Washington (CNN) - Officials at the Internal Revenue Service knew in June 2011 that their agents were targeting conservative groups for additional scrutiny on tax documents, an inspector general report to be released this week is expected to say, according to a congressional source familiar with the inquiry.
Further, an early timeline of events compiled by the inspector general and obtained by CNN indicates the agency's practice of singling out conservative groups began as early as March 2010, and in July of that year, unidentified managers within the agency "requested its specialists to be on the lookout for tea party applications." In August, specialists were warned to be on the lookout for "various local organizations in the tea party movement" applying for tax-exempt status. The specific criteria would change several times over the next two years, according to a portion of the report.
Following tea party complaints, IRS admits 'mistakes'
More: Palin blasts IRS 'corruption'
An IRS official on Friday admitted the agency made "mistakes" in the last few years with tax-exempt status applications and specifically those submitted by groups with the words "tea party" or "patriot" in their names. Multiple conservative groups have said their applications were delayed and returned with lengthy requests for supporting materials, sometimes including website printouts and lists of guest speakers.
The Treasury Department inspector general for tax administration launched an audit of the agency's practices, and spokesman David Barnes said the report is being finalized and is expected to be released this week.
Barnes said the review was requested by Rep. Darrell Issa, chairman of the House Committee on Oversight and Government Reform, and focused on programs and operations. An audit is separate from an investigation, which would assess wrongdoing such as violation of law or policies.
President Barack Obama's spokesman Jay Carney said Saturday that Obama believes the government should be staffed with "the very best public servants with the highest levels of integrity" and that "based on recent media reports, (the president) is concerned that the conduct of a small number of Internal Revenue Service employees may have fallen short of that standard."
"If the Inspector General finds that there were any rules broken or that conduct of government officials did not meet the standards required of them, the president expects that swift and appropriate steps will be taken to address any misconduct," he said in a statement.
Lois Lerner, director of tax-exempt organizations for the IRS, publicly admitted on Friday for the first time that agents used the keywords "tea party" and "patriot" to flag applications for further review, but she stressed that was done as a "shortcut" for picking the applications to review, not out of "political bias."
The IRS commissioner at the time said at a March 2012 congressional hearing that his agency did not target conservative groups for political reasons.
"I can give you assurances. We pride ourselves in being a nonpolitical, nonpartisan organization," Commissioner Douglas Shulman said. "There is absolutely no targeting. This is the kind of back and forth that happens when people apply for 501(c)(4) status."
The congressional source familiar with the inquiry understood that Lerner knew of the targeting in 2011 but sent letters to Congress earlier this year without disclosing the extent of her knowledge.
Lerner said on the Friday conference call that she "did not feel comfortable answering" as to when senior IRS officials became aware of the situation. She also said she could not give a time frame for when the IRS began looking into complaints.
She said the IRS has implemented changes to prevent similar mistakes in the future but could not say that any IRS employees had been disciplined.
The IRS said Sunday that the timeline in the inspector general's report was accurate, but that it "does not contradict" Shulman's March testimony.
"While Exempt Organizations officials knew of the situation earlier, the timeline reflects that IRS senior leadership did not have this level of detail," the statement from the IRS read. "The timeline supports what the IRS acknowledged on Friday that mistakes were made. There were not partisan reasons behind this."
The applications in question were processed by an office in Cincinnati that handles most applications for 501(c)(4) status and had seen the number of applications rise sharply between 2010 and 2012, Lerner said.
Some 75 conservative groups, flagged by agents because of their names, were among 300 groups singled out for this additional scrutiny, she said. The agency received more than 3,400 applications for 501(c)(4) status in 2012.
"They did pick the cases by names and that's absolutely inappropriate and not the way we should do things," she said, though stressing it was done as a "shortcut," not out of political bias.
Officials with some groups subjected to the scrutiny said they would have had to supply thousands of documents, stacked inches thick, to comply with the requests. Some chose not to, saying the agency was attempting to bury them in paperwork.
Tax-exempt groups are allowed to advocate for causes so long as their primary activities are dedicated to "social welfare," according to IRS rules. When an advocacy case is filed for further review, the IRS tries to determine if the group plans on sticking by that calculus.
