.²⁷³ Thomas suggested that the name of the spreadsheet be changed since it no longer was limited to just TAG issues, but she offered no suggestions for a new name.²⁷⁴

In accordance with Thomas's direction, Jon Waddell revised the "Joint Spreadsheet" to include tabs for TAG cases, Emerging Issues, Coordinated Cases, and a Watch List.²⁷⁵ Subsequently, on May 6, 2010, Elizabeth Hofacre, Emerging Issues Coordinator for Group 7825, sent a copy of the "joint issues" spreadsheet to her manager, Joseph Herr. The draft spreadsheet referred to "Tea Parties" as a sample entry under the Emerging Issues tab and directed agents to "[c]oordinate with group 7825."²⁷⁶

• Typically Applications Not Yet Received

• Issues are the Result of Significant Changes in Tax Law

• Issues are the Result of Significant World Events

• Special Handling is Required when Applications are Received.²⁸¹

The spreadsheet distributed by Hofacre also contained an entry for "Progressive" on the Tag Historical tab with the issue listed as "political activities." Further, the entry stated that the "[c]ommon thread is the word 'progressive.' Activities appear to lean toward a new political party. Activities are partisan and appear as anti-Republican. You see references to 'blue.'"²⁸⁴

In addition, the spreadsheet included a reference to "Acorn Successors" on the Watch List tab. The description stated that "[f]ollowing the breakup of ACORN, local chapters have been reforming under new names and resubmitting applications."²⁸⁵ Screeners were instructed to send these cases "to the TAG Group."²⁸⁶

On August 12, 2010, Hofacre distributed the first "BOLO" spreadsheet to EO Determinations agents in her capacity as Emerging Issues Coordinator. "Tea Party" applications were specifically identified under the Emerging Issues tab of the spreadsheet as follows: "[t]hese cases involve various local organizations in the Tea Party movement [that] are applying for exemption under 501(c)(3) or 501(c)(4)." The BOLO directed agents to send Tea Party applications to Group 7822 and advised that Hofacre was the coordinator.²⁸⁹ Jon Waddell provided Hofacre with the language for the Tea Party entry on the Emerging Issues tab.²⁹⁰

The BOLO spreadsheet distributed by Hofacre also contained an entry for "Progressive" on the Tag Historical tab with the issue listed as "political activities." Further, the entry stated that the "[c]ommon thread is the word 'progressive.' Activities appear to lean toward a new political party. Activities are partisan and appear as anti-Republican. You see references to 'blue.'"²⁹¹

For changes to the Emerging Issues tab, prior to May 17, 2012, suggestions were sent to the Emerging Issues Coordinator in Group 7822, who researched the matter and reported his/her conclusions to the Manager of Group 7822. The Manager of Group 7822 then consulted with the Area Manager and/or the EO Determinations Program Manager for a final decision. The Emerging Issues Coordinator then emailed changes to EO Determinations agents and managers.²⁹³

Subsequent to May 17, 2012, this process changed. On that date, Holly Paz, Director of Rulings and Agreements, issued a memorandum requiring that all changes to the BOLO spreadsheet tabs (Abusive Transaction and Fraud Applications (TAG), Emerging Issues, Coordinated Processing applications and Watch List applications) receive the approval of the Group Manager of the Emerging Issues Group, the EO Determinations Program Manager, and the Director of Rulings and Agreements.²⁹⁴

VI. APPLICATIONS SUBMITTED BY TEA PARTY ORGANIZATIONS WERE SYSTEMATICALLY IDENTIFIED, CENTRALIZED AND SUBJECTED TO HEIGHTENED SCRUTINY BY THE IRS

Shafer, in turn, forwarded Koester's email to Sharon Camarillo, his Area Manager, who sent it to Cindy Thomas, asking that Thomas "let 'Washington' know about this potentially politically embarrassing case involving a 'Tea Party' organization."³⁰³

Grodnitzky assigned the two Tea Party applications to EO Technical Group 2, managed by Ronald Shoemaker.³¹⁴ Shoemaker, in turn, assigned the two applications to Carter (Chip) Hull, a Tax Law Specialist in Group 2. Hull, a veteran of the IRS since 1965, was considered to be a subject-matter expert on 501(c)(4) organizations.³¹⁵ Grodnitzky directed Shoemaker to prepare an SCR on the Tea Party applications.³¹⁶ The Tea Party cases met the criteria for preparation of an SCR because the applications were likely to attract media attention. Accordingly, Hull prepared the first SCR on the Tea Party applications which is dated April 19, 2010. In the SCR, Hull noted that the applications from the Albuquerque Tea Party and the Prescott Tea Party were "[l]ikely to attract media or Congressional attention." Hull further indicated that "[t]he various 'tea party' organizations are separately organized but appear to be part of a national politically conservative movement that may be involved in political activities. The 'tea party' organizations are being followed closely in national newspapers (such as the Washington Post) almost on a daily basis."³¹⁷

Inclusion of the Tea Party reference in the Emerging Issues tab of the BOLO spreadsheet shaped the manner in which the Tea Party applications were processed by EO Determinations over the next few years. Specifically, applications identified as originating from Tea Party groups were then "centralized" by sending them to the Emerging Issues Group (7822). There they were subjected to full development for possible political advocacy.³²¹

In order to identify what was, in fact, a "Tea Party" application, the screening agents and secondary screeners in EO Determinations developed screening criteria. If an application met the screening criteria, it was sent to Group 7822 for centralized handling as a Tea Party application. John Shafer summarized the criteria as follows:

During Elizabeth Hofacre's tenure as Emerging Issues Coordinator in Group 7822 (May 2010 to October 2010), screeners sometimes sent to Group 7822 applications received from organizations on the left of the political spectrum that involved possible political campaign intervention.³²⁵ Hofacre returned these applications to the screeners or placed them in general inventory and they were subsequently assigned to any EO Determinations agent, since they did not meet the criteria for a Tea Party application.³²⁶ Similarly, Hofacre returned to the screeners or to general inventory applications received from groups on the right of the political spectrum that did not meet the Tea Party criteria.³²⁷ Applications so returned were assigned, processed and determinations were made on them.³²⁸ In contrast, and as described more fully in succeeding sections, applications identified as "Tea Party" applications by EO Determinations and centralized in Group 7822 were subjected to long delays, multiple reviews, and unnecessarily burdensome development.

On July 11, 2011, Ronald Bell sent the revised BOLO spreadsheet to EO Determinations employees in accordance with his responsibilities as the Emerging Issues Coordinator.³⁴⁴ While Bell informed recipients of the BOLO Alert email to be on the lookout for applications for exemption under 501(c)(3) for "green" energy, his cover email failed to apprise recipients of the changes made to the Emerging Issues tab.³⁴⁵

Similarly, Cindy Thomas understood the July 11, 2011 change directed by Lerner from "Tea Party" to "advocacy org." in the Emerging Issues tab to be no more than a name change.³⁴⁹ She did not feel that the name change necessitated any revisions to the way EO Determinations was processing cases that involved political advocacy issues. Thomas told the Committee:

Thomas herself believed that all Tea Party applications involved political activity and required full development. She stated to the Committee as follows:

The references to "political action type organizations involved in limiting" government and "educating on the constitution and bill of rights" were attempts to describe the agenda of the Tea Party without using the term "Tea Party."³⁶⁴ The reference to "$ocial economic reform/movement" was "code" for the Occupy organizations.³⁶⁵ Bell queried Bowling why it was necessary to include the "$ocial economic" reference in the Emerging Issues tab as well, but Bowling responded that organizations other than the Occupy groups were advocating a similar position.³⁶⁶

Subsequently, on May 15, 2012, Thomas sent Paz and Lerner another copy of the BOLO spreadsheet, including the Emerging Issues tab that reflected the changes made on January 25, 2012.³⁶⁹

On May 10, 2012, Paz asked Thomas to explain the process by which the Emerging Issues tab was amended.³⁷⁴ Thomas informed Paz that suggestions for additions were sent to the Emerging Issues Coordinator who then consulted with the Area Manager and/or the Program Manager to determine if the matter would be added to the Emerging Issue tab.³⁷⁵

On May 17, 2012, Paz issued a Memorandum to Thomas advising that any changes to the Emerging Issue tab would now require the approval of the Emerging Issues Group Manager, the EO Determinations Program Manager, and the Director of Rulings and Agreements.³⁷⁶

In June 2012, 2012, the BOLO Spreadsheet was revised.³⁷⁷ The Emerging Issues tab stated as follows:

This description remained in the Emerging Issues tab until April 2013 when the "Disposition of Emerging Issue" entry was changed to reflect that the cases should be sent to Group 7823.³⁷⁹ Shortly thereafter, on June 20, 2013, the IRS suspended the use of the BOLO spreadsheet.³⁸⁰

VII. THE PROCESSES USED BY THE IRS TO WORK THE TEA PARTY APPLICATIONS WERE INEFFICIENT, CUMBERSOME, INVOLVED MULTIPLE LEVELS OF REVIEW, AND WERE PLAGUED BY DELAY

All other applications received from Tea Party organizations remained in EO Determinations and in late April 2010, were assigned to Elizabeth Hofacre, the Emerging Issues Coordinator in EO Determinations, Group 7822.³⁸⁵ In mid-May 2010, Steve Grodnitzky, Acting Manager of EO Technical, directed Hull to share with Hofacre the development letters Hull had prepared for the Albuquerque and Prescott Tea Party applications.³⁸⁶ Grodnitzky told Hull to explain to Hofacre how the questions had been tailored to the facts of each application, lest Hofacre simply copy the development letters. In carrying out this directive, Hull advised Hofacre to send each of her draft development letters to him, together with copies of the applications and supporting documents.³⁸⁷ Under the process imposed by Hull, Hofacre could not release the development letters to the applicants without Hull's concurrence.³⁸⁸ When Hofacre began to receive responses to some of the development letters, Hull instructed Hofacre to send those responses to him, as well.³⁸⁹

Hofacre described this process as highly unusual.³⁹⁰ In Hofacre's experience, EO Determinations agents would sometimes contact EO Technical specialists, with prior management approval, to pose a question or two.³⁹¹ Typically, EO Determinations agents had broad discretion in processing applications and could make recommendations regarding the ultimate disposition of an application, or whether additional information was required of the applicant.³⁹² This was not the case for the Tea Party applications.³⁹³ With regard to those applications, Hofacre was not permitted by Hull to exercise any discretion regarding the applications.³⁹⁴ Hofacre felt that for several of the Tea Party applications, she had sufficient information in her possession to make a recommendation to either approve or deny the application, or to request additional information.³⁹⁵ However, she was unable to do so, as Hull effectively controlled all the decisions regarding how the Tea Party applications were handled.³⁹⁶

In October 2010, Cindy Thomas grew concerned with the efficacy of this process under which Hull reviewed each determination letter and informed Holly Paz, then Manager of EO Technical, as follows:

In October 2010, Hofacre left EO Determinations, in large part due to her frustration over a lack of "autonomy" in the processing of the Tea Party applications and because of her concern that these were "high-profile" applications that could have "imploded" at any time.⁴⁰⁵ When Hofacre left EO Determinations, only a few development letters had been sent out on the 40 Tea Party applications then pending in EO Determinations.⁴⁰⁶ A substantial number of the applications either remained unworked, or had been reviewed by Hofacre and draft development letters had been prepared, but not released.⁴⁰⁷ This was due in large measure to the requirement that Hull review each application, development letter, and response, a process that was necessarily laborious and which was delayed, for unexplained reasons, in August 2010 when Hull ceased communicating with Hofacre.

Upon the assumption of his new duties, Bell was also apprised by Steve Bowling, his Manager, that EO Technical was preparing guidance for EO Determinations to use to process the Tea Party applications.⁴¹⁰ Bell interpreted this to mean that he should perform no work on the Tea Party applications until receiving that guidance from EO Technical.⁴¹¹ Thus, in lieu of reviewing Tea Party applications and preparing draft development letters as Hofacre had done, Bell worked on auto-revocation cases.⁴¹²

In November 2010, Hull's three-month period of inaccessibility appears to have come to an end when he contacted Bell and requested that Bell send him draft development letters for his review.⁴¹³ Bell informed Bowling of Hull's request and Bowling, in turn, informed Sharon Camarillo, the Area Manager.⁴¹⁴ Bowling told Camarillo that "Ron is getting phone calls on these cases and his typical answer is 'the case is under review.'"⁴¹⁵ Camarillo sent Bowling's email to Thomas who advised that she would follow up with Holly Paz for a status report.⁴¹⁶

Thomas called Paz and discussed with her EO Technical's plan for dealing with the Tea Party applications.⁴¹⁷ Paz told Thomas that EO Technical was writing a briefing paper on the two applications under its review and would soon raise the issues in these applications with Judith Kindell, Senior Technical Advisor to Lois Lerner.⁴¹⁸ After her conversation with Paz, Thomas advised Bowling and Camarillo as follows:

In March 2011, Thomas requested of Michael Seto that EO Technical develop an "action plan" for processing the Tea Party applications.⁴²¹ In reply, Seto provided Thomas with an update on the two "test cases" being worked by Hull.⁴²² Thomas passed this information to Bowling, stating:

Steve Bowling's failure to communicate Thomas's directives of November 2010 and March 2011 to Bell regarding the processing of the Tea Party applications, and his neglect to take any measures to ensure that Bell was actually working those applications, resulted in Bell focusing almost exclusive attention on auto-revocation cases from October 2010 to November 2011.⁴²⁴ A factor further contributing to Bell's disregard of the Tea Party applications was that he received no guidance from EO Technical on what to do with those applications during his tenure as Emerging Issues Coordinator. When the screening group sent Bell an application from a Tea Party group during this period of time, he performed secondary screening on the application to ensure that it was, in fact, a Tea Party application.⁴²⁵ If it was, he placed the application in a file cabinet and returned to his work on auto-revocation cases.⁴²⁶ Aside from performing the secondary screening function, Bell did not review the Tea Party applications and did not prepare any development letters from October 2010, when he assumed responsibility as Emerging Issues Coordinator, until November 2011, when Stephen Seok replaced Bell as Emerging Issues Coordinator.⁴²⁷ Instead, the applications simply sat in a file cabinet during this period of time.⁴²⁸

Accordingly, miscommunications at the first level of management in EO Determinations between Bowling and Bell, coupled with a failure of EO Technical to provide guidance on how to develop the Tea Party applications, caused those applications to remain unworked in Cincinnati for over a year.

Hull's case notes for one of the two "test cases" assigned to him, the Albuquerque Tea Party, show that he completed development of the application on July 8, 2010 when he received the Albuquerque Tea Party's articles of incorporation.⁴³⁰ Hull's next entry in the case history is dated January 10, 2011, some six months later.⁴³¹ On that date, Hull noted that he had completed a memorandum for the file (memo).⁴³² In the two-page memo, Hull concluded that the Albuquerque Tea Party should be granted tax-exempt status.⁴³³ It is unclear why it took Hull six months to prepare the two page memorandum.

