With new revelations, outrage spreads about IRS targeting

WASHINGTON — Top career officials in the Internal Revenue Service withheld information from Congress for months about the tax agency’s targeting of conservative organizations for extra scrutiny, according to documents released Monday as a controversy involving alleged political bias in tax enforcement gathered strength.

Members of Congress called for firing the agency’s acting commissioner, one of the senior officials involved, and President Obama said he would “not tolerate” any such abuse of power by the IRS.

“If you’ve got the IRS operating in anything less than a neutral and nonpartisan way, then that is outrageous; it’s contrary to our traditions. And people have to be held accountable, and it’s got to be fixed,” Obama said at a White House news conference, noting that the IRS’ practices are under investigation. “We’ll wait and see what exactly all the details and the facts are. But I’ve got no patience with it. I will not tolerate it. And we will make sure that we find out exactly what happened on this.”

House Ways and Means Committee Chairman Dave Camp (R-Mich.) announced a hearing Friday. “News that the agency admits it targeted American taxpayers based on politics is both astounding and appalling,” he said. “It is almost inconceivable to imagine that top officials at the IRS knew conservative groups were being targeted but chose to willfully mislead the committee’s investigation into this practice.”

Despite calls for firings, neither the president nor members of Congress have legal authority to fire any IRS officials other than the commissioner and general counsel, who are the agency’s two political appointees. Neither of those jobs is currently filled.

Top officials at the IRS didn’t reveal the improper targeting until Friday, when it acknowledged mistakes it said had been made by its Cincinnati office, the main office handling tax-exempt entities — although members of Congress started asking questions about the agency’s handling of tea party organizations as early as 2011.

On Monday, Jay Sekulow, a lawyer representing 27 tea party groups, said IRS queries came not only from Cincinnati but from offices in Washington, D.C., and Laguna Niguel and El Monte, Calif.

Sekulow, a former lawyer for the IRS chief counsel’s office, said the groups would continue to press for answers on who was guiding the review of tea party groups. “Agents can’t do that on their own,” he said.

Some groups were sent detailed questionnaires that asked about their relationships with candidates or public officials, details of their fundraising pitches and their lists of donors.

The controversy centers on “social welfare” organizations set up under section 501(c)4 of the tax code, which can participate in elections as long as politics is not their primary purpose. Unlike political committees, such groups are not required to disclose their donors. Social welfare groups had a limited role in campaigns until 2010, when the Supreme Court ruled in the Citizens United case that corporations could spend unlimited sums on elections — a decision that also unleashed a flood of spending by the nonprofit groups.

The IRS staff has the job of determining which groups qualify for tax-exempt status. Lois Lerner, the IRS director of exempt organizations, said the disputed actions were devised as shortcuts by workers dealing with a flood of applications from groups seeking to become tax-exempt social welfare organizations.

The agency has acknowledged that employees in Cincinnati, in reviewing applications for nonprofit status, inappropriately singled out conservative organizations whose applications included the words “tea party” or “patriots” for closer examination.

But at least two top agency officials repeatedly assured members of Congress in 2012 that the IRS was processing applications in a smooth and consistent manner, even though they knew of the problems.

Steven T. Miller, a 20-year veteran of the agency who is the acting IRS commissioner, first learned on May 3, 2012, that the agency had inappropriately singled out groups by name, the IRS told the Los Angeles Times. A month later, Miller made no mention of the matter in a letter to Congress about the issue.

In a June 15, 2012, letter to the chairman of a key House oversight subcommittee, Miller wrote that after an increase in applications for tax-exempt status in 2010, the agency “took steps to coordinate the handling of the cases to ensure consistency.”

Miller, then deputy IRS commissioner, noted that some applications had lingered “for a longer time than expected,” according to the letter obtained by The Times. And he made an allusion to some internal problems, writing that, in early 2012, “issues with respect to these cases were brought to the attention” of top officials who “ensured more timely and consistent handling of the cases.”

Lerner had raised concerns about the criteria used to identify potentially problematic tax-exempt applicants at a June 2011 IRS staff meeting, according to a timeline assembled by the Treasury Department’s inspector general for tax administration.

When Lerner learned that groups with “tea party, “patriots” or “9-12 Project” in their names were selected for further review, she “instructed that the criteria be immediately revised,” according to the timeline, which is part of a report that a Treasury Department spokesman said would be released this week. The “9-12” designation refers to a conservative movement to restore the national unity felt after the Sept. 11 terrorist attacks.

But nearly a year later, in an April 26, 2012, letter to the House Committee on Oversight and Government Reform, Lerner said the agency was trying “to promote consistent handling” of tax-exempt applications. She also said the applications were judged by IRS agents who used “sound reasoning based on tax law training and his or her own experience.”

In a May 4, 2012, follow-up letter to the committee, Lerner wrote, “To minimize possible variances, the IRS utilizes training and tools to promote quality and consistency in similar cases.”

The IRS did not respond to questions about why the officials had not revealed the improper targeting sooner.

The timeline prepared by the inspector general depicts an agency mired in confusion, hung up on bureaucratic infighting and frozen by what the report calls “a lack of management oversight and guidance.”

The actions in question started about March 1, 2010, when an IRS specialist started pulling applications using keywords like “tea party.” By the time Lerner learned about the practice in June of the next year, employees were also selecting applications that criticized the government or talked about lobbying to “make America a better place to live.”

It was not until May 17, 2012, that the agency adopted its final criteria for review, which focused on organizations with a “significant amount of political campaign intervention.”

By that time, the questionnaires had already gone out and organizations had begun protesting about IRS harassment, drawing the attention of agency higher-ups. In April, a “senior technical advisor” visited Cincinnati and looked over the pending cases, pointing out “troubling questions,” including requests for donor information. On June 4, 2012, the agency drafted a letter assuring groups that any donor information would be destroyed.

Obama told reporters he learned about the issue from news reports Friday after Lerner revealed it during a talk at a conference. White House spokesman Jay Carney said the White House counsel received a “normal sort of heads-up” about the inspector general’s report the week of April 22.

“We, like everyone else, are awaiting the results,” Carney said.

joseph.tanfani@latimes.com

matea.gold@latimes.com

Lisa Mascaro, Melanie Mason, Michael A. Memoli, Christi Parsons, Jim Puzzanghera, Richard Simon and Wes Venteicher in the Washington bureau contributed to this report.