IRS scrutiny of conservative applications appears to have begun well before the groups had any idea they were in the spotlight.
The timeline prepared by the inspector general and obtained by CNN redacts events before March 2010 as well as several between then and July 15, 2012, when the timeline concludes. But between the omitted content is a series of events showing what was happening inside the agency.
Initially, unidentified managers from the Determinations Unit of the IRS searched for "applications involving political sounding names (such as ) 'We the People' or 'Take Back the Country.'" In mid-March 2010, the agency identified 10 tea party-related cases, and by April 5, there was a list of 18, though "three had already been approved as tax exempt," the report read.
In late April and May, specialists from the Technical Unit were involved, and on June 7, the "Determinations Unit began training its specialists on emerging issues to watch for, including an emerging issue referred to as Tea Party Cases."
That summer, an e-mail and a "be on the lookout" note were sent to employees that included a "coordinator contact for the cases."
Over the next year, some responsibilities shifted and new staff joined the effort.
The timeline suggests the first hesitation within the agency regarding the process came in June 2011, when "the acting director, Rulings and Agreements, commented that the criteria being used to identify tea party cases may have resulted in over-inclusion." But part of that entry, as well as the preceding one, are redacted from the timeline.
Later that month the director of exempt organizations was briefed on the efforts, and the criteria for evaluating applications were adjusted, one of several times the criteria would be tweaked. A guide sheet for handling applications was developed, and in September, "A Technical Unit specialist reviewed the list (of applications) to determine if any cases could be closed on merit or closed with an adverse determination letter," meaning the application would be accepted or denied.
The timeline continues to show incremental changes to the criteria, additional reviews and the involvement of counsel after the entry labeled "February-March 2012."
"Numerous news articles began to be published with complaints from tea party organizations about the IRS's unfair treatment," it read. "Congress also began to show interest in the IRS's treatment of Tea Party organizations."
Congress asks questions
By March of 2012, Congress was asking questions of the IRS. That month, Shulman denied the agency targeted groups for political reasons at the congressional hearing.
There was also an exchange of letters involving Capitol Hill, Shulman and Lerner.
"News reports ... indicate that the IRS effort lacks balance, with conservative organizations being the target of the IRS's scrutiny," Issa wrote to Lerner in a March 27, 2012, letter obtained by CNN. He noted a Capitol Hill news outlet had "contacted several liberal groups ... (and) none had received the recently-sent questionnaire."
Lerner responded that the IRS sets aside "applications that require further development by an agent in order to determine whether the application meets the requirements for tax-exempt status.
"... The revenue agent uses sound reasoning based on tax law training and his or her experience to review the application and identify the additional information needed to make a proper determination of the organization's exempt status," she wrote deeper in the eight-page response.
She did not disclose in that letter that the IRS targeted conservative groups, even if for nonpolitical reasons.
Separately, a dozen U.S. senators, led by Sen. Orrin Hatch, R-Utah, and Sen. Rob Portman, R-Ohio, sent Shulman a letter asking for more information about this situation.
Shulman's six-year term ended in November and the agency is currently led by interim commissioner Steven Miller.
CNN's Athena Jones and Ashley Killough contributed to this report.
If Scientology can get IRS religion status, tea party should get it too.
Simply unbelievable that there are ANY posters who would somehow support the IRS in this .....shows you the depth of the hypocrisy of the loony left.
Why are these organizations even considered for tax-exempt status?They are purely political, just like the Republican and Democratic parties, and they and their contributors should pay taxes just like the rest of us. The IRS was only going after sham organizations, which is their job.
Another day passes, another scandal for Obama, can we please impeach
This is soooooooooo funny. It just HAS to be President Obama's fault. So was the hindenberg, the Little Big Horn, the Civil War, the Lindberg Baby kidnapping and on and on.........You people are absolutely hilarious. I have it on good authority that he channeled Nixon too and told him just how to handle it. Pathetic, and yes racist. America, the only place in the world where the Village Idiot is an honored position.