On the following day, January 11, 2011, Hull submitted the memo to his reviewer, Elizabeth Kastenberg, a Tax Law Specialist in EO Technical, Group 2.⁴³⁴ Kastenberg reviewed the memo and recommended that it be sent to Judith Kindell, Senior Technical Advisor to Lois Lerner, for her consideration.⁴³⁵ Kindell regarded herself as the "go to" person for issues relating to political campaign intervention by tax-exempt entities.⁴³⁶

In accordance with Kastenberg's recommendation, on March 24, 2011, Hull forwarded the memo to Kindell.⁴³⁷ Around this time, Hull completed a draft denial of the other "test case" assigned to him, an application for 501(c)(3) status from a conservative organization called American Junto.⁴³⁸

Hull and Kastenberg met with Kindell on April 6, 2011, nearly three months after Kastenberg initially recommended consulting with Kindell, to discuss both the memo and the draft denial letter.⁴³⁹ During the meeting, Kindell raised a question whether American Junto was organized primarily for private benefit rather than for a tax-exempt purpose.⁴⁴⁰ Consequently, Kindell recommended that the issue of private benefit be developed and that the memo and draft denial letter be sent to the Office of the Chief Counsel so as to secure its views.⁴⁴¹ Hull followed up on Kindell's recommendation and sent a development letter to American Junto on April 27, 2011.⁴⁴² Subsequently, he sent his draft approval memo for the Albuquerque Tea Party to the Chief Counsel's Office on May 25, 2011,⁴⁴³ followed on July 19, 2011 by his draft denial letter for American Junto.⁴⁴⁴

Hull and Kastenberg next met with Don Spellman, Senior Counsel, and several other representatives from the Office of the Chief Counsel on August 10, 2011, to discuss the two "test cases."⁴⁴⁵ Four months had now lapsed since Kindell first recommended that the Office of Chief Counsel review the memo and draft letter. During the course of the meeting, Spellman recommended that EO Technical further develop the activities of both organizations during election year 2010.⁴⁴⁶ Spellman offered to review the development letters aimed at eliciting this information, but EO Technical never sought further involvement of the Chief Counsel's Office in either of the applications.⁴⁴⁷

In November 2011, Michael Seto transferred the "test cases" to Hillary Goehausen, a Tax Law Specialist in EO Technical, Group 1.⁴⁴⁸ In that same month, Goehausen prepared and sent out a development letter (the third) for American Junto and a development letter (the second) for the Albuquerque Tea Party.⁴⁴⁹ In December 2011, a representative of American Junto informed Goehausen that it would not respond to the third IRS development letter and that the organization had been dissolved.⁴⁵⁰ Goehausen closed the American Junto application for "failure to establish," thus leaving only one remaining "test case," the Albuquerque Tea Party.⁴⁵¹ Goehausen received the Albuquerque Tea Party's response to the development letter in January 2012, and commenced drafting a letter denying that group tax exemption.⁴⁵² Goehausen's draft letter reversed the conclusion that Hull had previously reached in his January 2011 memo in which he concluded that the application should be approved.

In April of 2012, Nancy Marks visited Cincinnati at the direction of Steve Miller, then Deputy Commissioner for Services and Enforcement, because of Miller's concerns over how EO Determinations was processing political advocacy applications.⁴⁵³ Among other things, Marks found that there were between 250-300 political advocacy applications awaiting determination, so she recommended to Miller that EO Technical staff provide direct assistance to EO Determinations by reviewing each political advocacy application through a "bucketing" exercise.⁴⁵⁴ The object of this endeavor would be to separate applications that could be quickly decided from those that either required varying degrees of development or that were likely denials, and to place them in respective "buckets" where they could be worked to completion.⁴⁵⁵ Miller concurred in the recommendation and the "bucketing" exercise began in mid-May 2012 and extended into early June 2012.⁴⁵⁶

The decision to assist EO Determinations by "bucketing" the applications in this fashion effectively superseded the plan to develop guidance for EO Determinations by working the "test cases." In May of 2012, when the IRS decided to pursue the "bucketing" exercise and to no longer rely on the "test cases" for the development of guidance, two out of three of the "test cases" had been closed for "failure to establish" and the third was still in the development/drafting stage. The two year period during which the "test cases" had been worked resulted in the development of little or no guidance that could be used by EO Determinations to reach decisions on the growing backlog of Tea Party and other political advocacy applications. Moreover, much of the two year period that EO Technical, Judith Kindell and the Office of the Chief Counsel spent focusing on the "test cases" was marked with protracted delays, unexplained intervals of inactivity, and a lack of any sense of urgency.

Inability to resolve the "test cases" and to develop the guidance that EO Determinations had first asked for in February 2010 contributed substantially to the delays experienced by the Tea Party and other advocacy organizations in securing decisions on their applications for tax exemption.

Spellman provided comments to Lerner on the guidesheet during the week of March 5, 2012.⁴⁷⁵ However, Lerner did not feel that the revisions made by Spellman would be helpful to EO Determinations agents working the applications and requested further changes in the format.⁴⁷⁶ Spellman provided yet another version of the guidesheet to Lerner on April 25, 2012.⁴⁷⁷ On April 27, 2012, Nikole Flax, the Assistant Deputy Commissioner for Services and Enforcement, sent the April 25, 2012 version of the guidesheet prepared by Counsel to Cathy Livingston, Health Care Counsel in the Office of Chief Counsel, and asked Livingston to provide a "gut reaction."⁴⁷⁸ Livingston reviewed the guidesheet and concluded as follows:

In view of the tentative nature of Goehausen's recommendations, Thomas was unable to direct her staff to approve or deny any application.⁵⁰⁴ She explained her actions to the Committee as follows:

Paz summarized the utility of the triage effort as a whole in the following terms:

To assist in processing the applications, Seok was provided a copy of the guidesheet and the results of the "triage."⁵¹³ He provided the team members with a copy of the draft guidesheet⁵¹⁴ and shortly thereafter convened the first meeting of the Advocacy Team on December 16, 2011.⁵¹⁵ At this point, the Office of the Chief Counsel had not reviewed the guidesheet nor had it been approved for use by management. During the December 16, 2011 meeting, the members discussed the history of the advocacy applications, the purpose of the team, and how they would process the political advocacy applications through the use of "template" development letters.⁵¹⁶ At the time of the meeting, Seok identified approximately 172 political advocacy applications awaiting decision.⁵¹⁷ While Seok served as Coordinator for the team, he reported to Steve Bowling and provided Bowling with periodic updates on the team's activities.⁵¹⁸

Throughout the remainder of December 2011 and into the first half of January 2012, Seok assigned political advocacy applications to the team members and reviewed their draft development letters.⁵¹⁹ In his report to Bowling dated February 13, 2012, Seok indicated that development letters had been sent out for most of the applications that had been assigned and that except for a few applications, no responses had yet been received.⁵²⁰ On February 15, 2012, Seok circulated to the Advocacy Team members as well as to Bowling copies of several draft documents, including a document that contained template development questions.⁵²¹ Among the template questions, which numbered in excess of 80, were questions seeking: the identity of donors and the amounts and dates of donations; the identity of volunteers; copies of every webpage including social networking sites and blog sites; detailed descriptions of all events sponsored by the organizations; and copies of all handouts distributed by the organizations.⁵²² Seok used the draft guidesheet that had been provided to him to prepare the template questions.⁵²³ In addition, Seok and other Advocacy Team members apparently used earlier iterations of the draft template questions to prepare some of the development letters sent to Tea Party organizations in January and early February 2012.

Beginning about the middle of February 2012, the IRS began to receive Congressional inquiries about the processing of applications for tax exemption filed by Tea Party organizations.⁵²⁴ The inquiries were prompted by complaints from Tea Party groups seeking tax-exempt status that had recently received development letters from the IRS containing questions that appeared to be burdensome, inappropriate, and sometimes intrusive.⁵²⁵ Many of the development letters requested information such as the names of all donors, donation amounts and dates of donations; the identities of all volunteers; and whether board members and officers would run for political office.⁵²⁶ The application for tax-exempt status (IRS Form 1023) does not require the provision of donor-identifying information. However, if an organization seeking tax-exempt status under section 501(c) provided information to the IRS regarding its donors during the application process pursuant to a follow-up request by an agent for donor-identifying information in connection with an application, then that information could be disclosed if the organization's application were subsequently approved. In contrast, 501(c) filers are required to disclose annually the names and addresses of anyone who contributed $5,000 or more as part of the Form 990 Schedule B, but Schedule B. is not required to be made public, except in the case of private foundations. Therefore, IRS agents requesting an organization's donor information during the application process subjected that donor information to a different standard of disclosure than otherwise applicable to 501(c) organizations.

In addition to Congressional inquiries, news articles began to appear in February 2012 reporting that Tea Party organizations that were awaiting determinations from the IRS on their requests for tax-exempt status had recently received burdensome development letters.⁵²⁷ These development letters, which in some cases contained over 80 separate questions, also allowed only 14 days for reply. Moreover, many of the letters received by the applicant organizations contained duplicate requests.⁵²⁸

In response to both mounting Congressional inquiries and media stories about intrusive development questions that had been received by Tea Party organizations, Steve Miller, then Deputy Commissioner for Services and Enforcement, took several remedial actions.⁵²⁹ Regarding donor information, Miller directed that the IRS inform recipients of the development letters that they need not provide the donor information.⁵³⁰ For organizations that had already provided that information, Miller was apprised by the Office of the Chief Counsel that the donor information could be destroyed since it had not been used.⁵³¹ Accordingly, in most cases, the donor information was destroyed.⁵³² Organizations were also allowed more time to respond to the development letters and were permitted to submit sample web pages, in lieu of screen shots of every page.⁵³³ Moreover, Cindy Thomas disciplined Seok as the majority of instances where donor information had been requested were applications that Seok had worked.⁵³⁴ In addition, Seok was eventually replaced as Coordinator for political advocacy applications.⁵³⁵ However, in January 2013, Thomas promoted Seok to the Group Manager position.⁵³⁶

The most significant consequence for the processing of political advocacy applications resulting from the issuance of the inappropriate, burdensome and sometimes intrusive development letters occurred on February 29, 2012. On that date, Lois Lerner instructed Paz to ensure that EO Determinations sent no further development letters until the letters were adjusted.⁵³⁷ Paz so advised Thomas, and Thomas in turn directed Bowling to cease assigning any more political advocacy applications "until we have the template questions from DC."⁵³⁸ On February 29, 2012, the Advocacy Team effectively ceased processing Tea Party and political advocacy applications, an activity that it would not resume again until mid-May 2012, when the IRS next attempted to process the Tea Party and other political advocacy applications through the "bucketing" initiative described below.

While the idea to form the Advocacy Team to finally work the Tea Party and other political advocacy applications appears to have been well-intentioned, the team was ill-equipped to carry out that task. The guidesheet relied on by the team was a draft only, and as explained in greater detail within this report, the IRS was never able to resolve its shortcomings. Additionally, the results of the "triage" performed in 2011 which the Advocacy Team also used as guidance were of dubious value, since the conclusions reached in that exercise were premised on a review of only partial records. Lastly, and perhaps most significantly, the Advocacy Team appears to have suffered from a lack of effective leadership. While Seok's errors may be explained somewhat by his apparent lack of managerial experience, Bowling was aware of the template questions, but failed to recognize the predictable consequences of their use. In sum, Bowling failed to properly manage the activities of the Advocacy Team, allowing burdensome, often irrelevant and sometimes intrusive questions to be asked of a group of organizations whose sensitivities were already heightened by years of delay in the resolution of their applications.⁵³⁹

In May 2012, Cindy Thomas advised members of her staff that certain EO Determinations personnel, as well as "a few additional folks from D.C.," would place the advocacy applications in one of the following four buckets:

The bucketing was preceded by several days of classroom training for the EO Determinations specialists. Holly Paz described the approach used to train the specialists as follows:

On June 7, 2012, Paz reported to Cindy Thomas and Lois Lerner the results of the now completed bucketing exercise as follows:

While not entirely free from problems, the "bucketing" exercise represented the first IRS initiative in two and a half years that actually succeeded in bringing political advocacy applications to closure. Yet, as of March 2014, more than four years since the first political advocacy applications were filed, 22% of those applications were still unresolved. While the IRS succeeded in closing most of the applications in the ensuing year, 10 organizations were still waiting a determination as of April 2015.⁵⁷⁰

VIII. THE IRS SELECTED LEFT-LEANING APPLICANTS FOR REVIEW AND SUBJECTED THEM TO HEIGHTENED SCRUTINY AND DELAYS

• Names associated with left-leaning applicants were placed on the Watch List and Tag Historical tabs of the BOLO list.

• IRS screeners were instructed during training sessions in 2010 to select left-leaning applications that were potentially political organizations.

• 9/12 Project

• Emerge

• Progressive

• We The People

• Rally Patriots, and

• Pink-Slip Program⁵⁷²

The EO Technical review of the applications was delayed because of pending litigation between the IRS and the Democratic Party Leadership Council.⁵⁷⁷ Two additional Emerge cases were put on the SCR, one in June 22, 2009, and another on January 18. 2010.⁵⁷⁸ As explained in greater detail in Section (B) below, the decision to review the Emerge cases pending the outcome of litigation contributed to delays in processing these cases.

On March 22, 2010, Cindy Thomas notified EO Technical that descendants of ACORN were reorganizing, citing three specific organizations that were likely to submit applications.⁵⁸³ In April 2010, Sharon Camarillo emailed Cindy Thomas and Robert Choi telling them that EO Determinations received two ACORN-successor cases.⁵⁸⁴

Also in April 2010, an IRS interoffice research team completed its research into allegations of illegal activity by ACORN, its affiliates and employees. The research team was formed to investigate allegations that ACORN was engaged in actions inconsistent with tax-exempt status, including systematic commingling of funds between taxable and tax-exempt entities and individuals associated with ACORN. The Research team found evidence of: the cover-up of an embezzlement committed by a board member; possible conflicts created by employees working for multiple affiliates and staffers and members serving on the Board of Directors; improper money transfers among the affiliates; lack of proper documentation of financial transactions; and possible improper use of donations as well as pension and health care benefit funds. The research team concluded that these findings, together with ACORN's apparent loose governance and a lack of respect for the corporate structure, warranted a closer examination by the IRS into the financial practices of ACORN and its affiliates to determine if its tax-exempt status was appropriate.⁵⁸⁵ This report was shared with IRS management, including Sarah Hall Ingram, Joseph Grant and Lois Lerner, in June and July 2010.⁵⁸⁶

The August 12, 2010 BOLO listed "ACORN Successors" as an "Issue Name" on the "BOLO List" tab. The description states that "Following the breakup of ACORN, local chapters have been reforming under new names and resubmitting applications." Screeners were instructed to send these cases "to the TAG Group."⁵⁸⁷ An entry for "Acorn Successors" appeared on copies of the BOLO lists, first on the BOLO List tab and then on the Watch List tab, examined by Committee staff from 2010 until Holly Paz removed it in June 2012.⁵⁸⁸

An October 7, 2010 email from Jon Wadell alerted Steven Bowling and Sharon Camarillo to two ACORN-related cases. Waddell recommended "an alert be sent informing agents/screeners that to be on the lookout for the following name an application factors associated with Acorn related cases."⁵⁸⁹ In addition, he suggested adding the following "factors to the Watch Issue Description section for this category":

The Watch List tab of the February 2, 2011 BOLO instructed IRS screeners to look for the words "ACORN" or "Communities for Change in the name and/or throughout the application." It read:

Steven Bowling told Cindy Thomas that the BOLO list would need to be modified in order to properly flag the Occupy cases, but expressed frustration that the IRS did not want to use the words "Tea Party" or "Occupy" in screening.⁵⁹⁶ Thomas replied:

Emails written in May 2012 show that at least two Occupy cases were flagged by IRS screeners after the term was added to the BOLO list.⁵⁹⁹ The next month, Holly Paz had Cindy Thomas revised the BOLO list to "remove the references to Acorn and Occupy from the "Watch List" and replaced the "Emerging Issue" description of ideological positions of conservative and liberal groups with neutral language.⁶⁰⁰

In the case of three of the Emerge groups, it took three years from the time they applied until the applications were denied. Previously, the IRS erroneously approved five applications affiliated with Emerge for 501(c)(4) status from 2004 through 2008, including the main umbrella organization Emerge America.⁶⁰¹ These five Emerge approvals were subsequently determined to have been in error because Emerge groups were found to benefit the Democratic Party. Their 501(c)(4) status was revoked.⁶⁰²

On September 2008, emails show that IRS employee Donna Abner recommended issuing an "alert" for other incoming Emerge cases because of the "partisan nature of the cases" as well as a reminder that "'sensitive political issue' cases are subject to mandatory review" per IRS guidelines and subject to full development.⁶⁰³

EO Technical staff asked EO Determinations to transfer the Emerge Maine and Emerge Nevada applications on October 10, 2008, to be held "until the litigation on this issue has concluded and then we will work them."⁶⁰⁴ EO Technical instructed EO Determinations to hold any additional Emerge cases "pending the outcome of a similar issue in the DLC litigation."⁶⁰⁵ A January 2011 Sensitive Case Report indicates that Emerge Massachusetts applied for tax-exempt status on August 15, 2008, and was transferred to EO Technical on April 16, 2009. Emerge Oregon applied on February 9, 2010, and its application was transferred to EO Technical on April 14, 2010. The IRS did not inform the four Emerge groups, whose cases were selected for review and then developed at EO Technical until 2011, that their applications had been denied, creating delays of approximately three years for some of the organizations.⁶⁰⁶

On July 15, 2010, Cindy Thomas alerted Robert Choi that EO Determinations received another "potential successor to Acorn" applying for 501(c)(3) status related to a 501(c)(4) ACORN-successor application received in April 2010.⁶⁰⁹ Thomas reported that "[w]e placed the other case in suspense pending guidance from the Washington Office and are doing so with this case."⁶¹⁰

