Tax agency faulted over spoof Star Trek video, spending

(Reuters) - A U.S. Government watchdog on Tuesday pointed to a spoof Star Trek video and use of luxury hotel rooms as examples of lavish spending by the Internal Revenue Service, adding to questions over the taxation agency's credibility after earlier accusations that it unfairly targeted conservative groups for scrutiny.

In a report that the IRS has already acknowledged as pointing out "inappropriate" spending, the Treasury Inspector General for Tax Administration faulted the agency specifically for a 2010 conference in Anaheim, California, that cost $4.1 million.

Some of the funding for the conference came from unused funds originally intended for hiring enforcement employees, the head of the watchdog agency, J. Russell George, said in the report.

"Certain of the IRS's expenses associated with the Anaheim conference do not appear to be a good use of taxpayer funds," George said.

The IRS said in a statement that its spending for travel and training was down 80 percent since 2010 and there had been no conferences like the one in Anaheim for three years.

"Taxpayers should take comfort in knowing that these kinds of expenses are no longer permitted and such a conference would not take place today," it said.

The IRS said costs for large IRS conferences fell to $4.9 million in fiscal year 2012, from $37.6 million in 2010.

In the last month the IRS has had its top executive ousted by President Barack Obama and seen its reputation damaged after allegations that it targeted conservative political activists' applications for tax-exempt status for extra scrutiny.

On Tuesday, conservative political activists told a House of Representatives committee in emotional testimony that their groups were targeted by the IRS over the years.

Excerpts of the inspector general's report had been leaked in recent days. It was due to be discussed at a congressional hearing on Thursday.

The report found that the IRS spent $50,187 on videos for the Anaheim conference, including a Star Trek parody that featured IRS executives portraying characters from the television show in a tax-themed skit.

The IRS had said the purpose of the video was to highlight issues facing the Small Business/Self Employed Division of the agency, according to the report.

The report said high-end hotel suites were occupied by IRS executives at the conference. The division's commissioner, for example, stayed five nights in a suite with a private bedroom, living area, wet bar, and billiard table, it said.

IRS Acting Commissioner Danny Werfel told a congressional panel on Monday he would clean up the agency. At least three congressional committees are investigating the agency, demanding reams of emails, correspondence and other documents.

(Editing by Kevin Drawbaugh and David Storey)