Tea party activists attend a rally on the grounds of the Capitol in Washington on June 19. (J. Scott Applewhite/Associated Press)

“For years, the president bashed the Tea Party groups. He was very public against these groups. And on his behalf — perhaps not on his request — on his behalf, the IRS executed a delaying tactic against the very groups that he talked about.”

— Rep. Darrell Issa (R-Calif.), chairman of the House Government Oversight Committee, during a CNN interview, June 25, 2013

“The audit served as the basis and impetus for a wide range of Congressional investigations and this new information [about ‘progressive’ groups appearing on IRS lists] shows that the foundation of those investigations is flawed in a fundamental way.”

— Rep. Sandy Levin (D-Mich.), ranking member of House Ways and Means Committee, statement, June 25

Confused about where the investigation in the Internal Revenue Service targeting conservative groups is heading? Join the club.

On the one hand, you have Republican suggestions that the IRS, in the midst of an election year, decided to thwart political groups that were opposed to the president’s agenda. On the other hand, you now have claims from Democrats that left-leaning groups were targeted as well.

It’s a bit risky to do a fact check in the middle of an investigation, given how new information or facts could alter our understanding of what happened at the IRS. So today we are offering a guide to the current state of play.

The Facts

The scandal erupted after the Treasury Department inspector general in May released a report that said that the IRS used “inappropriate criteria” — specifically terms such as “Tea Party” or “patriots” in the names of the organization — in selecting applicants for tax-exempt status, generally applying under Section 501 (c)(3) or Section 501(c)(4) of the tax code.

The IG reviewed 298 applications that had been selected as having being potential political cases, though in one of those delicious ironies, only 89 cases — those applying for 501 (c) (3) status — were actually required to make an application to the IRS. (The IG report makes this clear in Figure 1 on page 2 of the report.)

That’s because donations to Section 501(c)(4) organizations are not tax deductible and so the groups do not have to give donors the certainty of an exemption. In other words, many of these groups could have saved themselves trouble in the first place, since they actually would have faced no delays in establishing themselves.

The Washington Angle

A key focus of Republicans has been to determine how much the decision to highlight scrutiny of tea party groups was directed out of Washington. Initial statements by IRS official cast blame on front-line employees based in Cincinnati, where tax-exempt applications are examined, but interviews with some of those workers have painted a different picture.

They have told committee investigators that they understood IRS attorneys in Washington wanted Tea Party cases aggregated and elevated so that they would be treated consistently and fairly. Instead, many applications were systematically delayed, for reasons that are unclear.

Here are two excerpts from the testimony of Elizabeth Hofacre, who coordinated “emerging issues” cases for the IRS out of Cincinnati:

Question: I just want to be clear. When you sent these letters out, the letters that Carter Hull [Exempt Organizations technical attorney in Washington] approved, and you would get responses from the taxpayers, all of those responses you would then forward on to Carter Hull?

Answer: That is correct.

Q: Is that unusual?

A: Very unusual. I have never known of an agent to do that in the past or to this time.

Q: Even for other Emerging Issues?

A: I am not aware of any.


Q: Okay. Do you always need to go through EO Technical to get assistance on how to draft these kind of letters?

A: No, it was demeaning.

Q: What do you mean by “demeaning”?

A: Well, I might be jumping ahead of myself, but essentially — typically, no. As a grade 13 [federal employee], one of the criteria is to work independently and do research and make decisions based on your experience and education, whereas in this case, I had no autonomy at all through the process.

Q: So it was unusual for you to have to go through EO Technical to get these letters?

A: Exactly. I mean, exactly, because once he provided me with his letters I used his letters and his questions as a basis for my letters. I didn’t cut and paste or cookie cut. So then once I developed my letters from the information in the application, I would email him the letters. And at the same time he instructed me to fax 29 copies of the 1024 so he could review my letters to make sure that they were consistent with the 1024 application.

Q: Was that practice consistent with any other Emerging Issue?

A: I never have done that before or since then.

Still, investigators have thus far not found any direct connection between the heightened IRS scrutiny of tea party groups and the White House, contrary to the frequent and highly speculative suggestions by Republicans. We will keep an eye on such statements to see if Pinocchios are merited once the investigation is completed.

Scrutiny of ‘progressive’ organizations

Meanwhile, Democrats have highlighted information that they say undercuts the thrust of the Inspector general’s report. While that report focuses on scrutiny of “tea party” and related groups — which had been placed on “be on the lookout” (BOLO) lists — Democrats released documents showing that the term “progressive” had been part of a “TAG [touch-and-go] Historical” list.

The fact that progressive groups may have faced scrutiny is not new. Martin A. Sullivan of Tax Analysts in May documented how a substantial minority of scrutinized groups were not conservative, including at least six with “progressive” or “progress” in the name. But the reason the groups are on the public list released by the IRS is because they were ultimately approved.

At this point, no one seems to quite know what “TAG Historical” means, except that it indicates these were terms that would cause an organization to be assigned to one of several working groups that kept an eye on issues that had caused problems in the past. “We understand this tab to contain information about cases or issues that were once on the active TAG list,” said an IRS official.

The TAG process is described by a public IRS document on the Web (see page 15), as well as the issues that highlighted, such as fraud, cookie cutter applications and terrorism.

An interesting IRS affidavit posted by a pro-Israel group known as Z Street — which somehow was lumped with possible terrorism cases — also explains the process. The group has alleged that its application was held up because its views conflict with the Obama administration, and this 2010 affidavit was intended to rebut that claim.

The notation in the TAG historical document concerning progressive groups offered a reminder that if these organizations were applying for tax-exempt status under Section 501 (c)(3), meaning they were seeking the ability to accept tax-deductible donations, that designation may not be appropriate for such groups. In theory, however, any of these applications could have been approved on the spot.

Despite the claims of Democrats that this discovery opens up a new avenue of inquiry, the listing of “progressive” appears to be in the past, as part of a standard procedure in place at the IRS. In a letter last week, Inspector General J. Russell George pushed back against the notion that his investigation initially was too narrow.

“The ‘Progressives’ criteria appeared on a section of the ‘Be On the Look Out’ (BOLO) spreadsheet labeled ‘Historical,’ and, unlike other BOLO entries, did not include instructions on how to refer cases that met the criteria,” George wrote. “While we have multiple sources of information corroborating the use of Tea Party and other related criteria we described in our report, including employee interviews, e-mails, and other documents, we found no indication in any of these other materials that ‘Progressives’ was a term used to refer cases for scrutiny for political campaign intervention.”

He added that his office investigated and “determined that six tax-exempt applications filed between May 2010 and May 2012 having the words ‘progress’ or ‘progressive’ in their names were included in the 298 cases the IRS identified as potential political cases.”

Interestingly, that is the exact same number of organizations with such names that the IRS identified has having been approved as of this May. In other words, whatever scrutiny these groups may have faced ultimately did not prevent them from receiving their desired tax-exempt status.

It is appropriate to ask questions. But unless new information emerges, Democrats should be careful about suggesting the IRS handling of progressive groups was similar to the well-documented and controversial procedures in place for the Tea Party groups, which were immediately set aside to be coordinated with lawyers in Washington. Such statements may also result in Pinocchios.

(About our rating scale)

Check out our candidate Pinocchio Tracker

Follow The Fact Checker on Twitter and friend us on Facebook