Cindy Thomas emailed Holly Paz on October 24, 2010, with a request for technical assistance on ACORN-successor cases from EO Technical. Over a month later, on November 26, 2010, Holly Paz told Cindy Thomas to work with Carter Hull in EO Technical on the Acorn-successor cases, the same employee in charge of developing the Tea Party cases in 2010 and early 2011.⁶¹¹

An EO Determinations employee contacted Carter Hull on March 4, 2011, telling him that "we have four exemption applications for organizations that have previously operated as ACORN. Could we arrange to discuss these cases with you by phone sometime next week?"⁶¹² It is unclear what guidance Carter Hull provided EO Determinations on the ACORN-successor applications but he informed another EO Determinations employee in July 2011, that "his manager informed him that he should not be doing research for our cases."⁶¹³ Hull asked EO Determinations to remove his name "from the BOLO list as a contact person."⁶¹⁴

In April 2013, EO Technical was still developing two ACORN-successor applications, including one of the applications that spurred EO Determinations managers to alert screeners to flag ACORN-successor cases in October 2010.⁶¹⁵ The other case mentioned in the email was transferred from EO Determinations to EO Technical in April 2012.⁶¹⁶ ACORN-successor cases were still on hold as of May 2013, according to Cindy Thomas.⁶¹⁷

Other left leaning and progressive groups told media outlets their applications were delayed as well. One left-leaning group, Alliance for a Better Utah, told NPR Morning Edition in a story that aired on June 13, 2013, that it had been waiting almost 600 days for a determination on its application for 501(c)(3) status to do "voter-education work."⁶¹⁸ The same group told Politico a month later that the delay was "causing problems because it can't apply for foundation and grant money while that application to become a charitable organization is in limbo."⁶¹⁹ Progress Texas reported that it took "18 months to get its 501(c)(4) approval."⁶²⁰

IX. ADDITIONAL FINDINGS NOT RELATED TO THE DETERMINATIONS PROCESS

EO Examinations serves as the repository for allegations that tax-exempt organizations are engaged in improper conduct (or "referrals"). All referrals -- including those that originate in other divisions within the IRS, as well as those made by individuals or entities outside of the IRS -- are all given the same consideration.⁶²⁶ EO Examinations employees evaluate the referral based on its content and decide if the IRS will investigate further.⁶²⁷ Apart from the referral process, EO Examinations employees also use other criteria to determine if the IRS needs to open a review.

EO Examinations performs two kinds of reviews of tax-exempt organizations:

• Examinations (also known as audits) are reviews of a taxpayer's books and records to determine tax liability, and may involve the questioning of third parties. For exempt organizations, an examination also determines an organization's qualification for tax-exempt status. If the IRS determines that an organization is not complying with the tax law, the IRS may impose a tax liability and, in some instances, may also revoke the organization's tax-exempt status.⁶²⁸

• Compliance checks are less comprehensive reviews used to determine if an organization is following the required recordkeeping and reporting requirements, and whether its activities are consistent with its stated tax-exempt purpose. Compliance checks are usually conducted using information already in the possession of the IRS, although the IRS will sometimes request additional information from the taxpayer. If the IRS concludes that the organization might owe a tax liability, it may refer the organization for a full examination.⁶²⁹

When the ROO receives a referral, ROO employees review the referral, along with information in the possession of the IRS, to determine if the allegations can be supported. The ROO then recommends one of the following options:

• Start an examination;

• Start a compliance check; or

• Take no further action.⁶³²

In 2011, under the direction of Miller, Lerner and Downing, the IRS developed a new approach for referrals of political campaign intervention called the "Dual Track" process. This process allowed the ROO to perform its own analysis of organizations, using information from the annual Form 990 that tax-exempt organizations are required to file. The ROO would consider its analysis of the data, as well as any referral, when deciding if it should recommend a review of an organization's political campaign intervention.⁶³⁶

The ROO's recommendation would then be reviewed by a panel of career Federal employees, known as the Political Action Review Committee (PARC).⁶³⁷ The PARC could either concur with the ROO's recommendation or modify it. If the PARC selected an organization for examination or a compliance check, the PARC would also determine if the referral was high- or regular-level priority.⁶³⁸

The Dual Track process was modified in 2012, after an internal review found that the ROO's written explanations of its decisions "arguably [gave] the impression that somehow the political leanings of [the organizations] mentioned were considered in making the ultimate decision" of whether or not to recommend an examination or compliance check.⁶³⁹ The internal review also noted other problems with the Dual Track process, including choices made for reasons unrelated to the tax issues presented (such as the effect that an examination might have on an organization's fundraising ability).⁶⁴⁰

Although examinations related to political campaign intervention were suspended, the IRS continued to receive allegations that Tea Party organizations and other advocacy groups had engaged in improper political campaign intervention. The IRS treated those allegations as referrals and sent them to EO Examinations.⁶⁴¹ In all, the IRS received 53 referrals related to 24 applicants for tax-exempt status that the IRS identified as "political advocacy" organizations.⁶⁴² These referrals were eventually reviewed using the Dual Track criteria and some were selected for examination;⁶⁴³ however, as of June 2015, the IRS had not conducted any examinations in response to these referrals and was not actively considering the referrals.⁶⁴⁴

Ultimately, the Dual Track process was suspended in June 2013 at the direction of TE/GE managers installed by then-Principal Deputy Commissioner Daniel Werfel,⁶⁴⁵ and permanently discontinued in 2015.⁶⁴⁶ As a result, from the end of 2010 until April 2014, the IRS did not perform any examinations of 501(c)(4) organizations related to impermissible political campaign intervention.⁶⁴⁷ Since the Dual Track process was discontinued in 2015, the IRS has sent referrals of impermissible political campaign intervention to the PARC, where they are reviewed in the same manner as other referrals related to tax-exempt organizations.⁶⁴⁸ The IRS also continues to evaluate data submitted on Form 990 tax returns to assess if organizations have engaged in improper political activity.⁶⁴⁹

Although Lerner did not uniformly implement this approach, EO Determinations employees started to recommend that the ROO review the activities of certain political advocacy groups in the future. This happened with greater frequency during the "bucketing" process in 2012, when a large number of applications were recommended for approval subject to later review by the ROO.⁶⁵² EO managers, including Thomas and Paz, were aware of at least some of these recommendations.⁶⁵³

From the end of 2011 through May 2013, EO Determinations employees recommended that the ROO review 60 political advocacy organizations.⁶⁵⁴ After the TIGTA report came out, Downing learned that these 60 "Tea Party case referrals" had been "sitting in a pile for quite a while" in the ROO.⁶⁵⁵ Analysis performed by the Committee staff indicated that of these groups, 41 (68%) were conservative or Tea Party groups, 7 (12%) were progressive or liberal, and 12 (20%) had no obvious political affiliation. After consulting with managers installed by then-Principal Deputy Commissioner Werfel, Downing returned these referrals to EO Determinations for further processing.

Despite substantial time and effort expended by the IRS, the agency failed to perform any meaningful oversight of political advocacy performed by tax-exempt organizations for a three-year period. Although management has made recent changes to the examination process, concerns persist that the IRS could open examinations for an inappropriate reason. In July 2015, the Government Accountability Office (GAO) issued a report on the criteria and processes used by the IRS to select exempt organizations for examination.⁶⁵⁶ GAO concluded that "EO has some controls in place that are consistent with internal control standards, and has implemented those controls successfully," but found "several areas where EO's controls were not well designed or implemented." Most significantly, GAO stated that:

In June 2010, a freelance reporter made a FOIA request to the IRS for records that explained how the IRS was processing applications for tax-exempt status submitted by Tea Party organizations.⁶⁵⁸ As described below, by the time of the request, the IRS had generated numerous documents that satisfied the search criteria and explained how the agency was handling Tea Party applications. But the IRS performed a deficient search that revealed only a few of these numerous responsive documents in existence at the date of the request. Then, the IRS elected not to produce any of the documents it identified, incorrectly claiming that the agency had "no responsive documents." As a result, the reporter did not obtain any of the documents showing how Tea Party cases were handled in 2010.

On June 3, 2010, the IRS received a FOIA request from freelance reporter Lynn Walsh that sought:

On July 6, 2010, EO Guidance manager David Fish sent two responsive documents to the disclosure division: the April 19, 2010 and May 24, 2010 SCRs prepared by Hull that explained how the Tea Party cases were being handled.⁶⁶² After that, there were several additional document searches that were done within the EO Division and the Office of Chief Counsel's through early November 2010.⁶⁶³

Inexplicably, Baker and her managers in the Disclosure Office determined that these two documents were not responsive to Walsh's FOIA request. Baker excluded the SCRs because she deemed them to be outside of Walsh's request as they were not "guidance," despite Giuliano's assertion that these documents were indeed responsive. Baker notes in the Case Report that "I have been back and forth with Matthew and I am tried [sic]."⁶⁶⁴ Tiffany Eder and others in the Office of Chief Counsel also questioned Baker's interpretation of the request and suggested that she follow up with Walsh to clarify the scope of the request.⁶⁶⁵ It appears that the follow up never occurred.

In response to one of the searches, a third document was sent to Baker: a "Coordinating Tea Party Cases Update Memorandum" prepared by Hull on October 18, 2010.⁶⁶⁶ This document explained how Hull was working with Hofacre in EO Determinations to review and develop incoming Tea Party applications. Baker excluded the October 2010 memorandum on grounds that the document was not responsive to the FOIA request "since it occurred after the FOIA request was received in our office."

Ultimately, the IRS did not produce any documents to Walsh. On January 6, 2011, Disclosure Manager Marie Twarog, formally responded to Walsh's June 3, 2010 FOIA request, advising the journalist that "I found no documents specifically responsive to your request."⁶⁶⁷

The IRS's handling of this FOIA request reveals several troubling issues.

First, the search for responsive documents was deficient.

The IRS failed to search for relevant records in EO Determinations' Cincinnati office, even though they learned from the SCRs and Hull's memorandum that the Tea Party applications were being processed by EO Determinations employees in Cincinnati. The IRS also failed to locate numerous responsive emails generated by Rulings & Agreement employees in Washington regarding the handling of Tea Party cases, including emails to and from Lerner and Paz.

Second, the IRS's narrow reading of Walsh's FOIA request caused the agency to exclude responsive documents.

Although some IRS employees disagreed with Baker's interpretation of the request, no one in Baker's management chain overruled Baker or required her to follow up with Walsh to clarify the scope of the request. By excluding these records, the IRS violated its policies as stated in the IRM:

Finally, the IRS also took a narrow view of the time limits of Walsh's request

The IRS regulations implementing FOIA state that the agency's response "shall include only those records within the official's possession and control as of the date of the receipt of the request by the appropriate disclosure officer."⁶⁶⁹ But the IRM allows staff to include such documents at their discretion, particularly when there are delays in processing:

Although there is no reason to believe that the IRS's handling of this FOIA request was motivated by political bias, its treatment was not consistent with the purpose of FOIA, which states "that the public has a right to know what goes on in government without having to demonstrate a need or reason".⁶⁷² The IRS's deficient response to Walsh deprived her of the information that she was entitled to under the law, including SCRs; information about the purpose and use of the BOLO; and emails between Paz, Lerner and other managers containing instructions about how these cases should be handled. If the IRS had chosen to extend the responsive period until November 2010 -- when EO and Chief Counsel employees performed their final searches -- they could have also produced information about training on screening procedures for Tea Party applications given to EO Determinations screeners; Hull's October 2010 update on the status of Tea Party cases; and the first circulated BOLO spreadsheet. If this information had been made public in 2010 pursuant to a lawful FOIA request, the IRS's treatment of applications received from Tea Party organizations may have been exposed to the public in 2010, far sooner than it was. Shining the light of transparency on how the IRS was processing Tea Party applications in 2010 may have forced the IRS to have resolved those applications sooner than it eventually did. Instead, the IRS elected to release nothing and consequently, these applications were left to fester for years.

The Committee requested that TIGTA provide information about its investigations into four high-profile incidents of alleged disclosure of confidential taxpayer information by the White House and the IRS. Three of the alleged disclosures involved information about conservative organizations that applied for, or received, tax-exempt status. While the results of the investigations are considered tax return information and are thus confidential under section 6103 of the Internal Revenue Code, Committee staff believes it is in the public interest to lawfully disclose the results and status of these TIGTA investigations because the high-profile nature of the alleged disclosures raised serious concerns about public officials' handling of confidential taxpayer information.

On September 25, 2010, Holden issued a statement supporting an investigation while also stating that the "senior Obama administration official's August 27^th statement is wrong -- Koch Industries does pay corporate income taxes and complies with all its tax obligations."⁶⁷⁶

Inspector General George informed the Senate Finance Committee Republicans on September 28, 2010 that he would initiate a review of the matter.⁶⁷⁷ The TIGTA investigation concluded in August 2011, but TIGTA refused to release the results of its inquiry to Koch Industries or Senator Grassley, citing the same confidentiality provisions that were allegedly violated.⁶⁷⁸

In response to inquiries from Senate Finance Committee staff in connection with this investigation, Inspector General George stated in a letter to Chairman Wyden that there was no improper disclosure on the part of Austan Gooslbee. He wrote: "[t]he allegation was disproved. We developed no evidence that IRS information pertaining to Koch Industries was either accessed for or disclosed to the President's Economic Recovery Advisory Board."⁶⁷⁹

After the confidential donor information was published, Ranking Member Hatch wrote a letter on May 8, 2012 to IRS Commissioner Shulman asking that the IRS investigate to determine the source of the leak.⁶⁸²

NOM filed a lawsuit against the IRS on October 3, 2013, alleging that the IRS willfully disclosed the Schedule B Form.

In response to inquiries from Committee staff in connection with this investigation, TIGTA stated in a letter to Chairman Wyden that there was an improper disclosure of confidential taxpayer information. TIGTA determined that an IRS employee working in the Return and Income Verification Services (RAIVS) unit "printed unredacted copies of the National Organization for Marriage's IRS Form 990 . . . and the associated Schedule B Form . . . and sent them outside the IRS."⁶⁸³

The RAIVS unit is responsible for processing Form 4506-A (Request for Public Inspection or Copy of Exempt or Political Organization IRS Form) requests for public versions of tax-exempt organizations' Form 990s. However, the Schedule B of the Form 990 is confidential and should not be provided in response to a Form 4506-A public record request.⁶⁸⁴

TIGTA found that the "disclosure was probably a work error by the IRS employee" and that its investigation "did not identify any link between [the IRS employee] and the organizations or individuals involved in posting or publishing the unredacted forms." In addition, TIGTA did not find any evidence that the disclosure was motivated by political animus. TIGTA was "also unable to determine whether the IRS received a valid Form 4506-A . . . for the information at issue because" TIGTA "became aware of the allegation after the IRS's 45-day retention period for the Form 4506-A had passed."⁶⁸⁵

On August 10, 2012, TIGTA first referred the matter to the Department of Justice Public Integrity Section but it declined prosecution on September 19, 2012. TIGTA then referred the matter to the IRS "for administrative action on October 17, 2012. On January 30, 2013, the IRS issued a 'Closed Without Action' letter with a cautionary statement" to the employee involved in the disclosure.⁶⁸⁶

Previous to TIGTA's investigation, "IRS RAIVS unit employees had access to both redacted and unredacted copies of the IRS Form 990 and associated Schedule B Forms on the IRS's Statistics of Income Exempt Organizations Return Image Network (SEIN)." As a result of the incident, "[t]he IRS has now restricted RAIVS unit employees' access to only redacted Forms 990 maintained on the SEIN. In addition, the IRS's retention period for IRS Forms 4506-A was extended from 45 days to three years from the last day of the calendar year in which they are received."⁶⁸⁷

ProPublica disagreed with the IRS interpretation of the statute penalizing publication of the application, citing the First Amendment. Nonetheless, prior to publishing the document, ProPublica "redacted parts of the application to omit Crossroads' financial information."⁶⁹² On the same day ProPublica published the confidential tax-exempt application, the IRS requested that TIGTA investigate the matter.⁶⁹³

On January 2, 2013, ProPublica published details about five other pending tax-exempt applications in an article citing confidential application materials it had received from the IRS.⁶⁹⁴

