Washington • The Justice Department is investigating the Internal Revenue Service for targeting tea party groups for extra scrutiny when they applied for tax-exempt status, Attorney General Eric Holder said Tuesday, widening a probe that includes investigations by three committees in Congress.
Ineffective management at the IRS allowed agents to improperly target tea party groups for more than 18 months, concluded one investigation by the Treasury inspector general for tax administration. The inspector general's report, released Tuesday, lays much of the blame on IRS supervisors in Washington who oversaw a group of specialists in Cincinnati who screened applications for tax-exempt status.
The report does not indicate that Washington initiated the targeting of conservative groups. But it does say a top supervisor in Washington did not adequately supervise agents in the field even after she learned the agents were acting improperly.
"The report's findings are intolerable and inexcusable," President Barack Obama said in a statement. "The federal government must conduct itself in a way that's worthy of the public's trust, and that's especially true for the IRS. The IRS must apply the law in a fair and impartial way, and its employees must act with utmost integrity. This report shows that some of its employees failed that test."
Holder said he ordered the FBI to investigate Friday the day the IRS publicly acknowledged that it had singled out conservative groups.
"Those [actions] were, I think, as everyone can agree, if not criminal, they were certainly outrageous and unacceptable," Holder said. "But we are examining the facts to see if there were criminal violations."
The three congressional committees are already investigating the IRS for singling out tea party and other conservative groups during the 2010 congressional elections and the 2012 presidential election. But Holder's announcement takes the matter to another level, if investigators are able to prove that laws were broken.
Holder said he wasn't sure which laws may have been broken.
The agency started targeting groups with "Tea Party," ''Patriots" or "9/12 Project" in their applications for tax-exempt status in March 2010, the inspector general's report said. By August 2010, it was part of the written criteria used to flag groups for additional scrutiny.
Lois Lerner, who heads the IRS division that oversees tax-exempt organizations, had been briefed on the matter in June 2011. She ordered the initial tea party criteria to be scrapped but it later evolved to include groups that promoted the Constitution and the Bill of Rights.
IRS agents were trying to determine whether the political activities of such groups disqualified them for tax-exempt status. These groups were claiming tax-exempt status as organizations promoting social welfare.
Unlike other charitable groups, they can engage in political activity. But politics cannot be their primary mission.
It is up to the IRS to make the determination.
But by using improper criteria, the IRS targeted some groups, even though there were no indications that they engaged in significant political activities, the report said. Other non-tea party groups that had significant political activities were not screened, the report said.
"The criteria developed by the Determinations Unit gives the appearance that the IRS is not impartial in conducting its mission," the report said.
In all, IRS agents identified 296 applications for additional, sometimes burdensome, scrutiny.
Ninety-one of them should not have been targeted because they did not indicate they were engaged in significant political activities, investigators concluded.
The additional screening resulted in long delays as IRS agents asked intrusive, sometimes inappropriate questions, or merely let applications languish, the report said. Inappropriate questions included requests for lists of donors and the political affiliation of officers.
As of December, the delays averaged 574 days, which probably made donors reluctant to contribute, the report said. No group has had their application denied, though about half are still waiting, the IRS said.
"Unfortunately, the report raises more questions than it answers," said House Oversight Committee Chairman Darrell Issa, R-Calif. "What we do know for sure is that the IRS personnel responsible for granting tax exemptions systematically targeted conservative groups for extra scrutiny, and that officials in Washington, D.C., were aware of this practice, even while publically claiming that it never happened."