White House Press Secretary Jay Carney during his daily news briefing at the White House in Washington, Friday, May, 10, 2013. Carney responded on Senate Minority Leader Mitch McConnell, R-Ky, calling on top-to-bottom review of the Obama administration after the IRS admitted that it had targeted conservative groups during the 2012 election.
WASHINGTON (AP) — The Internal Revenue Service apologized Friday for what it acknowledged was "inappropriate" targeting of conservative political groups during the 2012 election to see if they were violating their tax-exempt status.
IRS agents singled out dozens of organizations for additional reviews because they included the words "tea party" or "patriot" in their exemption applications, said Lois Lerner, who heads the IRS division that oversees tax-exempt groups. In some cases, groups were asked for lists of donors, which violates IRS policy in most cases, she said.
The agency — led at the time by a Bush administration appointee — blamed low-level employees, saying no high-level officials were aware. But that wasn't good enough for Republicans in Congress, who are conducting several investigations and asked for more.
"I call on the White House to conduct a transparent, government-wide review aimed at assuring the American people that these thuggish practices are not under way at the IRS or elsewhere in the administration against anyone, regardless of their political views," said Senate Republican leader Mitch McConnell of Kentucky.
White House spokesman Jay Carney declared it was indeed inappropriate for the IRS to target tea party groups. But he brushed aside questions about whether the White House itself would investigate.
Instead, Carney said the administration expects a thorough investigation by the Treasury Department's inspector general for tax administration. The inspector general has been looking into the issue since last summer, and his report is expected to come out next week, the IG's office said Friday.
Carney said he did not know when the White House first learned that tea party groups were being targeted.
Lerner acknowledged it was wrong for the agency to target groups based on political affiliation.
"That was absolutely incorrect, it was insensitive and it was inappropriate. That's not how we go about selecting cases for further review," Lerner said at a conference sponsored by the American Bar Association.
"The IRS would like to apologize for that," she added.
Lerner said the practice was initiated by low-level workers in Cincinnati and was not motivated by political bias. Agency officials found out about the practice last year and moved to correct it, the IRS said in a statement. The statement did not specify when officials found out.
About 75 groups were inappropriately targeted. None had their tax-exempt status revoked, Lerner said.
The IRS is an independent agency within the Treasury Department that enforces the nation's tax laws. Revelations that the agency was targeting political groups because they were affiliated with a movement that is critical of President Barack Obama could become a new headache for the White House.
"The admission by the Obama administration that the Internal Revenue Service targeted political opponents echoes some of the most shameful abuses of government power in 20th century American history," said House Speaker John Boehner, R-Ohio.
Many conservative groups complained during the campaign that they were being harassed by the IRS. They accused the agency of frustrating their attempts to become tax exempt by sending them lengthy, intrusive questionnaires.
The forms, which the groups have made available, sought information about group members' political activities, including details of their postings on social networking websites and about family members.
IRS Commissioner Douglas Shulman told Congress in March 2012 that the IRS was not targeting groups based on politics.
"There's absolutely no targeting. This is the kind of back and forth that happens to people" who apply for tax-exempt status, Shulman told a House Ways and Means subcommittee.
The IRS said senior leaders were not aware that specific groups were being targeted at the time of the hearing.
"While we acknowledged centralization of these applications last year, the IRS did not acknowledge the use of names as part of the process earlier because the details were not initially known to senior leadership and (the inspector general) has been reviewing the situation," the IRS said in a statement. "Their work is now far enough along that it was appropriate to address the issue when it came up during (Friday's) tax conference."
Shulman was appointed by President George W. Bush. His 6-year term ended in November. President Barack Obama has yet to nominate a successor. The agency is now being run by acting Commissioner Steven Miller.
Rep. Charles Boustany, R-La., chairman of the Ways and Means oversight subcommittee, requested a trove of documents from the IRS on Friday, including all communications containing the words "tea party" and "patriot."
House Ways and Means Committee Chairman Dave Camp, R-Mich., said Friday he will hold a hearing on the matter has not yet set a date.
"The IRS absolutely must be non-partisan in its enforcement of our tax laws," Camp said. "We will hold the IRS accountable for its actions."
House Majority Leader Eric Cantor, R-Va., and the House Oversight and Government Reform Committee have also promised investigations.
Treasury spokesman Anthony Coley said the department will support the inspector general's investigation.
"The Treasury Department expects all individuals and organizations to be treated fairly by the IRS. Anything less is inappropriate and unacceptable."
