IRS Chief: No Evidence Of 'Intentional Wrongdoing' So Far 
 
 i i Win McNamee / Getty Images Win McNamee / Getty Images 
 
 That "be on the lookout list" used to flag Tea Party groups for extra scrutiny of their tax-exemption applications? 
 
 It turns out it wasn't the only one the Internal Revenue Service had been using. 
 
 There were also other lists, covering a "broad spectrum" of categories and cases, according to a preliminary IRS report released Monday. 
 
 "Once we came to that conclusion, we took immediate action to suspend the use of these lists in the Exempt Organizations unit within IRS," said Danny Werfel, the new acting chief of the IRS, in a conference call with reporters. 
 
 Werfel said he hopes to be able to release more information about the sorts of other groups that were being flagged in the coming days, but that he could not until the documents were scrubbed of details that could identify groups by name, which privacy laws prohibit. 
 
 Werfel also said that his review so far hasn't found any evidence of unintentional wrongdoing by any IRS employee, nor any influence by entities outside the IRS in the actions of the exempt-organizations office in Cincinnati. "I'm not providing a definitive conclusion that no intentional wrongdoing occurred. What I'm suggesting is that based on the ongoing review to date, no evidence has yet surfaced," he said. 
 
 Werfel replaced former acting IRS Commissioner Steven Miller last month after revelations that the IRS had pulled aside groups with "Tea Party," "patriot" or "9/12" in their names for extra scrutiny. That, combined with bureaucratic stumbles, forced some groups to wait years to get an answer on their applications. Nonprofits often seek IRS approval to make it easier to solicit donations as well as guarantee those donors that their names will be kept secret from the public. 
 
 In Monday's half-hour call, Werfel said the manager at every level in the organizational chart having to do with the exempt organizations had been replaced. "We believe that these individuals should no longer hold a position of public trust within IRS, and therefore we've replaced the leadership in those areas," he said. 
 
 For groups still awaiting an answer on their applications as 501(c)(4) "social welfare" organizations, Werfel said the IRS has created a new, fast-track process. This allows those waiting more than 120 days to fill out a form on which they promise not to engage primarily in politics and then start operating as a tax-exempt group. 
 
 Groups set up as social welfare organizations have always had that option available, rather than seeking formal approval from the IRS, Werfel pointed out. (Charities seeking 501(c)(3) status, which, unlike social welfare groups, can offer donors a deduction on their federal taxes, are required to seek pre-approval from the IRS.) If a subsequent audit shows too much politics or other legally impermissible activity, the IRS could then revoke that status — just as it can now. 
 
 Werfel is the sole witness scheduled to appear before the House Ways and Means Committee hearing on the issue on Thursday. Both the House and the Senate have ongoing inquiries into the matter. 
 
 To date, leaked transcripts from House interviews of IRS Cincinnati employees portray an environment of unclear guidelines and uneven management, rather than a concerted, politically motivated effort. 
 
 Werfel said that he hopes a planned Treasury Department analysis of how tax-exempt organizations are reviewed will help create standardized guidelines in the future. "Clearly this issue associated with some ambiguity in the regulation that governs this area contributed in part to these problems," he said. 
 
 Werfel's assurances Monday, though, did not satisfy the IRS's leading inquisitor in the House, California Republican Darrell Issa, chairman of the House Oversight and Governmental Reform Committee. "As investigations by Congress and the Justice Department are still ongoing, Mr. Werfel's assertion that he has found no evidence that anyone at IRS intentionally did anything wrong can only be called premature," Issa said in a statement Monday. "Only through continued cooperation with ongoing Congressional and Justice Department inquiries can IRS make a meaningful claim that it is trying to regain the trust of the American people." ||||| Daniel "Danny" Werfel, acting commissioner of the Internal Revenue Service (IRS), speaks during a House Appropriations subcommittee hearing in Washington, D.C., on June 3, 2013. 
 
 Daniel "Danny" Werfel, acting commissioner of the Internal Revenue Service (IRS), speaks during a House Appropriations subcommittee hearing in Washington, D.C., on June 3, 2013. Close 
 
 The Internal Revenue Service used terms such as “progressive” and evidence of advocacy on Israel to flag groups’ tax-exempt applications for extra attention, complicating what had been seen as targeted scrutiny for small-government groups. 
 
 The IRS’s disclosure yesterday of 15 redacted versions of its Be On the Lookout document, or BOLO, bolstered its contention that delays experienced by Tea Party groups applying for nonprofit status were a symptom of mismanagement and not politically motivated action. 
 
 “The BOLO list in my mind loses this sinister nature,” said Jeff Trinca, who was chief of staff to the IRS restructuring commission in the 1990s and is now a lobbyist at Van Scoyoc Associates in Washington. “And it becomes another way of creating criteria lists to try to deal with the huge volumes that come through the agency.” 
 
