What did Holly Paz tell IRS investigators?

The Internal Revenue Service (IRS) building stands in Washington, D.C., U.S., on Wednesday, May 15, 2013. Photographer: Andrew Harrer/Bloomberg

The Internal Revenue Service building in Washington. (Photo by Andrew Harrer/Bloomberg)

The transcript of congressional investigators' May 21 conversations with Holly Paz, who served as a top official in the Internal Revenue Service's tax-exempt organizations division until recently, just came to light Sunday. Paz was among the first IRS employees to be interviewed as part of an inquiry  into whether or not the agency improperly targeted conservative groups applying for tax-exempt status. Here are some of the most interesting things she told the House Oversight and Government Reform and Ways and Means Committees' members and aides during the course of those discussions:

1. Paz, who worked at IRS headquarters in Washington, reviewed about two dozen of the cases that agency officials singled out because they had words such as "tea party" and "patriot" in their name.

In her role as the IRS liaison with the Treasury Department Inspector General for Tax Administration probe in 2012, Paz looked at a number of the cases that attracted special scrutiny.

"I reviewed, I would say, over—between 20 or 30, perhaps," she told House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.).

2. IRS officials in Washington first learned of the Cincinnati office's decision to single out tea party groups in February 2010, right from the start of the program.

Paz said at that time, "a case was identified where there was potential for political campaign activity, and that was when they reached out to Washington and the case was transferred to Washington."

3. Agency officials felt ill-equipped to judge whether groups petitioning for tax-exempt status as a 501(c)(4) organizations deserved that designation.

"For a (c)(4), 501(c)(4) organizations can engage in some amount of political campaign intervention, but there’s no bright-line test as to exactly how much," Paz said. "It’s really a facts-and-circumstances determination of whether something is political campaign intervention. So it’s a very fact-and-circumstance intensive. So it’s a difficult issue. And political campaign intervention in 501(c)(4)s was not something we have previously dealt with very much. The vast majority of applications we get are from 501(c)(3) organizations."

4. IRS employees had no specific definition for how to define how much social welfare a group has to pursue in order to have it constitute its "primary activity," which is what makes it eligible for 501(c)(4) status.

"How is 'primary activity' defined?," asked one of the Democratic counsels on the House Oversight and Government Reform Committee.

"It’s not. It’s not," Paz replied. "So that ambiguity, they have expressed, is challenging for them in application."

5. Officials in the Cincinnati office used "tea party" as a shortcut to refer to all groups that may have engaged in extensive political activity.

At one point Paz's attorney Roel Campos asked her during the interview with Democratic aides, "What were these employees’ explanations for using the term 'tea party'?

"That it was really just an efficient way to refer to this issue; that they all understood the real issue was campaign intervention," Paz responded.

"It was a shortcut or abbreviation?" Campos inquired.

"Yes. Just sort of a shorthand reference," she said. "You know, I think they may have reference, you know, it’s like calling soda 'Coke' or, you know, tissue 'Kleenex.' They knew what they meant, and the issue was campaign intervention."

6. According to Paz, the Cincinnati employees were clueless about the fact that their decision to focus on conservative groups could be interpreted as politically-motivated. 

"Do you have any sense of how it is that they could have not noticed that there was a problem with using 'tea party' to refer to political advocacy cases?" asked another Democratic counsel for the Oversight and Government Reform Committee.

"My impressions, based on, you know, this instance and other instances is that because they are so apolitical, they are not as sensitive as we would like them to be as to how things might appear," Paz responded.

7. The IRS official in Cincinnati who improperly leaked tax information regarding the conservative non-profit Crossroads GPS to ProPublica was disciplined -- but not put on leave -- for the mistake.

"I believe she was issued a formal admonishment," Paz told investigators.

Paz, a career IRS official, was put on administrative leave earlier this month. Neither she nor her attorney could be reached for comment Monday.

 

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