On May 16, 2013, the Republican members of the Senate Finance Committee asked TIGTA to investigate "the IRS's improper, and likely illegal, disclosure of nine organizations' applications for tax-exempt status" to ProPublica.⁶⁹⁵

In response to inquiries from Committee staff in connection with this investigation, TIGTA stated in a letter to Chairman Wyden that there was an improper disclosure of confidential taxpayer information. TIGTA determined that an IRS employee improperly disclosed the tax-exempt applications of nine organizations that were awaiting a determination from the IRS. The organizations affected were Crossroads GPS, Rightchange.com, Freedompath, Citizen Awareness Project, Americans for Responsible Leadership, A Better America Now, America is Not Stupid, YG Network, and Secure America Now. The improper disclosure was made in response to a November 15, 2012 FOIA request from ProPublica, an online media organization.⁶⁹⁶

TIGTA did not find any evidence that the improper disclosure was motivated by political animus, and referred the matter to the IRS "for administrative action on January 30, 2013."⁶⁹⁷ TIGTA reported that "[o]n March 7, 2013, the IRS issued a 'Letter of Admonishment' to the employee responsible for the disclosure."⁶⁹⁸ Cindy Thomas explained that the letter from ProPublica had requested over 67 applications "and the clerical employee in the correspondence unit was trying to go through these very quickly." Thomas told the Committee that the IRS employee responsible was a "good employee, and it was the first time that she had made a mistake."⁶⁹⁹

As a result of this improper disclosure, the IRS now requires that the release of tax-exempt entity documents under FOIA be approved at the IRS headquarters level.⁷⁰⁰

The RGA spokesman told the Center for Public Integrity that "donor information is confidential, and its partial disclosure by the IRS was erroneous and unauthorized. In fact it is a felony to disclose the information."⁷⁰²

TIGTA investigated the circumstances behind the disclosure. They found that the Schedule B information was sent to the website by an employee in the Ogden, Utah IRS office. TIGTA concluded that the disclosure was a workplace error and found no indication this this information was intentionally disclosed. The IRS employee was subsequently disciplined by the IRS.⁷⁰³

X. CONCLUSION

This bipartisan report of the Committee concludes that between 2010 and 2013, the IRS failed to fulfill its obligation to administer the tax law with "integrity and fairness to all."⁷⁰⁴ The IRS functioned in a politicized atmosphere following the 2010 Citizens United Supreme Court decision, which put pressure on the IRS to monitor political spending. Employees in the TE/GE Division, including Lois Lerner, were aware that the IRS had received an increasing number of applications from organizations that planned to engage in some level of political advocacy. Yet senior IRS executives, including Lerner, failed to properly manage political advocacy cases with the sensitivity and promptness that the applicants deserved. Other employees in the IRS failed to handle the cases with a proper level of urgency, which was symptomatic of the overall culture within the IRS where customer service was not prioritized.

As a result of these failings, a number of Tea Party and other political advocacy groups waited as long as five years to receive a decision from the IRS. These delays negatively affected applicants in many ways, including:

• Inability to gain tax-exempt status within their state until the IRS issued a determination letter;⁷⁰⁵

• Significant time and financial cost to respond to lengthy and burdensome IRS questions;

• Ineligibility for grants and other financial support that require IRS documentation of tax-exempt status;

• Decreased donations; and

• Financial uncertainty about whether the organization will owe a tax liability if the IRS determines that it does not meet the criteria for tax-exemption.⁷⁰⁶

The consequences of the IRS's actions in singling out organizations based on their name and subjecting them to heightened scrutiny, substantial delays, and to burdensome and sometimes intrusive questions are far reaching and troubling. Undoubtedly, these events will erode public confidence and sow doubt about the impartiality of the IRS. The lack of candor by IRS management about the circumstances surrounding Lois Lerner's missing emails may only serve to reinforce those doubts.

The IRS exercises an important and powerful role in the lives of every citizen in the country, and it is charged with the responsibility to exercise that power in a fair and impartial way. Sadly, this investigation has uncovered serious shortcomings in how the IRS exercised that authority when it processed applications for tax-exemption from organizations that were engaged in political advocacy -- shortcomings that raise public doubt about whether the IRS is a neutral administrator of the tax laws. Immediate and meaningful changes, including increased accountability to Congress and strengthened internal controls, are necessary if diminished public confidence in the IRS is to be restored.

² American Bar Association, Transcript of The Exempt Organization Tax Review (May 10, 2013) ABA Tax Section's Exempt Organizations Committee Meeting, Vol. 72, No. 2 pp. 126-127.

³ TIGTA, Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review (May 14, 2013) TIGTA Audit Report #2013-10-053.

⁴ Letter from Chairman Baucus and Ranking Member Hatch to the Acting Commissioner Steven Miller (May 20, 2013).

⁵ 26 U.S.C. 6103 (2013).

⁶ Section 7213 states that criminal violations of section 6103 must be knowing, while under section 7431, civil violations must be knowing or negligent. Under section 7431(b), someone who discloses section 6103 information through a good-faith, non-negligent mistake is not liable.

⁷ This practice did not begin with the Nixon Administration. At a 1976 hearing by a subcommittee of the Senate Finance Committee, a witness included in the record a report by the Center for National Security Studies, which said, "[t]he IRS has from time to time used its power to conduct audits of groups and individuals whose political views and activities were of concern to others. Special groups were established to conduct such audits under the Kennedy, Johnson, and Nixon Administrations. On at least one occasion an audit was conducted at the request of a congressional committee." Hearing. Subcommittee of the Senate Finance Committee on Administration of the Internal Revenue Code, Federal Tax Return Privacy (Jan. 23, 1976) p. 10.

⁸ Section 6103(f) also allows other (i.e., non-tax) congressional committees to receive taxpayer-specific information, but only pursuant to a Senate or House resolution. Further, section 6103 contains a series of other exceptions, including allowing release of taxpayer-specific information to certain tax administrators, release of taxpayer-specific information of Presidential appointees, and release of taxpayer-specific information to criminal investigators pursuant to a court order.

⁹ Contrast section 6103(f)(4)(A) with section 6103(f)(4)(B), which provides that information obtained by a committee other than the Finance, Ways and Means, or Joint Committee on Taxation may be submitted to the Senate or the House "only when sitting in closed executive session" (unless the taxpayer consents). In the case of a submission to the House or Senate by one of the tax committees, in contrast, there is no equivalent requirement that the submission occur in closed session.

¹⁰ Section 6103 broadly public prohibits disclosure of "return information" in order to protect taxpayer privacy. Section 6103(2)(b) defines "return information" as information that can be identified with a particular taxpayer, but allows for disclosure of aggregate data for statistical analysis as long as that data doesn't directly or indirectly identify a taxpayer. Therefore, a report that does not contain return information protected under 6103 would necessarily be based on aggregated data, making a comprehensive review of the entity specific facts at issue difficult.

¹¹ Letter from Leonard Oursler to Senator Wyden and Senator Hatch (June 13, 2014).

¹²Id., Enclosure 3 p. 5.

¹³Id.

¹⁴ Letter from Chairman Wyden and Ranking Member Hatch to J. Russell George (June 23, 2014).

¹⁵ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014).

¹⁶ The other six employees are Nikole Flax, former Chief of Staff to former Acting Commissioner Steven Miller; Michelle Eldridge, Supervisory Public Affairs Specialist; Kimberly Kitchens, Revenue Agent; Julie Chen, Revenue Agent; Tyler Chumney, Supervisory Revenue Agent; and Nancy Heagney, Revenue Agent.

¹⁷ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 8. TIGTA noted that Lerner's computer received a software update on the afternoon of June 11, 2011; however, TIGTA concluded that "[t]here is no indication software [update] would have caused Lerner's hard drive to crash." Id. p. 9.

¹⁸Id. p. 9.

¹⁹Id. p. 10.

²⁰Id. pp. 5-6.

²¹Id. p. 5.

²²Id. p. 6.

²³Id. pp. 5-6.

²⁴Id. p. 6.

²⁵ TIGTA Memorandum of Interview or Activity, Personal Interview of Mauricio Terrazas (Aug. 28, 2014) p. 2; TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 6.

²⁶ TIGTA Memorandum of Interview or Activity, Personal Interview of Mauricio Terrazas (Aug. 28, 2014) p. 3; TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 6.

²⁷ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 6.

²⁸Id.

²⁹Id. p. 7.

³⁰Id. p. 6.

³¹ TIGTA Memorandum of Interview or Activity, Personal Interview of Lois Lerner (July 9, 2104).

³²Id.

³³ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 10.

³⁴Id. pp. 2-3.

³⁵ TIGTA Memorandum of Interview of Activity, Personal Interview of Julie Chen (Aug. 28, 2014).

³⁶ TIGTA Memorandum of Interview or Activity, Personal Interview of Pamela Merritt (Sep. 15, 2014).

³⁷ TIGTA Memorandum of Interview or Activity, Personal Interview of Nancy Heagney (Aug. 28, 2014).

³⁸ TIGTA Memorandum of Interview or Activity, Personal Interview of Marilyn Florence (Sep. 15, 2014).

³⁹ TIGTA Memorandum of Interview or Activity, Records Review of IRS Custodians and Hard Drive Failures (Sep. 4, 2014).

⁴⁰ Letter from Leonard Oursler to Chairman Camp (Sep. 5, 2014).

⁴¹ TIGTA Memorandum of Interview or Activity, Records Review of IRS Custodians and Hard Drive Failures (Sep. 4, 2014).

⁴² TIGTA Memorandum of Interview or Activity, Personal Interview of Judith Kindell (Aug. 6, 2014).

⁴³Id.

⁴⁴ TIGTA Memorandum of Interview or Activity, Personal Interview of Frank Dematteis (Oct. 3, 2014).

⁴⁵ TIGTA Memorandum of Interview or Activity, Personal Interview of Ronald Shoemaker (Aug. 4, 2014).

⁴⁶ TIGTA Memorandum of Interview or Activity, Personal Interview of Aaron Signor (Sep. 5, 2014) (attachment omitted).

⁴⁷ Email chain between Lois Lerner, Carl Froehlich, Lillie Wilburn and others (July 19 - Aug. 6, 2011) IRS0000651488-50.

⁴⁸ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 7.

⁴⁹Id.

⁵⁰Id. TIGTA noted that the IRS IT manager believed that "Lerner had categorized the data present on the hard drive as being personal in nature." This point is contradicted by Lerner's own testimony about the contents of her hard drive, as discussed above.

⁵¹ TIGTA Memorandum of Interview or Activity, Personal Interview of Lois Lerner (July 9, 2104).

⁵² Letter from Leonard Oursler to Senator Wyden and Senator Hatch (June 13, 2014) Enclosure 3, p. 7.

⁵³Id.

⁵⁴ Letter from Leonard Oursler to Chairman Camp (Sep. 5, 2014).

⁵⁵ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) pp. 7-8. TIGTA noted that under IRS procedures and terms of the vendor's contract with the IRS, the serial numbers of electronic media were not tracked throughout the disposal process, so TIGTA could not confirm with certainty that Lerner's hard drive was, in fact, destroyed. Nonetheless, after interviewing the vendor employees who processed IRS media and visiting the Marianna shredding facility, TIGTA found no evidence that Lerner's hard drive had not been destroyed. We have no reason to doubt TIGTA's conclusion that Lerner's hard drive was "more than likely destroyed."

⁵⁶Id. p. 12.

⁵⁷Id.

⁵⁸ TIGTA Memorandum of Interview or Activity, Personal Interview of Pamela Merritt (Sep. 15, 2014).

⁵⁹ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 3.

⁶⁰ Email chain between Lois Lerner, Maria Hooke, and others (Apr. 9, 2013) IRS0000726247-48.

⁶¹ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 22.

⁶²Id. p. 21.

⁶³ TIGTA Memorandum of Interview or Activity, Personal Interview of Julie Chen (Aug. 28, 2014).

⁶⁴ TIGTA Memorandum of Interview or Activity, Personal Interview of Ronald Shoemaker (Aug. 4, 2014).

⁶⁵ TIGTA Memorandum of Interview or Activity, Personal Interview of Thomas Kane (Oct. 22, 2014).

⁶⁶Id.

⁶⁷Id.

⁶⁸Id.

⁶⁹Id.

⁷⁰ TIGTA Memorandum of Interview or Activity, Personal Interview of John Koskinen (June 19, 2015).

⁷¹ TIGTA Memorandum of Interview or Activity, Personal Interview of Catherine Duval (July 1, 2014).

⁷² TIGTA Memorandum of Interview or Activity, Personal Interview of Thomas Kane (Oct. 22, 2014).

⁷³ TIGTA Memorandum of Interview or Activity, Personal Interview of John Koskinen (June 19, 2015).

⁷⁴ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 18.

⁷⁵ Letter from David Ferriero to Senator Wyden and Senator Hatch (July 10, 2014) (some enclosures omitted).

⁷⁶ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) pp. 21-22.

⁷⁷Id. p. 13.

⁷⁸Id. On May 22, 2013, the IRS CTO changed the backup tape policy to an indefinite retention in order to respond to ongoing investigations.

⁷⁹Id. p. 15.

⁸⁰Id. p. 3.

⁸¹Id.

⁸²Id.

⁸³Id.

⁸⁴Id.

⁸⁵Id.

⁸⁶Id. pp. 3-4.

⁸⁷ Letter from Leonard Oursler to Senator Wyden and Senator Hatch (June 13, 2014) Enclosure 3, p. 7.

⁸⁸ TIGTA, Exempt Organizations Data Loss, Report of Investigation 54-1406-008-I (June 30, 2014) p. 3.

⁸⁹ TIGTA Memorandum of Interview or Activity, Personal Interview of Terence Milholland (June 11, 2015).

⁹⁰ Email from Catherine Duval to Stephen Manning, and others (Feb. 3, 2014).

⁹¹ TIGTA Memorandum of Interview or Activity, Personal Interview of Terence Milholland (June 11, 2015).

⁹² Letter from Neil Eggleston to Chairman Camp and Chairman Wyden (June 18, 2014).

⁹³ Letter from John Koskinen to Senator Wyden (Mar. 19, 2014) (emphasis added).

⁹⁴ Letter from Leonard Oursler to Chairman Camp (Sep. 5, 2014).

⁹⁵ Declaration of John Andrew Koskinen (July 1, 2015).

⁹⁶ Letter from Neil Eggleston to Chairman Camp and Chairman Wyden (June 18, 2014).

⁹⁷ 26 U.S.C. § 501(c)(3) (2014).

⁹⁸Id.

⁹⁹ IRS, The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations.

¹⁰⁰Id.

¹⁰¹ 26 U.S.C. § 501(c)(4) (2014).

¹⁰² 26 C.F.R. § 1.501(c)(4)-1(a)(2)(i) (1990). The IRS did not create this definition out of whole cloth. The term "exclusively" appears in section 501(c)(3) as well as 501(c)(4), and in 1945 the U.S. Supreme Court ruled that a "substantial" nonexempt purpose will destroy exemption under section 501(c)(3). Better Business Bureau v. United States, 326 U.S. 279 (1945). But the Court did not interpret "exclusively" literally and forbid all non-exempt purposes. See Comment Letter on 501(c)(4) Exempt Organizations from the American Bar Association to Commissioner Koskinen dated May 7, 2014, at text accompanying footnotes 22-24. The 1959 regulations incorporated this interpretation, clarifying that "exclusively" means "primarily" for both section 501(c)(3) and section 501(c)(4) organizations. Congress also has demonstrated that the term "exclusively" cannot be interpreted literally. Organizations that operate exclusively to promote social welfare have had tax-exempt status since 1913. But in 1950, following revelations that some tax-exempt organizations also were operating businesses tax-free, Congress amended the law to add the unrelated business income tax (UBIT) regime. Under UBIT rules, nonprofits are allowed to engage in unrelated nonexempt activity as long as they pay taxes on the "unrelated business taxable income" generated as a result. See 26 U.S.C. §§ 511-513. According to one tax-exempt organizations expert, "exclusively" could not mean "exclusively" because "later law acknowledged these organizations could engage in other activities" if you tax them. See Alan Fram, Inside Washington: Conflicting Laws, IRS Confusion, Associated Press, June 5, 2013, quoting Tax Professor Ellen Aprill, an expert on tax-exempt organizations at Loyola Law School in Los Angeles, CA. Because of the statutory conflict in provisions allowing nonprofits to operate unrelated businesses, and the provision requiring section 501(c)(4) organizations to be operated exclusively for the promotion of social welfare, some suggest that the 1959 Treasury regulation interpreting "exclusively" to mean "primarily" was necessary to resolve this statutory conflict. Id. Thus, both the Better Business Bureau case and the UBIT regime support the argument that "exclusively" is not to be read literally.

