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Republicans See IRS Bias as Democrats Cite Mistakes

Photographer: Mark Wilson/Getty Images

A Tea Party activist protests in front of he U.S. Supreme Court, on June 28, 2012 in Washington, DC. Close

A Tea Party activist protests in front of he U.S. Supreme Court, on June 28, 2012 in Washington, DC.

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Photographer: Mark Wilson/Getty Images

A Tea Party activist protests in front of he U.S. Supreme Court, on June 28, 2012 in Washington, DC.

The Internal Revenue Service’s actions are a political Rorschach test, with Republicans seeing an effort to intimidate their allies and Democrats citing a mismanaged agency’s interpretation of flawed laws.

The bipartisan sense of outrage in the first days after the IRS revealed May 10 that it gave tougher scrutiny to small-government groups applying for tax-exempt status is starting to fray. Democrats -- while continuing to express anger at what the tax agency has acknowledged -- at a hearing yesterday sought to dispel the idea that the agency had a broader political motive.

Republicans, meanwhile, are drawing connections between the IRS’s scrutiny of the groups and other issues. They cite gift-tax audits of donors to a group that supported the war in Iraq, the release of confidential information from a group opposing same-sex marriage and attempts to prevent anti-abortion organizations from protesting.

“We still have a lot of questions that need to be answered,” Representative Charles Boustany, a Louisiana Republican, said yesterday after the fifth congressional hearing on the IRS in 19 days. “To what degree there was coordination, how high up it goes, remains to be determined.”

Democrats said Republicans are trying to create a wide-ranging scandal.

‘A Mistake’

“Republicans are looking for a conspiracy where there isn’t one,” said Representative Jim McDermott, a Washington Democrat, said at the hearing to those representing Tea Party groups. “What happened to you was unfair. It was unfair and incredibly inconvenient. But it was a mistake.”

The U.S. tax agency acknowledged that it singled out groups for extra scrutiny if their names included “Tea Party” or “patriot,” or if they focused on certain issues, such as government debt and spending.

Some groups had delays of up to three years in their applications for tax-exempt status. Some received what the IRS has acknowledged were inappropriate questions.

Six congressional committees have opened inquiries and the Justice Department has begun a criminal probe. The Treasury Inspector General for Tax Administration is investigating further.

At the IRS, President Barack Obama forced out Steven Miller, the acting commissioner, and replaced him with Danny Werfel. One executive, Joseph Grant, retired, and another, Lois Lerner, has been placed on administrative leave.

Tea Party

Lawmakers and investigators haven’t been able to determine who authorized the use of the name “Tea Party” as a screening tool and what their motives were. The IRS has called that a shortcut designed to collect similar applications so they could receive consistent treatment.

Groups organized under section 501(c)(4) of the tax code are required to operate exclusively for the benefit of social welfare. The IRS interprets that language to prohibit such groups -- which don’t have to disclose their donors -- from having politics as their primary mission.

Many 501(c)(4) groups, including Republican-backed Crossroads GPS and Democratic-backed Priorities USA Action, finance campaign ads.

That leaves the IRS to determine a group’s primary purpose, often with questions about political and campaign involvement that the groups find intrusive.

“We’ve got to clear out the unclarity in the law,” said Representative Bill Pascrell, a New Jersey Democrat.

Bias Claim

Republicans look more broadly at the incidents as evidence bolstering the claim that the IRS is biased against them. They’re continuing to solicit information from the public and vowed to press on with their investigations.

“This is not a mistake by the IRS,” said Representative Erik Paulsen, a Minnesota Republican. “This abuse was systemic and it’s been going on for years.”

Representative Dave Camp, chairman of the House Ways and Means Committee, cited a “culture of political intimidation and discrimination” at the IRS and said he planned to interview more IRS employees.

“This is not being chilling,” said Representative Mike Kelly, a Pennsylvania Republican. “The American people are frozen with fear.”

Among the witnesses at yesterday’s hearing was John Eastman, chairman of the National Organization for Marriage. The group’s political opponents at the Human Rights Campaign received NOM’s confidential information, including a donor list. The documents, Eastman said, contained markings that proved it had come from inside the IRS.

That can’t be inadvertent and it has affected donors, he said.

‘Our Shock’

“You can imagine our shock and disgust over this,” he said. He said he has been “stonewalled” in attempts to get information from the IRS or its inspector general about the document release. Eastman’s group opposes same-sex marriage.

The IRS said the inspector general’s investigation found that the release of information was inadvertent.

As chairman of the tax-writing Ways and Means committee, Camp, a Michigan Republican, has the authority to examine private taxpayer information that would help get to the facts of the marriage group’s case. He said after the hearing that he would do so at an appropriate time.

Separately, the inspector general yesterday released a report that said the IRS spent $4 million on a 2010 conference for employees in Anaheim, California, including $17,000 for a speaker who painted pictures of former basketball star Michael Jordan and U2 singer Bono to motivate employees.

225 Conferences

The tax agency spent about $49 million on 225 conferences from fiscal 2010 to 2012, according to the report. Most of that was in 2010; in fiscal year 2012, IRS held 24 conferences at a total cost of $5 million.

Two top IRS officials stayed in presidential suites that typically cost between $1,499 and $3,500 a night in Anaheim, the most expensive of the conferences, the report said. The IRS paid the government rate of $135 per night for all the rooms.

The House Oversight and Government Reform Committee plans a hearing tomorrow on the agency’s spending.

Also testifying to the Ways and Means Committee yesterday was Sue Martinek, president of the Coalition for Life of Iowa, who she said was asked by IRS officials not to protest at Planned Parenthood as a condition of receiving tax-exempt status.

Dianne Belsom, president of the Laurens County Tea Party in South Carolina, said she is still waiting to hear from the IRS on her group’s application for tax-exempt status after answering repeated and extensive questionnaires from the agency.

“Nearly three years of waiting for an answer is totally unacceptable,” Belsom said. “The IRS needs to be fully investigated and held accountable for its incompetence, harassment and targeting of conservative groups.”

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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