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Watchdogs say more oversight of IRS needed as it investigates nonprofits

Two years after facing accusations that it improperly targeted conservative nonprofits for additional scrutiny, the Internal Revenue Service still needs to take steps to prevent it from happening again, government watchdogs told lawmakers at a hearing Thursday.

Their conclusion comes after a 2013 investigation found the IRS inappropriately targeted groups with “tea party” in their name, in what defenders say was an attempt to weed out political groups that should not have nonprofit status. According to a Government Accountability Office report released Thursday, procedures meant to ensure all groups are treated fairly contain certain loopholes that could still allow IRS employees to target organizations based on their religious or political views.

“It is disappointing that over two years later, it is still possible that the IRS can select groups for adverse treatment based on their personal political, religious, or educational beliefs,” said Rep. Peter Roskam (R- Ill.), who chairs the House Ways and Means oversight subcommittee. “There isn’t proper documentation of allegations or decisions to audit; there are a handful of gatekeepers with sweeping authority and broad discretion; and there is a broken referral committee process.”

The IRS considers whether to examine thousands of organizations each year but ultimately selects only a small portion to investigate further. In the process, IRS employees make thousands of determinations about which organizations deserve further scrutiny. According to the report released Thursday, more oversight is needed to ensure that employees are making those decisions fairly and consistently.

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Deficiencies in existing procedures "increase the risk" that organizations could be selected "in an unfair manner – for example, based on an organization's religious, educational, political, or other views," the report said.

According to the report, the IRS generally agreed with the recommendations for improvement of procedures.

"When someone hears from us regarding their tax returns ... they need to understand that it is only because of something in their tax returns," IRS Commissioner John Koskinen said in written testimony submitted to the committee, emphasizing that the report did not find cases of wrongdoing.

The 2013 report found that for a year and a half, some IRS employees used inappropriate criteria to choose which organizations to investigate further. The same report found investigators had also asked organizations for information not pertinent to the investigation, such as past and present donor lists. The report faulted poor management and oversight for the problems.

Defenders maintain the investigations were not politically motivated, but rather an attempt to keep up with the complicated new legal landscape surrounding the political activities of nonprofit groups. At the hearing Thursday, a lawyer who represents progressive organizations testified that left-leaning groups are also frequently targeted for investigation.

The controversy resurfaced this week when President Obama used it as an example of an issue that gets blown out of proportion, saying, “There wasn’t some big conspiracy there.”

“When there was that problem with the IRS, everyone jumped. ... You’ve got this back office and they’re going after the tea party,” Obama said. “Well, it turned out, no. It turned out Congress had passed a crummy law that didn’t give people guidance about what it was they were trying to do and they did it poorly and stupidly.”

On Thursday, Republicans on the Ways and Means committee, led by Chairman Paul Ryan of Wisconsin, fired back.

"Conservative groups were in fact held to different scrutiny solely because of their political beliefs," they said in a statement.

"Maybe [Obama's] dismissiveness," they added, "helps explain why the IRS is poised to repeat the same mistakes."

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