¹⁰³ 26 C.F.R. § 1.501(c)(4)-1(a)(2)(i) (1990); IRS, Social Welfare Organizations.

¹⁰⁴ 26 C.F.R. § 1.501(c)(4)-1(a)(2)(i) (1990).

¹⁰⁵ IRS, Social Welfare Organizations.

¹⁰⁶ 26 U.S.C. § 508(a) (2006).

¹⁰⁷ Notes of Steven Miller (undated) IRS0000505538-42.

¹⁰⁸ 26 U.S.C. § 170 (2014).

¹⁰⁹ 26 U.S.C. § 6104(b), (d)(3)(A) (2014). 501(c) entities are required to submit to the IRS a list of persons who have donated $5,000 or more on an annual basis. This information generally is not made public, except that the information is made public for private foundations only.

¹¹⁰ 26 U.S.C. § 527(k) (2014).

¹¹¹ Information in this section relies on Notes of Steven Miller (undated) IRS0000505538-42; IRM §§ 1.54.1 (Jan. 1, 2006) and 7.29.3 (July 14, 2008).

¹¹² SFC Interview of John Shafer (Sep. 17, 2013) pp. 7-9.

¹¹³ Section 7.29.3.2(C) of the IRM (July 14, 2008) provides that the Group Manager will determine whether an SCR should be prepared to alert "upper management" that a case: (i) is likely to attract media or Congressional attention; (ii) presents unique or novel issues; (iii) affects large numbers of taxpayers; (iv) potentially involves large dollar amounts; or (v) has another issue that warrants attention.

¹¹⁴ IRM § 7.29.3.7(5) (July 14, 2008).

¹¹⁵ IRM § 1.54.7.2 (Jan. 1, 2006).

¹¹⁶ IRM § 7.29.3.2 (July 14, 2008).

¹¹⁷ SFC Interview of Sarah Hall Ingram (Dec. 16, 2013) pp. 44-45.

¹¹⁸ Email from Richard Daly to Jennifer Vozne and others (June 6, 2010) IRS0000163997-4013 (email attachments containing taxpayer information omitted by Committee staff); Email from Richard Daly to Jennifer Vozne, Nikole Flax and others (July 1, 2010) IRS0000164020-43; Email from Richard Daly to Sarah Ingram and others (Aug. 5-6, 2010) IRS0000164044-72 (email attachments containing taxpayer information omitted by Committee staff).

¹¹⁹Id.

¹²⁰ SFC Interview of Sarah Hall Ingram (Dec. 16, 2013) p. 42.

¹²¹Id. p. 44.

¹²²Id. p. 42.

¹²³ SFC Interview of Joseph Grant (Sep. 20, 2013) pp. 13-14.

¹²⁴Id. p. 11.

¹²⁵ SFC Interview of Steven Miller (Dec. 12, 2013) pp. 37-39.

¹²⁶ SFC Interview of Nikole Flax (Nov. 1, 2013) p. 30.

¹²⁷ SFC Interview of Steven Miller (Dec. 12, 2013) p. 39.

¹²⁸ SFC Interview of Nikole Flax (Nov. 1, 2013) p. 34.

¹²⁹ Holly Paz experienced a rapid climb through the management ranks in EO. She was hired by the IRS in 2007 and thereafter promoted or assigned to the following management positions within EO: Manager of EO Guidance Group 2 in July 2008; Acting Manager of EO Technical in September 2009; Manager of EO Technical in September 2010; Acting Director of Rulings and Agreements in January 2011; and Director of Rulings and Agreements in May 2012.

¹³⁰ SFC Interview of Nikole Flax (Nov. 21, 2013) p. 33.

¹³¹ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) p. 69.

¹³²Id.

¹³³ Heightened Awareness Issues (undated) IRS0000557291-308.

¹³⁴ SFC Interview of Cindy Thomas (July 25, 2013) p. 67.

¹³⁵ Email chain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) IRS0000352978-84.

¹³⁶ IRS management above Lerner uniformly claimed that they were unaware of the BOLO or any criteria on the document until May 2012 at the earliest. It is less obvious whether these managers should have taken a more active role in supervising how EO handled incoming applications for tax-exempt status; arguably, upper-level managers in TE/GE should have also been involved in decisions affecting large numbers of taxpayers.

¹³⁷ In January 2012, Bowling also added a separate BOLO entry for "'Occupy' Organizations" on the Watch List tab of the BOLO. TIGTA's report did not discuss whether this entry was inappropriate.

¹³⁸ Email from Cindy Thomas to Holly Paz (Oct. 26, 2010) IRS0000435238-39.

¹³⁹Id.

¹⁴⁰Id.

¹⁴¹ SFC Interview of Holly Paz (July 26, 2013) p. 166.

¹⁴² SFC Interview of Steve Grodnitzky (Sep. 25, 2013) p. 145.

¹⁴³ SFC Interview of Holly Paz (July 26, 2013) p. 144.

¹⁴⁴Id. p. 135.

¹⁴⁵Id. pp. 132-33.

¹⁴⁶ USA Today, Short-lived Ohio Group was early test case for IRS (Sep. 23, 2013).

¹⁴⁷ SFC Interview of Steven Grodnitzky (Sep. 25, 2013) pp. 135-37. "FTE" stands for "Failure to Establish," which refers to applicants that stop responding to IRS communications and are deemed to have constructively withdrawn from the application process.

¹⁴⁸ SFC Interview of Cindy Thomas (July 25, 2013) pp. 186-87.

¹⁴⁹ SFC interview of Holly Paz (July 26, 2013) p. 11.

¹⁵⁰Id.

¹⁵¹ IRM § 7.20.2.4.2 (Nov. 1, 2004).

¹⁵² SFC Interview of Nikole Flax (Nov. 21, 2013) p. 135.

¹⁵³ Based on data provided to the SFC by the IRS (Apr. 8, 2015).

¹⁵⁴ SFC Interview of John Shafer (Sep. 17, 2013) p. 96.

¹⁵⁵ SFC Interview of Cindy Thomas (July 25, 2013) pp. 116-17.

¹⁵⁶Id. p. 122.

¹⁵⁷Id. pp. 117-18.

¹⁵⁸ SFC Interview of Sharon Camarillo (Sep. 26, 2013) p. 7. Camarillo explained that she was scheduled to attend a 6-week training session at one time during her tenure in EO, but she was removed from the session after one day by Thomas. Id. p. 25.

¹⁵⁹Id. p. 16.

¹⁶⁰ Email chain between Lois Lerner, Nanette Downing and others (May 10-11, 2011) IRS0000014917-20.

¹⁶¹ Email from Steven Grodnitzky to Lois Lerner, Robert Choi and others (Apr. 28, 2010) IRS0000141809-11.

¹⁶² Email chain between Steven Grodnitzky, Lois Lerner, Robert Choi and others (May 13-16, 2010) IRS0000167872-73.

¹⁶³Id.

¹⁶⁴ Email from Steven Grodnitzky to Lois Lerner, Robert Choi and others (May 27, 2010) IRS0000141812-14; Email chain between Theodore Lieber, Lois Lerner and others (July 27-30, 2010) IRS0000807076-115 (email attachments containing taxpayer information omitted by Committee staff); Email from Steven Grodnitzky to Lois Lerner, Robert Choi and others (Sep. 30, 2010) IRS0000156433-36; Email from Holly Paz to Lois Lerner, Robert Choi and others (Nov. 3, 2010) IRS0000156478-81.

¹⁶⁵ Email chain between Holly Paz, Lois Lerner and Michael Seto (Feb. 1-2, 2011) IRS0000159431-33.

¹⁶⁶Id.

¹⁶⁷ SFC Interview of Holly Paz (July 26, 2013) p. 86. The meeting was originally scheduled for June 29, 2011, but was rescheduled for July 5, 2011.

¹⁶⁸ Email from Justin Lowe to Holly Paz and others (June, 27, 2011) IRS0000431165-66.

¹⁶⁹ SFC Interview of Holly Paz (July 26, 2013) pp. 86-89; SFC Interview of Cindy Thomas (July 25, 2013) pp. 53-55.

¹⁷⁰ Ingram served in that role from May 2009 to December 2010, when she became the Acting Director of the newly-created Services and Enforcement Affordable Care Act Office. Until the spring of 2013, Ingram also continued to serve as the Commissioner of TE/GE, providing high-level direction while Joseph Grant performed most of the duties as the Acting Director of TE/GE. Grant's position as Division Commissioner of TE/GE became permanent in May 2013, shortly before he retired from the IRS on June 3, 2013. SFC Interview of Sarah Hall Ingram (Dec 16, 2013) pp. 10, 19-20; SFC Interview of Joseph Grant (Sep. 20, 2013) pp. 5-6.

¹⁷¹ SFC Interview of Sarah Hall Ingram (Dec 16, 2013) p. 18.

¹⁷²Id. pp. 42-43.

¹⁷³Id. pp. 64-68.

¹⁷⁴ SFC Interview of Joseph Grant (Sep. 20, 2013) p. 63.

¹⁷⁵Id. p. 9.

¹⁷⁶Id. pp. 14-15.

¹⁷⁷ SFC Interview of Steven Miller (Dec. 12, 2013) pp. 16-17.

¹⁷⁸ SFC Interview of Joseph Grant (Sep. 20, 2013) pp. 53-55; SFC Interview of Sarah Hall Ingram (Dec. 16, 2013) p. 12.

¹⁷⁹ SFC Interview of Steven Miller (Dec. 12, 2013) p. 242.

¹⁸⁰Id. pp. 123-128.

¹⁸¹ SFC Interview of Douglas Shulman (Dec. 3, 2013) pp. 32-35.

¹⁸² SFC Interview of Sarah Hall Ingram (Dec. 16, 2013) p. 77.

¹⁸³Id. p. 79.

¹⁸⁴ SFC Interview of Douglas Shulman (Dec. 3, 2013) pp. 35-37.

¹⁸⁵ SFC Interview of Steven Miller (Dec. 12, 2013) pp. 133-141.

¹⁸⁶ SFC Interview of Douglas Shulman (Dec. 3, 2013) pp. 37-44.

¹⁸⁷ TIGTA Summary of Briefings to IRS and Treasury Leadership, Provided to SFC on May 19, 2014.

¹⁸⁸ SFC Interview of Douglas Shulman (Dec. 3, 2013) p. 80.

¹⁸⁹ SFC Interview of Steven Miller (Dec. 12, 2013) pp. 184, 240-41.

¹⁹⁰ SFC Interview of William Wilkins (Nov. 7, 2013) p. 24; Email from Michael Blumenfeld to William Wilkins and others (Mar. 13, 2012) IRS0000061498-505.

¹⁹¹ SFC Interview of William Wilkins (Nov. 7, 2013) p. 24.

¹⁹²Id. pp. 38-39.

¹⁹³Id. pp. 24, 35.

¹⁹⁴ Memorandum from Karen Schiller, Interim Guidance on the Suspension of BOLO List Usage (June 20, 2013). The memorandum instructed employees to immediately stop using the BOLO spreadsheet, including the Emerging Issues tab and the Watch List tab. However, employees were permitted to continue using other lists to identify and prevent waste, fraud and abuse.

¹⁹⁵ SFC Interview of Gary Muthert (July 30, 2013) (not transcribed).

¹⁹⁶Id.

¹⁹⁷ SFC Interview of Jack Koester (Aug. 1, 2013) p. 29.

¹⁹⁸Id. pp. 39-40. As Koester and other EO Determinations employees explained, the secondary screening process entailed a second review by an employee who was familiar with a particular type of applications. This same process was first used to screen incoming applicants from Tea Party organizations in 2010. Id. p. 35; SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 27-28, 44-45.

¹⁹⁹ Since the Committee conducted the interviews referenced in this section, the IRS has issued additional guidance to employees implementing new procedures for reviewing tax-exempt applications. See, e.g., Memorandum from Kenneth Corbin, Expansion of Optional Expedited Process for Certain Exemption Applications Under Section 501(c)(4) (Dec. 23, 2013); Memorandum from Stephen Martin, Streamlined Processing Guidelines for All Cases (Feb. 28, 2014). We have no knowledge of whether the IRS's recent guidance has affected the screening procedures applied to incoming applications for tax-exempt status.

²⁰⁰ SFC Interview of Sarah Hall Ingram (Dec. 16, 2013) p. 33.

²⁰¹Id. p. 32.

²⁰²Citizens United v. Federal Election Commission, SCOTUSblog.

²⁰³ Email chain between Sarah Ingram, Lois Lerner, Steve Miller and others (Jan. 22-24, 2010) IRS0000444375-77.

²⁰⁴Id.

²⁰⁵ Email chain between Nikole Flax, Sarah Hall Ingram, Cathy Livingston and others (Jan. 24-25, 2010) IRS0000442110-12.

²⁰⁶Id.

²⁰⁷ SFC Interview of Sarah Hall Ingram (Dec. 16, 2013) p. 40.

²⁰⁸ Email chain between Nikole Flax, Sarah Hall Ingram, Cathy Livingston and others (Jan. 24-25, 2010) IRS0000575821-24.

²⁰⁹Id.

²¹⁰ Email from Michael Tierny to Faye Ng and others (Jan. 22, 2010) IRS0000639344-48.

²¹¹ Email chain between Jack Koester, John Shafer and Gary Muthert (Aug. 3-4, 2010) IRS0000487033-35.

²¹²Id.

²¹³ Email from Michael Condon to Gary Muthert (Sep. 28, 2010) IRS0000487036.

²¹⁴ Email from Michelle Eldridge to Steve Miller, Sarah Ingram, Lois Lerner and others (Aug. 6, 2010) IRS0000452184.

²¹⁵Id.

²¹⁶ Email chain between Lois Lerner, Joe Urban and others (Aug. 22, 2010) IRS0000210591-93.

²¹⁷Id.

²¹⁸ Email chain between Steve Pyrek, Terry Lemons, Sarah Ingram and others (Sep. 21, 2010) IRS0000508974-76.

²¹⁹ Email chain between Michelle Eldridge, Steve Miller and others (Sep. 20, 2010) IRS0000211382.

²²⁰Id.; Email chain between Nikole Flax, Steve Miller, Ron Shultz and others (Sep. 20, 2010) IRS0000219086-91.

²²¹ Email chain between Steve Pyrek, Terry Lemons, Sarah Hall Ingram and others (Sep. 21, 2010) IRS0000508974-76.

²²²Id.

²²³ IRS Urged to Investigate Charity for Possible Political Activity, Tax Analysts (Apr. 1, 2010) IRS0000230462-77; As Campaign Money Pours In So Do Complaints, The Washington Post (Oct. 13, 2010) IRS0000071305-06; 3 Groups Denied Break by I.R.S. Are Named, New York Times (July 21, 2011) IRS0000012346-47; The I.R.S. Does Its Job, New York Times (Mar. 8, 2012) IRS0000212452-53; How Dark-Money Groups Sneak by the Taxman, Mother Jones (June 13, 2012) IRS0000177467-75; How Nonprofits Spend Millions on Elections and Call it Public Welfare, ProPublica (Aug 20, 2012) IRS0000180278-304; The IRS's Feeble Grip on Big Political Cash, Politico (Oct. 15, 2012) IRS0000180729-30.

²²⁴ Is 501(c)(4) Status Being Abused?, EO Tax Journal (Sep. 14, 2010) IRS0000512236-40; New York Times Primer on EO Tax Law, EO Tax Journal (Oct. 18, 2010) IRS0000385201-06; If You Can't Beat Them, Join Them, EO Tax Journal (Apr. 14, 2011) IRS0000645590; 3 Groups Denied Break by I.R.S. Are Named, New York Times (July 21,2011) IRS0000531334-39; Groups Challenge Legality of IRS Regs as Failing to Properly Limit Campaign Activity by 501(c)(4) Organizations, EO Tax Journal (July 28, 2011) IRS0000385238-50; Seven Democratic Senators Ask Whether IRS Investigating Political (c)(4)s, EO Tax Journal (Feb. 17, 2012) IRS0000529987-93.

