A total of 132 IRS officials received room upgrades at the conference, according to a report by J. Russell George, the Treasury Department inspector general for tax administration. The tax agency paid a flat daily fee of $135 per hotel room, the report said, but the upgrades were part of a package deal that added to the overall cost of the conference.
The report was made public on the same day leaders of six conservative groups testified at a congressional hearing, where they told lawmakers they had endured abuse from IRS agents as they spent years trying to qualify for tax-exempt status.
In often-emotional testimony, the conservatives described IRS demands for details about employees' and group officials' political activities and backgrounds, for comments they'd posted on websites, for videos of meetings and information on whether speakers at such sessions voiced political views. Some said it took three years to get their tax-exempt status; others said they were still waiting.
"I'm a born-free American woman," Becky Gerritson, president of the Wetumpka Tea Party of Alabama, tearfully told the lawmakers. "I'm telling my government, 'You've forgotten your place.'"
Federal regulations say that tax-exempt social welfare organizations can engage in some political activity but the activity cannot be their primary mission. It is up to the IRS to make that determination of their level of political activity, and some Democrats at Tuesday's House Ways and Means Committee hearing noted that some liberal groups also have had a hard time winning tax-exempt status from the IRS.
However, revelations about IRS agents improperly targeting tea party and other groups have led to investigations by three congressional committees and the Justice Department. One top IRS official was forced to resign, another retired and a third was placed on paid administrative leave.
Tuesday's report by the inspector general suggests the agency has struggled with management issues beyond the division that handles tax-exempt applications. According to the report, expensive employee conferences were approved with few restraints or safeguards until new rules were imposed in 2011.
In all, the IRS held 225 employee conferences from 2010 through 2012, at a total cost of $49 million, the report said. The Anaheim conference was the most expensive, but others were costly, too.
In 2010, the agency held a conference in Philadelphia that cost $2.9 million, one in San Diego that cost $1.2 million and another in Atlanta that also cost $1.2 million.
All of these conferences would violate new rules imposed by the White House budget office in 2012 that cap expenses for a single conference at $500,000. In 2010 alone, the IRS had 13 conferences that cost more than that.
By comparison, the General Services Administration was widely criticized for a 2010 conference in Las Vegas that cost $823,000.
Spending on IRS conferences dropped substantially, from $37.6 million in the 2010 budget year to $6.2 million in 2011 and then to $4.9 million last year, according to the IRS.
Acting IRS Commissioner Danny Werfel called the conferences "an unfortunate vestige from a prior era." Werfel took over the agency about two weeks ago, after President Barack Obama forced the previous acting commissioner to resign.
"Taxpayers should take comfort that a conference like this would not take place today," Werfel said in a statement.
The inspector general's report focused on the Anaheim conference, which was held for 2,609 managers in the agency's small business and self-employed division.
At the conference, the commissioner of the tax-exemption division, Christopher Wagner, stayed in a presidential suite that normally cost $3,500 a night. Wagner became chief of the IRS office of appeals in 2011 and retired this year.
His deputy, Fink, stayed in a room that normally cost $1,499 a night, the report said. Fink was promoted to commissioner of the small business and self-employed division in 2011.
Fink is among the witnesses scheduled to testify Thursday at a congressional hearing about the inspector general's report.
The IRS paid two event planners a total of $133,000 to organize the Anaheim conference. The planners were paid a percentage of the hotel room costs, which removed incentives for them to negotiate lower fees, the report said.
Fifteen outside speakers were paid a total of $135,350. One was paid $27,500 for two one-hour speeches; another was paid $17,000.
The IRS also spent more than $50,000 to produce three videos that were shown at the conference, the report said, including the "Star Trek" parody that featured Fink and other IRS employees.
The IRS said in a statement, "Many of the issues raised in the report, such as the use of event planners, the receipt of room upgrades and the welcome reception and breakfast provided by the hotel, were complimentary and did not entail the use of any additional government resources."
However, the report said the inspector general "believes that the costs for the conference could have been reduced if the IRS had not requested the numerous concessions from the Anaheim hotels and had instead negotiated for a lower room rate."
The IRS has been under heavy criticism since last month, when a previous inspector general's report showed that agents in a Cincinnati office had singled out tea party and other conservative groups for additional scrutiny when they sought tax-exempt status during the 2010 and 2012 election campaigns.
At Tuesday's hearing, Ways and Means Committee Chairman Dave Camp, R-Mich., said such an IRS focus was creating a "culture of political intimidation and discrimination." He said the agency's targets were "Americans who did what we ask people to do every day add their voice to the dialogue that defines our country."
John Eastman of the National Organization for Marriage said that in 2012, confidential donor information that he said came from his group's tax returns was posted on the website of a political opponent, the Human Rights Campaign. Eastman's group, which is tax exempt, opposes same-sex marriage, which the Human Rights Campaign supports.
"You can imagine our shock and disgust over this," Eastman said.
Sue Martinek, president of the anti-abortion Coalition for Life of Iowa, said an IRS agent told her the group's application for tax-exempt status would be granted if it sent a letter promising not to stage protests outside the offices of Planned Parenthood.
She said the IRS relented a week after her group retained an attorney who sent the agency a letter defending its efforts.
"As Christians, we knew we needed to pray for a better solution to unplanned pregnancy than abortion. Why not at the source?" Martinek told the committee.
Rep. Earl Blumenauer, D-Ore., said many of the conservative groups have taken positions on highly charged political issues.
"Let's stop this charade of pretending to be just social welfare organizations. Admit they are political and treat them as such," Blumenauer said.
That prompted an angry response from Eastman, who said that to say "defending traditional marriage doesn't qualify for defense of the public good is beyond preposterous."