WASHINGTON — The Internal Revenue Service apologized to tea party groups and other conservative organizations Friday for what it now says were overzealous audits of their applications for tax-exempt status.
Lois Lerner, the director of the IRS division that oversees tax-exempt groups, acknowledged that the agency had singled out nonprofit applicants with the terms “tea party” or “patriots” in their titles in an effort to respond to a surge in applications for tax-exempt status between 2010 and 2012.
She insisted that the move was not driven by politics, but she added, “We made some mistakes; some people didn’t use good judgment.”
“For that we’re apologetic,” she told reporters on a conference call.
Republicans seized on the acknowledgment, demanding more information and adding it to a growing list of steps by the Obama administration that they say prove political interference, from hiding the terrorist origins of the attack in Benghazi, Libya, to the demand for disclosure of donors to conservative super PACs.
Sen. Mitch McConnell of Kentucky, the Republican leader, called for “a transparent, governmentwide review aimed at assuring the American people that these thuggish practices are not under way at the IRS or elsewhere in the administration against anyone, regardless of their political views.”
The apology and the ensuing reaction could be a turning point for the IRS, which has been caught between congressional Democrats pressing the agency to protect tax-exempt status more aggressively from overtly political groups and conservative groups claiming harassment.
Campaign finance watchdogs have said for years that 501(c)(4) tax exemptions were widely abused by conservative and liberal groups whose primary purpose is to influence elections, not to promote “social welfare,” as tax-exempt status mandates.
But Lerner said the examinations of the tea party groups were not a response to such pressure. She portrayed it more as a bureaucratic mix-up. Between 2010 and 2012, applications for 501(c)(4) tax exemptions nearly doubled, to more than 2,400. As the agency has done in the past, it centralized the processing of the surge at its Cincinnati office, where about 300 were flagged for further examination.
Staff members at that office singled out the terms “tea party” and “patriot,” she said, but not out of political bias; it was “just their shortcut.” Only about a quarter of the 300 cases flagged for scrutiny were tea party-related, she said, but she called the singling out of those groups “absolutely inappropriate and not the way we should do things.”
Lerner indicated that no disciplinary action had been taken against the low-level employees she said were responsible; when pressed, she said she could not comment on such personnel matters. She said, however, that policy changes had been made to ensure that similar episodes would not happen again. For instance, high-level IRS officials must now approve efforts to lump similar applications or audits into one centralized location for processing.
To the conservative groups and their defenders, the acknowledgment confirmed their worst accusations. In early 2012, numerous tea party-affiliated groups came forward to charge the IRS with harassment for demanding that they fill out extensive — and intrusive — questionnaires before their tax-exempt applications could be approved. The questionnaires demanded detailed membership lists, donors, contact information, logs of activities and other information about the groups’ intentions.
Many of those groups found representation with the conservative American Center for Law and Justice and its outspoken lead lawyer, Jay Sekulow, who accused the IRS of “McCarthyism” intended to stifle conservative speech.
The center called the apology “a significant victory for free speech.”
Under current law, tax-exempt 501(c)(4) organizations are supposed to be “primarily” engaged in social welfare work. In practice, groups like the conservative Crossroads GPS and the liberal Priorities USA appear to spend virtually all their efforts trying to sway elections.
Last year, Senate Democrats began pressing the IRS to target such groups more aggressively. As the tea party questionnaires surfaced, the agency released a statement that said, “To be tax-exempt as a social welfare organization described in Internal Revenue Code (IRC) section 501(c)(4), an organization must be primarily engaged in the promotion of social welfare. The promotion of social welfare does not include any unrelated business activities or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”
But pressure will now come from the other direction. Rep. Charles Boustany Jr., the chairman of the House Ways and Means Subcommittee on Oversight, demanded more information, a possible prelude to hearings. Rep. Eric Cantor of Virginia, the House majority leader, promised an investigation.