Levin, McCain spar over IG report on IRS

A senior Democratic senator charged Friday that the IRS improperly scrutinized both liberal and conservative groups, and that the inspector general who investigated the agency fueled the current Tea Party controversy with a misleading report.

In a 224-page report, Sen. Carl LevinCarl Milton LevinOvernight Defense: First group of Afghan evacuees arrives in Virginia | Biden signs Capitol security funding bill, reimbursing Guard | Pentagon raises health protection level weeks after lowering it Biden pays tribute to late Sen. Levin: 'Embodied the best of who we are' Former Colorado Gov. Richard Lamm dead at 85 MORE (D-Mich.), the chairman of the Homeland Security Committee's permanent subcommittee on investigations, particularly chided Treasury’s inspector general for tax administration for limiting his examination to whether the IRS singled out conservative groups seeking tax-exempt status.

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Levin also maintained that Russell George, the tax administration inspector general, had determined that the IRS was not guilty of political bias in its treatment of Tea Party groups before releasing his May 2013 report, but left that finding out.

The inspector general's report came just days after former IRS official Lois Lerner acknowledged and apologized for the agency’s actions, in an attempt to lessen the sting of the audit's findings.

Those findings, Levin said, “told only half the story, because it left out that the IRS mistreated liberal groups in the same way, and its key finding that the IRS’ actions were not politically motivated.”

George’s report and Lerner’s apology caused a political firestorm that still rages, helped along by the IRS’s admission this summer that an untold number of Lerner’s emails from 2009 to 2011 had gone missing.

Republicans on Capitol Hill have latched on to Lerner’s missing emails to make the case that the IRS is obstructing their investigation into the agency, an issue that also revs up the GOP’s conservative base.

On Friday, Sen. John McCainJohn Sidney McCainGOP senators appalled by 'ridiculous' House infighting MSNBC's Nicolle Wallace, Chris Christie battle over Fox News Trump's attacks on McConnell seen as prelude to 2024 White House bid MORE (R-Ariz.), the top Republican on the investigations subcommittee, blasted Levin’s findings, in the latest sign of how divided Democrats and Republicans are over the Tea Party controversy.

Several congressional committees are investigating the IRS's handling of tax-exempt applications, but the investigations panel is the first to release a thorough report.

Levin and McCain have teamed up to release an array of reports taking top corporations like Apple, Credit Suisse and JPMorgan Chase to task, and the two senators’ staff worked together to comb through almost 800,000 pages of documents and conduct some two dozen interviews.

But while Levin found the IRS wrongly treated conservatives and liberals alike, McCain says in a 37-page rebuttal that the evidence points to Tea Party groups receiving far worse treatment.

Unlike the Tea Party groups that faced years of delay, McCain says the IRS had plenty of reasons to hold up liberal groups like ACORN, the grassroots group that formally disbanded in 2010 after employees were caught on tape giving tips on tax evasion.

Levin’s report, McCain insists, “fails to capture the extent of the IRS’s bias against conservative groups and flagrant abuse of power.”

George responded to Levin's report by noting that his review of the case was far from closed, and that the IRS had accepted all of the inspector general's original recommendations.

"I firmly stand behind the audit report that we issued last year, showing the inappropriate treatment of applicants for 501 (c)(4) status, for which the IRS apologized," George said. 

A spokeswoman for George said the inspector general’s office was reviewing the report.

In May 2013, Republicans and Democrats both sharply criticized the IRS following George’s findings that groups with Tea Party in their name had been singled out for extra scrutiny.

Levin and McCain’s response now illustrates how little bipartisan agreement remains over the IRS’s handling of tax-exempt applications.

In the ensuing 16 months, House Republicans have voted to hold Lerner in contempt of Congress and referred the now-retired IRS official to the Justice Department for potential criminal prosecution.

Democrats have said for months that there was no political bias behind the agency's scrutiny of Tea Party groups, and have chalked up the problems with groups seeking 501(c)(4) status to bureaucratic bungling. Levin is also far from the first Democrat to say that George, a Republican nominated to his post by former President George W. Bush, conducted a flawed investigation.

In his new report, Levin blames the IRS for not giving staffers enough guidance on how to deal with tax-exempt applications. But he also insists that the inappropriate selection criteria used by the IRS cut both ways, with the agency using “Progressive,” “ACORN” and “Occupy” to single out groups as well.

The Michigan Democrat also reiterated that the IRS has been allowing too many political groups to gain tax-exempt status. Current law says that 501(c)(4) groups must exclusively engage in social welfare work, but IRS regulations have said that should be the organizations’ primary purpose.

Republicans, meanwhile, have for months said that the IRS treated conservative groups far more shabbily than liberal organizations.

McCain pressed that case further in his rebuttal, noting that conservative groups seeking tax-exempt status had a 45 percent approval rate from the IRS — far below the 70 percent rate liberal groups received. The IRS was also considering far more conservative applications (248) than liberal ones (29), McCain maintained.

Conservative groups and congressional Republicans don’t plan to let up on the IRS any time soon, either.

A handful of conservative groups have lawsuits against the IRS pending in federal court, and Republicans including House Ways and Means Committee Chairman Dave Camp (Mich.), House Oversight Committee Chairman Darrell Issa (Calif.) and Rep. Jim Jordan (Ohio) continue to look into Lerner’s missing emails, as is George’s office.

John Koskinen, the IRS commissioner, is scheduled to testify before Congress again this month. Jordan said in a Friday release that Republicans were particularly concerned about the IRS’s recent statement that one of Lerner’s BlackBerrys was wiped clean after lawmakers had started to question her about the agency’s treatment of Tea Party groups. 

This story was updated at 5:51 p.m.