Liberal groups also screened, says IRS

WASHINGTON -- The Internal Revenue Service's screening of groups seeking tax-exempt status was broader and lasted longer than previously has been disclosed, the new leader of the agency acknowledged Monday.

Terms including "Israel," "Progressive" and "Occupy" were used by agency workers to help pick groups for closer examination, according to an internal IRS document obtained by The Associated Press.

The IRS has been under fire since last month after admitting it targeted for tough examinations tea party and other conservative groups that wanted the tax-exempt designation.

While investigators have said that agency screening of those groups had stopped in May 2012, Monday's revelations made it clear that screening of other kinds of organizations continued until earlier this month, when the agency's new chief, Danny Werfel, says he discovered it and ordered it halted.

The IRS document said an investigation into why specific terms were included was still underway. It blamed the continued use of inappropriate criteria by screeners on "a lapse in judgment" by the agency's former top officials. The document did not name the officials, but many top leaders have been replaced.

In a conference call with reporters, Werfel said after becoming acting IRS chief last month, he discovered varied and improper terms on the lists and said screeners still were using them. He did not specify what terms were on the lists, but said he immediately suspended the use of all such lists.

"There was a wide-ranging set of categories and cases that spanned a broad spectrum" on the lists, Werfel said. He said his aides found those lists contained "inappropriate criteria that was in use."

Werfel ordered a halt in the use of spreadsheets listing the terms -- called BOLO lists for "be on the lookout for" -- on June 12 and formalized their suspension with a June 20 written order, according to an IRS document. Investigators have previously said the lists evolved over time as screeners found new names and phrases to help them identify groups to examine.

Democrats on the House Ways and Means Committee released one of the lists, dated November 2010, the IRS has provided to congressional investigators. That 16-page document shows the terms "Progressive" and "Tea Party" were on that list, as well as "Medical Marijuana" and "Healthcare legislation."

Rep. Sander Levin of Michigan, top Democrat on the Ways and Means panel, said he was writing a letter to J. Russell George, the Treasury Department inspector general whose audit in May detailed IRS targeting of conservatives, asking why his report did not mention other groups that were targeted.

"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.

George's report criticized the IRS for using "inappropriate criteria" to identify tea party and other conservative groups. It did not mention more liberal organizations, but in response to questions from lawmakers at congressional hearings, George said he recently had found other lists that raised concerns about other "political factors" he did not specify.

Democratic staff on Ways and Means said in a press release they had verified that of the 298 groups seeking tax-exempt status that George's audit had examined, some were liberal organizations -- something George's report did not mention.

Many organizations seeking tax-exempt designation were applying for so-called 501(c)(4) status, named for its section of the federal revenue code. IRS regulations allow that status for groups mostly involved in "social welfare" and that don't engage in election campaigns for or against candidates as their "primary" activity, and it is up to the IRS to judge whether applicants meet those vaguely defined requirements.

Werfel's remarks came as he released an 83-page examination he has conducted of his embattled agency. The conclusions, which Werfel cautioned are preliminary, have so far found there was "insufficient action" by IRS managers to prevent and disclose the problem involving the screening of certain groups, but no specific clues of misconduct.

"We have not found evidence of intentional wrongdoing by anyone in the IRS or involvement in these matters by anyone outside the IRS," he told reporters.

The report found no indication so far of improper screening beyond the IRS offices, mostly in Cincinnati, that examine groups seeking tax-exempt status.

Werfel's report describes several new procedures the agency is installing to prevent unfair treatment of taxpayers in the future. They include a fast-track process for groups seeking tax-exempt status that have yet to get a response from the IRS within 120 days of applying. He is also creating an Accountability Review Board, which within 60 days is supposed to recommend any additional personnel moves "to hold accountable those responsible" for the targeting of conservative groups, a Treasury Department fact sheet on Werfel's report.

The top five people in the agency responsible for the tax-exempt status of organizations have already been removed, including the former acting commissioner, Steven Miller, whom President Barack Obama replaced with Werfel.

"The IRS is committed to correcting its mistakes, holding individuals accountable as appropriate" and establishing new controls to reduce potential future problems, Werfel told reporters.

IRS screening of conservative groups had sparked investigations by three congressional committees, the Justice Department and a Treasury Department inspector general.

Werfel's comments and report drew negative reviews from one of the IRS's chief critics in Congress, Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee.

Issa said the review "fails to meaningfully answer the largest outstanding questions about inappropriate inquiries and indefensible delays. As investigations by Congress and the Justice Department are still ongoing, Mr. Werfel's assertion that he has found no evidence that anyone at IRS intentionally did anything wrong can only be called premature."

House Ways and Means Committee Chairman Dave Camp, R-Mich., whose panel is also investigating the agency, said the IRS "still needs to provide clear answers to the most significant questions -- who started this practice, why was it allowed to continue for so long, and how widespread was it? This culture of political discrimination and intimidation goes far beyond basic management failure and personnel changes alone won't fix a broken IRS."

Werfel had promised to produce a report within a month of taking over the agency.

Werfel said he briefed Obama and Treasury Secretary Jacob J. Lew on the report earlier Monday.

Werfel, initially named the IRS's acting commissioner, is now the agency's deputy principal commissioner because federal law limits the time an agency can be led by an acting official.