U.S. IRS budget drops as watchdog gets 2014 funding bump

WASHINGTON Fri Jan 17, 2014 5:42pm EST

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WASHINGTON Jan 17 (Reuters) - The inspector general of the U.S. Internal Revenue Service is slated to get a budget increase in 2014, but the tax-collecting agency itself will get less funding.

The Treasury Inspector General for Tax Administration (TIGTA), which oversees the IRS, will get $156 million for the year, a 2.6 percent funding increase, under a U.S. congressional budget pact passed this week.

But the IRS budget is set to decline by about 4 percent to $11.3 billion under the same agreement.

What explains the stark difference in treatment by the U.S. Congress?

To hear some Republicans tell it, the answer goes back to mid-2013, when TIGTA played a key role in investigating the agency's handling of applications for tax-exempt status submitted by certain conservative political groups.

TIGTA "helped expose wrongdoing, consequences are appropriate - budgets included," said Republican Darrell Issa, chairman of the House Oversight and Government Reform Committee, which has been investigating the IRS, said in an e-mailed statement to Reuters on Friday.

TIGTA audits IRS activities and also provides armed escorts to IRS employees when they need to face dangerous taxpayers.

The IRS's most embarrassing episode in many years began in May when a senior agency executive publicly apologized for what she described as inappropriate scrutiny of the applications from groups aligned with the Tea Party conservative movement.

Angry Republicans immediately launched investigations, as did the FBI. The chief of the IRS stepped down and several highly publicized congressional hearings followed. A frequent witness at these sessions was TIGTA chief J. Russell George, whose inquiries produced sharp criticism of the IRS.

Republicans praised George - also a Republican, appointed by former President George W. Bush - for his actions, but some Democrats blasted him after the IRS revealed that it had given extra scrutiny to some liberal-leaning groups, as well.

By September, Republican attempts to link the IRS decisions to the White House had failed and the scandal faded from view, but it left behind a fiscal impact.

During the budget-writing process, "there was an effort to punish the IRS," said a Republican tax lobbyist.

At the same time, lawmakers eager to probe the IRS thought, "let's make sure TIGTA has enough people," said the lobbyist, who spoke anonymously to describe the budget deal.

President Barack Obama was expected to sign the budget into law by Saturday. (Editing by Kevin Drawbaugh and Richard Chang)

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