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Article posted: 5/11/2013 2:35 PM

Report: IRS brass knew tea party targeted in 2011

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WASHINGTON -- A federal watchdog's upcoming report says senior Internal Revenue Service officials knew agents were targeting tea party groups in 2011.

The disclosure contradicts public statements by former IRS Commissioner Douglas Shulman, who repeatedly assured Congress that conservative groups were not targeted.

On Friday, the IRS apologized for what it acknowledged was "inappropriate" targeting of conservative political groups during the 2012 election to see if those groups were violating their tax-exempt status.

The Treasury's inspector general for tax administration is expected to release the results of a nearly yearlong investigation in the coming week.

The Associated Press obtained part of the draft report.

That report says the head of the IRS division that oversees tax-exempt groups learned that groups were being targeted in June 2011. It does not say whether Shulman was notified.

White House spokesman Jay Carney declared Friday 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."

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