IRS scrutinized broad array of groups seeking tax-exempt status


Daniel Werfel, the principal deputy commissioner of the IRS, is seen at a hearing in this June file photo. Werfel announced on June 24 that all senior IRS officials involved in the targeting have left their positions and that the agency would make it far easier for these groups to obtain tax-exempt status (Andrew Harrer/BLOOMBERG)

The Internal Revenue Service said in a report released Monday that it had been scrutinizing a broad array of groups seeking tax-exempt status — and a congressional committee revealed that at least some of those groups were screened because they had the word “progressive” in their names.

The IRS had been using what it called “be on the lookout” lists that targeted groups for scrutiny based partly on their names as recently as this month. Principal deputy commissioner Daniel Werfel, whom President Obama chose to lead the agency when a controversy broke out last month about tax officials targeting conservative groups for scrutiny, put an end to the practice shortly after joining the IRS.

The IRS previously had said that it stopped selecting conservative groups for review based on terms such as “tea party” or “patriot” last year. But the practice continued for other groups, the agency said in a report Monday that identified “significant management and judgement failures” that had led to the initial targeting of conservatives.

“There was a wide-ranging set of categories and cases that spanned a broad spectrum,” Werfel said in a conference call. He added that though the screening method was inappropriate, “we have not found evidence of intentional wrongdoing by anyone in the IRS or involvement in these matters by anyone outside the IRS.”

Groups reviewed by the IRS for tax-exempt status also included the terms “blue” — referring to Democrat-leaning states. Others that were targeted included groups focused on open-source software, health-care legislation, medical marijuana and “occupied territory advocacy,” internal documents released separately Monday by a congressional committee showed.

Werfel said his agency’s new report would not be the final word on the matter, with a further review by the IRS and investigations by the Justice Department and several congressional committees.

“I’m impatient, too, and I want to get to the bottom of this,” said Werfel, a former senior budget aide to Obama.

Werfel briefed the president and Treasury Secretary Jack Lew on his findings Monday. Obama tapped Werfel to lead the IRS after the agency acknowledged, and an inspector general report detailed, that officials had closely scrutinized the applications of right-leaning groups seeking tax-exempt status, sometimes selecting them for review because they had “tea party” or “patriot” in their names.

The backlash that erupted raised questions about whether the nation’s tax collectors were politically motivated and became an enormous distraction for the White House as it struggled to respond to the revelations.

Werfel said on Monday that all five senior IRS officials involved in the targeting have left their positions. Some have resigned, while others are on administrative leave or seeking an alternative position.

The review “fails to meaningfully answer the largest outstanding questions about inappropriate inquiries and indefensible delays,” said House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) “Mr. Werfel’s assertion that he has found no evidence that anyone at IRS intentionally did anything wrong can only be called premature.”

In his report, Werfel said the IRS has created an Accountability Review Board to determine within 60 days if additional agency personnel should be held accountable for the targeting. A number of officials involved in the targeting were lower-ranking employees in the agency’s Cincinnati office.

The report also indicated that the agency would grant tax-exempt status to applicants who have been waiting more than 120 days for approval if they certify that they will not engage in excessive political activity in violation of tax-exemption law.

“The problems . . . have created significant concerns for taxpayers,” Werfel said Monday. “It’s incumbent on us to take swift action.” He added that the IRS would continue to review what happened and take steps to ensure it does not recur.

Zachary A. Goldfarb is a staff writer covering the White House, focusing on President Obama’s economic, financial and fiscal policy.
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