IRS 'lookout' lists cast wider net than conservative groups

WASHINGTON Mon Jun 24, 2013 6:31pm EDT

Sen. Rand Paul (R-KY) addresses the crowd during a Tea Party rally to ''Audit the IRS'' in front of the U.S. Capitol in Washington June 19, 2013. REUTERS/Gary Cameron

Sen. Rand Paul (R-KY) addresses the crowd during a Tea Party rally to ''Audit the IRS'' in front of the U.S. Capitol in Washington June 19, 2013.

Credit: Reuters/Gary Cameron

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WASHINGTON (Reuters) - U.S. Internal Revenue Service agents used more than just "Tea Party" and other conservative terms to screen tax exempt applications, the newly-appointed IRS chief said on Monday after a month-long review ordered by President Barack Obama.

The IRS has scrapped use of the "be on the lookout" (BOLO) lists, newly appointed IRS chief Daniel Werfel said in a conference call with reporters. His disclosure about the breadth of the lists added a new twist to a six-week-old controversy that has embarrassed the Obama administration, forced the exit of several IRS officials and triggered probes by the FBI and Congress.

"We did determine and discover there are other BOLO lists in place," Werfel said on the call. "There was a wide ranging set of categories and cases that spanned a broad spectrum."

A top Democrat on the Ways and Means Committee, Sander Levin, said the word "progressive" was on one of the lists, which agency officials have said they used to flag applications for potential scrutiny.

The IRS has been blasted for the lists since May 10 when a senior official apologized for scrutiny of conservative groups. On May 14, the Treasury Inspector General for Tax Administration (TIGTA) issued a report on the lists.

White House press secretary Jay Carney said Obama met with Werfel on Monday, and called the report a good first step.

"As the President has made clear, the misconduct identified in last month's Inspector General report is unacceptable," Carney said in a statement.

In response to the controversy, Obama last month fired then-acting IRS Commissioner Steven Miller and ordered a 30-day review. At least three other IRS officials have been replaced or are on administrative leave.

Werfel said the IRS review found no intentional wrongdoing by employees inside or outside the agency.

Republican lawmakers, who have been suspicious that the White House played a role in the added scrutiny, said that many questions remained unanswered.

"The IRS still needs to provide clear answers ... who started this practice, why was it allowed to continue for so long, and how widespread was it?" said Dave Camp, the Republican chief of the Ways and Means Committee in the U.S. House of Representatives.

Werfel is set to testify before the committee on Thursday.

LISTS ALSO FLAGGED "PROGRESSIVE" GROUPS

The IRS has provided hundreds of pages of documents to congressional investigators. Levin released some of the lists later on Monday, including one that included "progressive."

Levin, a Democrat from Michigan, said the May 14 TIGTA report is flawed because it ignored this fact.

"The audit served as the basis and impetus for a wide range of Congressional investigations and this new information shows that the foundation of those investigations is flawed in a fundamental way," Levin said.

According to documents released by Levin, the lists also included applications from groups interested in "disputed territories in the Middle East" and Obama's controversial health care law, among other hot-button topics.

FAST TRACK

Werfel's full report also outlines a new fast-track process for tax-exempt, 501(c)(4) applications stalled for more than 120 days, allowing them to "self-certify" by pledging to not spend more than 40 percent of their activities and expenditures on political activity.

"If they are less than 40, we think they are in a good place to self-certify and move forward," Werfel said, adding that those with 40 percent to 50 percent would likely require IRS review.

Political activity must not be the primary purpose of groups earning 501(c)(4) status, according to IRS interpretation of the law.

But the murky definition of "primary" led to some of the short-cuts used by IRS agents that got them into trouble, IRS officials have said.

(Reporting by Patrick Temple-West and Kim Dixon; Editing by Leslie Gevirtz and David Gregorio)

(This story was refiled to fix typo in the second paragraph)

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