Treasury Inspector General (TIG) Report

In 2010, the IRS began using inappropriate criteria to identify organizations for tax-exempt status for indications of significant political campaign interventions. The TIG found the IRS used inappropriate criteria that reviewed Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention. Ineffective management 1) allowed inappropriate criteria to be developed and stay in place for more than 18 months, 2) resulted in substantial delays in processing certain applications, and 3) allowed unnecessary requests to be issued.

In August 2010 the Cincinnati Determinations Unit (DU) was asked to "be on the lookout for" (BOLO) political-sounding names. These names included "Tea Party", "Patriots", or "9/12 Project," plus issues including government spending, debt or taxes, and advocacy/lobbing to "make America a better place to live." The applications for those organizations that were identified for processing by the team of specialists experienced significant delays and requests for unnecessary information. One hundred sixty cases were open from 206 to 1,138 calendar days (some crossing two election cycles).

The IRS asked for the following information from applicants: "Donations, contributions, and grant income for each year, which includes the following information: 1. The names of the donors, contributors, and grantors. If the donor, contributor, or grantor has run or will run for a public office, identify the office. If not, please confirm by answering this question "No." 2. The amounts of each of the donations, contributions, and grants and the dates you received them. 3. How did you use these donations, contributions, and grants? Provide the details." The TIG found the DU had requested unnecessary and inappropriate information for many potential political cases.

In June 2011, the Director for Exempt Organizations, immediately directed that the criteria be changed. In July 2011, the criteria were changed to focus on the potential "political, lobbying, or [general] advocacy" activities of the organization. The criteria was again changed in January 2012 without executive approval. The January 2012 criteria again focused on the policy positions of organizations instead of tax-exempt laws and Treasury Regulations. After three months, the Director, Rulings and Agreements, learned the criteria had been changed and subsequently revised the criteria again in May 2012. The May 2012 criteria more clearly focus on activities permitted under the Treasury Regulations. As a result of changes made to the criteria without management knowledge, the Director, Rulings and Agreements, issued a memorandum requiring all original entries and changes to criteria included on the BOLO listing be approved at the executive level prior to implementation.

The House Oversight Committee chairman, Republican Darrell Issa, and the ranking Democrat Elijah Cummings have overreached in recent statements about the committee's investigation of the IRS. Issa alleged that Obama administration officials in Washington ordered the targeting of conservative groups. The IG report found no evidence of that. The report said that employees in the Cincinnati office "developed and implemented" the "inappropriate criteria" in early 2010 and Lois Lerner, the director of the exempt organizations division, "immediately directed that the criteria be changed" once she learned about it in June 2011. Cummings has failed to provide evidence that there was "no political involvement," saying "the case is solved."

Wall Street Journal, June 5: "The transcripts don't suggest that Obama administration officials at the Treasury or the White House knew of or were involved in the targeting. Many questions remain unanswered, including who ordered the targeting."

Fact Check: "Public trust is compromised when the committee's top members selectively release partial transcripts that provide an incomplete picture of what has become a partisan investigation."

http://factcheck.org/

http://www.treasury.gov/tigta/auditreports/2013reports/201310053fr.pdf