DOJ opens criminal probe into IRS’s politically biased audits

The Justice Department on Tuesday opened a criminal investigation into the Internal Revenue Service’s targeting of conservative groups as lawmakers clamored for senior officials at the agency to be fired.

Attorney General Eric HolderEric H. HolderOvernight Tech: Uber CEO resigns | Trump's Iowa tech trip | Dems push Sessions to block AT&T-Time Warner deal | Lawmakers warned on threat to election systems | Uber CEO Travis Kalanick resigns Holder mulling 2020 bid MORE said the department would be looking into whether any IRS staffers broke the law when giving extra scrutiny to Tea Party groups and other organizations on the right that sought tax-exempt status.

“Those were, I think, as everyone can agree, if not criminal, they were certainly outrageous and unacceptable,” Holder said at a press conference. “But we are examining the facts to see if there were criminal violations.”

The accelerated response from Holder took place as Republicans are increasingly painting the scandal as emblematic of President Obama’s White House, and on the same day that a highly anticipated report was leaked to the press with allegations of “ineffective management” at the IRS. 

White House press secretary Jay Carney on Tuesday categorically denied that anyone in the West Wing had knowledge of the IRS’s actions. 

The report from Treasury’s inspector general for tax administration found that the IRS had used “inappropriate criteria” to single out Tea Party groups seeking tax-exempt status and requested “unnecessary information.”

According to the report, IRS staff wrongly identified groups for further scrutiny based on names and policy positions — like “Tea Party” and “9/12” — instead of tax laws and regulations. 

That criteria stayed in place for 18 months, while many organizations seeking tax-exempt status waited years for a verdict from the IRS. Agency staffers, the report found, did not take into account “the public perception of using politically sensitive criteria,” and gave inconsistent treatment to various applicants.

Senior IRS officials did tell the inspector general that the criteria were solely the creation of agency employees, and were not influenced by any outside individual or group. 

In its response to the report, the IRS acknowledged that “errors occurred” in identifying applications for further review, and said the criteria would be handled by higher-level officials in the future. 

But the IRS added that it was grappling with an “influx of advocacy cases” when decisions were made, and that Tea Party groups passed along for further scrutiny were treated exactly the same as other groups at that point.

“We believe the front line career employees that made the decisions acted out of a desire for efficiency and not out of any political or partisan viewpoint,” Joseph Grant, the IRS’s acting commissioner for tax-exempt and government entities, wrote in response to the report.

 GOP lawmakers took aim Tuesday at the IRS’s acting commissioner, Steven Miller, who found out about the agency’s scrutiny of conservative groups more than a year ago but declined several times to inform Congress, according to Republicans.

Miller and former IRS Commissioner Doug Shulman both found out about the targeting of Tea Party groups in May 2012, but Miller did not disclose the practice in letters he later sent to lawmakers.

“He and others over there purposefully misled me,” Sen. Orrin HatchOrrin HatchLive coverage: Senate GOP unveils its ObamaCare repeal bill Grassley doesn't see how Judiciary 'can avoid' obstruction probe Ryan calls for tax reform to be permanent MORE (Utah), the ranking Republican on the Senate Finance Committee, said Tuesday about Miller. 

Miller met on Tuesday with Finance Chairman Max BaucusMax BaucusLawmakers: Leave advertising tax break alone GOP: FBI firing won't slow agenda White House tax-reform push is ‘game changer,’ says ex-chairman MORE (D-Mont.), who has launched an investigation into the IRS. 

 “It was a tough talk. The senator didn’t pull any punches and warned Mr. Miller that he is in for some serious questioning from the Committee,” Sean Neary, a spokesman for Baucus, said in a statement. “He told Mr. Miller today that the committee will not accept anything less than his complete cooperation and transparency.”

 Senate Majority Leader Harry ReidHarry ReidDems see surge of new candidates Dems to grind Senate to a halt over ObamaCare repeal fight GOP fires opening attack on Dem reportedly running for Heller's Senate seat MORE (D-Nev.) will meet with Miller later this week.