 The disclosure raised a new set of questions about the IRS, which acknowledged last month that it had given extra attention to Tea Party organizations and other advocates for small government. The documents don’t explain how employees used the BOLO or which groups, if any, received extra scrutiny because of it. 
 
 Representative Sander Levin of Michigan, the top Democrat on the tax-writing House Ways and Means Committee, said the IRS inspector general, J. Russell George, should explain why his May 14 report didn’t include this information. 
 
 Photographer: Andrew Harrer/Bloomberg The Internal Revenue Service revealed May 10 that it had given extra attention to Tea Party groups and other small-government advocates. Close The Internal Revenue Service revealed May 10 that it had given extra attention to Tea... Read More Close Open Photographer: Andrew Harrer/Bloomberg The Internal Revenue Service revealed May 10 that it had given extra attention to Tea Party groups and other small-government advocates. 
 
 ‘Flawed’ Probes 
 
 “The audit served as the basis and impetus for a wide range of congressional investigations and this new information shows that the foundation of those investigations is flawed in a fundamental way,” Levin said in a statement. 
 
 Since the IRS apologized for scrutiny of Republican-leaning groups on May 10, six congressional committees have opened inquiries and the Justice Department has begun a criminal probe. President Barack Obama replaced the acting IRS commissioner and Danny Werfel, the agency’s interim leader, has replaced three others with direct responsibility for tax-exempt groups. 
 
 The documents don’t show that Tea Party groups and progressives were treated equally. In fact, they suggest that the entries on the BOLO derived from separate efforts to police applications for tax-exempt status for political activity. 
 
 Law Enforcement 
 
 The IRS is charged with enforcing tax law, which forbids political activity for 501(c)(3) charities that can receive tax-deductible contributions and limits campaign involvement for 501(c)4 social welfare groups that don’t have to disclose their donors. 
 
 The term “progressive” appeared on a November 2010 document released by House Ways and Means Committee Democrats. It appears to refer to applications for 501(c)(3) status, not the 501(c)(4) status sought by many Tea Party groups. 
 
 Employees were told to watch for applications that were “partisan and appear as anti-Republican.” On the document released by Democrats, the reference to progressives is in a different section than the Tea Party groups, and it doesn’t direct employees to send the cases to a special unit, unlike the Tea Party cases. 
 
 Even on the first BOLO document released, from August 2010, progressives are listed under the label of TAG Historical, short for Touch-and-Go Historical, or issues that had been raised in the past. Tea Party is listed under Emerging Issues. 
 
 18-Page Surveys 
 
 The disclosure of the scrutiny of groups working on Israel-related issues confirms what organizations had suspected. 
 
 Ameinu, which on its website calls itself a “community of progressive Jews,” received its 501(c)(3) tax-exempt status on May 28 -- five years after applying. 
 
 IRS agents peppered the group with 18-page surveys and lingered for months without follow-up, Hiam Simon, national director of Ameinu, said in a telephone interview. He said he was looking at a 4-inch thick folder of Ameinu’s communications with the IRS. 
 
 “I think they were painting with a broad brush, with worries about Middle East ties to terrorism,” he said of the IRS. “I don’t think it was caused by malice. Ignorance is too strong a word, too. They simply weren’t nuanced enough or careful enough.” 
 
 Committee hearings, an inspector general’s report and congressional investigators’ interviews with IRS employees have shown the scrutiny of Tea Party groups started with a single case in February 2010 that an employee flagged to his manager. 
 
 Werfel said he was suspending the use of BOLOs, which were employed as recently as last month. The final BOLO released, from April, doesn’t include Tea Party or progressive groups specifically, just general language about political involvement. 
 
 Redacted Information 
 
 The IRS took several weeks to release yesterday’s documents, because it had to scrub the be-on-the-lookout lists of taxpayer-specific information before making them public. The BOLO mostly consists of redacted information. 
 
 The prospect that Democratic-friendly groups experienced extra scrutiny wasn’t entirely new. 
 
 Eight groups with “progress” or “progressive” in their names had appeared on a publicly available list of groups whose applications had been delayed and later approved by the IRS. That list included many small-government groups. 
 
 Progress Texas, an Austin-based group that typically backs Democratic positions, received an IRS letter with essentially the same questions the agency had asked of some Republican-leaning groups. As with Tea Party groups, the IRS wanted promotional materials, backgrounds of officers, meeting minutes and specifics about activities the organization said it would conduct. 
 
 Time Consuming 
 
 Matt Glazer, former executive director, told Bloomberg News in May that the questionnaire was time consuming, though not intrusive. His group was approved. 
 
 Still, Steven Miller, the former acting IRS commissioner, told the Ways and Means Committee May 17 that progressive groups weren’t targeted. 
 
