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Report blames IRS managers for lax oversight

White House faces scrutiny over awareness

Attorney General Eric Holder said that he had ordered an investigation into whether IRS officials broke any laws.

Jim Lo Scalzo/EPA

Attorney General Eric Holder said that he had ordered an investigation into whether IRS officials broke any laws.

WASHINGTON — An inspector general’s report issued Tuesday blamed ineffective Internal Revenue Service management in the failure to stop employees from singling out conservative groups for added scrutiny. Congressional aides, meanwhile, sought to determine whether the Obama administration’s knowledge of the effort extended beyond the IRS.

House and Senate aides said they were focusing on an Aug. 4, 2011, meeting in which the IRS’s chief counsel appears to have conferred with agency officials to discuss the activities of a team in the Cincinnati field office that had been subjecting applications for tax-exempt status from Tea Party and other conservative groups to a greater degree of review than those from other organizations.

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Under IRS rules, the agency’s chief counsel, William J. Wilkins, reports to the Treasury Department’s general counsel, and investigators want to determine if Wilkins took the issue out of the independent IRS to other parts of the Obama administration.

If the inquiry determines any new link to the administration, it could change the political equation for the White House, which has stressed the IRS’s independence even as President Obama has castigated the agency over the allegations of political bias. A bipartisan investigation by the Senate Finance Committee built steam Tuesday, and the House Ways and Means Committee prepared for the first hearing on the matter Friday with an extensive request for documents from the IRS. The House Oversight Committee formally accused one IRS official of misleading lawmakers on four ­occasions.

‘‘What we don’t know at this point is whether it jumped the fence from the IRS to the White House,’’ said Senator Mitch ­McConnell of Kentucky, the Republican leader. ‘‘But we do know this: We can’t count on the administration to be forthcoming about the details of this scandal, because so far they’ve been anything but.’’

Late Tuesday, Obama said in a statement that ‘‘the report’s findings are intolerable and inexcusable.’’

‘‘The federal government must conduct itself in a way that’s worthy of the public’s trust, and that’s especially true for the IRS,’’ he said, adding, ‘‘This report shows that some of its employees failed that test.’’

He said he was asking Jacob J. Lew, the Treasury secretary, ‘‘to hold those responsible for these failures accountable, and to make sure that each of the inspector general’s recommendations are implemented quickly.’’

The administration tried to stay ahead of the furor with an announcement by Attorney General Eric H. Holder Jr. that he had ordered an investigation into whether IRS officials broke any criminal laws.

‘‘The FBI is coordinating with the Justice Department to see if any laws were broken in connection with those matters related to the IRS,’’ Holder said. ‘‘Those were, I think, as everyone can agree, if not criminal, they were certainly outrageous and unacceptable, but we are examining the facts to see if there were criminal violations.’’

But a matter portrayed by the IRS on Friday as a little-known operation conducted in Cincinnati, largely out of the sight of Washington officials, continued to sprawl. The report by the Treasury inspector general for tax administration offered new details on the scope of the IRS targeting effort.

Mismanagement at the agency allowed ‘‘inappropriate criteria’’ for the singling out of conservative groups to be developed and stay in place for more than 18 months, starting in 2010, the report said. That resulted in ‘‘substantial delays’’ for groups applying for tax-exempt status, either as 501(c)(4) or 501(c)(3) organizations, and it allowed unnecessary and intrusive information like donor lists to be gathered. IRS officials told the inspector general that all donor information received was later destroyed.

Of the 296 applications the inspector general reviewed, 108 were approved, 28 were withdrawn by the applicants, and 160 were still open, some pending for up to 1,138 days.

In a statement Tuesday night, the IRS acknowledged that ‘‘inappropriate shortcuts were used to determine which cases may be engaging in political activities.’’ But it said the agency had a responsibility to make sure that such organizations did not engage in impermissible political actions, and that not just conservative groups were singled out. It also said that ‘‘there was no intent to hide this issue,’’ but that the agency had been awaiting the inspector general’s report.

The report said that senior IRS officials told inspectors that no individual or group outside the agency influenced the criteria used to single out Tea Party or other conservative groups.

But congressional aides looking into the matter are not convinced.

It is clear that the IRS headquarters in Washington was more involved in the effort than initially portrayed. A ‘‘sensitive case report’’ on Tea Party targeting was sent from Cincinnati to Lois Lerner, the head of the IRS’ division for tax-exempt groups, and another Washington official on April 19, 2010, more than a year before previously thought.

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