FBI starts criminal probe of IRS as report details unfair treatment

The Internal Revenue Service asked “unnecessary, burdensome questions” of conservative groups seeking tax-exempt status, questions that unfairly delayed the applications, according to an investigative report obtained Tuesday by McClatchy.

Ultimately, the organizations were told the information was not needed, according to the report by the Treasury inspector general for tax administration. The report, which has not yet officially been made public, has fueled allegations of abuse of government power to target the rising tea party political movement.

“The report’s findings are intolerable and inexcusable,” President Barack Obama said in a statement Tuesday evening after reading the report.

“The federal government must conduct itself in a way that’s worthy of the public’s trust, and that’s especially true for the IRS. The IRS must apply the law in a fair and impartial way, and its employees must act with utmost integrity. This report shows that some of its employees failed that test.”

He said he directed Treasury Secretary Jack Lew “to hold those responsible for these failures accountable, and to make sure that each of the Inspector General’s recommendations are implemented quickly, so that such conduct never happens again.”

While the report from Inspector General J. Russell George gave no indication that he encountered legal violations in his audit, Attorney General Eric Holder said Tuesday that he’s ordered a criminal investigation of the IRS actions.

“The FBI is coordinating with the Justice Department to see if any laws were broken in connection with those matters related to the IRS,” Holder told reporters. “Those were, I think as everyone can agree, if not criminal, they were certainly outrageous and unacceptable.”

At the same time, pressure mounted on the Obama administration Tuesday to disclose who in the White House knew about the actions by the IRS. The inspector general’s report said it found no evidence of influences from outside the IRS.

“Unfortunately, the report raises more questions than it answers,” said House Oversight Committee Chairman Rep. Darrell Issa, R-Calif.

“What we do know for sure is that the IRS personnel responsible for granting tax exemptions systematically targeted conservative groups for extra scrutiny, and that officials in Washington, D.C., were aware of this practice, even while publicly claiming that it never happened,” Issa said.

Leaked portions of the report emerged Monday and sparked a firestorm in the nation’s capital. The leaks suggested that top IRS officials, including current acting chief Steven Miller, were aware of the unusual targeting of conservative groups as far back as at least May 2012. Lower level officials knew about it at least since April 2010.

The full report obtained Tuesday concluded that the Cincinnati-based Determinations Unit developed and used inappropriate criteria that effectively slowed down applications when an organization had tea party or other political names. It said the IRS agreed with most but not all of the unit’s recommendations.

“Although the IRS has taken some action, it will need to do more so that the public has reasonable assurance that applications are processed without unreasonable delay in a fair and impartial manner in the future,” the report said.

In its written response, the IRS defended its actions as well-meaning but acknowledged they were “inappropriate.”

Cases should be organized by “a review of the facts . . . and not just by name,” Joseph Grant, acting commissioner, tax exempt and government entities, wrote in an April 30 response to the inspector general.

“We recognize that some errors occurred in the handling of the influx of advocacy cases,” he said.

Grant defended choosing certain organizations for review, saying that to qualify for special status a group had to be primarily involved in the promotion of social welfare and not political involvement.

“Many applications included what appeared to be incomplete or inconsistent information,” he said. “For example, a number of applications indicated that the organization did not intend to conduct campaign activity but elsewhere described activities that appeared in fact to be such activity.”

The process has since been changed, Grant said. “We believe this will prevent a recurrence of what happened in this case,” he said.

Grant conceded other errors, citing “mistakes that were made in the process by which these applications were worked.”

But, he said, the way such cases were handled “did not dictate how the case ultimately was or will be resolved,” and most cases chosen for fuller probes “were not selected based on the organizations’ names.”

In an email response to McClatchy, the IRS said it remained quiet to let the inspector general finish his report. “There was no intent to hide this issue, but rather we waited until (the inspector general’s office) completed their fact finding, made recommendations, and we reviewed their findings.”

The release of the much-anticipated report is likely to be just the start of the IRS’s problems.

The Republican chairman and ranking Democrat on the powerful House Ways and Means Committee announced Tuesday that they’ve sent a letter to Miller demanding all documents relating to the special treatment of conservative tea party groups. They also demanded all correspondence on the matter between the agency and the White House and added a new wrinkle to the unfolding controversy.

“Media reports have detailed that the IRS conducted special reviews of organizations whose missions involve Israel. Did the IRS undertake special reviews of these and other organizations whose activities contradict or are inconsistent with the administration’s policies?” said the letter from Reps. Dave Camp, R-Mich., and Sander Levin, D-Mich. The letter said IRS officials have “failed to be completely truthful” with Congress.

McClatchy pressed the administration Tuesday for details about who informed the White House counsel’s office on April 22 about the IRS actions. The White House and Treasury Department declined to say with whom or how widely that information was shared several weeks ago, or whether Treasury Secretary Jacob Lew, formerly the president’s chief of staff, was told at the time. IRS officials also refused comment.

“We were not aware of any (IRS) activity, or of any review conducted by the inspector general until several weeks ago,” White House spokesman Jay Carney insisted during his daily briefing.

Carney denied that anyone in the White House knew about the IRS actions or the inspector general’s probe of the agency before April 22. He wouldn’t say how he could make such an assertion.

“I am certainly not aware of and am confident that no one here was involved in this. We found out about it just a few weeks ago, and only, you know – when I say ‘we,’ I didn’t, the president didn’t, but the White House counsel’s office only found out about the review being conducted and coming to a conclusion by the inspector general,” he said. “Prior to that, there was no knowledge here at the White House.”

The White House also refused to say why such a serious allegation did not make it up the information chain to the president when his lawyer learned of it more than two weeks earlier.

“I have to presume White House had some knowledge of this, maybe earlier than we know, but I don’t have any facts,” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, which will hold hearings on the matter.

Later in the day, Hatch criticized what he said was a changing narrative from the White House.

“What the IRS asserted on Friday is simply not true. It wasn’t just some lowly staffers in the Cincinnati office. In fact, that’s a pretty important office in the IRS,” he said, adding that very “senior management at the IRS here in Washington knew what was going on for over a year, and they didn’t even say a word. In fact, after the IRS leadership learned of this, they sent Congress letters saying that the targeting of conservative groups wasn’t happening.”

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