Tax-exempt groups were IRS targets

The IRS subjected conservative groups already granted tax-exempt status to additional scrutiny during the 2012 election cycle, House Oversight Committee Chairman Darrell Issa (R-Calif.) charged on Monday.

Issa called on a Treasury watchdog already looking into the IRS to investigate the matter, and signaled he would expand his committee’s probe into improper targeting of political groups given the new revelations.

Rep. Elijah Cummings (D-Md.), the ranking member on Issa’s panel, accused the chairman of pushing a “political narrative” by picking choice quotes and disregarding contrary evidence.

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“It is unfortunate that you persist in this pattern of selectively releasing quotes instead of conducting a responsible investigation focused on implementing real reforms. I urge you to focus on obtaining the full set of facts rather than making unsubstantiated allegations,” he said in a letter sent to Issa Monday.

He said the Virginia-based Leadership Institute was audited in 2011 and 2012 for activities it engaged in during the 2008 election year, even though it had functioned as a tax-exempt organization since 1979.

It faced “invasive questions” — including about its interns and where they went on to work — and ended up turning over to the IRS more than 23,000 pages of documents at a cost of roughly $50,000 to comply with the inquiry, Issa said.

“It has come to the attention of the committee that in addition to inappropriate treatment given to some applicants for tax-exempt status, existing organizations already recognized as tax-exempt by the IRS, appear to have faced questionable treatment by the IRS,” Issa wrote Monday in a letter to the Treasury inspector general (IG) for tax administration.

Rep. Jim Jordan (R-Ohio), an Oversight subcommittee chairman, also signed on to the request that the Treasury watchdog do a second investigation.

Issa said the Institute was told by the IRS office conducting the audit that there would be follow-up document requests and questions. About two months later, in July 2012, the IRS concluded the audit, which is roughly the same time the Treasury IG determined the IRS changed its process for scrutinizing potential political groups applying for tax-exempt status.

Issa specifically questioned whether the IRS had a “systematic” plan in place to automatically review conservative groups several years after granting an exemption. He said that interviews with 18 IRS employees indicated that at least some Tea Party groups were referred to the unit that conducted follow-up scrutiny.

Cummings took issue with this claim, saying that the head of the IRS exempt organizations unit in Cincinnati told congressional investigators that groups were referred to this unit on a case-by-case basis. He added that a separate IRS employee told investigators that a referral to this unit did not automatically mean an audit would occur, and that referrals to this group were actually meant to facilitate an approval, not burden the organization with added inquiries.

The administration has acknowledged problems at the IRS, but it has joined Democratic lawmakers in arguing that liberal groups also came under scrutiny.

Treasury Secretary Jack Lew told “Fox News Sunday” that an investigation into the IRS practice revealed problems at the agency, but also that progressive groups were improperly targeted alongside conservative ones. He also added that there was no evidence of political pressure.

Joseph Metzger, the vice president of finance at the Institute, told The Hill that the group had previously been audited twice before, once under President Reagan and again under President Clinton.

While the most recent audit was painful, Metzger said the audit under Clinton was “particularly savage” and spanned three years and five different agents. He said the one in the 1980s was more “routine in nature.”

The Leadership Institute states on its website that its mission is to “increase the number and effectiveness of conservative activists and leaders in the public policy process.”

It also includes a disclaimer at the bottom of its website stating that it is a tax-exempt 501(c)(3) organization, and does not endorse or oppose candidates or legislation.

The head of another conservative group, the Clare Boothe Luce Policy Institute, claimed they faced “harassment” from the IRS, as they worked to comply with an audit that took most of a year and cost “tens of thousands of dollars.” The group was founded in 1993.

On its website, the group describes its mission as “preparing and promoting conservative women leaders.” The existing probe into the IRS has so far failed to tie any of the IRS targeting to White House or high-ranking Treasury officials.

President Obama chastised Washington last Wednesday for pursuing “phony scandals” instead of policies to grow the economy.

Published at 2:37 p.m. and was last updated at 8:38 p.m.