At 10 a.m., the Senate Finance Committee is holding its first hearing looking at the Internal Revenue Service's inappropriate targeting of conservative groups.

Set to testify are the same two witnesses who testified before the House last week -- former acting IRS commissioner Steven Miller and J. Russell George, the Treasury Department inspector general for tax administration -- along with a much-anticipated new witness: former IRS commissioner Douglas Shulman, who was in charge when the targeting began in 2010.

Stay tuned to the live blog below for all the key moments...


Hearing ends as Portman hits Miller for lack of disclosure

The hearing has now adjourned, but not before Sen. Rob Portman (R-Ohio) got in some final shots at the IRS officials on the witness stand.

Portman pressed former acting IRS commissioner Steven Miller about why he didn't disclose the wrongdoing sooner.

Portman noted that Miller wrote an April 26, 2012, letter to the Senate Finance Committee that did not disclose the wrongdoing. He has said he then found out about the wrongdoing in a briefing on May 3.

Portman pressed him on why he didn't reach out to the senators again to clarify the letter, given the proximity of those events.

Miller noted that the April 26 letter was on a separate matter related to improper requests for donor lists.

"There's no question that your letter was inaccurate," Portman said. "And you learned on May 3 that it was false. And you did nothing to correct the public record, even though you were 'outraged,' based on your own testimony, by your May 3 briefing."

Shulman punts on whether groups are abusing tax-exempt status

Senate Finance Committee Max Baucus (D-Mont.) grew frustrated with former IRS commissioner Douglas Shulman during a tough back-and-forth over what the IRS is doing about political groups allegedly abusing tax-exempt status.

Democrats have long argued that Republican-leaning nonprofits, which aren't allowed to be explicitly campaign-oriented, register as nonprofits to avoid disclosing their donors.

Baucus pressed Shulman on what the IRS did to look into the matter and whether it should crack down on them, and he wasn't satisfied with any of the answers he was getting.

Shulman argued that he, as a political appointee, shouldn't take a position on individual cases.

"It came to my mind that career professionals should be the ones touching these cases, thinking about are they using the tax-exempt laws properly, and presidential appointees should not be touching the case," Shulman said.

Baucus repeatedly accused Shulman of "dodging the question" about whether he had done anything about the broader issue of abuse of tax-exempt status.

"I was aware ... the appropriate people were making sure that the (IRS) was working on this issue," Shulman said.

Baucus responded: "I'm not going to split hairs here, but that's a frankly unresponsive answer."

Shulman, it should be noted, was appointed by George W. Bush but served in the early years of President Obama's term.

Hatch presses Shulman on when he found out about scandal

In a second round of questioning, Sen. Orrin G. Hatch (R-Utah) pressed Douglas Shulman for more information on when exactly he found out that IRS employees were improperly targeting certain groups.

"I was told of the problem, as I mentioned before, by Mr. Miller and at that time, I was also told that TIGTA was looking into the issue," Shulman said. "I don’t recall telling anyone about it, because I think this is not the kind of information once TIGTA starts looking at it that should leave the IRS."

When Hatch inquired about whether he told anyone at the White House or Treasury Department, Shulman said "I have no knowledge of people at the Treasury Department knowing about tea party groups being subject to scrutiny." He added later that "I didn't have conversations" with anyone at Treasury about the investigation.

Democrat hits IRS officials for lack of contrition

After returning from a brief recess, Sen. Bob Casey (D-Pa.) expressed disappointment in the lack of contrition from the IRS officials testifying.

"I have to say, listening -- and I've been here for virtually every moment of this hearing -- I wish there was more of a sense of outrage or at least more contrition than demonstrated by both you, Mr. Shulman, and you, Mr. Miller, in light of what's happened here," Casey said.

Miller has apologized; Shulman stopped short of doing so. Pressed further by Sen. Tom Carper (D-Del.) on the issue of contrition, Miller repeated his apology.

"I do apologize," Miller said. "What happens on my watch ... I am responsible."

