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25 Jun, 2013 12:12

No exemptions in tax targeting: IRS eyed both sides of political spectrum

No exemptions in tax targeting: IRS eyed both sides of political spectrum

The Internal Revenue Service’s intensified scrutiny of groups seeking tax exempt status extended beyond Tea Party-affiliated groups, with those whose names included the terms ‘Progressive’, ‘Occupy’ and ‘Israel’ being more intensely vetted as well.

IRS documents released Monday counter initial claims that the tax service had specifically tried to stamp out the nascent Tea Party movement through the use of ‘Be On The Lookout’, or BOLO, lists. Rather, the agency claims to have relied on keyword searches to single out all overtly political groups.

Although the IRS discontinued the screening of overtly conservative and Tea Party related groups in May 2012, other organizations continued to find themselves under the microscope until earlier this month, when the new IRS chief, Danny Werfel, said he became aware of the practice and called a stop to it.

"There was a wide-ranging set of categories and cases that spanned a broad spectrum" on the lists, Werfel said. He added that his aides found those lists contained "inappropriate criteria that was in use."

Many organizations seeking tax-exempt designation apply for 501(c)(4) status, in accordance with its section of the federal revenue code. IRS regulations allow that status for groups whose activities primarily center around social welfare activities, and it is up to the discretion of the IRS to determine whether applicants meet the vaguely defined requirements. Generally, no more than 40 percent of a group’s time and activities can be dedicated to helping a candidate who is seeking public office, while at least 60 percent of its operations must be dedicated to social welfare programs.

Democrats on the House Ways and Means Committee – the House of Representatives’ chief tax writing body – released 15 lists of terms employed by the IRS which were handed over to congressional investigators.

The lists, ranging from 11 to 17 pages, were dated between August 2010 and April 2013 — just one month before the scandal surrounding the IRS targeting of conservative groups broke.

One of the lists, dated November 2010, included the terms ‘Progressive’, ‘Medical Marijuana,’ ‘Occupied Territory Advocacy,’ as well as ‘Tea Party’, ‘Healthcare legislation’ and ‘Paying National Debt’.

Under the section ‘Occupied Territory Advocacy’, the ‘Watch Issue Description’ noted, “Applications deal with disputed territories in the Middle East. Examples may include organizations named or connected with [redacted]. Applications may be inflammatory, advocate a one-sided point of view and promotional materials may signify propaganda.”   

Chief among those groups apparently included groups advocating on behalf of Israeli settlement expansion who were applying for non-profit status.

The list further notes that a “Common thread is the word ‘progressive’.”

“Activities appear to lean toward a new political party. Activities are partisan and appear as anti-Republican. You see references to ‘blue’ as being ‘progressive’.”

'Regional health information organizations' seeking nonprofit tax exemptions for their electronic healthcare data-collection efforts were also flagged, while those involved in implementing the Affordable Care Act were sent to the IRS for “secondary screening.”

Acting IRS (Internal Revenue Service) Commissioner Daniel Werfel (AFP Photo)

Lists from April 2013 that were released further included the terms ‘Paying National Debt’ and ‘Green Energy Organizations’. 

On Monday, Werfel released an 83-page report at the behest of President Barack Obama containing his assessments of the agency and areas which can be improved upon.

While the report noted that IRS managers exhibited a “lack of critical thinking and judgment” in screening non-profit organizations, it found no evidence of wrongdoing. It further said that the targeting had not been directed by anyone outside of the agency.

The report also describes several new procedures which are intended to prevent taxpayers from being unfairly singled out in the future as well as streamline the non-profit application process.

The top five employees in the IRS tasked with handling nonprofit organizations were all replaced, starting with the former acting IRS Commissioner Steven Miller, whom President Barack Obama replaced with Werfel.

"The IRS is committed to correcting its mistakes, holding individuals accountable as appropriate" and establishing new controls to reduce potential future problems, Werfel said.

The White House called Werfel's actions "an important step in ensuring accountability" at the agency.

Monday’s revelations follow a report issued last month by the Treasury Inspector General for Tax Administration which found that groups whose applications included words such as ‘tea party’ and ‘patriots’ were red flagged.

The report indicated that not all the groups selected for additional screening used those terms, though no further description was provided for such organizations. 

Demonstrators with the Tea Party protest the Internal Revenue Service (IRS) targeting of the Tea Party and similar groups during a rally called "Audit the IRS" outside the US Capitol in Washington, DC, June 19, 2013. (AFP Photo/Saul Loeb)

House Democrats were quick to jump on the latest release, questioning why the previous report failed to make any mention of non-conservative groups who were met with increased scrutiny. 

Democrats on the Ways and Means Committee have called for a second hearing with the inspector general, J. Russell George, so that he can “explain the glaring omission in his audit report.”

“The audit served as the basis and impetus for a wide range of Congressional investigations, and this new information shows that the foundation of those investigations is flawed in a fundamental way,” said Representative Sander M. Levin of Michigan, the committee’s ranking Democrat.

Republicans, who accused the IRS of attempting to stifle the party’s campaigning efforts in the run-up to the 2012 elections, said critical distinctions still remained in how conservative and progressive groups were targeted.

A statement by the GOP staff of House Ways and Means said: "It is one thing to flag a group, it is quite another to repeatedly target and abuse conservative groups."

House Oversight Committee Chairman Darrel Issa, R-Calif., who has selectively released portions of his own ongoing investigation into IRS malfeasance, branded Werfel’s report “premature.”

Issa added that the review "fails to meaningfully answer the largest outstanding questions about inappropriate inquiries and indefensible delays.”

House Ways and Means Committee Chairman Dave Camp, R-Mich., whose panel is also investigating the agency, said 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."