Some Democrats — including Sen. Claire McCaskillClaire McCaskillSenators question need for HHS cyber office Overnight Cybersecurity: Obama DHS chief defends Russian hack response | Trump huddles on grid security | Lawmakers warned about cyber threat to election systems We must protect our most vulnerable from financial fraudsters MORE (Mo.) — joined with Republicans in saying that Miller or other senior IRS officials should be shown the door.

“Anyone in any supervisory position that had any knowledge that somebody had lost their mind should be removed,” McCaskill said. “I just can’t imagine that there is not unanimous support for consequences for this. It’s just stupid.”

 But leading Democrats, while condemning the IRS’s actions, also tried to broaden the debate over the agency. 

 Reid, for instance, asked where the outrage was when the IRS targeted the NAACP during the George W. Bush administration.

Other top Democrats raised questions about the IRS’s oversight of groups seeking tax-exempt 501(c)(4) status — a designation reserved for social welfare groups, but which Democrats say political groups are using to conceal their donors.

The furor over the IRS’s handling of Tea Party groups comes just days before the House Ways and Means Committee is scheduled to hold the first hearing on the matter, with Miller as one of two scheduled witnesses. 

Ahead of Friday’s hearing, Ways and Means Chairman Dave Camp (R-Mich.) and Rep. Sandy Levin (Mich.), the committee’s top Democrat, asked for all of the IRS’s documents related to the vetting of conservative groups. 

Rep. Charles BoustanyCharles BoustanyDemocrats, Republicans must work together to advance health care Lobbying World Former GOP rep joins K Street lobbying firm Capitol Counsel MORE Jr. (R-La.), the chairman of the Ways and Means Oversight subcommittee, said, “Any way you look at it, it signifies a culture of rottenness.”

The Louisiana lawmaker said there is plenty of proof — including testimony from the IRS last year — that Washington, D.C.-based agency officials are involved in enforcement decisions. He will brief his fellow Republican colleagues Wednesday morning during their weekly closed-door conference meeting.

The news organization ProPublica also announced Tuesday that it had received confidential documents on conservative groups from the IRS, while the National Organization for Marriage — a group that opposes same-sex marriage — said it would sue the agency for leaking its tax return. 

With all that in mind, Senate Minority Leader Mitch McConnellMitch McConnell43 arrested in ObamaCare repeal protests at Capitol Four Senate conservatives say they oppose ObamaCare repeal bill The Hill's Whip List: Senate ObamaCare repeal bill MORE (R-Ky.) predicted Congress had “only started to scratch the surface” of the scandal.

“There are lots of questions,” McConnell said. “I think Congress is fully capable of conducting an independent review of what went on.”

Tea Party leaders on Tuesday provided new details about the treatment they received from IRS agents. 

Marion Bower, co-founder of the Ohio group American Patriots Against Government Excess, estimated she sent a “couple hundred” pages of documents to the IRS during a two-and-a-half year effort to obtain tax-exempt status.

Bower said the IRS asked the group for a synopsis of a book the group studied, The 5,000 Year Leap, while the IRS eventually agreed to grant the group tax-exempt status in June 2012. 

“My husband and I are both 68 this year. We’re still both working full time, and well I don’t have time to do a book report for anybody, let alone the IRS,” she said.

Experts believe that both Miller and Lois Lerner, who heads an IRS section on tax-exempt groups and first publicly disclosed the targeting, can be removed from their positions if the allegations bear out, despite being career employees. 

Federal employees can be fired for poor conduct, and IRS employees in particular can be dismissed if they violate rules commonly known as the 10 “deadly sins” — which include violating the constitutional rights of taxpayers and violating agency rules for the purposes of “harassing a taxpayer.”

“If the allegations are found to be correct, then it’s going to be very tough not to hold somebody accountable, and clearly the standards would support a dismissal,” said John Palguta, vice president for policy for the Partnership for Public Service, a nonprofit devoted to improving the federal workforce.

— Molly K. Hooper contributed to this report.