The Treasury Inspector General for Tax Administration's report, released Tuesday, was an audit -- not an investigative report. It made recommendations about how tax-exempt applications should be processed in the future. It did not blame specific employees or suggest disciplinary action.
The report found the IRS office in Cincinnati, which processes all applications for tax-exempt status, singled out "Tea Party," "Patriot" and "9/12" groups based solely on their names. The applications were singled out for further review of whether they were involved in political campaign activity. The groups were applying for tax exempt status reserved for groups that conduct "social welfare" activities as the bulk of their work.
The IRS's special treatment of Tea Party applications led to long processing delays, the inspector general said. For 13 months beginning in October 2010, the Cincinnati office stopped working on potential political cases entirely.
The report said 170 groups received IRS letters asking for additional information, and in 98 of those cases the questions asked were later determined to be inappropriate or unnecessary. Those questions included the names of donors, the political affiliation of officers, and their employment outside the organization.
In a response to the draft report, the IRS defended its decision to separate out groups involved in potential political activities. "While centralization was warranted, the manner in which we initially designated cases for centralization was inappropriate," wrote Joseph H. Grant, the acting commissioner for tax exempt and government entities.
He also said determining which groups are engaged in prohibited political activity is difficult: "There are no bright line tests for what constitutes political campaign intervention ... or whether an organization is primarily engaged in social welfare activities," Grant said.
MORE: Read the full report Inspector general's report on IRS targeting
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