Lew ‘would have advised against’ planted question

Treasury Secretary Jack Lew said he would have "advised against" the decision by the IRS to plant a question at the American Bar Association Conference recently in order to reveal the targeting of conservative groups before notifying Congress.

Sen. Mike Crapo (R-Idaho) asked Lew if he was personally involved in the decision.

Lew said no, but that there were some conversations about it at a staff level between Treasury and IRS. He emphasized that the management of the matter was up to the IRS's discretion.

"I would have advised against doing that," Lew said. "But, it was a decision for the IRS to make."

Committee taking brief recess

Senate Finance Committee Chairman Max Baucus (D-Mont.) has promised a second round of questions for members of the panel, but they're on a brief break to go vote on a matter in the full Senate.

We'll resume shortly.

Shulman stops short of apologizing for scandal

Douglas Shulman, who was IRS commissioner when the improper targeting of conservative groups began, declined to offer a direct apology for his role in the wrongdoing.

Asked by Sen. John Cornyn (R-Texas) whether he would apologize -- as former acting IRS commissioner Steven Miller did in his opening statement -- Shulman said that he was "deeply saddened" by what happened.

Pressed further by Cornyn on whether Shulman would apologize to Cornyn's constituents, Shulman noted that he's not sure what occurred specifically with Texas-based groups and that he wasn't involved in the wrongdoing.

"I certainly am not personally responsible for making a list that had inappropriate criteria on it," Shulman said, adding: "With that said, this happened on my watch, and I very much regret that this happened on my watch."

Cornyn responded: "Well I don't think that qualifies as an apology."

Watchdog: IRS disclosure to ProPublica might have been illegal

Inspector general J. Russell George said in response to questioning by Sen. John Thune (R-S.D.) that IRS aides might have broken the law by releasing confidential applications for tax-exempt status to the media organization ProPublica.

Asked directly whether that might have been illegal, George said, "It could have been."

Here's more on the ProPublica controversy, which several Republicans have touched on during today's hearing. The media organization reported in December that the IRS sent it Crossroads GPS's application after a public records request.

The IRS has said it cannot release information on groups whose tax-exempt status has not been approved.

Treasury secretary says he learned of IRS targeting in March

In a separate hearing Tuesday before the Senate banking committee, Treasury Secretary Jack Lew testified that he first became aware of allegations that the IRS was targeting conservative groups on March 15, when he had a meeting with the Treasury Department’s inspector general for tax administration.

“The IG mentioned that there was an audit of 501(c)(4) activity and told me that there might be troubling findings, but did not describe them in detail,” Lew said.

Lew said the Treasury Department took pains not to interfere with the inspector general's report, which came out last week, stressing the department’s semi-independence from Treasury.

“The practice at Treasury, quite appropriately, is when you’re notified of an IG investigation, you allow the IG to do their work, you don’t get in the way, you make sure they have access to whatever they need access to to complete their audit and that’s what Treasury was doing," Lew said.

Lew also testified that the new acting commissioner of the IRS, Daniel Werfel, will “hit the ground running” Wednesday with a thorough review of the IRS.

He said he directed Werfel to do three things immediately:

1. Make sure those who acted inappropriately are held accountable.
2. Examine and correct any failures in the system that allowed the targeting to happen.
3. Determine whether the IRS has systemic problems to be addressed.

“We’re going to make sure that nothing like this ever happens again,” Lew said, promising that Werfel will report back to Obama in 30 days.

Officials not sure why non-conservative groups were targeted

More than two-thirds of the approximately 300 groups that were incorrectly targeted by the IRS were not conservative groups. But neither the IRS nor the inspector general's report has said why those group were targeted.

Sen. Ben Cardin (D-Md.) pressed the witnesses on on that question. But neither inspector general J. Russell George nor former acting IRS commissioner Steven Miller had a good answer.

"I believe there was evidence of political activity that the screener believed was there and therefore it was put in," Miller said. "It is my hope that when you do your review, that some of these things will become more clear than they were in the report."

George added: "That's part of the problem. There was no indication at all in the case files why" the other groups were targeted.

