The Internal Revenue Service's watchdog told top Treasury officials around June 2012 he was investigating allegations the tax agency had targeted conservative groups, for the first time indicating that Obama administration officials were aware of the explosive matter in the midst of the president's re-election campaign.
The disclosure to the Treasury general counsel and the deputy secretary was a cursory one, according to J. Russell George, the Treasury inspector general for tax administration. He said he didn't reveal conclusions of the probe, which was in its early stages, and his disclosure came as part of a routine update to Treasury leaders. At the time, Republican lawmakers were complaining publicly about alleged IRS targeting of tea-party groups.
The revelation nonetheless raised a fresh set of questions about who was aware of the problem within the Obama administration. It was one of several new details that emerged during a contentious four-hour House committee hearing Friday, held one week after an IRS official revealed at a legal conference that the agency had taken "absolutely inappropriate" actions in targeting conservative groups seeking tax-exempt status for often heavy-handed scrutiny.
Among other disclosures: The conference revelation was itself stage-managed. Ousted IRS acting Commissioner Steven Miller testified he planned it with the director of the division in question. Republican lawmakers expressed amazement that IRS officials didn't tell them first.
The hearing left numerous other fundamental questions unanswered, however, including who ordered the targeting and why it continued so long, pointing to a protracted investigation ahead. Mr. Miller conceded the agency likely disciplined the wrong employee in one effort to address the problem. Another was reassigned in the agency's Cincinnati office, but he couldn't provide the employee's name.
Following the hearing, House Ways and Means Committee Chairman Dave Camp (R., Mich.), who led the proceedings, expressed frustration and left open the possibility of issuing subpoenas to the IRS. "I think the most interesting revelation was the overall arrogance of the IRS and the lack of information from somebody who was in charge," Mr. Camp said.
The Treasury Department, in a statement, confirmed officials were notified in June 2012 that an audit had begun. It added an underlined sentence, "Treasury strongly supports the independent oversight of its three Inspectors General, and it does not interfere in ongoing IG audits."
Treasury also said Neal Wolin, the deputy secretary, didn't notify anyone outside of Treasury that the audit was under way and that Mr. Wolin and Treasury Secretary Jacob Lew "learned about [the inspector general's] findings when they were reported publicly last week." A White House aide said Friday that Treasury officials didn't share the information with White House officials.
White House officials say they learned about the targeting of conservative groups from the report, and not before. President Barack Obama on Thursday said, "I can assure you that I certainly did not know anything about the IG report before the IG report had been leaked through the press."
At the hearing, lawmakers of both parties expressed anger that IRS officials didn't reveal the problems to them in 2012. GOP lawmakers, after receiving complaints from tea-party groups about IRS scrutiny, asked then-commissioner Douglas Shulman about that in March 2012. He testified before the Ways and Means committee then that there was "absolutely no targeting," but he didn't correct his testimony after learning of the problems in May, according to congressional investigators. Mr. Shulman couldn't be reached for comment.
Several other IRS officials, including Mr. Miller, didn't disclose the problems to lawmakers in letters and testimony. Mr. Miller Friday cited the continuing inspector-general investigation, even though he obtained an internal IRS investigation in May 2012 that came to some of the same conclusions as the inspector general report.
"I was not going to go there because I did not have full possession of the facts, sir," Mr. Miller said at one point.
In sometimes combative testimony, Mr. Miller also took exception to the idea that the IRS had engaged in targeting conservative groups, pointing out that groups representing other ideologies also were caught up in the extra review.
The inspector general's report said that based on a statistical sample, "all cases with Tea Party, Patriots or 9/12 in their names were forwarded" for extra scrutiny. Many of the cases were delayed for years.
Lawmakers of both parties questioned his response.
"Throughout this time, the IRS leadership has demonstrated a total disregard for the oversight role of the Congress and this committee," said Rep. Sander Levin (D., Mich.), the committee's top Democrat. Mr. Shulman "had an obligation to return to this committee and set this record straight. So did Mr. Miller."
"How was that not misleading this committee?" said Rep. Paul Ryan (R., Wis.) to Mr. Miller. "How can we not conclude that you misled this committee?"
"I did not mislead the committee," Mr. Miller responded, adding later, "I answered the question truthfully."
Messrs. Miller and George, the inspector general, said so far they had discovered no evidence that the targeting was politically motivated, and Mr. Miller described it as a bungled way to try and screen applicants.
Later Friday, the woman who posed the question at a conference to IRS official Lois Lerner—the moment last week that first revealed the problems at the IRS—said Ms. Lerner planted the query. Washington lawyer Celia Roady said in a statement that Ms. Lerner provided her the question to ask. She added that Ms. Lerner "did not tell me, and I did not know, how she would answer the question."
The IRS didn't respond to requests for comment from Ms. Lerner, who runs the exempt-organizations unit at the agency.
Mr. Miller said the IRS, meanwhile, had "called to get on the calendar" to also brief the Ways and Means committee—a statement Republicans met with barely disguised disbelief.
Mr. Camp and other GOP lawmakers suggested a pattern of efforts to use the IRS to attack conservatives. Those include a White House official's discussion in mid-2010, during a briefing with reporters, of the purported tax-filing status of Koch Industries. Its owners are big donors to conservative causes. The tax-filing status of businesses is often confidential. The White House said in 2010 that the official's statement "was not based on any review of tax filings." It promised not to use the example in the future.
In an interview, Mr. Levin said the IG's report to Treasury officials constituted only "a brief reference," that he doubted was communicated up the chain.
-Peter Nicholas contributed to this article.
Write to John D. McKinnon atjohn.mckinnon@wsj.com, Siobhan Hughes atsiobhan.hughes@dowjones.com and Damian Paletta atdamian.paletta@wsj.com
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