There has been a surge of politically active groups claiming tax-exempt status in recent elections — conservative and liberal. Among the highest profile are Republican Karl Rove's group, Crossroads GPS, and the liberal Moveon.org.
These groups claim tax-exempt status under section 501 (c) (4) of the federal tax code, which is for social welfare groups. Unlike other charitable groups, these organizations are allowed to participate in political activities but their primary activity must be social welfare.
That determination is up to the IRS.
Lerner said the number of groups filing for this tax-exempt status more than doubled from 2010 to 2012, to more than 3,400. To handle the influx, the IRS centralized its review of these applications in an office in Cincinnati.
Lerner said this was done to develop expertise among staffers and consistency in their reviews. As part of the review, staffers look for signs that groups are participating in political activity. If so, IRS agents take a closer look to make sure that politics isn't the group's primary activity.
As part of this process, agents in Cincinnati came up with a list of things to look for in an application. As part of the list, they included the words, "tea party" and "patriot," Lerner said.
"It's the line people that did it without talking to managers," Lerner told The AP. "They're IRS workers, they're revenue agents."
In all, about 300 groups were singled out for additional review, Lerner said. Of those, about a quarter were singled out because they had "tea party" or "patriot" somewhere in their applications.
The IRS statement said that once applications were chosen for review, they all "received the same, even-handed treatment."
Lerner said 150 of the cases have been closed and no group had its tax-exempt status revoked, though some withdrew their applications.
"Mistakes were made initially, but they were in no way due to any political or partisan rationale," the IRS said in a statement. "We fixed the situation last year and have made significant progress in moving the centralized cases through our system."
"I don't think there's any question we were unfairly targeted," said Tom Zawistowski, who until recently was president of the Ohio Liberty Coalition, an alliance of tea party groups in the state.
Zawistowski's group was among many conservative organizations that battled the IRS over what they saw as discriminatory treatment. The group first applied for nonprofit status in June 2009, and it was finally granted on Dec. 7, 2012, he said — one month after Election Day.
"It is suspicious that the activity of these 'low-level workers' was unknown to IRS leadership at the time it occurred," said Jenny Beth Martin, national coordinator for Tea Party Patriots, which describes itself as the nation's largest tea party organization. "President Obama must also apologize for his administration ignoring repeated complaints by these broad grass-roots organizations of harassment by the IRS in 2012, and make concrete and transparent steps today to ensure this never happens again."
About a half-hour into a conference call with reporters Friday afternoon, senior Internal Revenue Service official Lois Lerner said something she will regret.
“I’m not good at math,” she confessed as she tried to summon a statistic.
Lerner clarified that she is a lawyer and not an accountant (a fair defense) but the remark instantly blew up on Twitter — an IRS official being bad at math!? — and wound up punctuating what was a torturous response to the IRS’ admission that it inappropriately targeted tea party groups.
A skeptical press corps peppered Lerner with questions, many of which she and her staff were unable or unwilling to answer.
1. IRS officials claimed that there was no political bias behind the targeting of these conservative groups, but they failed to produce any examples of similar targeting of groups with non-conservative-sounding names. Initially, they suggested that other non-conservative-sounding names might have been targeted. By the end of the call, though, Lerner acknowledged: “I only said that because I never like to say ‘absolutely not.’ I don’t have any information on that.”
2. Lerner wouldn’t say whether anyone is being disciplined, then appeared to say there was no disciplinary action, then went back to saying she wouldn’t comment. Federal personnel rules appear to prohibit Lerner from discussing discipline, so she has some justification for not commenting. But that justification was never explained, and instead she was pressed repeatedly on why she wouldn’t discuss discipline.
3. Lerner said she disclosed the information because someone asked her about it Friday morning — indicating that she had no plans to release the information publicly, despite the confirmed wrongdoing.
4. When asked how they found out about the wrongdoing, Lerner said the investigation stemmed from media reports about conservative groups claiming that they were targeted, not from any internal review.
5. Lerner and her staff tried to get off the phone call after less than half an hour of questioning, but Columbia Journalism Review reporter (and Pulitzer Prize winner) David Cay Johnston informed them that they had better stay and answer everyone’s questions. They stayed on the call for another 20 minutes. By the end, they said Lerner had to get to some appointments and cited the “repetitive” line of questioning. Johnston informed them that it was because they weren’t answering the questions.
Over two years, IRS field office agents repeatedly changed their criteria while sifting through thousands of applications from groups seeking tax-exempt status to select ones for possible closer examination, the findings showed.