Wyden: Bigger issue is secrecy in politics

Sen. Ron Wyden (D-Ore.) used his question period to raise more general concerns about the vast expansion of tax-exempt groups with a political bent.

"My hope that out of this will come clear and enforceable rules to treat all political groups equally," Wyden said.

"The lines have blurred between politically active groups that disclose their donors – those are the 527s – and those that do not – those are the 501 (c) (4)s," Wyden said. "And it has become apparent that ought to be 527s are applying for c4 status to avoid disclosure obligations. That means that there’s an incentive to choose their tax status based on whether they want to hide their donors. My view, that’s a loophole that Congress ought to close."

"All I can say is that this is a very hard task given to the IRS. To have the IRS, which needs to process 140 million tax returns and get billions of dollars in refunds out every year, to also have this piece of the operation that by the law has to be asking questions about the political activities, is very difficult," former IRS Commissioner Douglas Shulman told Wyden in response, adding later that "If Congress could help clarify the law, that would be a very helpful thing."

Inspector general: Nothing illegal found yet

The inspector general responsible for uncovering the IRS scandal still says he has found no evidence of criminal wrongdoing.

"If we determine that something has occurred, we will certainly pass it along," J. Russell George said. "We thus far have not uncovered any actions that we would deem illegal."

Russell said much the same thing in his report and at last week's House Ways and Means Committee hearing.

Republicans have pushed for criminal prosecutions -- including House Speaker John Boehner (R-Ohio) asking "who's going to jail" -- but lawyers generally agree that it's unlikely anybody will be convicted.

Roberts calls Lerner ‘the lady who doesn’t do math but can plant a question’

Lois Lerner, the head of the IRS's tax exempt division, isn't there to defend herself. But that doesn't mean she's immune to criticism.

During a lengthy statement, Sen. Pat Roberts (R-Kan.) called Lerner “the lady who doesn’t do math but can plant a question.”

As we noted the day the scandal broke, Lerner's torturous conference call included her admitting that she wasn't "good at math." It later came out that Lerner asked a lawyer to ask her the question that led her to disclose the wrongdoing -- a practice known in the media as "planting" a question.

Lerner has been asked to testify before the House oversight committee at its hearing Wednesday morning.

Shulman defends incorrect testimony

Sen. Orrin Hatch (R-Utah) pressed Shulman on why he hasn't corrected his past testimony now that it's clear targeting did occur.

"You should have corrected the record, and you should have done it long before today," Hatch said.

Shulman emphasized that the full report only came out last week and that he didn't know what other groups might have been targeted. He said he wanted to let the investigation play out.

"What I knew was not the full set of facts in this report," Shulman said.

Shulman said earlier in the hearing "I don't believe I was aware" of the targeting when he testified in March 2012 that there was none.

Why did it take almost two years to fix problems?

In her line of inquiry, Sen. Debbie Stabbenow (D-Mich.) tried to learn why it took the IRS almost two years to address the problems in the Cincinnati tax-exempt unit.

"How in the world could it take so long for senior people at the IRS to find the problem, fix the problem and was there no ongoing oversight of the employees in Cincinnati and what they were doing?" she asked Shulman and Miller.

"I agree that this is an issue that when someone spotted it, they should have brought it up the chain and they didn't," Shulman said. Why they didn’t, I don’t know."

"I would agree," Miller said. "I’m not going to disagree with your characterization of bad management here, because that  did happen. And I don’t want to understate concerns with the list, because we should not have done that. … We should look at the files, we should look at the names, we should not look at positions taken on a certain topic.”


MR. George, could you speak more about the amangement?

When asked about the management breakdown, Inspector General J. Russell George noted that the Cincinnati field office sought clarification from officials in Washington about the situation "and it took almost a year before a response was received by them on how to handle some of these issues."

Due to the lack of clarification, workers in Cincinnati "decided to revert to a slightly different yet slightly inappropriate way of handling these matters," George said.

In sum, the situation suggests ""A breakdown in communications -- mismanagement on behalf of the Internal Revenue Service," George said.

