IRS BOLOs: What’s the problem?

Internal Revenue Service documents released last week show that the agency has screened both progressive and conservative groups for extra scrutiny when they applied for tax-exempt status.

Democrats have used that discovery to question an inspector general’s audit that determined the IRS had targeted tea party groups and subjected them to inappropriate scrutiny during the 2010 and 2012 election cycles.

The findings, which appeared in a May report by Treasury Inspector General J. Russell George, led to public outrage, agency apologies, congressional hearings, a Justice Department probe, and a shake-up that involved former IRS acting commissioner Steven Miller resigning under White House pressure.

The IRS documents released last week have complicated matters. They show that terms such as “progressive,” “blue” and “medical marijuana” appeared on a multi-part “Be on the Lookout” list, or BOLO, that has helped the agency determine which groups deserve additional screening.

(AP Photo/Charles Dharapak) - Treasury Inspector General Russell George.
(AP Photo/Charles Dharapak) – Treasury Inspector General Russell George.

In a letter to the inspector general on Wednesday, Rep. Sandy Levin (D-Mich.) said: “There is increasing evidence that the May 14, 2013 audit was fundamentally flawed and that your handling of it has failed to meet the necessary test of objectivity and forthrightness.”

George’s spokeswoman, Karen Kraushaar, fueled that notion when she told the Hill newspaper that the office of Republican House Oversight Committee chairman Darrell Issa (Calif.) asked the inspector general to “narrowly focus on tea party organizations.”

Kraushaar has walked back her remarks, telling the Washington Post, “The statements attributed to me in The Hill are not accurate.” She did not say the article misquoted her, which suggests the inaccuracy was on her part.

Kraushaar clarified her comments, saying: “Several members of Congress shared their concerns about tea party organizations with [the inspector general’s office]. However, the focus of our audit was on the IRS’s consistency in its identification and review of applications for tax-exempt status involving potential political advocacy issues.”

George, appointed to his position in 2006 by President George W. Bush, has denied that the audit was narrowly focused on conservative applicants, saying in a letter to Levin that his office “reviewed all cases that the IRS identified as potential political cases and did not limit our audit to allegations related to the Tea Party.”

George testified before Congress last month that his office was unable to determine whether any cases in the audit involved progressive groups. He said the names “in many instances were neutral, in that you couldn’t necessarily attribute it to one particular affiliation or another.”

Rep. Gerry Connolly (D-Va.), whose questioning prompted that response, said in a letter to George last week that his testimony was “at best incomplete, if not misleading.” He also suggested that George should appear again before the House Oversight Committee to “explain himself.”

Despite the recent revelations, the BOLO could still be problematic for the IRS. The list’s “emerging issues” category included only conservative terms at the outset, raising questions about why the IRS prioritized conservative groups but none from the left.

The term “progressive” appeared in a separate part of the BOLO, under the “touch and go historical” criteria.

Questions remain about when and how the progressive terms were used, as well as whether BOLO categories other than “emerging issues” were even relevant to the audit. The IRS and George’s office said this week that they’re still looking into those matters.

George’s audit focused primarily on the controversial “emerging issues” category. That section evolved over time, with the IRS using exclusively conservative terms in 2010 but switching to more generic criteria in July 2011, after an agency official, Lois Lerner — who has been placed on administrative leave — ordered changes.

George has said the IRS did not use progressive criteria to identify groups involved in campaign intervention. “We are reviewing whether these criteria led to expanded scrutiny for other reasons and why these criteria were implemented,” his office said in a statement on Wednesday.

Another problem with the BOLO: Its guidelines directed agents to forward tea party cases for further review, but they allowed processors to approve other types of groups “on merit if applicable” without elevating those cases.

Republicans have downplayed the recent revelations about progressive search criteria.

“Our Democratic colleagues should stop trying to derail the investigation by defending IRS officials with distorted claims equating the systematic scrutiny of Tea Party groups with the more routine screening progressive groups received,” Issa said.

House Ways and Means Committee chairman Dave Camp (R-Mich.), said the IRS controversy goes beyond the issue of search terms to the inappropriate questions agents asked of conservative groups and alleged leaks of private taxpayer information.

“At this point, the evidence shows us that conservative groups were not only flagged, but targeted and abused by the IRS,” said Camp spokeswoman Sarah Swinehart. “As we gather the facts, we will follow them wherever they lead us.”

There is little debate at this point about whether the IRS erred in its review of tax-exemption applications. Acting IRS Commissioner Daniel Werfel, whom President Obama appointed to lead the agency after Miller’s resignation, said in a conference call with reporters last week that the screening methods were inappropriate.

The question now is whether the IRS erred simply by profiling groups or by creating a special BOLO category for conservatives.

To connect with Josh Hicks, follow his Twitter feed, friend his Facebook page or e-mail josh.hicks@washpost.comFor more federal news, visit The Federal Eye, The Fed Page and Post Politics. E-mail federalworker@washpost.com with news tips and other suggestions.

Josh Hicks covers the federal government and anchors the Federal Eye blog. He reported for newspapers in the Detroit and Seattle suburbs before joining the Post as a contributor to Glenn Kessler’s Fact Checker blog in 2011.
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