 Congressional Republicans said the IRS’s actions against small-government and Republican-leaning groups weren’t limited to extra scrutiny of tax-exempt applications. 
 
 House committees are also probing gift-tax audits of donors to a group that backed the war in Iraq, disclosures of the confidential information of several groups and IRS requests that anti-abortion groups agree not to protest at Planned Parenthood as a condition of receiving their tax-exempt status. 
 
 Flagging Groups 
 
 “It is one thing to flag a group,” Sarah Swinehart, a spokeswoman for Ways and Means Chairman Dave Camp, said in an e-mailed statement. “It is quite another to repeatedly target and abuse conservative groups.” 
 
 Werfel will testify at a Ways and Means hearing June 27. 
 
 J. Russell George, the inspector general whose report revealed the Tea Party scrutiny, was asked at a May 22 hearing whether Democratic-leaning groups were targeted. 
 
 At first, he said he couldn’t give a definitive answer when questioned by Representative Darrell Issa, a California Republican and chairman of the House Oversight and Government Reform Committee. 
 
 Then, George said that under “the purposes of the audit that we conducted, which was to determine whether they were looked for in the context of political campaign intervention, there were no others.” 
 
 The inspector general’s office said in a statement that the initial review had been limited to language designed to flag political involvement. 
 
 New Review 
 
 “Although these criteria were not used to select cases for review of potential political campaign intervention, we are reviewing whether these criteria led to expanded scrutiny for other reasons,” according to the statement. 
 
 Dianne Belsom, president of the Laurens County Tea Party in South Carolina, told lawmakers earlier this month her group had been waiting almost three years to hear from the IRS on an application for tax-exempt status after answering repeated and extensive questionnaires. 
 
 “The IRS needs to be fully investigated and held accountable for its incompetence, harassment and targeting of conservative groups,” Belsom said at a June 4 Ways and Means Committee hearing. 
 
 The BOLO also has terms related to Israel, looking for applications that “deal with disputed territories in the Middle East” and “may be inflammatory.” 
 
 Z Street, which describes itself as a Zionist education organization, sued the IRS in federal court over its treatment, which it called discriminatory. 
 
 “It’s great that they’re finally acknowledging what we’ve known all along,” co-founder Lori Lowenthal Marcus said in a telephone interview. 
 
 IRS Backlog 
 
 Marcus said the IRS told Z Street it “froze” their application for 501(c)(3) tax-exempt status when it filed suit. The case is scheduled for hearings next month in U.S. District Court for the District of Columbia. 
 
 The documents also show that the tax-exempt office was handling issues that had nothing to do with political campaigns or partisanship, such as cases involving medical marijuana, “potentially abusive” pain management clinics and life insurance policies owned by charities. 
 
 Also yesterday, Werfel released a report outlining his plans for restoring trust in the agency and reducing the backlog of applications for tax-exempt status. 
 
 ‘Fairness,’ Neutrality 
 
 Groups stuck in the backlog will have a chance for approval of their applications within two weeks if they promise to limit political spending. The IRS will send letters to about 80 groups. 
 
 “The administration is committed to making sure the IRS continues to reform itself with the goals of providing the highest quality service and reflecting the principles of fairness and neutrality,” Jay Carney, the White House press secretary, said in a statement. 
 
 Obama was briefed yesterday by Werfel and Treasury Secretary Jacob J. Lew. 
 
 Werfel said his review of the agency’s actions hasn’t found evidence of intentional wrongdoing or involvement from outside the IRS. That’s consistent with the findings so far of congressional investigators. 
 
 “They just let it fester and then they let some folks who didn’t really have the guidance they need go crazy with these questions,” said Trinca, a former Democratic congressional staff member. “The whole thing was just an absolute debacle.” 
 
 To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Julie Bykowicz in Washington at jbykowicz@bloomberg.net 
 
 To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net
– Tea Party groups weren't the only ones targeted by the IRS. Documents obtained by Bloomberg reveal the agency also used terms such as "Israel," "progressive," and "occupy" when applying extra scrutiny to groups seeking tax-exempt status. New agency chief Danny Werfel earlier confirmed that there were more "be on the lookout" lists than just the already known Tea Party-related ones—and that some lists were still being used as recently as last month— but did not disclose what words featured on those lists, the AP reports. "There was a wide-ranging set of categories and cases that spanned a broad spectrum" on the lists, Werfel says. He says he will officially release more information soon, once the lists have been censored to protect groups' privacy, NPR reports. However, Werfel still maintains that no evidence of "intentional wrongdoing" has been found. "I'm not providing a definitive conclusion that no intentional wrongdoing occurred," he clarified. "What I'm suggesting is that based on the ongoing review to date, no evidence has yet surfaced."