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.
By the way, the person who runs the IRS is a Bush appointee.
The person in charge of the IRS is the Treasury Secretary – a member of Obama's cabinet. Currently it's Jack Lew. Prior to that it was Tim Geitner. Oddly enough, Geitner – the man in charge of the IRS – was a tax cheat. Obama had a rat guarding the cheese. Go figure.
P.S. Bush Derangement Syndrome is soooooooooooo 2008. Grow up.
@AL, Its Sunday morning now and you make the post:
"@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."
Perhaps you should leave your mom's basement once in a while. At least long enough to know what day it is. LOL.
@Objective guy, Get a job. That way you will know that today is Sunday, not Monday.
To conservatives – welcome to the wonderful world of profiling. Sucks when you're the target.
Never mind Nixon, this is the most corrupt administration ever.
Sooooooo - I can put "TeaParty" on my income tax and not have to pay?????
WOW - Just WOW - let's all try it next year - maybe a few hundred will slip thru. ha ha ha ha ha
Let's flood them.
People overlook the fact that yes Shulman was appointed by Bush, but he is a registered DEMOCRAT!!!!
Now our government has fallen to intimidating honest citizens. Wow I would think this would be the biggest headline in the news.
Lol today is Sunday morning in the states, not Monday. And guys this wasn't even an Obama appointee, it was a Bush appointee... Lol you clowns probably blame Obama for bad weather too
Just an excuse to reduce the number of IRS agents when they should be expanding the number. i pay all my taxes so should everyone.
Typical of a tyrannical, despotic regime, of course most of the cnn posters here are quite Fascist and therefore natually support this sort of thuggishness.
The Tea Part should be targeted. So should left wing shadow political groups, and all lobbyists!
Sounds like racial profiling. What goes around comes around.
Not sure what the uproar is about. Comparing Obama to Nixon over this? Laughable. We went through an application process for tax exempt status during this period for our organization. It was incredibly slow, and we were asked for piles and piles of additional information and our organization name was not tea party related or one that would have been flagged. While the time it took and the continued requests for additional information were incredibly frustrating, we understood the need for OUR government to be thorough in approving these requests. If you haven't noticed, unfortunately, honesty doesn't seem to be a strong point of many in our country. Being more prudent in approving these applications to insure they meet the tax exempt criteria is a good thing, unless you think it is fine for some people/groups get away with not paying taxes when they should be. The point is, a decision was made to more closely monitor these applications in an effort to insure accuracy. While singling out groups based on names is obviously not ideal, based on my experience, they were implementing the same criteria for all applications. Frankly, with the reduction in staff throughout the government, attempting to use tools to more accurately focus on groups that may have an anti-government slant, seems to not be completely unreasonable.
I would love to hear others thoughts.
According to a poll conducted the first week of May 2013, from Fairleigh Dickinson University's PublicMind, nearly a third of registered US voters think armed revolution might be necessary in the next few years to protect American personal liberties. Stuff like the political party in the White House using Federal agencies to harm political opponents, reinforce their perception that liberty is in need of protection from criminal abuses of politicians that consider themselves "above the law".
It becomes annoying to see every post here blaming the President, over things that would not fall into his view. Please... Get over the bias – does not help, does not add to the issue, only distracts from the subject. You do not have to like the President, George W is a great example of crook in the whitehouse, but did not see any bashing his dumb behind.
Now we KNOW for certain that Mitt Romney DID pay his taxes.
Do you suppose for one minute that if he HADN'T paid them IRS wouldn't have used it against him? After all they ARE politically motivated, aren't they............and obviously in Obama's favor.
American is now the official LAUGHING STOCK of the world. You no longer have any credibility – NONE.
Shulman was appointed by Bush.......so WHAT? Obama put Geithner in charge as OVERSEER aka shaker and mover of the IRS. Enough said.
The Tea Party is running scams designed to prevent TP people from paying their fair share of taxes.
The IRS was correct in targeting these greedy unpatriotic TP groups.
IRS liberals within this administration targeting,profiling,discriminating against,dirty tricks,inhibiting free speech and likely much more can only occur with active or passive approval from those in high places....the fox is guarding the hen house.
@Policy... Best post of the day. Thank you. I suggest you all read this again.
"Not sure what the uproar is about. Comparing Obama to Nixon over this? Laughable. We went through an application process for tax exempt status during this period for our organization. It was incredibly slow, and we were asked for piles and piles of additional information and our organization name was not tea party related or one that would have been flagged. While the time it took and the continued requests for additional information were incredibly frustrating, we understood the need for OUR government to be thorough in approving these requests. If you haven't noticed, unfortunately, honesty doesn't seem to be a strong point of many in our country. Being more prudent in approving these applications to insure they meet the tax exempt criteria is a good thing, unless you think it is fine for some people/groups get away with not paying taxes when they should be. The point is, a decision was made to more closely monitor these applications in an effort to insure accuracy. While singling out groups based on names is obviously not ideal, based on my experience, they were implementing the same criteria for all applications. Frankly, with the reduction in staff throughout the government, attempting to use tools to more accurately focus on groups that may have an anti-government slant, seems to not be completely unreasonable. I would love to hear others thoughts."
Please, please, please, continue to insult tea parties and like minded individuals. PLEASE DO SO. Insulting groups who were abused by government officials because they are, in part, concerned about the abuse of government is so effective at turning people against those groups.
So, please call them teatards, tea baggers, whatever. The few independent people who read these boards will be so convinced to turn against these groups because of your insults. Especially in light of evidence that runs counter to their concerns about abuse.
What I want to know is, why to this day has the IRS not scrutinized the tax exempt status of ALEC (American Legislative Exchange Council)? Now that is a bogus "charitable" organization if I ever saw one. Of course I actually know the answer: ALEC is made up of America's most powerful corporations. No one in government, including the IRS, wants to get on the wrong side of ALEC.
Policy – that's not what happened. They were not being more prudent. They abused our freedom of speech and freedom of association and they have admitted doing it unfairly.
IRS liberals targeting,profiling,discriminating against,dirty tricks,inhibiting free speech and likely much more can only occur with active or passive approval from those in high places....the fox is guarding the hen house.