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President Barack Obama speaks on the Internal Revenue Service's targeting of conservative groups for extra tax scrutiny in the East Room of the White House in Washington, Wednesday May 15, 2013. Obama announced the resignation of Acting IRS Commissioner Steven Miller, the top official at the IRS. (AP Photo/Pablo Martinez Monsivais)

President Barack Obama speaks on the Internal Revenue Service's targeting of conservative groups for extra tax scrutiny in the East Room of the White House in Washington, Wednesday May 15, 2013. Obama announced the resignation of Acting IRS Commissioner Steven Miller, the top official at the IRS. (AP Photo/Pablo Martinez Monsivais)

Obama picks budget official to run troubled IRS

Last Modified: Thursday, May 16, 2013 3:50 PM

WASHINGTON (AP) — President Barack Obama picked a senior White House budget official on Thursday to become the acting head of the Internal Revenue Service even as he dismissed the idea of naming a special prosecutor to investigate the troubled agency for targeting conservative groups.

Obama named Daniel Werfel as the acting IRS commissioner. Werfel, 42, currently serves as controller of the Office of Management and Budget.

"Throughout his career working in both Democratic and Republican administrations, Danny has proven an effective leader who serves with professionalism, integrity and skill," Obama said in a statement. "The American people deserve to have the utmost confidence and trust in their government, and as we work to get to the bottom of what happened and restore confidence in the IRS, Danny has the experience and management ability necessary to lead the agency at this important time."

Werfel replaces Steven Miller as acting IRS commissioner. Miller was forced to resign Wednesday amid the growing scandal, though he is still scheduled to testify Friday at a congressional hearing.

Werfel agreed to serve through the end of September, the White House said. Presumably, Obama will nominate a new commissioner by then.

IRS commissioners serve five-year terms and must be confirmed by the Senate. Werfel won't need Senate approval because he is a temporary appointment. The Senate, however, confirmed Werfel for his current position without opposition in 2009.

Werfel served has had several jobs at the Office of Management and Budget. He has also been a trial attorney in the Justice Department's Civil Rights Division.

"He is an immensely talented and dedicated public servant who has ably served presidents of both parties," Treasury Secretary Jacob Lew said in a statement. "Danny has a strong record of raising his hand for — and excelling at — tough management assignments."

Werfel takes over an agency in crisis and under investigation. The IRS apologized last week for improperly targeting conservative political groups for additional, sometimes burdensome scrutiny when they applied for tax-exempt status. The practice went on more than 18 months, diminishing the ability of these groups to raise money during election cycles in 2010 and 2012, said an inspector general's report released this week.

The report did not indicate that Washington initiated the targeting of conservative groups. But it did blame ineffective management in Washington for allowing it to happen.

On Thursday, Obama dismissed the idea of a special prosecutor, saying probes by Congress and the Justice Department should be able to figure out who was responsible.

"Between those investigations I think we're going to be able to figure out exactly what happened, who was involved, what went wrong, and we're going to be able to implement steps to fix it," Obama said at a Rose Garden press conference.

Obama promised to work with Congress in its investigations, and he reiterated that he did not know that conservative groups were targeted until it became public last Friday.

"I promise you this, that the minute I found out about it, then my main focus was making sure that we get the thing fixed," Obama said. "I'm outraged by this in part because look, I'm a public figure, if a future administration is starting to use the tax laws to favor one party over another or one political view over another, obviously, we're all vulnerable."

Don't look for the controversy to subside.

Three congressional committees are investigating, and the FBI has launched a criminal probe.

On Friday, Miller is scheduled to testify before the House Ways and Means Committee. Also testifying is J. Russell George, the Treasury inspector general for tax administration.

Ways and Means Committee members are expected to grill Miller over why he failed to tell lawmakers that conservative groups were targeted, even after the agency said he was briefed in May 2012.

At least twice after the briefing, Miller wrote letters to members of Congress to explain the process of reviewing applications for tax-exempt status without disclosing that tea party groups had been targeted. On July 25, 2012, Miller testified before the House Ways and Means oversight subcommittee but again was not forthcoming on the issue — despite being asked about it.

"The IRS has demonstrated a culture of cover up and has failed time and time again to be completely open and honest with the American people," said Rep. Dave Camp, R-Mich., chairman of the Ways and Means Committee. "The committee and the American people deserve honest answers from Mr. Miller at our hearing this Friday."

The groups were applying for tax-exempt status as social welfare organizations. Unlike other charitable groups, social welfare organizations can engage on politics but it is not supposed to be their primary mission.

It is up to the IRS to make the determination.

The inspector general's report said that if agents saw the words "Tea Party" or "Patriots" in an application, they automatically set it aside for additional scrutiny that could hold up approval for an average of nearly two years. The 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.

Miller, a 25-year career civil servant at the IRS, took over the agency in November, when the five-year term of Commissioner Douglas Shulman ended. Shulman was appointed by President George W. Bush.

At the time when tea party groups were targeted, Miller was a deputy commissioner who oversaw the division that dealt with tax-exempt organizations.

Miller was to return to his job as a deputy commissioner when he was done being the acting head of the agency. But Miller resigned from that position on Wednesday.

The Senate Finance Committee said it will hold a hearing on the matter Tuesday. The House Oversight Committee is to hold a hearing Wednesday.

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