WASHINGTON — Senior Treasury officials were made aware in June 2012 that investigators were looking into complaints from tea party groups that they were being harassed by the Internal Revenue Service, a Treasury inspector general said Friday, disclosing that Obama administration officials knew there was an inquiry during the heat of the presidential campaign.
J. Russell George, the Treasury inspector general for tax administration, testified alongside ousted IRS head Steven Miller, who did little to subdue Republican outrage during hours of intense congressional questioning. Both defiant and apologetic, Miller acknowledged agency mistakes in targeting tea party groups for special scrutiny when they applied for tax-exempt status, but he insisted that agents broke no laws and that there was no effort to cover up their actions.
Miller only stoked the criticism of many Republicans, who are assailing the administration on a sudden spate of other controversies, as well, even as some Democrats tried to contain the political damage.
"I don't know that I got any answers from you today," Rep. Mike Kelly, R-Pa., told Miller. "I am more concerned today than I was before."
At one point in the day's hearing, Treasury inspector general George said he had told the department's general counsel about his investigation on June 4, 2012, and Deputy Treasury Secretary Neal Wolin "shortly thereafter." But those discussions were "not to inform them of the results of the audit," George cautioned. "It was to inform them of the fact that we were conducting the audit."
After the hearing, inspector general spokeswoman Karen Kraushaar said George "informed Department of Treasury officials that we were looking into the IRS's handling of applications for tax-exempt status, partly due to allegations raised by conservative organizations."
Kraushaar said the disclosure was part of a routine briefing about the office's activities.
The Treasury Department issued a statement Friday saying officials first became aware of the actual results of the investigation in March of this year, when they were provided a draft of George's report, a standard practice.
George's disclosure came before the House Ways and Means Committee in the first of several congressional hearings on the matter. He was joined by Miller, who spoke publicly about the controversy for the first time.
Miller was contrite as he apologized for the actions of agents who singled out conservative political groups for additional, often burdensome scrutiny.
"First and foremost, as acting commissioner, I want to apologize on behalf of the Internal Revenue Service for the mistakes that we made and the poor service we provided," he told the committee. "The affected organizations and the American public deserve better."
But the hearing turned prickly when Miller insisted he did not deceive Congress, though he repeatedly failed to reveal the controversy last year when he was asked about it by lawmakers — even after he had been briefed.
"I did not mislead Congress or the American people," Miller said.
The administration is on the defensive for a trio of issues that are threatening to derail the president's second-term agenda. In addition to the IRS case, President Barack Obama and other officials are being pressed about last September's terrorist attack in Benghazi, Libya, that killed the U.S. ambassador and three other Americans, and the government's seizure of Associated Press telephone records as part of a leaks investigation.
"Listening to the nightly news, this appears to be just the latest example of a culture of coverups and political intimidation in this administration," said Rep. Dave Camp, R-Mich., chairman of the Ways and Means Committee. "It seems like the truth is hidden from the American people just long enough to make it through an election."
Committee Democrats were also critical of the IRS, but several took offense at Camp's assertion that this matter is part of a wider problem within the administration. They noted that there has been no evidence that anyone outside the IRS was involved in targeting conservative groups.
"If this hearing becomes essentially a bootstrap to continue the campaign of 2012 and to prepare for 2014, we will be making a very, very serious mistake," said Rep. Sander Levin of Michigan, the top Democrat on the panel.
Levin said Lois Lerner, who heads the IRS division that makes decisions about tax-exempt groups, "should be relieved of her duties." Lerner is the IRS official who made the scandal public May 10 in what Miller said was a planned event at a legal conference.
Obama forced Miller to resign this week though he will remain on the job a few days until a new acting director takes over. Obama named Daniel Werfel, a top White House budget officer, to replace Miller and met with Werfel on Friday.
Miller is a 25-year IRS employee who was a deputy commissioner when the tea party groups were being targeted. In that job, Miller was over the division that dealt with tax-exempt organizations.
He became acting head of the agency in November, when IRS Commissioner Douglas Shulman's five-year term expired. Shulman had been appointed by President George W. Bush.
Camp said Miller's departure wouldn't be enough.
"The reality is this is not a personnel problem. This is a problem of the IRS being too large, too powerful, too intrusive and too abusive of honest, hardworking taxpayers," Camp said.
Miller surprised committee members when he said "it is absolutely not illegal" for IRS agents to single out conservative groups for additional scrutiny.
"Please don't get me wrong," he added. "It should not happen."
George backed up Miller's assertion.
"It is not illegal, but it was inappropriate," George said of targeting conservative groups.
George's report concluded that an IRS office in Cincinnati, which screened applications for the tax exemptions, improperly singled out tea party and other conservative groups for tougher treatment. The report says the practice began in March 2010 and lasted in various forms until May 2012.
Agents did not flag similar progressive or liberal labels, though some liberal groups did receive additional scrutiny because their applications were singled out for other reasons, the report said.