The IRS Abuse Scandal Keeps Growing

An audit of the agency's behavior unearths disturbing new information.


Reading the highly critical report by the Internal Revenue Service's auditor, you get the sense that rogue, lower-level agents ran amok, writing up watch lists, targeting conservative agencies, and stalling their applications for tax-exempt status.

At least IRS management has painted a picture of misguided underlings who acted "inappropriately," finally offering a mea culpa a couple years after claims that Tea Party groups being hung up, even harassed, by tax agents began filtering in.

Lois Lerner, director of the IRS' exempt organizations unit, apologized a week ago for front-line employees who inappropriately flagged for further review organizations with the descriptors, "tea party" or "patriot."

"We had a shortcut in the process. It wasn't appropriate.  We learned about it and we fixed it," Lerner said, emphatically denying that the segregation of applications and the lengthy delays in processing them merely based on conservative-sounding names had absolutely nothing to do with partisan politics.

But a report released late Tuesday by the Treasury Inspector General for Tax Administration, the independent overseer of the IRS, points to lax management and at least ignorance of federal code governing tax-exemption review. And while TIGTA may not employ the term "targeted" in its scathing review, the auditor blasts the IRS for singling out conservative groups, asking them a host of unnecessary questions and, in many cases, grinding the application process to a halt.

More than anything, the IRS' "inappropriate" measures threaten public confidence, the report notes.

"The mission of the IRS is to provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.  According to IRS Policy Statement 1-1, IRS employees accomplish this mission by being impartial and handling tax matters in a manner that will promote public confidence," the audit states.

"However, the criteria developed by the (IRS) Determinations Unit gives the appearance that the IRS is not impartial in conducting its mission.  The criteria focused narrowly on the names and policy positions of organizations instead of tax-exempt laws and Treasury Regulations."


The audit depicts agents in 2010, earlier than IRS brass previously had stated, pulling out 501(c)(4) applications with "Tea Party, Patriots, or 9/12 in the organizations name," as well as "political-sounding names." In May 2010, the Determinations Unit began developing a spreadsheet that would become known as the "Be On the Look Out" list, according to the audit. By August, the unit began distributing the first formal BOLO list.

A 501(c)(4) is designated for the promotion of social welfare and cannot include direct or indirect participation or intervention in political campaigns on behalf of, or in opposition to, any candidate for public office.

"However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity. However, any expenditure it makes for political activities may be subject to tax under section 527(f)," according to the IRS.

It is the IRS' tax-exempt division's job to sort all of that out.

The "look out" criteria were expanded over time, including:

  • Issues include government spending, government debt or taxes.
  • Education of the public by advocacy and lobbying to "make America a better place to live".
  • Statement in the case file critical of how the country is being run.

"By June 2011, the expanded criteria included additional names (Patriots and 9/12 Project) as well as policy positions espoused by organizations in their applications," the audit states.

The 9/12 Project refers to a group created by radio personality Glenn Beck.

Top IRS officials told auditors the BOLO lists were not influenced by an individual or organization outside the agency. They said only first-line management approved references to the Tea Party and the BOLO listing criteria before it was rolled out.

But it was "insufficient oversight" that allowed the "inappropriate" signaling out of certain groups to go on for so long, the audit notes.

"As a result, inappropriate criteria remained in place for more than 18 months," according to the TIGTA report, which also notes IRS employees did not consider the "public perception of using politically sensitive criteria when identifying these cases."

Beyond that, the audit found the employees lacked knowledge of allowed activities under code.

The IRS' director of Rulings and Agreements, defending the agency's employees and management, told auditors the fact that the team of tax-exempt specialists worked applications that did not involve the Tea Party, patriots, or 9/12 groups "demonstrated that the IRS was not politically biased in its identification of applications for processing by the team of specialists."

The inspector general's response: Sure, but all cases with Tea Party, patriots, or 9/12 in the statistical review were flagged and the applications were forwarded to tax-exempt specialists.

Waiting Game

Some applications were delayed more than three years, crossing two election cycles, the report notes. Of 296 total applications screened for further intervention, 160 had been open from 206 to 1,338 calendar days.