Shulman: ‘I don’t believe I was aware’ of IRS targeting

Former IRS commissioner Douglas Shulman said "I don't believe I was aware" of the IRS's improper targeting of conservative groups when he testified in March 2012 that there was none.

The comment came as Sen. Max Baucus (D-Mont.) began the questioning of witnesses by trying to determine why nobody was fired or faced other significant disciplinary action for being involved in the targeting of certain groups.

"Why wasn’t more direct action taken?" Baucus asked Shulman and his successor, former acting commissioner Steven Miller.

Both men essentially said they weren't aware of the targeting and therefore didn't take significant action.

"All I can say is that we were unaware, I was unaware," Miller said, adding later that "When I found out in May [2012] I took action."

So what action did he take?

"So I was briefed on it after sending a group to take a look at the cases," Miller recalled. "They reported back to me in May 2012. Essentially with much of what had transpired and what is shown in the IG report, that the cases were languishing that a list was utilized that letters were sent out that were much more broad than they should be."

In response, Miller called for new training and workshops to ensure that employees understood the rules. He asked for a review of languishing cases to ensure that they were appropriately addressed.

Miller said that one person responsible for sending letters to certain organizations seeking tax-exempt status was "transferred and reassigned" while another person received oral counseling.

Baucus then asked Shulman what he learned about the situation and what steps he took before he stepped down as agency head last November.

"During my time at the IRS, I believed and I articulated that the IRS needed to be a nonpolitical, nonpartisan," Shulman said.

But Baucus cut him off: "If you articulated that, how did this happen?"

"I think that there’s a set of rules built into the system, there’s laws, there’s education of people that I think the vast majority of the IRS employees understand that," Shulman said.

Baucus pressed him for specifics: "What happened in Cincinnati? What conditions caused that?"

"I can’t say that I know that answer. I’m six months out," Shulman said.

"You’ve got some sense of it… some idea," Baucus insisted.

"I’m six months out of office," Shulman said. "When I left, the IG was looking at this to gather all the facts."

"Well, I’m kind of disappointed, because you’ve had some time," Baucus said before wrapping up his line of questioning.

Miller repeats: Targeting wasn’t partisan

In a brief opening statement, Steven Miller, the former acting IRS commissioner who also testified in front of the House last week, apologized for the IRS's wrongdoing but continued to say that it wasn't motivated by politics.

"I do not believe that partisanship motivated the practices described in the inspector general's report," Miller said, adding that the mistakes were made out of a desire for expediency.

As we've noted before, admitting that the targeting was partisan would open the IRS and its employees up to potential criminal charges, which is why Miller has repeatedly emphasized that it was not.

Shulman ‘dismayed’ by watchdog findings

Former IRS commissioner Douglas Shulman made his first public comments since the release of a watchdog report detailing the agency's inappropriate targeting of certain groups seeking tax-exempt status.

"I was dismayed and I was saddened to read the inspector general’s conclusions that actions had been taken creating the appearance that the service was not acting as it should have, that is as a nonpolitical, nonpartisan agency," Shulman told the Senate Finance Committee.

"The IRS serves a critical function for our nation," he added. "It collects the taxes necessary to run the government. Because of this important responsibility, the IRS must administer and it must be perceived to administer our tax laws fairly and impartially. Given the challenges that the agency faces, it does its job in an admirable way the great majority of the time and the men and women of the IRS are hard-working, honest public servants.

"While the inspector general’s report did not indicate that there was any political motivation involved, the actions outlined in the report have justifiably led to questions about the fairness of the approach taken here," Shulman concluded. "The affect has been bad for the agency and bad for the American taxpayer."

Watchdog: IRS inappropriately targeted groups for more than 18 months

J. Russell George, the Treasury inspector general for tax administration, shared his findings with members of the Senate Finance Committee. His oral testimony was virtually similar to what he told the House Ways and Means Committee last Friday.

You can review his full testimony below and read it here.

Hatch to White House: ‘These hearings are not some sideshow’

Sen. Orrin Hatch (R-Utah) used his opening statement to suggest the White House is downplaying the IRS scandal.

