IRS Finally Names 426 Organizations in Targeting Scandal

A court order forced the IRS to release a lengthy list of groups that applied for nonprofit status and were given extra scrutiny based on their political views.

“Among the most serious allegations a federal court can address are that an executive agency has targeted citizens for mistreatment based on their political views,” Circuit Court Judge Raymond Kethledge said in a March ruling where he demanded the list be revealed, according to Fox News. "No citizen—Republican or Democrat, socialist or libertarian—should be targeted or even have to fear being targeted on those grounds."

The list, filed in a court document last month, contained the names of 426 groups that the federal agency has said it scrutinized during the tax-exempt application process, according to The Wall Street Journal. A lawsuit from the NorCal Tea Party Patriots has been pushing the federal agency to release the list over the last three years in order to allow those groups the opportunity to join NorCal's lawsuit, which aims to learn more about the targeting and seek damages for any legal violations. Another 40 groups, which already have opted out of the lawsuit, are not included on the list. The addition of those groups would bring the total number to 466 targeted organizations.

Treasury Inspector General Russell George identified 298 affected organizations in the Treasury Inspector General for Tax Administration audit that was released in 2013.

The latest list includes more liberal groups, according to The Wall Street Journal.

“I think what more discovery will show is that once the IRS came under fire, it started adding [liberal] names to obfuscate what it was doing,” Mark Meckler, president of Citizens for Self Governance, which is financing the lawsuit, told The Wall Street Journal.

The scandal, which has cost the federal government more than $20 million to investigate, technically wrapped up in October when the Department of Justice announced it would not recommend the filing of any criminal charges against IRS officials.

In the latest development of the IRS scandal, the House of Representatives' Oversight and Government Reform Committee voted to censure IRS Commissioner John Koskinen last week, according to Bloomberg. While Koskinen wasn't at the helm of the IRS when the scandal occurred and joined the agency to clean up the aftermath, Republicans have claimed he obstructed the investigation. The House Judiciary Committee, which seeks to impeach Koskinen, held a hearing Wednesday to examine the allegations against him. Neither effort is expected to succeed in the Senate though. And if successful, the censure would not remove Koskinen from his post, but just take away some of his federal benefits, like his pension.

The scandal began in 2010 when employees at an IRS office in Cincinnati were directed to scrutinize tax-exempt applications that had politically charged keywords, according to the inspector general report. The IRS developed its "Be on the Lookout" listing criteria, which directed employees to closely examine Tea Party organizations applying for 501(c)(3) or 501(c)(4) tax-exempt statuses. The directive included looking for keywords, like "Tea Party," "Patriots" or "9/12 Project," in the files. Other case file red flags for scrutiny included the organization having issues with government spending, debt or taxes, advocating or lobbying to "make America a better place to live" or criticizing how the country is run.

"According to IRS policy statement 1-1, IRS employees accomplish this mission [of providing tax-exempt status] by being impartial and handling tax matters in a manner that will promote public confidence," according to the inspector general report. "However, the criteria developed by the [Cincinnati] Determinations Unit gives the appearance that the IRS is not impartial in conducting its mission. The criteria focused narrowly on the names and policy positions of organizations instead of tax-exempt laws and Treasury regulations."

In a May 2013 American Bar Association meeting, Lois Lerner, IRS director of exempt organizations, clarified the issue, noting the increase in 501(c)(4) applications between 2010 and 2012.

"The problem in the (c)(4) area is that the kind of activity the organizations were doing is OK for (c)(4)s but it can’t be their primary activity," she said. "So that weighing and balancing is a little different than when we have a (c)(3) that says you can’t do any political activity."

She also admitted there was an "absolutely incorrect, insensitive and inappropriate" targeting based on a group's political views that occurred.

"[The IRS workers in Cincinnati] centralized work on these in one particular group," Lerner said. "They do that for efficiency and consistency—something we do whenever we see an uptick in a new kind of application or something we haven’t seen before. Folks might remember from back a few years ago we had credit counseling organizations and we centralized those cases. We had mortgage foreclosure cases and we centralized those cases. We do it for consistency  So they went ahead and did that. How they do centralization is they have a list in their office that they give out to folks who are screening cases that says if it is one of these kind of cases and it can’t be screened, it needs to go to group X. So centralization was perfectly fine."

Weeks later, she read a statement and then pled the Fifth and refused to testify before the House Committee on Oversight and Government Reform, according to Forbes. She was placed on administrative leave and later retired after the IRS Accountability Review Board recommended she be fired for "neglect of duties."

In the October 2015 letter from the DOJ announcing no charges would be filed, Peter J. Kadzik, U.S. assistant attorney general, credited Lerner, who participated in interviews with the DOJ, with discovering and correcting the problem at the Cincinnati office. Among other reasons that supported why there was no evidence of criminal activity, he determined:

"When Ms. Lerner became fully aware of and focused on the Cincinnati-based Determinations Unit's use of inappropriate criteria, she recognized that it was wrong, ordered that it stop immediately, and instructed subordinates to take corrective action," he said. "In fact, Ms. Lerner was the first IRS official to recognize the magnitude of the problem and to take concerted steps to fix it. To the extent that Ms. Lerner mishandled the oversight of how these tax-exempt applications were processed, it resulted from her failure to digest materials available to her from which she could have identified the problem sooner, and her delegation of corrective action to subordinates whom she did not adequately supervise to assure that her directions were implemented sufficiently."

However, to charge her or anyone else at the IRS with a crime, authorities needed to find evidence of a "political bias, discriminatory intent or corruption," but they could not find any evidence of criminal intent.

"Our investigation uncovered substantial evidence of mismanagement, poor judgment and institutional inertia, leading to the belief by many tax-exempt applicants that the IRS targeted them based on their political viewpoints," Kadzik said. "But poor management is not a crime."