²²⁵ Email from Jorge Castro to Nikole Flax (Jan. 28, 2013) IRS0000292300-09. During that time, the IRS also received numerous informal requests from members of Congress and staff that are not captured in this exhibit.

²²⁶Id.

²²⁷ Email from Lois Lerner to Holly Paz and others (July 24, 2012) IRS0000179669.

²²⁸E.g., Email from Lois Lerner to Holly Paz and others (Apr. 17, 2012) IRS0000325929-30.

²²⁹E.g., Email from Holly Paz to Lois Lerner (May 2, 2013) IRS0000409884.

²³⁰ Email from Joseph Urban to Holly Paz and others (Feb. 2, 2011) IRS0000350193-97.

²³¹ Email chain between Lois Lerner, Ruth Madrigal, Holly Paz and others (Mar. 2, 2011) IRS0000634267-69; Email chain between Gregory Colvin, Lois Lerner and Judith Kindell (Aug. 24-27, 2012) IRS0000572618-19.

²³² Email from Lois Lerner to David Fish (Sep. 30, 2011) IRS0000511994-2018.

²³³ Email chain between Steven Miller, Faris Fink and others (Feb. 29, 2012) IRS0000341677-80.

²³⁴ Email chain between Lois Lerner, Ruth Madrigal and others (Dec. 14-19, 2012) IRS0000446771-75; SFC Interview of Victoria Judson (Sep. 11, 2013) pp. 40-43.

²³⁵ SFC Transcription of Video Available on Youtube.com, Lois Lerner Discusses Political Pressure on IRS in 2010 (Oct. 19, 2010) <https://www.youtube.com/watch?v=EH1ZRyq-1iM>.

²³⁶ Steve Miller notes (March 14, 2012) IRS0000506870-71.

²³⁷Id.

²³⁸ Senate Finance Committee Hearing, A Review of Criteria Used by the IRS to Identify 501(c)(4) Applications for Greater Scrutiny (May 21, 2013).

²³⁹ Email from Christopher Giosa to Lois Lerner and others (Dec. 6, 2012) IRS0000185323-27.

²⁴⁰Id.

²⁴¹ Email from Justin Abold to Lois Lerner, Holly Paz and others (Apr. 12, 2013) IRS0000195666-90.

²⁴²Id.

²⁴³Id.

²⁴⁴ Miller's calendar shows that he organized a meeting on May 7, 2013 to discuss "EO Data Matters" with Nikole Flax, Dean Silverman, Eric Schweikert and Joseph Grant (May 7, 2013) IRS0000456399.

²⁴⁵ Email chain between Justin Lowe, Justin Abold and others (May 6, 2013) IRS0000494805-29.

²⁴⁶Id.

²⁴⁷ IRS, Update on the Proposed New Regulation on 501(c)(4) Organizations (May 22, 2014).

²⁴⁸ Email from Cindy Thomas to Holly Paz (Mar. 16, 2011) IRS0000008593-602.

²⁴⁹Id.

²⁵⁰ Heightened Awareness Issues (undated) IRS0000557291-308.

²⁵¹ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 31-32.

²⁵²Id.

²⁵³Id.; SFC Interview of Cindy Thomas (July 25, 2013) p. 66.

²⁵⁴ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 31-32.

²⁵⁵Id. pp. 135-136.

²⁵⁶ Email from Cindy Thomas to Jon Waddell (Apr. 18, 2007) IRS0000008413-14.

²⁵⁷ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 30-33.

²⁵⁸Id.

²⁵⁹Id.

²⁶⁰Id.

²⁶¹ Email from Cindy Thomas to Holly Paz (Mar. 16, 2011) IRS0000008593-602.

²⁶²Id.

²⁶³ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 17-18.

²⁶⁴Id. pp. 94-95.

²⁶⁵Id.

²⁶⁶ Email from Jon Waddell to Sharon Camarillo and Brenda Melahn (Apr. 6, 2010) IRS0000629335-48.

²⁶⁷Id.

²⁶⁸Id. Waddell noted that "the previous tabs for Archived and Removed TAG Issues have been taken out of the spreadsheet. Since the spreadsheet is now a joint one between TAG and Emerging Issues, we felt it would be too cumbersome to include additional tabs of 100's [of] former TAG issues."

²⁶⁹ Heightened Awareness Issues IRS0000557291-308.

²⁷⁰Id.

²⁷¹ Email Chain between Holly Paz, Lois Lerner and Cindy Thomas (Feb. 18 -- Mar. 16, 2011) IRS0000008593-602.

²⁷² Email chain between Cindy Thomas, Sharon Camarillo and Joseph Herr (Apr. 6-13, 2010) IRS0000629335-48.

²⁷³Id.

²⁷⁴Id.

²⁷⁵ Email from Jon Waddell to Sharon Camarillo and Brenda Melahn (Apr. 27, 2010) IRS0000629455-57.

²⁷⁶ Email from Elizabeth Hofacre to Joseph Herr (May 6, 2010) IRS0000542119-24.

²⁷⁷ SFC Interview of Cindy Thomas (July 25, 2013) p. 43.

²⁷⁸ Email chain between Cindy Thomas and Holly Paz (May 9-10, 2012) IRS0000004755-62.

²⁷⁹ Heightened Awareness Issues (undated) IRS0000557291-308.

²⁸⁰Id.

²⁸¹Id.

²⁸² Email from Elizabeth Hofacre to Steve Bowling, John Shafer and others (July 27, 2010) IRS0000008609-24.

²⁸³ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) p. 109.

²⁸⁴ Email from Liz Hofacre to IRS Staff (July 27, 2010) IRS0000008609-24.

²⁸⁵Id.

²⁸⁶Id.

²⁸⁷ SFC Interview of Cindy Thomas (July 25, 2013) p. 43.

²⁸⁸ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 127-128.

²⁸⁹ Email chain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) IRS0000352978-84.

²⁹⁰ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 129-131.

²⁹¹ Combined Spreadsheet TAG 8 12 10 (Aug. 10, 2010).

²⁹² Email chain between Cindy Thomas and Holly Paz (May 9-10, 2012) IRS0000004755-62.

²⁹³Id.

²⁹⁴ Email chain between Holly Paz, Lois Lerner and Nikole Flax (May 17, 2012) IRS0000437639-41.

²⁹⁵ Email chain between Cindy Thomas, Steven Grodnitzky and others (Mar. 31 -- Apr. 12, 2010) IRS0000165413-14.

²⁹⁶Id.

²⁹⁷ Based on data provided to the SFC by the IRS (Mar. 26, 2014).

²⁹⁸ SFC Interview of Jack Koester (Aug. 1, 2013) p. 8.

²⁹⁹Id. p. 23.

³⁰⁰Id. pp.12-13.

³⁰¹ Email chain between Jack Koester, John Shafer, Sharon Camarillo, Cindy Thomas and others (Feb. 25 -- Mar. 17, 2010) IRS0000180869-73.

³⁰²Id.

³⁰³Id.

³⁰⁴Id.

³⁰⁵Id.

³⁰⁶ SFC Interview of Gary Muthert (July 30, 2013) (not transcribed).

³⁰⁷Id.

³⁰⁸ Email chain between Cindy Thomas, Holly Paz and others (Feb. 25 -- Mar. 17, 2010) IRS0000180869-73.

³⁰⁹Id.

³¹⁰ SFC Interview of Holly Paz (July 26, 2013) p. 16.

³¹¹ Email chain between Donna Elliot-Moore, Steve Grodnitzky and others (Mar. 31 -- Apr. 2, 2010) IRS0000165413-14.

³¹²Id.

³¹³Id.

³¹⁴ Email chain between Steve Grodnitzky, Ronald Shoemaker and others (Mar. 31 -- Apr. 5, 2010) IRS0000166266-67.

³¹⁵ SFC Interview of Ronald Shoemaker (July 31, 2013) (not transcribed); SFC Interview of Carter Hull (July 23, 2013) (not transcribed).

³¹⁶ Email chain between Steve Grodnitzky, Ronald Shoemaker and others (Mar. 31 -- Apr. 5, 2010) IRS0000166266-67.

³¹⁷ TE/GE Division Sensitive Case Report (Apr. 19, 2010) IRS0000164074-75.

³¹⁸ Email chain between Jon Waddell, Sharon Camarillo, Brenda Melahn and others (Apr. 6-13, 2010) IRS0000629335-48.

³¹⁹ Email chain between Elizabeth Hofacre, Joseph Herr and others (May 6-7, 2010) IRS0000542119-24.

³²⁰ Email chain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) IRS0000352978-84.

³²¹ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) p. 47.

³²² Email chain between Holly Paz, John Shafer, Cindy Thomas and others (June 1-10, 2011) IRS0000066837-40.

³²³ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) p. 118.

³²⁴Id. pp. 50-52; Email chain between Holly Paz, John Shafer, Cindy Thomas and others (June 1-10, 2011)IRS0000066837-40.

³²⁵ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 45-52.

³²⁶Id.

³²⁷Id.

³²⁸Id.

³²⁹ Email chain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) IRS0000352978-84.

³³⁰Id.

³³¹Id.

³³² SFC Interview of Joseph Herr (June 18, 2013) (not transcribed); SFC Interview of Ronald Bell (July 30, 2013) (not transcribed).

³³³ Email chain between Cindy Thomas, Ronald Bell and others (July 5, 2011) IRS0000620735-40.

³³⁴ Email from Justin Lowe to Holly Paz (June 27, 2011) IRS0000431165-66.

³³⁵ Email chain between Cindy Thomas, Steve Bowling, John Shafer and others (July 5, 2011) IRS0000620735-40.

³³⁶Id.

³³⁷ SFC Interview of Holly Paz (July 26, 2013) p. 87.

³³⁸ Email chain between Cindy Thomas, Steve Bowling, John Shafer and others (July 5, 2011) IRS0000620735-40.

³³⁹Id.

³⁴⁰Id.

³⁴¹ Email chain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) IRS0000352978-84.

³⁴² Email chain between Cindy Thomas, Steve Bowling, John Shafer and others (July 5, 2011) IRS0000620735-40.

³⁴³Id.

³⁴⁴ Email from Ronald Bell to EO Determinations employees (July 11, 2011) IRS0000618365-70.

³⁴⁵Id.

³⁴⁶ SFC Interview of John Shafer (Sep. 17, 2013) pp. 120-122.

³⁴⁷Id. p. 121 and Interview Exhibit 8.

³⁴⁸ SFC Interview of John Shafer (Sep. 17, 2013) p. 120.

³⁴⁹ SFC Interview of Cindy Thomas (July 25, 2013) p. 91.

³⁵⁰Id.

³⁵¹ SFC interview of Gary Muthert (July 30, 2013) (not transcribed). Muthert stated that after the July 2011 change to the Emerging Issues tab of the BOLO spreadsheet, he continued to send applications that contained the words "Tea Party," to Group 7822 for full development.

³⁵²Id.

³⁵³ This is consistent with TIGTA's finding that all applications received by EO from organizations with "Tea Party," "Patriots," or "9/12" in their names were forwarded to Group 7822 for full development. TIGTA, Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review, TIGTA Audit Report 2013-10-53 (May 14, 2013) p. 6.

³⁵⁴ SFC Interview of Cindy Thomas (July 25, 2013) p. 91.

³⁵⁵ Email from Holly Paz to David Fish and Andy Megosh (Sep. 21, 2011) IRS0000010131.

³⁵⁶ SFC Interview of Cindy Thomas (July 25, 2013) p. 80.

³⁵⁷Id. p. 82.

³⁵⁸Id. p. 93; SFC Interview of Ronald Bell (July 30, 2013) (not transcribed).

³⁵⁹ SFC Interview of Cindy Thomas (July 25, 2013) pp. 93-94; Email chain between Mary Sheer and Peggy Combs (Jan. 9-20, 2012) IRS0000013412.

³⁶⁰ Email chain between Cindy Thomas and Steven Bowling (Jan. 20-24, 2012) IRS0000621814-17.

³⁶¹Id.; SFC Interview of Cindy Thomas (July 25, 2013) pp. 93-95.

³⁶²Id.

³⁶³ SFC Interview of Cindy Thomas (July 25, 2013) pp. 93-95; Email chain between Holly Paz, Lois Lerner and Nikole Flax (May 21, 2012) IRS0000352978-84. When asked by Committee Staff who was responsible for the January 25, 2012 revisions to the BOLO spreadsheet, Bowling stated as follows:

³⁶⁴ SFC Interview of Ronald Bell (July 30, 2013) (not transcribed).

³⁶⁵ Email chain between Ronald Bell and Steve Bowling (Jan. 25, 2012) IRS0000013187.

³⁶⁶Id. In response to a written questionnaire from the Committee, Bowling alleged that he did "not understand thedifference between liberal organizations, Tea Party groups, or any other political groups." See IRS Employee Responses to Written Questions from Finance Committee Staff (Dec. 19, 2013). He also made similar assertions to the Committee staff during an interview on June 13, 2013. Bowling's statements to the Committee are at odds with his apparent understanding of the political viewpoints espoused by both Tea Party and Occupy organizations, as evidenced by the language he developed and proposed to Thomas for inclusion in the BOLO spreadsheet.

³⁶⁷ Email chain between Holly Paz, Cindy Thomas, Roberta Zarin, Lois Lerner and others (Feb. 22, 2012) IRS0000013739-48.

³⁶⁸Id.

³⁶⁹ Email chain between Lois Lerner, Holly Paz and Cindy Thomas (May 15, 2012) IRS0000013776-82.

³⁷⁰ SFC Interview of Steven Miller (Dec. 12, 2013) pp. 133-141.

³⁷¹Id. p. 139.

³⁷² SFC Interview of Sarah Hall Ingram (Dec. 16, 2013) p. 107.

³⁷³ Email chain between Holly Paz and Cindy Thomas (May 9-10, 2012) IRS0000004755-62.

³⁷⁴Id.

³⁷⁵Id.

³⁷⁶ Email chain between Holly Paz, Lois Lerner and Nikole Flax (May 17, 2012) IRS0000437639-41.

³⁷⁷ Email chain between Holly Paz, Nancy Marks and Sharon Light (May 14, 2013) IRS0000195830-31.

³⁷⁸ Email from Holly Paz to Cindy Thomas (June 1, 2012) IRS0000013799.

³⁷⁹ BOLO Spreadsheet (Apr. 19, 2013) IRS0000002718-30.

³⁸⁰ Memorandum from Karen Schiller, Interim Guidance on the Suspension of BOLO List Usage (June 20, 2013).

³⁸¹ SFC Interview of Carter Hull (July 23, 2013) (not transcribed).

³⁸² SFC Interview of Ronald Shoemaker (July 31, 2013) (not transcribed).

³⁸³ SFC Interview of Carter Hull (July 23, 2013) (not transcribed).

³⁸⁴Id.

³⁸⁵ Email chain between Cindy Thomas, Steve Grodnitzky, Ron Shoemaker and others (Apr. 23-26, 2010) IRS0000181051-52.

³⁸⁶ Email chain between Steve Grodnitzky and Carter Hull (May 17, 2010) IRS0000631583-84.

³⁸⁷ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 52-70.

³⁸⁸Id.

³⁸⁹Id.

³⁹⁰Id.

³⁹¹Id.

³⁹²Id.

³⁹³Id.

³⁹⁴Id.

³⁹⁵Id.

³⁹⁶Id.

³⁹⁷ Email chain between Cindy Thomas, Holly Paz, Sharon Camarillo, Steve Bowling and others (Oct. 26, 2010 - Jan. 28, 2011) IRS0000435238-39 (emphasis added).

³⁹⁸ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 58-70.

³⁹⁹Id.

⁴⁰⁰Id.

⁴⁰¹Id.

⁴⁰²Id.

⁴⁰³Id.

⁴⁰⁴Id.

⁴⁰⁵Id.

⁴⁰⁶ SFC Interview of Ronald Bell (July 30, 2013) (not transcribed).

⁴⁰⁷Id.

⁴⁰⁸Id.

⁴⁰⁹ SFC Interview of Elizabeth Hofacre (Sep. 24, 2013) pp. 150-152.

⁴¹⁰ SFC Interview of Ronald Bell (July 30, 2013) (not transcribed).

⁴¹¹Id. Bell told the Committee that Bowling did not directly instruct him not to work the Tea Party applications.Rather, Bell stated that Bowling knew that Bell was working on the auto-revocation cases, and therefore must have known that he was not working on the Tea Party applications. Bell also told the Committee that Bowling prepared Bell's performance appraisal for this time period, an act that would have necessarily required Bowling to know what work Bell had performed during the performance assessment period.

