Senate Report: IRS Mismanagement Led to Targeting of Tea Party Groups

Mismanagement at the Internal Revenue Service led to improper targeting of conservative organizations applying for tax-exempt status, a Senate Finance Committee report detailing the findings of a two-year investigation finds.

According to the report, The Internal Revenue Service's Processing of 501(c)(3) and 501(c)(4) Applications for Tax-Exempt Status Submitted by "Political Advocacy" Organizations From 2010-2013 (145 pages, PDF), "IRS management was delinquent in its responsibility to provide effective control, guidance, and direction over the processing of applications for tax-exempt status filed by Tea Party and other political advocacy organizations." The investigation found that Lois Lerner, who headed the Exempt Organizations division at the time, failed to adequately manage the employees who processed the growing number of applications from Tea Party-affiliated groups and did not inform IRS leadership about the lengthy delays in processing those applications. The report cites a "dysfunctional" workplace culture in the division that put little emphasis on customer service, as well as flawed and/or mismanaged initiatives such as the Be On the Lookout (BOLO) list, which was used improperly to subject applications from Tea Party groups to heightened scrutiny.

The interpretation of the evidence, however, differed by party on the question of whether White House politics was behind the IRS leadership's actions. "This bipartisan investigation shows gross mismanagement at the highest levels of the IRS and confirms an unacceptable truth: that the IRS is prone to abuse," said committee chair Orrin Hatch (R-UT) in a statement. "The committee found evidence that the administration's political agenda guided the IRS’s actions with respect to their treatment of conservative groups. Personal politics of IRS employees, such as Lois Lerner, also impacted how the IRS conducted its business."

In the same statement, ranking member Ron Wyden (D-OR) said, "The results of this in-depth, bipartisan investigation showcase pure bureaucratic mismanagement without any evidence of political interference....Groups on both sides of the political spectrum were treated equally in their efforts to secure tax-exempt status."

The committee's recommendations for addressing mismanagement in the EO unit include publishing the procedures used to process applications from organizations engaged in political campaign activity in the application for tax exemption; requiring that decisions on tax-exempt status be made within two hundred and seventy days of filing; tracking applications to detect backlogs early in the process and empowering management to take steps to address them; and revising the Hatch Act to designate all IRS, Treasury, and Chief Counsel employees who handle exempt organization-related matters as "further restricted" — meaning they are precluded from active participation in political management or partisan campaigns, even when off-duty.

"The IRS is fully committed to making further improvements, and we want to do everything we can to help taxpayers have confidence in the fairness and integrity of the tax system," the agency said in a statement. "We have already taken many steps to make improvements in our processes and procedures, and we are pleased to have other suggestions from the committee to help us in our continuing effort."

"Finance Committee Releases Bipartisan IRS Report." Senate Committee on Finance Press Release 08/05/2015. "IRS Statement on the Senate Finance Committee Report." Internal Revenue Service Statement 08/05/2015.