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IRS probe finds more screening lists

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 By Tom Cohen CNN 
 The Internal Revenue Service used multiple lists of inappropriate criteria in reviewing applications for tax-exempt status up until this month, the temporary head of the tax agency said Monday in his first report on the targeting of conservative groups.
 IRS Principal Deputy Commissioner Daniel Werfel provided no details of what inappropriate criteria were on the lists, but said "there was a wide-ranging set of categories and cases that spanned a broad spectrum."
 The practice of using so-called "Be On the Look Out" or BOLO criteria has been suspended in considering tax-exempt applications, Werfel told reporters in announcing his initial review of the agency he took over in May.
 His report was the most substantive IRS response to date of the scandal uncovered by an inspector general's report that found conservative groups applying for tax-exempt status came under extra scrutiny because of labels such as "tea party" in their name.
 Use of some lists of conservative labels for further screening stopped in May 2012 when IRS officials were first notified of the practice.
 However, an IRS document obtained by CNN showed that other inappropriate lists continued to be used until as recently as this month by the unit that handles tax-exempt applications.
 Werfel was informed on June 12, 2013, that other BOLO lists were still in use, the IRS document said. He immediately suspended use of any BOLO lists by the unit that handles tax-exempt applications.
 Werfel's ongoing review of the controversy found no evidence so far of intentional wrongdoing by IRS personnel, involvement by anyone outside the IRS or that targeting extended into other areas of the agency, he said.
 "Several key leaders, including some in the commissioner's office, failed in multiple capacities to meet their managerial responsibilities at various points during the course of these events," his report said. "Most notably, there was insufficient action by these leaders to identify, prevent, address, and disclose the problematic situation that materialized with the review of applications for tax exempt status."
 Five IRS managers have been replaced, from the previous acting commissioner whom Werfel succeeded to the head of the unit based in Cincinnati that handles tax-exempt applications.
 In addition, Werfel created an Accountability Review Board to recommend within 60 days "any additional personnel actions necessary to hold accountable those responsible" for the targeting disclosed by the inspector general's report.
 The White House ordered the review by Werfel when he started the job on May 22 in the aftermath of an inspector general's audit that found targeting of some conservative groups seeking tax-exempt status.
 Werfel was given 30 days to complete the review and he told a congressional hearing on June 3 that he would finish the report by the end of the month.
 The House Ways and Means Committee has scheduled a hearing for Thursday on the report, with Werfel as the lone witness, the GOP-led panel announced last week.
 The targeting scandal and a separate inspector general's report that documented wasteful spending on IRS conferences in past years have led to a series of investigations of the tax collection agency by Congress, the Department of Justice, the tax administration inspector general's office and Werfel.
 The IRS admitted there was unfair targeting of conservative groups seeking tax-exempt status starting in 2010, but officials said the action was a bureaucratic shortcut in its Cincinnati office rather than an exercise of political bias.
 In his report that disclosed the misconduct, Treasury Inspector General for Tax Administration J. Russell George said there was no evidence of a political motive. However, George is continuing to investigate the matter, along with the FBI and the congressional committees.
 Republicans argue the controversy is proof that the administration and progressive groups have been trying to clamp down on those who disagree with President Barack Obama's agenda.
 Rep. Dave Camp of Michigan, the Republican chairman of the House Ways and Means Committee, said Monday that the IRS "still needs to provide clear answers to the most significant questions -- who started this practice, why was it allowed to continue for so long, and how widespread was it?"
 "This culture of political discrimination and intimidation goes far beyond basic management failure and personnel changes alone won't fix a broken IRS," Camp said in a statement that promised continued investigation.
 As part of his review, Werfel said 80 groups awaiting IRS action on their applications for tax exempt status for more than 120 days could self-register with the agency as long as they certified under penalty of perjury that they would comply with applicable laws and regulations.
 At the heart of the matter is what kind of organization can qualify for tax-exempt status. Regulations limit such status to groups primarily involved in social welfare activities, while political groups are considered ineligible.
 Confusion over defining what constitutes political activity versus social welfare activity contributed to the targeting by the IRS, Werfel said.
 An IRS statement on Monday said the "safe-harbor" option for self-certification would apply to groups that "certify they devote 60% or more of both their spending and time on activities that promote social welfare."
 "At the same time, they must certify that political campaign intervention involves 40% or less of both their spending and time," the statement said. Applicants meeting those thresholds would get approval within two weeks of seeking self-certification, it said.
 Werfel said the IRS would continue checking on tax-exempt groups to ensure they were following the law.

 

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