The Internal Revenue Service used terms such as “progressive” and evidence of advocacy on Israel to flag groups’ tax-exempt applications for extra attention, complicating what had been seen as targeted scrutiny for small-government groups.
The IRS’s disclosure yesterday of 15 redacted versions of its Be On the Lookout document, or BOLO, bolstered its contention that delays experienced by Tea Party groups applying for nonprofit status were a symptom of mismanagement and not politically motivated action.
“The BOLO list in my mind loses this sinister nature,” said Jeff Trinca, who was chief of staff to the IRS restructuring commission in the 1990s and is now a lobbyist at Van Scoyoc Associates in Washington. “And it becomes another way of creating criteria lists to try to deal with the huge volumes that come through the agency.”
The disclosure raised a new set of questions about the IRS, which acknowledged last month that it had given extra attention to Tea Party organizations and other advocates for small government. The documents don’t explain how employees used the BOLO or which groups, if any, received extra scrutiny because of it.
Representative Sander Levin of Michigan, the top Democrat on the tax-writing House Ways and Means Committee, said the IRS inspector general, J. Russell George, should explain why his May 14 report didn’t include this information.
“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,” Levin said in a statement.
Since the IRS apologized for scrutiny of Republican-leaning groups on May 10, six congressional committees have opened inquiries and the Justice Department has begun a criminal probe. President Barack Obama replaced the acting IRS commissioner and Danny Werfel, the agency’s interim leader, has replaced three others with direct responsibility for tax-exempt groups.
The documents don’t show that Tea Party groups and progressives were treated equally. In fact, they suggest that the entries on the BOLO derived from separate efforts to police applications for tax-exempt status for political activity.
The IRS is charged with enforcing tax law, which forbids political activity for 501(c)(3) charities that can receive tax-deductible contributions and limits campaign involvement for 501(c)4 social welfare groups that don’t have to disclose their donors.
The term “progressive” appeared on a November 2010 document released by House Ways and Means Committee Democrats. It appears to refer to applications for 501(c)(3) status, not the 501(c)(4) status sought by many Tea Party groups.
Employees were told to watch for applications that were “partisan and appear as anti-Republican.” On the document released by Democrats, the reference to progressives is in a different section than the Tea Party groups, and it doesn’t direct employees to send the cases to a special unit, unlike the Tea Party cases.
Even on the first BOLO document released, from August 2010, progressives are listed under the label of TAG Historical, short for Touch-and-Go Historical, or issues that had been raised in the past. Tea Party is listed under Emerging Issues.
The disclosure of the scrutiny of groups working on Israel-related issues confirms what organizations had suspected.
Ameinu, which on its website calls itself a “community of progressive Jews,” received its 501(c)(3) tax-exempt status on May 28 -- five years after applying.
IRS agents peppered the group with 18-page surveys and lingered for months without follow-up, Hiam Simon, national director of Ameinu, said in a telephone interview. He said he was looking at a 4-inch thick folder of Ameinu’s communications with the IRS.
“I think they were painting with a broad brush, with worries about Middle East ties to terrorism,” he said of the IRS. “I don’t think it was caused by malice. Ignorance is too strong a word, too. They simply weren’t nuanced enough or careful enough.”
Committee hearings, an inspector general’s report and congressional investigators’ interviews with IRS employees have shown the scrutiny of Tea Party groups started with a single case in February 2010 that an employee flagged to his manager.
Werfel said he was suspending the use of BOLOs, which were employed as recently as last month. The final BOLO released, from April, doesn’t include Tea Party or progressive groups specifically, just general language about political involvement.
The IRS took several weeks to release yesterday’s documents, because it had to scrub the be-on-the-lookout lists of taxpayer-specific information before making them public. The BOLO mostly consists of redacted information.
The prospect that Democratic-friendly groups experienced extra scrutiny wasn’t entirely new.
Eight groups with “progress” or “progressive” in their names had appeared on a publicly available list of groups whose applications had been delayed and later approved by the IRS. That list included many small-government groups.
