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.
So it was the IRS that targeted an organization, who was already targeting the government to take revenue from the America system by alleging non-profit status. Seems like everyone is crooked in this scandal.
Oh and if the President wants "the very best public servants with the highest levels of integrity" and the American people also want that, why has the government (Congress) given so many dis-incentives to federal employees (no cost of living for three years, more expensive health care with fewer benefits, reduced retirement programs, lower budgets to complete public works programs etc.). Seems to me the politicians give themselves raises by saying if you want the best to represent you you need to pay more, but government employees who actually do the work for the American people get the dis-incentives to do a good job. Face it , the system is a mess!
Whoa..............Just like Nixon!!
Will the media pursue it?
Is this a coincidence that this story gets posted over the weekend, and then will likely disappear on Monday morning, so that it receives the least possible readership? I wonder... What are the odds that the dictate to the IRS didn't come STRAIGHT from the oval office??? Obama is becoming Nixon. Shall we commence with the impeachment proceedings?
Scary. Will this get handled with a simple slap on the wrist? Does this happen with all administrations, targeting select groups for IRS scrutiny? If not, heads should roll, all the way to the top, cabinet positions. Tired of the free pass.
I can't stand the tea party groups, but Lerner and Shulman should be thrown in jail for this. This is criminal. Government workers cannot behave like this and then continually lie to congress about it. Thrown them in jail to make an example of them.
By the way, the person who runs the IRS is a Bush appointee. Had the Republicans not stonewalled all of Obama's appointee's then maybe the President could have put his own person in charge. That way, you Tea Baggers would really have something to complain about. For all we know, this might be part of the Republican "establishment" trying to rid themselves of the cancer known as the Tea Party.
However, it looks like the gift you conservatives gave us in 2000 keeps on giving
Pity pity government.
Is there anyone in the U.S. that is not an IRS employee that trusts the IRS?
why wouldn't the IRS look at the Tea Party's taxes in detail? the Tea Party are the ones who clearly state that they loathe taxes and do not want to pay their share. Of course they will get a double look. Anybody in their right mind knows they are hiding funds from "big brother".
Anything you say bad (true or not) about Obama and everyone (media and his supporters) consider you a racist he has done an awful job an no one seems to care.
There is nothing to see here, move along. The president does not know anything about this, he is busy with fixing the economy, a mess created by every republican that ever lived, while the democrats are saints and totally blameless. The president does not control the IRS, it is controlled by Boehner. We need to worry about more important things than the silly IRS targeting , errr.... Hey the fire alarm is going off....please move to the nearest exit, all is well, obviously Bush left some smoke grenades behind, this is all Bush's fault. Quickly, quickly.
Maybe it's just me, but if I were running the IRS I would definitely target a fringe group of anti-government extremists who hate taxes and think the country should revolt against paying them. Seems like that would be a pretty obvious group who may avoid paying some or all of their taxes.
Obama and his henchmen knew there was corruption and did nothing to stop it? That's not news. That is the dishonest Obama and his cronies common behavior. Sad. When will the Liberals learn.
The IRS also in the practice of singling out Scientology and the Association for the Unification of World Christianity, commonly called the Unification Church or Unificationism, ”The Moonies .
Why not Karl Rove and FreedomWorks for America is a super PAC formed in July 2011.
Dose the NRA pay taxes ?
Can someone in Congress please investigate and prosecute everyone in charge. Please also look at Obama emails. Impeach if necessary. This is just like Nixon!
So now to figure out if the people targeting them were Democrats or Republicans. I know a lot of both that have no love for the tea party in any flavor. I have to say it's been the greatest re-branding I've ever seen in politics. Libertarians couldn't buy a vote. Change your name to the tea party and now you have people jumping on board not even knowing what you stand for. (...and it isn't good.... )I'm thinking they are backed by a foreign nation that knows you can spread hate and discontent by waving a flag, holding up a bible and scream our rights are being taken away. Kind of brilliant but very dangerous for the USA.
If the irs has all of the extra revenue for political purposes then they have excess funds that can be trimmed from their budget.
Stop kiking around Nixon !
Stop blaiming him , we have had two Reagan terms and three Bush terms since then. .
The GOP is always passing the buck !
No matter which side of the political aisle you sit, this should enrage you. The government is targeting it's political enemies in a stunning display of abuse of power. How does this not alarm you? Have the intellectual maturity to put aside your petty political views and look at the bigger picture here. For posterity's if nothing else.
@ObjectiveGuy. You say this article will be buried and not show up Monday morning whilst commenting on it Monday morning. Then go on to blame Obama. Now, think about this. You are commenting on it Monday morning saying it won't show up Monday morning. This is why we don't take you guys seriously.
Wether you agree with the tea party or not, the targeting of groups like this is wrong. NAMBLA had no problem getting tax exempt status, so why should TP'ers? Obama needs to propose a law that gives the DHS oversight of the IRS.
A politically motivated tax revenue service... Are we in Russia?
If these "unidentified managers" all began their Tea Party witch hunt around the same time, that suggests it wasn't just coincidence and that a higher authority was involved. I want to know who would misuse their power to attempt to keep a political foe at bay and I want them out of our government.
Finally, the IRS doing something right. It's about time...the tea baggers are all UnAmerican tax dodging crooks...
The Treasury head Secretary Geithner who oversees the IRS Commissioner is a tax cheat; Obama most likely gave the orders to Geithner to corruptly go after the Tea Party - Obama's administration is corrupt from top to bottom -- this is typical operation policy for Dems - Lies, Cheat, Demonize anything to beat the GOP. Time for impeachment proceedings against Obama and for Secretary Geithner to be prosecuted