“These hearings are not some sideshow designed to distract from the president’s agenda,” Hatch said. “I hope the administration is not trying to distract us from getting to the bottom of this.”

White House senior adviser Dan Pfeiffer on Sunday referred to the trio of controversies as "a swamp of partisan fishing expeditions, trumped up hearings and false allegations."

Hatch said the purpose of the hearing is to figure out who is responsible for the targeting and who knew about it.

"It has become clear that this problem was not limited to a few employees in Cincinnati," Hatch said.

A note on today’s hearing

For those who watched the House's hearing on the IRS scandal and Attorney General Eric Holder's testimony before a House committee last week, don't expect the same thing.

Senate hearings generally include fewer theatrics and more measured questioning. We can still expect tough questions, but the Senate is a different animal.

In addition, the Senate Finance Committee includes none of the Senate's young, outspoken conservatives (i.e. Mike Lee, Ted Cruz, Rand Paul, Marco Rubio).

It does, however, include several true-blue Republicans, including Iowa's Chuck Grassley and Senate Minority Whip John Cornyn (Texas).

Baucus: IRS workers ‘abandoned good judgment’

After pausing to note the deadly tornadoes in Oklahoma, Senate Finance Committee Chairman Max Baucus (D-Mont.) launched into his opening statement critical of the Internal Revenue Service's handling of employees who inappropriately targeted certain tax-exempt groups.

The IRS “abandoned good judgment and lost the public's trust," Baucus said. "The American people have every right to be outraged. Targeting groups based on their political views is not only inappropriate, it is intolerable. We need to understand how and why this targeting occurred. We need to know who was involved and who was responsible. We need to install new safeguards to ensure this doesn’t happen again."

"The IRS has one of the most direct relationships wit the American public than any of our agencies in the government," Baucus noted later. "IRS agents know where we live, where we work, how many children we have and what investments we make. Because of this, IRS employees are placed in a position of great trust and they must exercise this trust in a fair and independent matter."

But the committee's early assessment of the situation suggests that the IRS “abused this trust," Baucus said.

The chairman, who plans to retire when his term expires in early 2015, said his panel's ongoing investigation "will follow the facts and see where they take us."

He added that the scandal should compel lawmakers to "review and reform the nation's tax laws," a goal Baucus had already set as part of his impending retirement.

Setting the scene

My colleague Ed O'Keefe sets the scene for today's hearing, noting that it's Douglas Shulman's debut before the committee:

The star witness is Douglas Shulman, who stepped down as IRS commissioner last November and will be making his first public appearance since agency officials admitted that employees improperly targeted some conservative-leaning organizations seeking tax-exempt status. Shulman will be joined at the witness table by outgoing agency head Steven T. Miller, who submitted his resignation under pressure last week, and J. Russell George, the Treasury Department inspector general for tax administration whose report published last week details how IRS employees singled out certain groups for closer scrutiny.

The hearing comes a day after the White House admitted that senior officials, including Chief of Staff Denis McDonough, learned last month about George’s investigation, but they did not inform President Obama.

In that vein, the Finance panel asked Miller Monday to document any communications in recent months with top Obama administration officials regarding the watchdog investigation.

Sens. Max Baucus (D-Mont.) and Orrin G. Hatch (R-Utah), who lead the Finance Committee, wrote to Miller Monday and made 41 specific requests for information, including documentation of all attempts to elicit information from groups seeking tax-exempt status; a list of all the words and phrases used to target applicants for additional scrutiny; how IRS officials discovered that employees were inappropriately targeting certain groups; and all internal communications between employees working to review the groups.

Hearing on IRS scandal: Live updates

The first high-profile hearing on the IRS scandal is being held today before the House Ways and Means Committee, which oversees the IRS. Lawmakers in both chambers are seeking answers about why they weren’t told that the IRS had singled out conservative groups for scrutiny despite multiple inquiries in recent years.The hearing is the first of several sessions in coming weeks in which lawmakers will grill current and former officials about the IRS’s screening practices.