Progress Texas, an Austin-based group that typically backs Democratic positions, received an IRS letter with essentially the same questions the agency had asked of some Republican-leaning groups. As with Tea Party groups, the IRS wanted promotional materials, backgrounds of officers, meeting minutes and specifics about activities the organization said it would conduct.
Matt Glazer, former executive director, told Bloomberg News in May that the questionnaire was time consuming, though not intrusive. His group was approved.
Still, Steven Miller, the former acting IRS commissioner, told the Ways and Means Committee May 17 that progressive groups weren’t targeted.
Congressional Republicans said the IRS’s actions against small-government and Republican-leaning groups weren’t limited to extra scrutiny of tax-exempt applications.
House committees are also probing gift-tax audits of donors to a group that backed the war in Iraq, disclosures of the confidential information of several groups and IRS requests that anti-abortion groups agree not to protest at Planned Parenthood as a condition of receiving their tax-exempt status.
“It is one thing to flag a group,” Sarah Swinehart, a spokeswoman for Ways and Means Chairman Dave Camp, said in an e-mailed statement. “It is quite another to repeatedly target and abuse conservative groups.”
Werfel will testify at a Ways and Means hearing June 27.
J. Russell George, the inspector general whose report revealed the Tea Party scrutiny, was asked at a May 22 hearing whether Democratic-leaning groups were targeted.
At first, he said he couldn’t give a definitive answer when questioned by Representative Darrell Issa, a California Republican and chairman of the House Oversight and Government Reform Committee.
Then, George said that under “the purposes of the audit that we conducted, which was to determine whether they were looked for in the context of political campaign intervention, there were no others.”
The inspector general’s office said in a statement that the initial review had been limited to language designed to flag political involvement.
“Although these criteria were not used to select cases for review of potential political campaign intervention, we are reviewing whether these criteria led to expanded scrutiny for other reasons,” according to the statement.
Dianne Belsom, president of the Laurens County Tea Party in South Carolina, told lawmakers earlier this month her group had been waiting almost three years to hear from the IRS on an application for tax-exempt status after answering repeated and extensive questionnaires.
“The IRS needs to be fully investigated and held accountable for its incompetence, harassment and targeting of conservative groups,” Belsom said at a June 4 Ways and Means Committee hearing.
The BOLO also has terms related to Israel, looking for applications that “deal with disputed territories in the Middle East” and “may be inflammatory.”
Z Street, which describes itself as a Zionist education organization, sued the IRS in federal court over its treatment, which it called discriminatory.
“It’s great that they’re finally acknowledging what we’ve known all along,” co-founder Lori Lowenthal Marcus said in a telephone interview.
Marcus said the IRS told Z Street it “froze” their application for 501(c)(3) tax-exempt status when it filed suit. The case is scheduled for hearings next month in U.S. District Court for the District of Columbia.
The documents also show that the tax-exempt office was handling issues that had nothing to do with political campaigns or partisanship, such as cases involving medical marijuana, “potentially abusive” pain management clinics and life insurance policies owned by charities.
Also yesterday, Werfel released a report outlining his plans for restoring trust in the agency and reducing the backlog of applications for tax-exempt status.
Groups stuck in the backlog will have a chance for approval of their applications within two weeks if they promise to limit political spending. The IRS will send letters to about 80 groups.
“The administration is committed to making sure the IRS continues to reform itself with the goals of providing the highest quality service and reflecting the principles of fairness and neutrality,” Jay Carney, the White House press secretary, said in a statement.
Obama was briefed yesterday by Werfel and Treasury Secretary Jacob J. Lew.
Werfel said his review of the agency’s actions hasn’t found evidence of intentional wrongdoing or involvement from outside the IRS. That’s consistent with the findings so far of congressional investigators.
“They just let it fester and then they let some folks who didn’t really have the guidance they need go crazy with these questions,” said Trinca, a former Democratic congressional staff member. “The whole thing was just an absolute debacle.”