Former Lois Lerner Deputy Involved in Obama Era IRS Scandal That Targeted Conservatives Leads Major IRS Division Under Trump

A former top deputy to Lois Lerner, the former director of the IRS Exempt Organizations division and central figure in the 2013 IRS targeting scandal, now runs one of the primary operating divisions of the IRS, according to a report from the American Accountability Foundation. 

The report alleges that Holly Paz, “seems to have been rewarded by the Biden Administration for her partisan loyalty with one of the IRS’ most powerful positions.” Though Paz was placed on administrative leave for her involvement in the 2013 targeting scandal, she is now the agency’s commissioner of the Large Business & International Division (LB&I), according to the IRS website and a publicly available IRS organization chart. 

American Accountability Foundation (AAF) President Thomas Jones previously wrote a letter to Treasury Secretary Scott Bessent that called for Paz’s termination in March. “Paz has proved undeserving of the honor to serve the American public,” Jones wrote, adding that the organization “implores the Trump administration to root out any anti-conservative partisan bias at the IRS.”

Rep. Darrell Issa, R-Calif., the former chairman of House Oversight and Government Reform Committee that oversaw the House investigation of the scandal, told The Daily Signal, “I’m calling on President Trump to finish the job of cleaning house at yet another government agency and ensuring that it serves the American people first and always.”

“Individuals like this have no business holding positions of trust, particularly at the IRS, where the Obama and Biden administrations weaponized the agency and abused its power,” Issa added. “Our investigations revealed that literally thousands of innocent Americans were targeted by the Lerner/Paz IRS and denied their fair access to our nonprofit laws and even our democracy.”

AAF’s Jones also said in the March letter that the organization’s “first finding of this investigation is that the former top deputy to Louis Lerner — Holly Paz — regained a high-ranking position within the IRS during the Biden Administration,” and promised to “continue to investigate IRS leadership.” The results of that investigation into Paz, obtained by The Daily Signal, found that, despite her controversial past as a high-ranking IRS official, which included targeting “tea party” nonprofits, contradictory testimony to Congress, and administrative leave, Paz remains LB&I commissioner even under the Trump administration. 

The exact date of Paz’s appointment to the position remains unclear because the IRS did not reply to The Daily Signal’s request for clarification; however, Paz identifies herself as the acting commissioner of LB&I in a January 2023 blog post on the IRS website. The Daily Signal also attempted to contact Paz through the IRS for comment.

The Treasury Inspector General for Tax Administration released a report on May 14, 2013 that suggested the IRS inappropriately reviewed and delayed applications from conservative nonprofit organizations for tax exempt status, especially groups that had “Tea Party,” “Patriots” or “9/12” in their names and focused on issues of government debt and government spending. 

“The IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention,” the report said. The practice started in 2010, but the public increasingly became aware of controversial actions undertaken by the IRS from late 2011 and throughout 2012. Attempting to preempt the bombshell report, Lerner publicly acknowledged, at a conference hosted by the American Bar Association, that the IRS had engaged in this activity during the 2012 election cycle—information that she had previously failed to divulge to Congress. 

Paz served as the IRS liaison with the Treasury Department Inspector General for Tax Administration probe in 2012 and was one of the IRS officials who executed IRS directives to delay these applications. Paz told Issa that she “reviewed… between 20 or 30” cases involving these conservative groups flagged for further scrutiny. 

During their investigation, the oversight committee found that Paz ordered IRS officials working out of the Cincinnati branch to “hold” cases involving tea party groups. Holds placed on processing dozens of these cases lasted more than a year. 

Nevertheless, Paz maintained in her May 21, 2013 testimony that IRS officials used “tea party” as shorthand for any group engaged in extensive political activity. “It was really just an efficient way to refer to this issue; that [the officers] all understood the real issue was campaign intervention,” Paz told the committee. “It’s like calling soda ‘Coke’ or, you know, tissue ‘Kleenex.’ They knew what they meant, and the issue was campaign intervention,” Paz later added. 

Paz also told the committee that the officials might not be aware their actions could be read as political “because [the officers] are so apolitical.” 

“They are not as sensitive as we would like them to be as to how things might appear,” Paz said. 

The oversight committee, however, later pressed Paz on statements that appeared to contradict what the committee found in its investigation. “Since your transcribed interview with Committee staff on May 21, 2013, the Committee has uncovered additional information that appears to contradict your testimony in several areas relevant to the Committee’s investigation,” Issa and Rep. Jim Jordan, R-Ohio, then an oversight subcommittee chairman, wrote in an August 2013 letter to Paz. The committee claimed, for example, that multiple Cincinnati employees claimed to understand ”Tea Party” not as a generic term, but a term that targeted conservative groups. 

After Paz was placed on administrative leave, her attorney Roel Campos claimed she was “the hero” of the targeting controversy. “Holly Paz did nothing wrong and in fact she was an ideal employee, an ideal public servant,” Campos told The Wall Street Journal.

In later legal proceedings, Paz’s remarks seem to suggest there would not be a legal basis to deny these groups tax exempt status.

During a 2017 deposition that was unsealed in 2022, Paz was asked by an attorney if the law “would warrant the recognition of [tax] exemption,” despite their political activity. “At the time, my thinking was that the majority of the (c)(4) applications, while they may have indicated some amount of political activity, that we would not have enough basis to make a determination that that would be their primary activity and deny them exempt status,” Paz replied. 

To which the attorney asked, “And, therefore, they would receive an approval or recognition of exemption?” 

“Correct,” Paz asserted. 

Paz’s deposition, as well as a deposition of Lerner, were sealed by a judge in 2017 after the pair claimed to have received death threats. 

Furthermore, in NorCal Tea Party Patriots, et al. v. The Internal Revenue Service, et al., the NorCal Tea Party Patriots discovered that Lerner and Paz were involved in email correspondence about right-wing groups applying for tax-exempt status after the Supreme Court’s 2010 ruling in Citizens United v. Federal Election Commission, which held that corporate spending on political messaging cannot be limited under the First Amendment. Lerner emailed Paz and others the following: 

Tea Party Matter very dangerous…This could be the vehicle to go to court on the issue of whether Citizen’s United [sic] overturning the ban on corporate spending applies to tax exempt rules. Counsel and Judy Kindell need to be in on this one please needs to be in this. Cincy should probably NOT have these cases—Holly please see what exactly they have please. 

Lerner also encouraged IRS officials to try and find reasons beyond political activity to deny the Tea Party applicants’ desired tax-exempt status. “Even if we go with a [501(c)(4)] on the Tea Party cases, they may want to argue they should be [501(c)(3)s] so it would be great if we can get there without saying the only reason they don’t get [501(c)(3) status] is political activity,” a 2011 email from Lerner to her deputies said.

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