The IRS Strategic Plan 2009–2013 has several goals and objectives involving timely interaction with taxpayers, including enforcement of the tax law in a timely manner while minimizing taxpayer burden.

Applications were delayed in part by questions the inspector general deemed "unnecessary." The audit lists seven questions IRS agents had no business asking applicants

1. The names of donors.
2. A list of all issues that are important to the organization and asks that the organization indicate its position regarding such issues.
3. a) The roles and activities of the audience and participants other than members in the activity and b) the type of conversations and discussions members and participants had during the activity.
4. Whether the officer, director, etc., has run or will run for public office.
5. The political affiliation of the officer, director, speakers, candidates supported, etc., or otherwise refers to the relationship with identified political party–related organizations.
6. Information regarding employment, other than for the organization, including hours worked.
Information regarding activities of another organization -- not just the relationship of the other organization to the applicant

The audit notes overt double standards by an agency that demanded prompt information from applicants.

"These letters requested that the information be provided in two or three weeks (as is customary in these letters) despite the fact that the IRS had done nothing with some of the applications for more than one year," the TIGTA report states.

When the agency did in 2011 correct the criteria used in signaling out the conservative groups, IRS specialists "subsequently changed the criteria in January 2012 without executive approval because they believed the July 2011 criteria were too broad," the audit notes.

"The January 2012 criteria again focused on the policy positions of organizations instead of tax-exempt laws and Treasury Regulations.  After three months, the Director, Rulings and Agreements, learned the criteria had been changed by the team of specialists and subsequently revised the criteria again in May 2012," the report adds.

TIGTA has made nine recommendations to fix its problems, including "better documenting the reasons why applications potentially involving political campaign intervention are chosen for review." The inspector general also wants to the see the IRS develop and publish tax-exempt guidance, and "before each election cycle, expeditiously resolve remaining political intervention cases."

The IRS' response: Yeah, we see your point on seven of the nine recommendations, but we've got our own corrective action plans for the other two, thanks.

"TIGTA does not agree that the alternative corrective actions will accomplish the intent of the recommendations and continues to believe that the IRS should better document the reasons why applications potentially involving political campaign intervention are chosen for review and develop and publish guidance," the audit notes.

The IRS did not return a request for comment.

A version of this article originally appeared at Watchdog.org.

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  1. The problem isn't whether a bunch of rogue agents or partisan hacks played favorites. The problem is with the premise of income tax itself because there is no such thing as "privacy" and therefore EVERYTHING is taxable unless or until our benevolent tax collectors declare that it's not.

    It's not that they abused their power, it's that they have that power in the first place.

    1. Agreed! Absolute power corrupts absolutely.

    2. Start working at home with Google! It's by-far the best job Ive had. Last Wednesday I got a brand new BMW since getting a check for $6474 this - 4 weeks past. I began this 8-months ago and immediately was bringin home at least $77 per hour. I work through this link, http://www.Mojo50.com

  2. This can't be true, Cenk Uygur on the Young Turks told me this was not that big of a deal!

    1. I went and watched the Young Turks video just cause of your comment. Excuse me while I go throw up now

    2. I remember when he said that Obamacare was going to reduce healthcare costs by limiting health insurance profits. I'm not holding my breath waiting for a retraction from that stupid jackass.

      1. he also propagated the whole weinergate denial thing for two weeks, then when weiner admitted he had a replacement host.

  3. It's interesting that the Benghazi scandal and the AP wiretap scandals both have to deal with, at least in part, free speech issues, however it is singularly the wiretaps that got journalists to start looking at all three administration scandals this past week. It hit home for the news media and brought the other two in.

    But I think the IRS scandal is going to be the one that resonates most with people in general. While the targeting seems to be advocacy groups, which most people don't pay attention to, the IRS is a feared and hated organization that everyone has to deal with at least once a year. To see it used so openly as a club to beat political opponents with, most will recognize as truly disgusting and pretty frightening. It's third world dictatorship thuggery crap.

    1. The IRS is bad, I find the AP scandal to be most offensive. The 4th amendment may as well not even exist.

    2. I think you're a little naive about the IRS. 47% pays no income tax, meaning they're almost certainly getting a return. They fill out a 1040EZ and the IRS sends them a check. They love it!