⁴¹²Id. Section 6033(j) of the Internal Revenue Code (2010) requires the automatic revocation of exempt status forany organization that fails to file a required return for three consecutive years.

⁴¹³ Email chain between Steve Bowling, Sharon Camarillo and Cindy Thomas (Nov. 16-17, 2010) IRS0000163029-30.

⁴¹⁴Id.

⁴¹⁵Id.

⁴¹⁶Id.

⁴¹⁷ Email chain between Cindy Thomas, Sharon Camarillo, Steve Bowling, Holly Paz and others (Oct. 26, 2010 - Jan. 28, 2011) IRS0000435238-39.

⁴¹⁸Id.

⁴¹⁹Id.

⁴²⁰ SFC Interview of Ronald Bell (July 30, 2013) (not transcribed).

⁴²¹ Email chain between Cindy Thomas, Michael Seto, Holly Paz and others (Mar. 29 - Apr. 13, 2011) IRS0000576953-55 (Email attachments containing taxpayer information omitted by SFC staff).

⁴²²Id.

⁴²³Id.

⁴²⁴ SFC Interview of Ronald Bell (July 30, 2013) (not transcribed).

⁴²⁵Id.

⁴²⁶Id.

⁴²⁷Id.

⁴²⁸Id.

⁴²⁹ Email chain between Holly Paz, Cindy Thomas and others (Feb. 25 - Mar. 17, 2010) IRS0000180869-73.

⁴³⁰ Technical Case History for Albuquerque Tea Party, IRS0000001323-24.

⁴³¹Id.

⁴³²Id.

⁴³³ Email chain between Michael Seto, Cindy Thomas, Holly Paz and others (Mar. 29 - Apr. 13, 2011) IRS0000622735-53.

⁴³⁴ Technical Case History for Albuquerque Tea Party, IRS0000001323-24.

⁴³⁵ SFC Interview of Carter Hull (July 23, 2013) (not transcribed).

⁴³⁶ SFC Interview of Judith Kindell (July 18, 2013) p. 12.

⁴³⁷ Technical Case History for Albuquerque Tea Party, IRS0000001323-24.

⁴³⁸ Email chain between Michael Seto, Cindy Thomas, Holly Paz and others (Mar. 29 - Apr. 13, 2011) IRS0000622735-53. Hull had been assigned an application for exemption under 501(c)(3) from the Prescott Tea Party but had closed the application in May 2010 for "failure to establish" when the Prescott Tea Party did not respond to a development letter. On June 30, 2010, Hull was assigned the application for exemption under 501(c)(3) submitted by American Junto as a replacement "test case."

⁴³⁹ Technical Case History for Albuquerque Tea Party, IRS0000001323-24.

⁴⁴⁰ Email chain between Judith Kindell, Lois Lerner, Holly Paz and others (Apr. 7, 2011) IRS0000634444.

⁴⁴¹Id.

⁴⁴² Email chain between Hillary Goehausen, Michael Seto, Carter Hull and others (Feb. 28, 2012) IRS0000058356-61.

⁴⁴³ Technical Case History for Albuquerque Tea Party, IRS0000001323-24.

⁴⁴⁴ Sensitive Case Report (Oct. 19, 2011) IRS0000644656-57.

⁴⁴⁵ SFC Interview of Carter Hull (July 23, 2013) (not transcribed).

⁴⁴⁶ SFC Interview of Donald Spellman (July 10, 2013) pp. 23-36.

⁴⁴⁷Id.

⁴⁴⁸ SFC Interview of Carter Hull (July 23, 2013) (not transcribed).

⁴⁴⁹ Email chain between Hilary Goehausen, Michael Seto, Carter Hull and others (Feb. 28, 2012) IRS0000058356-61.

⁴⁵⁰Id.

⁴⁵¹Id.

⁴⁵²Id.

⁴⁵³ SFC Interview of Steve Miller (Dec. 12, 2013) pp.128-145.

⁴⁵⁴Id.

⁴⁵⁵Id.

⁴⁵⁶ Email chain between Cindy Thomas, Bonnie Esrig, Peggy Combs and others (May 8-9, 2012) IRS0000596252; SFC Interview of Holly Paz (July 26, 2013) pp. 153-162.

⁴⁵⁷ SFC Interview of Holly Paz (July 26, 2013) pp. 86-96.

⁴⁵⁸Id.; Email from Justin Lowe to Holly Paz (June 27, 2011) IRS0000431165-66.

⁴⁵⁹ SFC Interview of Holly Paz (July 26, 2013) pp. 86-96.

⁴⁶⁰Id.

⁴⁶¹Id. The suggestion contained in the briefing paper used for the meeting stated that "EOT composes a list ofissues or political/lobbying indicators to look for when investigating potential political intervention and excessive lobbying, such as reviewing website content, getting copies of educational and fundraising materials, and close scrutiny of expenditures." Email from Justin Lowe to Holly Paz (June 27, 2011) IRS0000431165-66.

⁴⁶² SFC Interview of Holly Paz (July 26, 2013) p. 96.

⁴⁶³ Email chain between Michael Seto, Hillary Goehausen and others (July 23-24, 2011) IRS0000644018.

⁴⁶⁴ SFC Interview of Hilary Goehausen (July 11, 2013) (not transcribed).

⁴⁶⁵ Email from Hilary Goehausen to Judith Kindell and others (Sep. 21, 2011) IRS0000636285-97.

⁴⁶⁶ Email chain between Hillary Goehausen, Judith Kindell and others (Sep. 21 - Nov. 3, 2011) IRS0000057352-65.

⁴⁶⁷ SFC Interview of Holly Paz (July 26, 2013) p. 125.

⁴⁶⁸Id. p. 18. Paz was on maternity leave from October 24, 2011 to February 6, 2012. During that time, David Fish,Manager of EO Guidance, served as Acting Director of Rulings and Agreements.

⁴⁶⁹ Email chain between David Fish, Michael Seto, Cindy Thomas and others (Oct. 24 - Nov. 6, 2011) IRS0000520827-41; SFC Interview of Holly Paz (July 26, 2013) pp. 133-134.

⁴⁷⁰ SFC Interview of Holly Paz (July 26, 2013) p. 133.

⁴⁷¹Id. p. 134.

⁴⁷² Email chain between Holly Paz, Don Spellman and others (Nov. 21, 2011 - Feb. 24, 2012) IRS0000056937-50.

⁴⁷³Id.

⁴⁷⁴ Email chain between Lois Lerner, Don Spellman, Janine Cook and others (Feb. 24 - March 1, 2012) IRS0000594977-80.

⁴⁷⁵ Email chain between Don Spellman, Lois Lerner and others (Mar. 5, 2012) IRS0000057789-90.

⁴⁷⁶ Email chain between Janine Cook, Lois Lerner, Victoria Judson and others (Mar. 19-21, 2012) IRS0000056992-7043.

⁴⁷⁷ Email from Don Spellman to Lois Lerner and others (Apr. 25, 2012) IRS0000512392-446.

⁴⁷⁸ Email chain between Nikole Flax, Cathy Livingston and others (Apr. 26 - May 1, 2012) IRS0000063118-21.

⁴⁷⁹Id.

⁴⁸⁰ SFC Interview of Holly Paz (July 26, 2013) p. 153.

⁴⁸¹ SFC Interview of Steve Miller (Dec.12, 2013) pp. 121-122.

⁴⁸² Email chain between Cindy Thomas, Bonnie Esrig and others (May 8-9, 2012) IRS0000596252.

⁴⁸³ SFC Interview of Holly Paz (July 26, 2013) p. 163.

⁴⁸⁴ SFC Interview of Steve Miller (Dec. 12, 2013) p. 122.

⁴⁸⁵ SFC Interview of Cindy Thomas (July 25, 2013) pp. 143-148.

⁴⁸⁶Id.

⁴⁸⁷Id.

⁴⁸⁸Id.

⁴⁸⁹Id.

⁴⁹⁰ Email chain between Cindy Thomas, Holly Paz and others (Sep. 15 - Nov. 15, 2011) IRS0000057399-426; IRM § 7.15.6 (June 12, 2013).

⁴⁹¹ SFC Interview of Holly Paz (July 26, 2013) p. 131.

⁴⁹² SFC Interview of Cindy Thomas (July 25, 2013) pp. 145-146.

⁴⁹³ Email chain between Cindy Thomas, Holly Paz and others (Sep. 15 - Nov. 15, 2011) IRS0000057399-426.

⁴⁹⁴Id.

⁴⁹⁵Id.

⁴⁹⁶Id.

⁴⁹⁷Id.

⁴⁹⁸Id.

⁴⁹⁹Id.

⁵⁰⁰ SFC Interview of Cindy Thomas (July 25, 2013) p. 146.

⁵⁰¹ Email chain between Michael Seto, Cindy Thomas and others (Nov. 22 - Dec. 12, 2011) IRS0000439824-26.

⁵⁰² SFC Interview of Holly Paz (July 26, 2013) p. 135.

⁵⁰³Id.

⁵⁰⁴ SFC Interview of Cindy Thomas (July 25, 2013) p. 147.

⁵⁰⁵Id.

⁵⁰⁶ SFC Interview of Holly Paz (July 26, 2013) p. 135.

⁵⁰⁷ Email chain between Holly Paz, Cindy Thomas and others (Feb. 25 - Mar. 17, 2010) IRS0000180869-73; Email chain between Cindy Thomas, Holly Paz and others (Oct. 26, 2010 - Jan. 28, 2011) IRS0000435238-39; Email chain between Cindy Thomas, Holly Paz and others (Oct. 26, 2010 - Mar. 2, 2011) IRS0000620724-26; Email chain between Cindy Thomas, Michael Seto and others (Mar. 29 - Apr. 13, 2011) IRS0000576953-55; Email chain between Cindy Thomas, Holly Paz and others (Sep. 15 - Nov. 15, 2011) IRS0000057399-426; Email chain between Cindy Thomas, Lois Lerner and others (Nov. 3, 2011) IRS0000162845-46 (Email attachment containing taxpayer information omitted by Committee staff); Email chain between Michael Seto, Cindy Thomas and others (Nov. 22 - Dec. 12, 2011) IRS0000439824-26.

⁵⁰⁸ SFC Interview of Cindy Thomas (July 25, 2013) p. 147.

⁵⁰⁹Id. pp. 147-48.

⁵¹⁰Id.

⁵¹¹ Email chain between Michael Seto, Cindy Thomas and others (Nov. 22 - Dec. 12, 2011) IRS0000439824-26.

⁵¹²Id.; Email chain between Cindy Thomas, Nancy Marks and others (Apr. 17-23, 2012) IRS0000013058-61.

⁵¹³ SFC Interview of Cindy Thomas (July 25, 2013) pp. 147-48.

⁵¹⁴ Email from Stephen Seok to Ronald Bell and others (Dec. 12, 2011) IRS0000059316-28.

⁵¹⁵ Email chain between Cindy Thomas, Nancy Marks and others (Apr. 17-23, 2012) IRS0000013058-61.

⁵¹⁶Id.

⁵¹⁷Id. Text discussing the 172 pending cases notes "37 c3 125 c4;" "[m]ostly advocacy with strong or some political activities, at least implied;" "[a]bout 155 cases reviewed by EO Tech: Favorable 13, Denial 13, All others: Development Needed;" "30 Something TEA party, Several 912, Repeal PPACT (Patient Protection and Affordable Care Act), Enact Universal Single-Payer Health Case [sic] System, etc."

⁵¹⁸ Email chain between Stephen Seok, Steve Bowling, Holly Paz and others (Jan. 8 - Aug. 7, 2012) IRS0000434203-08.

⁵¹⁹Id.

⁵²⁰Id.

⁵²¹ Email from Stephen Seok to Steve Bowling and the Advocacy Team (Feb. 15, 2012) IRS0000594910-29.

⁵²²Id.

⁵²³ SFC Interview of Steve Miller (Dec. 12, 2013) p. 113. The close relationship between the draft guidesheet and the template questions clearly suggests that the former was used to prepare the latter.

⁵²⁴ SFC Interview of Holly Paz (July 26, 2013) pp. 141-142; Letter from Senator Orrin G. Hatch to IRS Commissioner Shulman (Mar. 14, 2012) IRS0000488582-85.

⁵²⁵ Email chain between David Fish, Keith Frank, Andy Megosh and others (Feb. 17-21, 2012) IRS0000610957-60.

⁵²⁶ Email from Michele Eldridge to Steve Miller and others (Mar. 1, 2012) IRS0000341681-83.

⁵²⁷ Email chain between Faris Fink, Steve Miller, Shane Ferguson and others (Feb. 29, 2012) IRS0000341677-80.

⁵²⁸ Email chain between Lois Lerner, Holly Paz, Cindy Thomas and others (Feb. 24 - Mar. 1, 2012) IRS0000594977-80.

⁵²⁹ SFC Interview of Steve Miller (Dec. 12, 2013) pp. 123-129.

⁵³⁰Id.

⁵³¹Id. Miller explained during his interview that if donor information had been retained by the IRS and the organization's application was subsequently approved, the donor information would then become public.

⁵³²Id. However, in at least one instance, donor information was not destroyed. See Email from Sharon Light to Lois Lerner (Apr. 19, 2013) IRS0000195724-25.

⁵³³ SFC Interview of Steve Miller (Dec. 12, 2013) pp. 123-129.

⁵³⁴ SFC Interview of Cindy Thomas (July 26, 2013) pp. 134-39.

⁵³⁵Id.

⁵³⁶Id.

⁵³⁷ Email chain between Lois Lerner, Holly Paz, Cindy Thomas and others (Feb. 29, 2012) IRS0000594977-80.

⁵³⁸Id.

⁵³⁹ These egregious deficiencies in Bowling's management of the advocacy team do not appear to have adversely affected the IRS's assessment of his performance. In fact, the IRS performance review board gave him the highest recommendation for an award for the period which encompassed the events described above in late 2011 and early 2012. As a result, Bowling received a bonus that was among the highest for TEGE front-line managers, an amount that exceeded 2% of his annual salary. Email from Brent Brown to Lois Lerner and Dawn Marx (Nov. 29, 2012) (attachment containing sensitive personnel information omitted by Committee staff). Not only did the IRS give Bowling a stellar cash performance award in 2012, but upon Cindy Thomas's reassignment in August 2013, it also elevated him to the position of EO Determinations Manager along with Jon Waddell and Donna Abner. IRS Briefing for SFC Staff (July 7, 2015).

⁵⁴⁰ Email chain between Cindy Thomas, Michael Seto, Steve Bowling and others (Mar. 6, 2012) IRS0000617020-21.

⁵⁴¹ Email chain between Justin Lowe, Michael Seto, Steve Grodnitzky and others (Jan. 31 - Mar. 5, 2012) IRS0000594982-84; Email from Michael Seto to Steve Grodnitzky and others (Mar. 9, 2012) IRS0000066875.

⁵⁴² SFC Interview of Steve Grodnitzky (Sep. 25, 2013) pp. 137-146.

⁵⁴³Id.

⁵⁴⁴Id.

⁵⁴⁵ SFC Interview of Steve Miller (Dec. 12, 2013) pp. 129-145.

⁵⁴⁶Id.

⁵⁴⁷Id.

⁵⁴⁸ Email chain between Holly Paz, Cindy Thomas, Donna Abner and others (Apr. 20-23, 2012) IRS0000003152-55.

⁵⁴⁹Id.

⁵⁵⁰ SFC Interview of Steve Miller (Dec. 12, 2013) pp. 129-145.

⁵⁵¹Id.

⁵⁵²Id.

⁵⁵³ Email chain between Cindy Thomas, Bonnie Esrig and others (May 8-9, 2012) IRS0000596252.

⁵⁵⁴Id.

⁵⁵⁵ SFC Interview of Holly Paz (July 26, 2013) p. 162.

⁵⁵⁶ Email chain between Cindy Thomas, Bonnie Esrig and others (May 8-9, 2012) IRS0000596252.

⁵⁵⁷ SFC Interview of Holly Paz (July 26, 2013) pp. 160-161.

⁵⁵⁸Id.

⁵⁵⁹Id.

⁵⁶⁰Id.

⁵⁶¹Id.

⁵⁶²Id.

⁵⁶³ Email chain between Holly Paz, Lois Lerner, Donna Abner and others (June 8, 2012) IRS0000578664-66.

