Updated May 21, 2013, 12:11 a.m. ET
Treasury Knew IRS Was Planning Apology
By DAMIAN PALETTA, PETER NICHOLAS and JOHN MCKINNON
Not all controversies are created equal. The IRS controversy carries the most potential to do long-term damage to the Obama agenda, Jerry Seib says on The News Hub. Photo: Getty Images.
The Internal Revenue Service briefed the Treasury Department extensively last month about a looming inspector general's report that would find the agency had inappropriately targeted for extra scrutiny applications from conservative groups seeking tax-exempt status, a new timeline of events shows.
The IRS consulted Treasury in late April about its plans to pre-emptively apologize for its actions, and a flurry of conversations transpired that included White House Chief of Staff Denis McDonough and senior Treasury officials, Obama administration officials said Monday.
Two people kept out of the loop, according to administration officials, were President Barack Obama and Treasury Secretary Jacob Lew. Neither was consulted, administration officials said, because their staff wanted to ensure that it didn't appear they had interfered in any way in the process.
Mr. Lew is testifying before a Senate panel Tuesday, where the matter is certain to be raised.
The IRS is a division of the Treasury Department that by its design is supposed to be independent and apolitical.
The new revelations don't touch on some of the more fundamental questions about the IRS scandal, such as who initially ordered the targeting of conservative groups in 2010 and why it wasn't halted until 2012. But it does suggest a much more engaged White House and Treasury Department in the IRS's attempt to apologize before the inspector general's report was released on May 14.
Beginning in late April, Treasury staff learned of three separate scenarios the IRS was eyeing about how to publicly apologize for the targeting, which IRS officials had previously said didn't occur. In each case, a Treasury official said the agency deferred to the IRS, but it did raise concerns about at least one scenario that included a planned speech. The IRS nixed the speech idea, though it couldn't be learned whether the decision was influenced by Treasury's misgivings.
The Treasury briefed the White House on two of the IRS's scenarios, but told administration officials it was deferring to the IRS.
White House officials have said they acted appropriately by not intervening before the report was released.
Such an intervention could have prompted criticism the White House was interfering in the audit, they said. They also have said they weren't involved in the decision to target conservative groups.
Among the White House officials that Treasury told of the looming audit was counsel Kathryn Ruemmler. She soon told Mr. McDonough and some other senior aides about the audit's findings, White House spokesman Jay Carney said Monday. But she also told them they shouldn't alert the president—a suggestion Mr. Carney said they followed.
Mr. Obama has said he didn't learn about the matter until seeing news reports on May 10—the day an IRS official publicly apologized for the actions described in the audit, which was released four days later.
Ms. Ruemmler told "other members of the senior staff that this is not the kind of thing—when you have an continuing investigation or an continuing audit—that requires notification to the president because what is important is that we wait until that kind of process is completed before we take action, and that's what the president did," Mr. Carney said.
The spokesman's comments marked the first time administration officials said Ms. Ruemmler had informed White House staff outside the counsel's office of the audit's findings.
More of the story is likely to emerge this week at hearings where lawmakers likely will focus in part on why then-IRS Commissioner Douglas Shulman told them in early 2012 that "absolutely no targeting" of conservative groups was occurring, yet never changed his story after investigations showed it did occur.
Mr. Shulman didn't respond to requests for comment, nor did the IRS. On Monday Mr. Shulman withdrew his candidacy for election to the board of CBOE Holdings Inc., CBOE -0.32% the parent of the Chicago Board Options Exchange.
Republicans questioned the decision to keep the president uninformed about a case involving alleged misuse of IRS power. Brendan Buck, a spokesman for House Speaker John Boehner (R., Ohio) said: "The White House's story continues to evolve every day, but it's clear they want Americans to see the president as in the dark on what his administration is up to."
Republicans also are questioning the less-detailed version of events provided earlier by senior White House officials. Mr. Carney said last week, "My understanding is that the White House Counsel's Office was alerted in the week of April 22nd of this year, only about the fact that the IG was finishing a review about matters involving the [IRS] office in Cincinnati."
Lawmakers this week likely will press for more information on how the targeting began. They also likely will follow up on ousted IRS Acting Commissioner Steven Miller's testimony at a House committee hearing Friday that he was told an inspector general's report would come out in the summer of 2012.
—Ashby Jones contributed to this article.