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.
LMAO! crooked politicians calling out crooked politicians. The teabag party are the rich and dont want to pay taxes while the middle class foot the bill for the whole country. No one should be tax exempt. No one ever.
I honestly don't care if they were targeted they are domestic terrorists, Not to mention 501c regulations say you can not back a political venue of any kind in order to maintain charitable status.
Sure, this all smells like partisan politics and the misuse of the IRS similar to Nixon. But let's face it. After Citizens United and the way right wing groups are laundering money to fund candidates, there are good reasons to suspect right wing organizations. If the government were allowed to profile, who would we go after as terrorists? First. MedEast fundamental Islamists and second, right wing groups" skin heads, KKK, etc. There certainly are shady left wingers but the balance tips to the fanatical right when it comes to political cheating. McCain warned us. He said that with so much money sloshing around there will inevitably be scandals. Here we go. Let the games begin.
It's about time somebody went after these Tea Party hacks. Nobody likes to.pay taxes but these people are obsessed with not paying taxes at all. They are backed by big money. Why wouldn't the IRS target them? If they have nothing to hide, why are they afraid? They surely must be hiding something.
Miki thinks that it was merely an investigation. It appears to be much more than that and I don't think miki is being honest. If true the IRS conducted an investigation against a possible political opponent during an election in order to intimidate. It will be interesting to see to what extent this had on the Tea Party's actions and how much it influenced the outcome of the election.
If an individual or organization is accused of wrong doing, an audit is coming to find something .... anything to justify the government accusations. Speak out publicly and indeed you may be audited. Remember the person that created a video that made the US look bad and hateful .... the person is in jail ..... on unrelated charges but non the less the voice was silenced!
Lois felt uncomfortable answering questions? How about at a Grand Jury before she heads off to prison? She will really be squirming then.
On one hand I can't stand what the TeaTards say and stand for but on the other hand I love the fact that they're destroying the Republican Party. So hopefully nothing gets found out and they can stick around because they're the absolute best thing that could have ever happened to Dems.
This, the IRS, is the organization that will be enforcing the obamacare laws. That should scare the heII out of every American citizen and the illegals.
I find it hilarious. The president shouldn't apologize at all. The conservatives just don't like the taste of their own medicine they are good in dishing it out constantly but can't heck it when they wind up on the other end of the pole.
As much as right wingers hate to pay taxes. I guess it was probable cause to make sure they are not misusing their non profit status.
Good for them. Let them feel the one sided unjust practices they keep engaging in like voter fraud, hiding money, not paying taxes, etc
The name Tea Party originated by a bunch of people refusing to pay taxes to the King in present day it basically means the same thing in this case to not pay taxes to the Federal Goverment why shouldn't they be targeted?
On the one hand I don't mind added scrutiny because people doing politics doesn't necessarily strike as "social welfare".
On the other they didn't do the same with liberal groups. I'm curious what those groups are and if they aren't for "social welfare" then I do think they should get scrutiny too.
That said I'm glad at least some political groups got a hard look-over. I think it would be fine if most political groups had tax exempt status ended.
Now if someone really thinks the Tea Party (or other groups) are really here for for "social welfare" then I would like to see the explanation.
This is like Nixon all over again. It's sad to see this administration repeating Tricky Dick's shameful, shenanigans.
Dems will be *leaning forward* and falling off their chairs when the IRS starts handling Obamacare. This isn't about targeting one political group, it's about targeting private property.
Libs shows their true colors. of course some lower level bureucrat will be blamed. The director of the IRS and Prez hoosein should resign over this.
I love it when journalists are manipulated by members of Congress, turning molehills into controversy is just about all that the media seems to be good at these days. When IRS agents see large amounts of money sloshing around in a particular area, it would be dumb for them not to take a closer look. Forbidding them from taking closer a look because the money is sloshing around on one end of the political spectrum is actual political bias, and forcing them to do unnecessary work so that it appears that they are politically neutral is a waste of resources. This article basically admits that no one has any proof of political motivation–until that proof shows up this "story" isn't newsworthy or at the minimum the headline should be "IRS officials utilize logic in order maximize their efficiency and for some reason are hamstrung by politicians yet again."
Awww, Tea Partiers feel profiled? At least most of you don't have to worry about being asked to prove you're an American citizen at a traffic stop. Hey – Freedom of Speech advocates, remember the whole "questioning your government is unpatriotic" thing? Yeh, that wasn't a bunch of Dems saying that...
So what's the problem? These groups preach hate towards our government. They don't want to pay their fair share of taxes and probably cheat. They exhibit hate to America. They should be investigated. All this talk about investigating the Boston why not the Tea Party! What do they have to hide?
Political correctness run amuck. Chances are this was a good idea.
Whose been fired, who has been held accountable? Answer from the Chicago crowd this was business as usual in the gutter Chicago flatlander politics of corruption and NON transparency that remains from the Benghazi/Fast and Furious criminals.
TeaParty, boo hoo hoo.
What did the IRS do wrong?
If they focused extra, special love on the Tea Party, that is a good thing, they had it coming.
Tea Party members, living on fixed income, social security and unemployment checks, want their donors like the
Koch Brothers to pay zero in taxes, they threatened President Obama, were attacking America.
They should be investigated with a penetrating laser light.
All Tea Party Donors should be under the IRS glare.
Thank you IRS! Keep up the good work and continue.
I thank you for your post. If accurate is has a very good point.
So many comments on here hating the Tea Party. All they want is fiscal responsibility and respect for our Constitution. They're not racists. They're not tax dodgers. They're decent people who CARE about the future of our country. I've NEVER heard so many outright lies about any other organization in my life. There's a REASON for the lies and attacks, people. THINK ABOUT IT. Our country is under attack from within.