IRS chief John Koskinen testifies before Congress in July. Some Republicans said the report confirmed their views that Koskinen should resign.

IRS chief John Koskinen testifies before Congress in July. Some Republicans said the report confirmed their views that Koskinen should resign. Andrew Harnik/AP

Senate Panel Blasts IRS More for Mismanagement Than Political Bias

Bipartisan report on handling of tax-exempt groups faults managers’ inattention.

In the first bipartisan congressional report on the two-year-old controversy over politicization of the Internal Revenue Service, a Senate panel found IRS management “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.”

But the Senate Finance Committee report released Wednesday based on extensive interviews with IRS staff and reviews of emails did not find evidence of political direction from the White House or other top administration officials, as has been suggested by many congressional Republicans.

The investigation of processing delays, paperwork burdens and “be on the lookout” lists based on names of nonprofits applying for tax-exempt status “found that from 2010 to 2013, … IRS managers either failed in their responsibility to keep informed about the very existence of the applications, or failed to recognize the sensitivity of these applications. In the case of the former, IRS managers forfeited the opportunity to shape the IRS’s response to the influx of political advocacy applications by simply failing to read reports informing them of the existence of those applications,” the report said. “In the case of the latter, IRS managers did not take appropriate steps to ensure that the applications were processed expeditiously and accurately.”

Finance Committee Chairman Orrin Hatch, R-Utah, saw more politics at work at the agency than did his Democratic counterpart. “The committee found evidence that the administration’s political agenda guided the IRS’s actions with respect to their treatment of conservative groups,” Hatch said in a statement. “Personal politics of IRS employees, such as Lois Lerner, also impacted how the IRS conducted its business. American taxpayers should expect more from the IRS and deserve an IRS that lives up to its mission statement of administering the tax laws fairly and impartially – regardless of political affiliation.”

Ranking member Sen. Ron Wyden, D-Ore., 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.  Now is the time to pursue bipartisan staff recommendations to ensure this doesn’t happen again.”

The report faults Lerner for failing to keep her superiors informed of the Exempt Organization unit’s struggles with criteria for approving applications from groups with apparent political goals. It counted “seven poorly planned and badly executed initiatives aimed at bringing the growing number of applications from Tea Party and other groups to decision. Every one of those initiatives ended in predictable failure and every failure resulted in months and years of delay.”

The report accuses the IRS of impeding its investigation by making what proved to be inaccurate statements on the search for missing emails and backup data.

Hatch and Wyden disagreed on the question of whether progressive groups were treated as badly as conservative ones. The report “indicates that 'Progressive' was on the BOLO list, along with 'ACORN' and other terms like ‘occupy’ that were considered to indicate progressive or Democratic-leaning political engagement,” Wyden said on the Senate floor. “The report also shows that IRS also conducted workshops directing employees to look for terms like ‘Progressive’ and ‘Emerge’ as well as ‘Tea Party.’ Again, these groups suffered from the same sorts of delays and intrusive questions that Tea Party and other conservative groups [did].”

Hatch replied that the progressive groups investigated had “participated in activities that legitimately called their tax-exempt status into question. The IRS did not target these groups based on their names or ideologies. Instead, it evaluated their actual activities that were known to the IRS -- activities that, in many cases, properly resulted in denial or revocation of tax-exempt status.”

In 10 key findings and multiple recommendations, the report proposed more frequent reporting on progress in application processing as well as improving responses to Freedom of Information Act requests by having more than one employee make determinations. And it proposed that the Hatch Act be revised to designate all IRS, Treasury and Chief Counsel employees who handle exempt organization matters as “further restricted,” or precluded from active participation in political management or partisan campaigns, even while off-duty. 

The tax agency, having implemented reforms recommended in May 2013 by the Treasury Inspector General for Tax Administration, is credited with some progress in accelerating applications processing using a categorization method called bucketing.  “While not entirely free from problems, the ‘bucketing’ exercise represented the first IRS initiative in two and a half years that actually succeeded in bringing political advocacy applications to closure. Yet, as of March 2014, more than four years since the first political advocacy applications were filed, 22 percent of those applications were still unresolved. While the IRS succeeded in closing most of the applications in the ensuing year, 10 organizations were still awaiting a determination as of April 2015.”

Wyden stressed that Commissioner John Koskinen, whose firing House Republicans demanded last week, was not at the IRS when most of the problems arose, but he did criticize the commissioner for delayed notification of Congress that important emails were missing.

Republicans found confirmation of their views on Koskinen in the report. “This bipartisan report is a helpful addition to our own ongoing investigation,” said House Oversight and Government Reform Committee Chairman Jason Chaffetz, R-Utah. “It supports the fact that Commissioner Koskinen provided false statements to Congress. Further, when given the opportunity to clarify the record, Mr. Koskinen did not.”

The IRS released a statement saying, “We appreciate the work of the Senate Finance Committee on this extensive report, and we look forward to reviewing it along with the recommendations. 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. 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.”

In a sign the controversy will continue, House Oversight ranking member Rep. Elijah Cummings, D-Md., claimed vindication by the Senate report. "After more than $20 million, two inspector general reports, two years of congressional investigations, and now a bipartisan Senate report, the fundamental facts remain the same:  while there was certainly mismanagement at the IRS, there is still no evidence that the White House ever directed the IRS to target conservative groups, as Republicans have claimed for years,” he said in a Thursday statement. "This bipartisan Senate report also confirms what Democrats have long stated: that the inspector general’s May 2013 report left out critical information by failing to include evidence that progressive groups were singled out for scrutiny in the same manner as conservative groups."

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