At one point, the agents chose to screen applications from groups focused on making "America a better place to live."
Exactly who at the IRS made the decisions to start applying extra scrutiny was not clear from the findings, which were contained in portions of an investigative report from the Treasury Inspector General for Tax Administration (TIGTA).
Expected to be made public this week, the report was obtained in part by Reuters over the weekend as a full-blown scandal involving the IRS scrutiny widened, embarrassing the agency and distracting the Obama administration.
In one part of the report, TIGTA officials observed that the application screening effort showed "confusion about how to process the applications, delays in the processing of the applications, and a lack of management oversight and guidance."
After brewing for months, the IRS effort exploded into wider view on Friday when Lois Lerner, director of exempt organizations for the IRS, apologized for what she called the "inappropriate" targeting of conservative groups for closer scrutiny, something the agency had long denied.
At a legal conference in Washington, while taking questions from the audience, Lerner said the agency was sorry.
She said the screening practice was confined to an IRS office in Cincinnati; that it was "absolutely not" influenced by the Obama administration; and that none of the targeted groups was denied tax-free status.
It is clear from the TIGTA findings that Lerner was informed in June 2011 that the extra scrutiny was occurring. Key words in the names of groups - including 'Tea Party,' "Patriot' and '9/12' - were being used to choose applications, TIGTA found.
"Issues" criteria were also used, TIGTA found. Scrutiny was being given to references to "Government spending, Government debt, or taxes; Education of the public via advocacy/lobbying to 'make America a better place to live;' and Statements in the case file (that) criticize how the country is being run."
Under these early criteria, more than 100 tax-exempt applications had been identified, according to TIGTA.
Briefed on the practice, Lerner ordered changes.
CONSTANTLY SHIFTING CRITERIA
By July 2011, the IRS was no longer targeting just groups with certain key words in their names. Rather, the screening criteria had changed to "organizations involved with political, lobbying, or advocacy."
But then it changed again in January 2012 to cover "political action type organizations involved in limiting/expanding government, educating on the constitution and bill of rights, social economic reform/movement," according to the findings contained in a Treasury Department watchdog report.
In March 2012, after Tea Party groups complained about delays in processing of their applications, then-IRS Commissioner Doug Shulman was called to testify by a congressional committee. He denied that the IRS was targeting tax-exempt groups based on their politics.
The IRS said on Saturday that senior IRS executives were not aware of the screening process. The documents reviewed by Reuters do not show that Shulman had any role.
In May 2012, the criteria for scrutiny were revised again to cover a variety of tax-exempt groups "with indicators of significant amounts of political campaign intervention (raising questions as to exempt purpose and/or excess private benefit)," according to a TIGTA timeline included in the findings.
THOUSANDS OF APPLICATIONS
Each year the IRS reviews as many as 60,000 applications from groups ranging from charities to labor unions that want to be classified as tax-exempt. "Social welfare" groups dedicated to the general good can be tax-exempt under tax law 501(c)4.
These groups do not have to disclose the identities of their donors and they can spend money on advertising for general issues, but they may not endorse specific candidates or parties.
The U.S. Supreme Court's January 2010 "Citizens United" ruling unleashed a torrent of new political spending and 501(c)4 groups became a popular conduit for some of it, on both ends of the political spectrum, but especially for conservatives.
The number of applications sent to the IRS by groups seeking 501(c)4 status rose to 3,400 in 2012 from 1,500 in 2010. As money poured into 501(c)4 groups, campaign finance activists began to raise questions and demanded a crackdown by the IRS.
The passionately pro-Israel organization Z STREET filed a lawsuit against the IRS, claiming it had been told by an IRS agent that because the organization was “connected to Israel,” its application for tax-exempt status would receive additional scrutiny. This admission was made in response to a query about the lengthy reveiw of Z STREET’s tax exempt status application.
In addition, the IRS agent told a Z STREET representative that the applications of some of those Israel-related organizations have been assigned to “a special unit in the D.C. office to determine whether the organization’s activities contradict the Administration’s public policies.” . . .
And at least one purely religious Jewish organization, one not focused on Israel, was the recipient of bizarre and highly inappropriate questions about Israel. Those questions also came from the same non-profit division of the IRS at issue for inappropriately targeting politically conservative groups. The IRS required that Jewish organization to state “whether [it] supports the existence of the land of Israel,” and also demanded the organization “[d]escribe [its] religious belief system toward the land of Israel.”