      1. Return, refund, what's the difference?

      2. 47% pays no income tax, meaning they're almost certainly getting a return. They fill out a 1040EZ and the IRS sends them a check. They love it!

        I'm willing to bet that a large percentage of that 47% that pays no income tax also doesn't vote. Wealthier people are much more likely to vote.

        It therefore doesn't really matter if 47% of people like the IRS. The vast majority of people who pay attention to politics and choose to vote despise it. Probably 65-70% of actual voters can't stand the IRS.

        1. I think the outcome of the last election is pretty strong evidence that you're belief is no longer correct.

          1. Ugh.... grammar snob makes you're your error.

        2. Fraudulent votes/voters don't care about the IRS.

    3. I guess it's nice that the media are now at least paying lip-service to their purported responsibilities, but it makes me despise them even more. The only reason any of this is getting any coverage is because of the AP scandal, which directly affected them. How many other outrages are still unknown because of our derelict press corps?

  4. TAX COURT is the only branch of the law wherein you are GUILTY UNTIL PROVEN INNOCENT. It would seem with that amount of power that the IRS should be held to a commensurate level of discretion. We as Americans are letting a bunch of hacks wield a scalpel.

    1. You've obviously never been to family court.

      1. Yes, imagine if the IRS could take your kids for evading taxes.

    2. Or to criminal court....

      1. Maybe if you had the money that had been stolen from you in tax court, you could afford a decent attorney for criminal court or family court.

  5. The Obama answer to all of these scandals is "Hey, we're not evil; we're just incompetent! We don't know what goes on in the executive branch departments. Oh well!"

    And I'm supposed to be happy with that answer, to indeed be grateful. And then drop the subject.

    I'm certainly never supposed to entertain the notion that perhaps incompetent people shouldn't be trusted with important jobs. Why, that would be extremist!

    1. "It's the other team that's evil"

      1. Sounds like an apt slogan for the democrats: "We may be stupid but at least we're not evil like the republicans!"

    2. "Don't blame me I voted for Kodos!"

    3. Obama: "I compiled my enemies list so I could go after the bad guys."

  6. I start my job at the IRS this Monday . . . on the plus side, it looks like there'll be ample opportunity for rapid advancement!

    1. Well listen Ron,why don't you start Monday by inserting a worm virus into their data banks and wipe out everybodys balances and contact data.Just a thought

  7. "Who's willing to fight for Stockton?" asked Mayor Anthony Silva.
    After his almost hour-long speech, Silva pulled out armor with a helmet and mace while asking the crowd to go to war for the broke and crime-ridden city.

    1. +1 plate mail.

    2. Aye, stay, and you'll be bankrupt. Run, and your credit will live, at least for a while. And tell me, as you lay dying on your bed years from now would you be willing to trade all of it, from this day to that, for one chance to tell the creditors that they may liquidate our assets, but they may never take our Stockton?!

    3. "Who's willing to fight for Stockton?"

      No one.

    4. Stockton /=/ Stockton's government.

  8. Ken Shultz nailed it dead on in the earlier thread: government bureaucrats do absolutely nothing unless they're ordered to do it by the person above them on the org chart. The idea that someone in the Cincinnati field office did this on their own initiative is utterly laughable.

    1. Yeah, the only thing IRS workers are less capable of than competence is initiative.

  9. The mission of the IRS is to provide America's taxpayers top quality service a good screwing over by helping them understand and meet their tax responsibilities bend over and take it.

    Had to fix that, it was such a pathetically lame statement.

    1. needz moar epic sax

        1. And since I accidentally forgot to close the a tag in the last comment, here's the fun entry from last year, a bunch of Russian grannies singing a song called Party for Everybody.

      1. How about Bigger sax

    2. The song that almost* became Estonia's entry.

      * well, it finished third but was a local sensation over two countries for a week or so 🙂

      Meiecundimees ?ks Korsakov l?ks eile L?tti - My buddy some Korsakov went to Latvia

      As far as I've heard (as nobody is able to tell the lyrics anyway) it's about some truck driver who went to Latvia and had all his bones broken, and how life is generally unfair and so on.