J. Edgar Hoover lives on in WASH-DC still...as this president promotes/allows his Federal employees to act just like Hoover to create "lists" of citizens & their organizations to be hounded by the IRS...tyranny is all this is...
Arm Up America or be unprepared for the tyranny to take over...
This moronic Prez Lite took his culture of Chicago corruption to Washington with him. Who didn't see this coming? Allowing the Cincinnati IRS office to nationally target his political opposition is the least of this Administration's sins, and let's not even start on the complicit "newsmedia." They needn't flatter themselves as news sources any longer. They are just cheap partisan PR slaves of the Democratic Party. They lied about Mitt Romney and got away with it, just like they sheltered this incompetent Prez Lite and his cronies. They don't want to know about Benghazi, and they don't want to know about the IRS. Either one of these scandals are far more serious than what Nixon resigned for. Their lack of a moral compass has really bitten the Liberal Dems, and will ruin our country if they are not held accountable for every misdeed and coverup. We're hovering just over worthless Third-world status, and if the Dems get away with all this, we will have arrived there, Congrats, Dems...
Of couse pres. Obumer will clain he knew nothing about it and he will get some lower level political hack to lie about the entire matter. When you have a president who has no concern about playing by the rules or following the law, this type of stuff will continue to happen over and over. Worse yet, the major new networks will just give him a pass.
white supremacist, KKK, Tea Party are scary groups who will go to whatever means they need to get their own way. They will destroy others and this country.
The Teas Party while screaming bloody murder about poor people and illegals not paying taxes are themselves wanting to not pay taxes. Hypocrite much?
whiite supremacist, KKK, Tea Party are sc-ary groups who will go to whatever means they need to get their own way. They will des-troy others and this country.
Who cares? The Tea Party should have been targeted. This isn't law enforcement of civil law. This is enforcement against the greedy who don't want to pay taxes. The IRS has many more powers in collecting taxes than other branches of the government because people who want to have freedom without paying for it because they are greedy and self-centered are everywhere and have been since the beginning of the country. This is a non-issue.
wh-ite supr-emacist, KKK, Tea Party are sca-ry groups who will go to whatever means they need to get their own way. They will des-troy others and this country.
I think they can easily say they did it because of the rising popularity of the tea party at the time and wanted to make sure people weren't piggybacking on the movement for their own interests. 300/3400 were flagged in 2010 but I'm more curious how many actually got accepted for tax exempt status. I'd guess like 3200 of them were eventually thrown out.
And the sad part is that plenty of people don't care about this because the Tea Party are for the most part extremists (In the sense that they're far-right, not in the "think blowing people up is okay if they're heathens" sort of way).
Don't worry, it's always Obama's fault, he authorized this according to the Republicans.
The government that does everything for you can do anything to you.
Anyone who defends the IRS in this case is giving the green light for the next party to use the peoples government to attack them in the future. I do not believe the president knew but when you surround yourself with fools you should not expect less. Unfotrunately for Obama this has happened under his watch. Man up and start the firings or the American people will demand you leave.
The IRS' excuse is that they used "tea party" and "patriot" simply as a "shortcut," not to single out political groups. A shortcut for what? I'm not sure what other kind of shortcut this could be for.
The IRS was profiling for groups trying to manipulate the tax code. "Social welfare" Status is massively abused. What groups would you look at if you wanted to be most efficient? It's not going to look good for them anymore than for police who profile blacks.
Having lived through Nixon's resignation, I find this headline troubling on so many levels, I don't know where to begin. To characterize this 'shortcut' as inappropriate is quite the understatement. And from a political optics perspective, it's about the stupidest thing a federal agency could possibly do. If the IRS really did use political affiliation as a filter, then lied about, some heads should roll.
Time to find out who those managers are, and where they got their orders. Let's put the fear of gawd in them.
Dose the NRA pay taxes ?
What better types of organizations to examine more closely for tax fraud? When an organization parades around with signs specifically declaring their objection to the taxing of Americans don't you suppose they'd be more likely to cheat? If an organization was publicly in favor of domestic terrorism wouldn't they get "extra attention" by the F.B.I.?