WASHINGTON - Political Washington reacted with bipartisan outrage Monday to reports that the Internal Revenue Service targeted conservative organizations applying for special tax-exempt status - though questions have been raised about politics and tax status since at least 2006.
President Obama said it was "outrageous" if true that the IRS gave extra scrutiny to right-leaning groups applying for tax-exempt status. "They have to be held fully accountable, because the IRS as an independent agency requires absolute integrity, and people have to have confidence that they're ... applying the laws in a nonpartisan way," he said at the White House.
"We need to get to the bottom of what happened here. I want to see all the facts," said Sen. Max Baucus (D., Mont.), chairman of the Finance Committee. "The American people have questions for the IRS, and I intend to get answers."
Said Sen. Pat Toomey (R., Pa.), a member of the Finance Committee and the subcommittee on taxation and IRS oversight: "Whether you are conservative, liberal, libertarian, or any other political persuasion, you should be concerned that the IRS was targeting specific groups for extra scrutiny and intimidation," he said. "The IRS's actions are akin to an enemies list and further contribute to the deep cynicism that many Americans have about the government."
While political leaders reacted to the news, insiders noted that there had been complaints about IRS treatment of groups engaging in political activity since at least 2006. Then, it was scrutiny of liberal-leaning churches during the Bush administration. Now, it's the treatment of right-leaning groups during Obama's.
"There are tea-party groups that went out of business because of these [IRS] letters," Tom Zawistowski, the executive director of the TEA Party in Portage County, Ohio, and president of the We the People Convention, told McClatchy. "I see a class-action suit."
At issue is a Cincinnati-based office of the IRS that determines whether applications for tax-exempt status are legitimate.
The "determinations" unit in spring 2010 began giving special scrutiny to organizations that mentioned tea party, patriots, or other "take back the country" references in the name. They later extended to groups focused on government spending, according to a timeline obtained by McClatchy from congressional sources.
The timeline comes from an unreleased report from the Treasury Department's inspector general for tax administration, which is due out this week. That office began looking into a "campaign of intimidation" alleged in a June 28, 2012, letter and request for investigation from Rep. Darrell Issa (R., Calif.), chairman of the House Committee on Oversight and Government Reform.
The inspector general, J. Russell George, responded July 11, 2012, pledging to look into Issa's concern, specifically "questionnaires that the IRS has issued which may exceed appropriate scrutiny and a potential lack of balance in the use of criteria for reviewing organizations that are applying for tax-exempt status."
Lois Lerner, who heads the IRS division overseeing tax-exempt groups, acknowledged Friday that organizations were singled out in their applications for tax-exempt status because of their names.
Murky tax code
The controversy underscores the less-than-clear line in the tax code distinguishing between organizations that are political in nature vs. those that broadly promote social welfare.
"The line between different types of organizations engaging in advocacy and election activities is very blurry," said Jeremy Koulish, a researcher for the Center on Non-Profits and Philanthropy at the Urban Institute, a centrist policy think tank. "That has a lot of implications, and it makes it very difficult to enforce the regulations that exist."
In fact, the current IRS firestorm isn't exactly new.
Democrats in March 2012 called on the IRS to look broadly at the political behavior of certain tax-exempt groups whose political involvement is supposed to be limited to issues and not particular candidates. They had in mind Crossroads GPS, the huge tax-exempt organization run by Republican strategist Karl Rove. Around the same time, GOP leaders such as Senate Minority Leader Mitch McConnell of Kentucky began complaining that conservative groups were getting unfair attention.
Allegations of IRS meddling go back further than that. In 2006, houses of worship across the nation reviewed their get-out-the-vote efforts after the IRS probed the liberal All Saints Episcopal Church.
The pastor of that church claimed he was targeted for criticizing the war in Iraq, and clergy of all faiths and religious-affiliated groups complained of undue IRS attention. During the 2004 election cycle, the IRS investigated 110 cases of alleged illegal political activity by churches, McClatchy reported in 2006.