      1. One of my Finnish friends says that Estonian (about the most closely related language to him) sounds like people trying to speak Finnish who are extremely constipated. 🙂

        1. Er, closest to Finnish.

          Unfortunately, I don't have access to Eurovision live, but from the chat threads I'm reading, the highlights seem to be the Romanian entry above; Bonnie Tyler looking drunk; and the Belgian entry's eyebrows.

        2. Estonian and Finnish aren't related closely enough to be mutually intelligible but are similar enough to embarrass someone who thinks they can speak the other language. One Estonian guy told me a story of a man showing off his new house to his Finnish friends - ruumis means room in Estonian but corpse in Finnish - "...and we've also got three stiffs upstairs!".

        3. Ted,
          I've heard Northern Germans claim those in the south don't have a language, they have a throat disease. And I'd rate that about the same as northern US presumptions of southerners; NWS.

    3. If the Romanian doesn't want to provoke vampire jokes, he shouldn't dress in that Count Dracula get-up.

      1. At Talill, Iraq, the Romanians had the security force in 2008 - they had the good humor to name their encampment "Camp Dracula".

        1. People from that region that I've met, mostly Albanians, Bosniaks and Romanians, have consistently had the best and darkest sense of humor.

    4. If Romania is to enter something, the least they can do is to enter something awesome.

  10. How come hardly anyone is talking about Sarah Ingram. She was the one who was actually in charge of the tax exempt unit when this was going on. Guess what she does now, she's the head of the Obamacare office!


    1. So, a merit promotion then?

    2. I suspect she's talking to a lawyer and not getting a lot of sleep these days....

      1. I hope she's not getting a lot of sleep these days. Unfortunately with Eric Holder as Attorney General, I doubt she has anything to worry about.

  11. Sort of like how the low level underlings at Abu Grab decided to abuse the Iraqi prisoners, with no knowledge of or commands from their superiors?

    1. Look, a squirrel!

  12. Seattle Times claims the IRS scandal is all just a big misunderstanding.

    IRS office was perplexed, inundated with tax-exempt applications.

    1. "We were so overwhelmed with applications that we decided to generate lots of extra paperwork for ourselves and everyone: asking for all 'indirect communications' with politicians, contents of prayers, promises to never protest Planned Parenthood, that sort of thing. We had to make sure they wouldn't do something like endorse candidates. It would have been much simpler if these Tea Party groups had started as campaign organizations, like Obama for America. It was quite easy to turn them into a 501(c)(4)...."

    2. The article boils down to, "There's talk of a scandal at the IRS, but we asked some guys at the IRS and they said it's totally cool and there's nothing to see here."


  13. You know, if I were as incompetent at my job as some of these lefty commentators are claiming the "low level" employees were, I would be out of work.

    There need to be "low level" employees fired, or "high level" employees in jail, or preferably both.

  14. Now we know why Obama was tap dancing all week.

    Obama is the secret love child of Sammy Davis Jr and Richard Nixon.

    That's why the birth certificate is hidden.

  15. "...TIGTA has made nine recommendations to fix its problems..."

    I don't suppose that any of those recommendation included the hanging from a lamppost of any of the offending IRS employees?

  16. Ken Shultz is right on the other thread. My experience of over 15 years working in government is that the beaucracy is remarkably non political. People just don't give their political views on a regular basis. Maybe the IRS is different. But I doubt it. I find it extremely unlikely that a bunch of low level employees would have on their own commited a crime and risked their jobs and careers to do this. Moreover, even if they did, they wouldn't just have started doing it in 2010. They would have been doing it all along. And it wouldn't have just been Tea Party groups but all conservative groups.

    It is the targeted nature and the timing of this that makes it so suspicous. Anything is possible. But the idea that some low level employees at teh IRS would, after years of otherwise non political service, decide on their own accord, to target the Tea Party seems extremely unlikely.

  17. I see what I think is the root cause. Taxation of proceeds to non-profits used for political advocacy. Why are we tolerating a new Stamp Act? That is what this tax policy does. It uses taxation as a govenor to throttle speech. Had we object to and prevented this type of taxation to begin with this whole episode wouldn't be happening. Therefore, the way to prevent a future event of the nature lays plainly before us.

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