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Treasury OIG Report on IRS Targeting Tea Party Groups

Treasury OIG Report on IRS Targeting Tea Party Groups

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Published by Mike Riggs
Inappropriate Criteria Were Used to
Identify Tax-Exempt Applications for Review.
Inappropriate Criteria Were Used to
Identify Tax-Exempt Applications for Review.

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Published by: Mike Riggs on May 14, 2013
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07/10/2013

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TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION 
Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review 
May 14, 2013
Reference Number: 2013-10-053
 This report has cleared the Treasury Inspector General for Tax Administration disclosure review processand information determined to be restricted from public release has been redacted from this document.
Redaction Legend
:1 =Tax Return/Return Information
Phone Number | 202-622-6500 E-mail Address TIGTACommunications@tigta.treas.gov  Website | http://www.treasury.gov/tigt
 
HIGHLIGHTS 
 INAPPROPRIATE CRITERIA WERE
intervention was started soon after receipt, no
USED TO IDENTIFY TAX-EXEMPT
work was completed on the majority of these
 APPLICATIONS FOR REVIEW
 
applications for 13 months. This was due todelays in receiving assistance from the Exempt
Highlights
 
Organizations function Headquarters office.For the 296 total political campaign interventionapplications TIGTA reviewed as of December 17, 2012, 108 had been approved,
Final Report issued on May 14, 2013
 
28 were withdrawn by the applicant, none hadbeen denied, and 160 were open from 206 toHighlights of Reference Number: 2013-10-0531,138 calendar days (some for more thanto the Internal Revenue Service Actingthree years and crossing two election cycles).Commissioner, Tax Exempt and GovernmentEntities Division.More than 20 months after the initial case wasidentified, processing the cases began in
IMPACT ON TAXPAYERS
earnest. Many organizations received requestsEarly in Calendar Year 2010, the IRS beganfor additional information from the IRS thatusing inappropriate criteria to identifyincluded unnecessary, burdensome questionsorganizations applying for tax-exempt status to(
e.g.
, lists of past and future donors). The IRSreview for indications of significant politicallater informed some organizations that they didcampaign intervention. Although the IRS hasnot need to provide previously requestedtaken some action, it will need to do more soinformation. IRS officials stated that any donorthat the public has reasonable assurance thatinformation received in response to a requestapplications are processed withoutfrom its Determinations Unit was later destroyed.unreasonable delay in a fair and impartial
WHAT TIGTA RECOMMENDED
manner in the future. TIGTA recommended that the IRS finalize the
WHY TIGTA DID THE AUDIT
interim actions taken, better document the TIGTA initiated this audit based on concernsreasons why applications potentially involvingexpressed by members of Congress. Thepolitical campaign intervention are chosen foroverall objective of this audit was to determinereview, develop a process to track requests forwhether allegations were founded that the IRS:assistance, finalize and publish guidance,1) targeted specific groups applying fordevelop and provide training to employeestax-exempt status, 2) delayed processing of before each election cycle, expeditiously resolvetargeted groups’ applications, and 3) requestedremaining political campaign intervention casesunnecessary information from targeted groups.(some of which have been in process forthree years), and request that social welfare
WHAT TIGTA FOUND
activity guidance be developed by theDepartment of the Treasury. The IRS used inappropriate criteria thatidentified for review Tea Party and otherIn their response to the report, IRS officialsorganizations applying for tax-exempt statusagreed with seven of our nine recommendationsbased upon their
 
names or policy positionsand proposed alternative corrective actions forinstead of indications of potential politicaltwo of our recommendations. TIGTA does notcampaign intervention. Ineffective management:agree that the alternative corrective actions will1) allowed inappropriate criteria to be developedaccomplish the intent of the recommendationsand stay in place for more than 18 months,and continues to believe that the IRS should2) resulted in substantial delays in processingbetter document the reasons why applicationscertain applications, and 3) allowed unnecessarypotentially involving political campaigninformation requests to be issued.intervention are chosen for review and finalizeand publish guidance.Although the processing of some applicationswith potential significant political campaign
 
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
 
TREASURY INSPECTOR GENERALFOR TAX ADMINISTRATION
May 14, 2013
MEMORANDUM FOR
 
ACTING COMMISSIONER, TAX EXEMPT AND GOVERNMENTENTITIES DIVISION
FROM:
 
Michael E. McKenneyActing Deputy Inspector General for Audit
SUBJECT:
 
Final Audit Report – Inappropriate Criteria Were Used to IdentifyTax-Exempt Applications for Review (Audit # 201210022)This report presents the results of our review to determine whether allegations were founded thatthe Internal Revenue Service (IRS): 1) targeted specific groups applying for tax-exempt status,2) delayed processing of targeted groups’ applications for tax-exempt status, and 3) requested unnecessary information from targeted groups. This audit was initiated based on concernsexpressed by members of Congress and reported in the media regarding the IRS’s treatment of organizations applying for tax-exempt status. This review is included in our Fiscal Year 2013Annual Audit Plan and addresses the major management challenge of Tax ComplianceInitiatives.We would like to clarify a few issues based on the IRS response to our report. The responsestates that our report views approvals as evidence that the Exempt Organizations function should not have looked closely at those applications. We disagree with this statement. Our objectionwas to the criteria used to identify these applications for review. We believe all applicationsshould be reviewed prior to approval to determine whether tax-exempt status should be granted.The IRS’s response also states that issues discussed in the report have been resolved. Wedisagree with this statement as well. Nine recommendations were made to correct concerns weraised in the report, and corrective actions have not been fully implemented. Further, as our report notes, a substantial number of applications have been under review, some for more thanthree years and through two election cycles, and remain open. Until these cases are closed by theIRS and our recommendations are fully implemented, we do not consider the concerns in thisreport to be resolved. Management’s complete response to the draft report is included asAppendix VIII.

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