⁵⁶⁴ Email from Judith Kindell to Lois Lerner (July 18, 2012) IRS0000585328.

⁵⁶⁵ Email chain between Holly Paz, Lois Lerner, Donna Abner and others (June 8, 2012) IRS0000578664-66.

⁵⁶⁶ Email chain between Cindy Thomas, Holly Paz, and Donna Abner (June 27-28, 2012) IRS0000005239.

⁵⁶⁷Id.

⁵⁶⁸ SFC Interview of Cindy Thomas (July 26, 2013) p. 108.

⁵⁶⁹ Calculation based on data provided to the SFC by the IRS (Mar. 26, 2014).

⁵⁷⁰ Based on data provided to the SFC by the IRS (Apr. 8, 2015).

⁵⁷¹ Screening Workshop Notes (July 28, 2010) IRS0000012315-17; Screening Workshop Presentation IRSR0000169695-720.

⁵⁷² Screening Workshop Notes (July 28, 2010) IRS0000012315-17.

⁵⁷³ Screening Workshop Presentation (July 28, 2010) IRS0000169695-720.

⁵⁷⁴ BOLO Spreadsheet (Aug. 12, 2010).

⁵⁷⁵ SFC Interview of Ron Bell (July 30, 2013) (not transcribed).

⁵⁷⁶ Email from Joseph Herr to Elizabeth Hofacre and others (Sep. 24, 2008) IRS0000011492-4.

⁵⁷⁷ TE/GE Division Sensitive Case Report (Oct. 21, 2008) IRS0000012307-08.

⁵⁷⁸ TE/GE Division Sensitive Case Report (June 22, 2009) IRS0000633497-98; TE/GE Division Sensitive Case Report (Jan. 18, 2010) IRS0000147518-19.

⁵⁷⁹ Heightened Awareness Issues (undated) IRS0000557291-308; Email from Chadwick Kowalczyk to Donna Abner and others (May 18, 2010) IRS0000195587.

⁵⁸⁰ Acorn on Brink of Bankruptcy, Officials Say, New York Times (May 19, 2014).

⁵⁸¹Id.

⁵⁸²Id.

⁵⁸³ Email chain between Cindy Thomas, Steven Grodnitzsky and others (Mar. 22, 2010) IRS0000458448-51.

⁵⁸⁴ Email from Sharon Camarillo to Cindy Thomas and Robert Choi (Apr. 28, 2010) IRS0000458467.

⁵⁸⁵ IRS, ACORN Research Activities Summary Report (Apr. 28, 2010) IRS0000713482-87.

⁵⁸⁶ IRS, Memorandum on Investigative Research Findings (June 21, 2010) IRS0000713488; Email from Nancy Todd to Sarah Hall Ingram, Joseph Grant, Lois Lerner, and others (July 8, 2010) IRS0000713482.

⁵⁸⁷ Combined Spreadsheet TAG 8 12 10 (Aug. 12, 2010).

⁵⁸⁸Id.; Email chain between Holly Paz, Cindy Thomas and others (June 1, 2012) IRS0000013434-35.

⁵⁸⁹ Email chain between Jon Waddell, Steven Bowling, Sharon Camarillo and others (Oct. 7-8, 2010) IRS0000410433-34.

⁵⁹⁰Id.

⁵⁹¹ Email chain between Jon Waddell, Sharon Camarillo, John Shafer and others (Oct. 7-8, 2010) IRS0000389342.

⁵⁹²Id.

⁵⁹³ BOLO Spreadsheet (Feb. 2, 2011) IRS0000389362.

⁵⁹⁴ Email from Ronald Bell to Carter Hull (May 13, 2012) IRSR0000054963.

⁵⁹⁵ Email chain between Cindy Thomas, Steven Bowling and Peggy Combs (Jan. 20, 2012) IRS0000013418-19; Email chain between Cindy Thomas, Steve Bowling, Peggy Combs and Mary Sheer (Jan. 20, 2012) IRSR0000013414-15.

⁵⁹⁶ Email chain between Cindy Thomas, Steven Bowling and Peggy Combs (Jan. 20, 2012) IRS0000013418-19.

⁵⁹⁷ Email from Cindy Thomas to Steven Bowling (Jan. 24, 2012) IRSR0000621814-17.

⁵⁹⁸ Email between Steven Bowling and Ronald Bell (Jan. 25, 2012) IRS0000013187.

⁵⁹⁹ Email chain between Tyler Chumney, Peggy Combs and others (May 24-27, 2012) IRSR0000013234-48.

⁶⁰⁰ Email chain between Holly Paz, Cindy Thomas and others (June 1, 2012) IRS0000013434-35.

⁶⁰¹ Email chain between Donna Abner, Cindy Thomas and others (Sep. 8, 2008) IRS0000012292-93.

⁶⁰² Email from Nalee Park to Justin Lowe (Nov. 16, 2011) IRS0000636384 (Email attachments containing taxpayer information omitted by Committee staff).

⁶⁰³ Email chain between Donna Abner, Cindy Thomas and others (Sep. 8, 2008) IRSR0000012292-93.

⁶⁰⁴ Email chain between Justin Lowe to Jon Waddell (Oct. 10, 2008) IRS0000012299-300.

⁶⁰⁵ Email chain between Deborah Kant, Cindy Wescott and others (Oct. 16, 2008) IRS0000012304.

⁶⁰⁶ TE/GE Division Sensitive Case Report (Jan. 18, 2011) IRSR0000147518. Although this document is dated "January 18, 2010," it references events in January 2011. Therefore, we believe that it was mistakenly dated 2010 instead of 2011.

⁶⁰⁷ Email from Sharon Camarillo to Cindy Thomas and Robert Choi (Apr. 28, 2010) IRS0000458467.

⁶⁰⁸ Email chain between Steven Grodnitzky, Cindy Thomas, Donna Abner and others (June 8, 2010) IRS0000054956.

⁶⁰⁹ Email chain between Cindy Thomas, Robert Choi and others (July 15-16, 2010) IRS0000054949-50.

⁶¹⁰Id.

⁶¹¹ Email chain between Holly Paz, Cindy Thomas and others (Oct. 14, 2010 - Jan. 19, 2011) IRS0000054942-44.

⁶¹² Email from John McGee to Carter Hull (Mar. 4, 2011) IRS0000631878.

⁶¹³ Email chain between Melissa Conley, William Agner and others (July 11, 2011) IRS0000054945-46.

⁶¹⁴Id.

⁶¹⁵ Email chain between Holly Paz, Cindy Thomas and others (Apr. 3, 2013) IRS0000054976-78.

⁶¹⁶Id.

⁶¹⁷See response submitted by Cindy Thomas, IRS Employee Responses to Written Questions from Finance Committee Staff (Dec. 19, 2013).

⁶¹⁸NPR, Liberal Groups say They Received IRS Scrutiny Too (June 19, 2013).

⁶¹⁹Politico, IRS Scrutinized Some Liberal Groups (July 22, 2013).

⁶²⁰Id.

⁶²¹ SFC Interview of Holly Paz (July 26, 2013) pp. 146-147.

⁶²² Email chain between Judith Kindell, Holly Paz and Sharon Light (Apr. 25, 2012) IRS0000013868 (email attachment containing taxpayer information omitted by Committee staff).

⁶²³ IRS, Charity and Nonprofit Audits: Exempt Organizations Examinations.

⁶²⁴ SFC Interview of Nanette Downing (Dec. 6, 2013) pp. 6, 9, 15.

⁶²⁵Id. p. 53; SFC Interview of Sarah Hall Ingram (Dec. 16, 2013) p. 71.

⁶²⁶ SFC Interview of Nanette Downing (Dec. 6, 2013) pp. 35-37.

⁶²⁷Id. pp. 26-29.

⁶²⁸ IRS Memorandum produced to SFC (Sep. 4, 2013) IRS0000378444-46; IRS, Charity and Nonprofit Audits: Closing/Conclusion.

⁶²⁹ IRS Memorandum produced to SFC (Sep. 4, 2013) IRS0000378444-46; IRS Publication 4386, Compliance Checks, Rev. 4-2006.

⁶³⁰ IRS Memorandum produced to SFC (Sep. 4, 2013) IRS0000378444-46.

⁶³¹Id.

⁶³² Email from Diane Letourneau to Sarah Ingram, Nikole Flax, Lois Lerner and others (Oct. 13, 2011) IRS0000468121-28.

⁶³³ Downing repeatedly disputed this conclusion during her interview conducted by Committee staff:

⁶³⁴ SFC Interview of Nanette Downing (Dec. 6, 2013) pp. 30-31.

⁶³⁵Id. pp. 63-64. The IRS continued to examine other types of allegations against tax-exempt organizations.

⁶³⁶ Email from Diane Letourneau to Sarah Ingram, Nikole Flax, Lois Lerner and others (Oct. 13, 2011) IRS0000468121-28.

⁶³⁷ IRS Memorandum produced to SFC (Sep. 4, 2013) IRS0000378444-46.

⁶³⁸ Email from Diane Letourneau to Sarah Ingram, Nikole Flax, Lois Lerner and others (Oct. 13, 2011) IRS0000468121-28.

⁶³⁹ Email from Lois Lerner to Nikole Flax, Nanette Downing and others (July 9, 2012) IRS0000179069-71.

⁶⁴⁰Id.

⁶⁴¹ Email chain between Lois Lerner, Nicole Flax, David Fish and others (Sep. 28 - Oct. 3, 2011) IRS0000263043-67.

⁶⁴² IRS Memorandum produced to SFC (Sep. 4, 2013) IRS0000378444-46.

⁶⁴³Id.

⁶⁴⁴ IRS Briefing for SFC Staff (June 22, 2015).

⁶⁴⁵Id.

⁶⁴⁶ IRS Briefing for SFC Staff (June 22, 2015).

⁶⁴⁷ SFC Interview of Nanette Downing (Dec. 6, 2013) pp. 63-64; IRS Briefing for SFC Staff (Aug. 26, 2014). In April 2014, the IRS re-opened 26 examinations that had been selected under the Dual Track process related to allegations of impermissible political campaign intervention. These 26 examinations were all concluded by June 2015. None resulted in revocation of tax-exempt status, although some of the organizations received a written advisory. IRS Briefing for SFC Staff (June 22, 2015).

⁶⁴⁸Id.

⁶⁴⁹Id.

⁶⁵⁰ Email chain between Holly Paz and Janine Cook (July 18-19, 2011) IRS0000429489.

⁶⁵¹ SFC Interview of Holly Paz (July 26, 2013) p. 139; Email chain between Cindy Thomas, Ronald Bell, Steve Bowling and others (July 5, 2011) IRS0000620735-40.

⁶⁵² Email chain between Sharon Light, Cindy Thomas and others (Aug. 27-28, 2012) IRS0000573175-76; Email from Janine Estes to Hilary Goehausen (July 11, 2012) IRS0000582651 (Email attachment containing taxpayer information omitted by Committee staff).

⁶⁵³ Email chain between Sharon Light, Cindy Thomas and others (Aug. 27-28, 2012) IRS0000573175-76.

⁶⁵⁴ IRS Chart produced to SFC (Sep. 4, 2013) IRS0000378447-48.

⁶⁵⁵ SFC Interview of Nanette Downing (Dec. 6, 2011) pp. 47-48.

⁶⁵⁶ GAO, IRS Examination Selection: Internal Controls for Exempt Organization Selection Should be Strengthened (July 2015) GAO-15-514.

⁶⁵⁷Id.

⁶⁵⁸ 5 U.S.C. § 552 (2009).

⁶⁵⁹ FOIA Request Letter from Lynn Walsh (June 3, 2010) IRSC003801.

⁶⁶⁰ Email chain between Sharon Baker, Valerie Barta and others (June 14, 2010) IRSC003861-63.

⁶⁶¹Id.

⁶⁶² Memorandum from David Fish to Manager, Disclosure with Attachments (July 6, 2010) IRSC003845-49.

⁶⁶³ Case Notes Report (Jan. 6, 2011) IRSC003756-61.

⁶⁶⁴Id.

⁶⁶⁵Id.

⁶⁶⁶ Fax transmission from James Mackay to Sharon Baker (Oct. 26, 2010) IRSC003782-84.

⁶⁶⁷ Letter to Lynn Walsh (Jan. 6, 2011) IRSC003765.

⁶⁶⁸ IRM § 11.3.13.6.2(2) (Oct. 1, 2007).

⁶⁶⁹ 26 C.F.R. § 601.702(c)(8)(ii) (2002).

⁶⁷⁰ IRM § 11.3.13.6.3(13) (Oct. 1, 2007) (emphasis added).

⁶⁷¹ 5 U.S.C. § 552(a)(6)(A) (2009).

⁶⁷² IRM § 11.3.13.1(3) (Oct. 1, 2007).

⁶⁷³The Weekly Standard, Koch Industries Lawyer to White House: How Did You Get Our Tax Information? (Sep. 20, 2010).

⁶⁷⁴Id.

⁶⁷⁵ Letter from Senate Finance Committee Ranking Member Charles Grassley, et. al. to Inspector General J. Russell George (Sep. 23, 2010).

⁶⁷⁶ Koch Industries Statement (Sep. 25, 2010).

⁶⁷⁷Bloomberg News, White House Advisor Goolsbee's Comment on Koch Taxes Reviewed by Treasury (Oct. 7, 2010).

⁶⁷⁸The National Review, The Missing Koch Report (Aug. 20, 2013).

⁶⁷⁹ Letter from Inspector General J. Russell George to Chairman Ron Wyden (May 22, 2014).

⁶⁸⁰Human Rights Campaign Blog, One of NOM's Top Secret Donors Revealed: Mitt Romney (Mar. 30, 2012); The Huffington Post, Mitt Romney's PAC Funded Anti-Gay Marriage Group Under the Radar (Mar. 30, 2012).

⁶⁸¹The Huffington Post, Mitt Romney's PAC Funded Anti-Gay Marriage Group Under the Radar (Mar. 30, 2012).

⁶⁸² Letter from Senator Orrin Hatch to IRS Commissioner Shulman (May 8, 2012).

⁶⁸³ Letter from Inspector General J. Russell George to Chairman Ron Wyden (May 22, 2014).

⁶⁸⁴ Instructions for Form 4506-A (Rev. Aug. 2014).

⁶⁸⁵ Letter from Inspector General J. Russell George to Chairman Ron Wyden (May 22, 2014).

⁶⁸⁶Id.

⁶⁸⁷Id.

⁶⁸⁸ProPublica, IRS Office That Targeted Tea Party Also Disclosed Confidential Docs From Conservative Groups(May 13, 2013).

⁶⁸⁹Id.

⁶⁹⁰ProPublica, Karl Rove's Dark Money Group Promised IRS It Would Spend "Limited" Money on Elections (Dec. 14, 2012).

⁶⁹¹Id.

⁶⁹²Id.

⁶⁹³ Email chain between Beth Tucker, Timothy Camus, Nikole Flax and others (Dec. 14, 2012 - Jan. 4, 2013) IRS0000562277-78.

⁶⁹⁴ProPublica, Controversial Dark Money Group Among Five that Told IRS They Would Stay Out of Politics,Then Didn't (Jan. 2, 2013).

⁶⁹⁵ Letter from Senate Finance Committee Republicans to Inspector General J. Russell George (May 16, 2013).

⁶⁹⁶ Letter from Inspector General J. Russell George to Chairman Ron Wyden (May 22, 2014).

⁶⁹⁷Id.

⁶⁹⁸Id.

⁶⁹⁹ SFC Interview of Cindy Thomas (July 25, 2013) p. 120.

⁷⁰⁰ Letter from Inspector General J. Russell George to Chairman Ron Wyden (May 22, 2014).

⁷⁰¹ Center for Public Integrity, IRS "Outs" Handful of Donors to Republican Group (Apr. 4, 2013).

⁷⁰²Id.

⁷⁰³ TIGTA Briefing for SFC Staff (July 10, 2015).

⁷⁰⁴ IRS, The Agency, Its Mission and Statutory Authority.

⁷⁰⁵ Some states require applicants to submit an IRS Determination letter before the state will confer tax-exempt status. See, e.g., Georgia Department of Revenue, Tax-Exempt Organizations Frequently Asked Questions.

⁷⁰⁶ For a discussion of these and other adverse effects of the IRS' delayed rulings, see Politico, From IRS: "Death by Delay" (Feb. 26, 2015).