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IRS office at heart of scandal was understaffed backwater

Employees given heavy workload, little direction

“Foolish mistakes were made by people trying to be more efficient,” former IRS chief Steven Miller said.

J. Scott Applewhite/AP

“Foolish mistakes were made by people trying to be more efficient,” former IRS chief Steven Miller said.

NEW YORK — During the summer of 2010, the dozen or so accountants and tax agents of Group 7822 of the Internal Revenue Service office in Cincinnati got a directive from their manager.

A growing number of organizations identifying themselves as part of the ‘‘Tea Party’’ had begun applying for tax exemptions, the manager said, advising the workers to be on the lookout for them and other groups planning to get involved in elections.

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The specialists, hunched over laptops on the office’s fourth floor, rarely discussed politics, one former supervisor said. Low-level employees in what many in the IRS consider a backwater, they processed thousands of applications a year, mostly from charities like private schools or hospitals.

For months, the Tea Party cases sat on the desk of a lone specialist, who used ‘‘political-sounding’’ criteria — words like ‘‘patriots,’’ “we the people’’ — as a way to search efficiently through the flood of applications for groups that might not quality for exemptions, according to the IRS inspector general. ‘‘Triage,’’ the agency’s acting chief described it.

As President Obama denounced the IRS’s ‘‘inexcusable’’ actions last week and lawmakers of both parties lined up on Friday to accuse it of an array of misconduct, everything seemed so clear: The nation’s tax agency had deliberately targeted conservative activists, violating the public trust — and perhaps the law.

While there are still many gaps in the story of how the IRS scandal happened, interviews with current and former employees and lawyers who dealt with them, along with a review of IRS documents, paint a more muddled picture of an understaffed Cincinnati outpost alienated from the broader IRS culture and provided with little direction.

Overseen by a revolving cast of midlevel managers, stalled by miscommunication with IRS lawyers and executives in Washington, and confused about the rules they were enforcing, the Cincinnati specialists flagged virtually every application with Tea Party in its name.

But their review went beyond conservative groups: More than 400 organizations came under scrutiny, including at least two dozen liberal-leaning ones and some that were seemingly apolitical.

Over three years, as the office struggled with a growing caseload of advocacy groups seeking tax exemptions, responsibility for the cases moved from one group of specialists to another, and the Determinations Unit, which handles all nonprofit applications, was reorganized.

One batch of cases sat ignored for months. Few if any of the employees were experts on tax law, contributing to waves of questionnaires about groups’ political activity and donors that top officials acknowledge were improper.

‘‘The IRS is pretty dysfunctional to begin with, and this case brought all those dysfunctions to their worst,’’ said Paul Streckfus, a former IRS employee who runs a newsletter devoted to tax-exempt organizations. ‘‘People were coming and going, asking for advice and not getting it, and sometimes forgetting the cases existed.’’

Who gets the blame and how far it goes are questions already consuming Washington. Two top IRS officials have resigned, including the acting commissioner, Steven Miller. The Justice Department has begun an investigation into potential civil rights and criminal violations by the IRS.

This week, a House committee will seek to depose five IRS employees, including a midlevel executive in Washington and a Cincinnati specialist said to have handled the cases in the spring and summer of 2010.

‘‘I think that what happened here was that foolish mistakes were made by people trying to be more efficient in their workload selection,’’ Miller testified to a House committee Friday. While ‘‘intolerable,’’ he said, it ‘‘was not an act of partisanship.’’

Administering the nearly 4-million-word federal tax code involves so many arcane legalities, and is so fraught with potential to ignite Washington’s partisan skirmishes or infuriate taxpayers, that much of the IRS is run by lawyers.

But the Exempt Organizations Division — concentrated in Cincinnati with fewer than 200 workers, according to IRS officials — is staffed mostly with accountants, clerks, and civil servants. They review about 70,000 applications for exemptions each year.

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