IRS IG Report: Targeting Conservatives Began In 2010

The targeting of conservatives by the IRS started earlier and was more extensive than the IRS acknowledged last week, according to a draft IRS inspector general report obtained by ABC News.

As we reported on "Good Morning America" this morning, the IRS began targeting "Tea Party or similar organizations" in March 2010. That was when the Cincinnati-based IRS unit responsible for overseeing the applications for tax exempt status starting using the phrases "Tea Party," "patriots" and "9/12? to search for applications warranting greater scrutiny.

During this first phase, 10 Tea Party cases were identified. By April of 2010, 18 Tea Party organizations were targeted, including three that had already been approved for tax-exempt status.

By June 2011, the unit had flagged over 100 Tea Party-related applications and the criteria used to scrutinize organizations had grown considerably, flagging not just "Tea Party" or "Patriot" in group names, but also groups that were working on issues like "government debt," "taxes" and even organizations making statements that "criticize how the country is being run."

The report, done by the Inspector General for the IRS, also shows that senior IRS officials in Washington was aware of what was going on as early as August 4, 2011 when, according to the report, the IRS chief counsel held a meeting with the IRS's Rulings and Agreements unit "so that everyone would have the latest information on the issue."

Click here to see the draft report.

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IRS commissioner was grilled on targeting conservatives earlier than first thought

IRS Commissioner Douglas Shulmanis sworn in prior to testifying before the Senate Homeland Security and Governmental …

News reports about how the Internal Revenue Service applied heavier scrutiny on conservative political organizations applying for tax-exempt status have pointed to a March 22, 2012 House Ways and Means oversight subcommittee hearing in which IRS Commissioner Douglas Shulman denied any wrongdoing. But that wasn't the first time lawmakers grilled him about the IRS' practices.

During a Financial Services subcommittee hearing earlier that month, on March 7, 2012, Georgia Republican Rep. Tom Graves questioned Shulman about similar concerns. Shulman pushed back against allegations that the IRS was targeting groups that advocated for limited government, just as he did at the subsequent Ways and Means subcommittee hearing.

At the March 7 hearing, Graves pointed to concerns from tea party groups that the IRS had unfairly scrutinized them with burdensome questions because of their political ideology. Shulman, who was appointed to the post by President George W. Bush and whose five-year term as IRS commissioner ended in Nov. 2012, told Graves that the agency had followed standard protocol and said allegations that specific groups were being targeted were "off."

"Can you help put any of those concerns to rest today that these groups are specifically being targeted because of their political activities or their opposition to the administration’s policies?" Graves asked, according a transcript of the exchange.

"It is a good question. I am glad you asked it because I think there has been lots of information flying around in the press, and I think it is important that people put it in perspective," Shulman said, and went on to explain the agency's process for examining applications non-profit status. "When we decide to do an examination, we pride ourselves on being a non-political, non-partisan agency. We are given these complex rules that have things like political activity written into the tax code that does not allow you to do certain things or else you jeopardize your tax exemption. We have set up very clear safeguards, for determinate exams.

"This notion that we are targeting anyone, I think, is off," Shulman added, "because these people are going through an application process that they voluntarily decided to do. It is not required under the law."

The IRS on Friday apologized for singling out conservative organizations that applied for tax-exempt status between 2010 and 2012. A forthcoming audit of IRS procedures during that time will show that the agency was made aware of the practices as early as 2011, according to copy of the report obtained by the Associated Press.

The White House and several lawmakers have called for an investigation for more details.

Here's the full transcript of Graves' exchange with Schulman during the March 7 Financial Services subcommittee hearing:

Mr. GRAVES: Madam Chair, Commissioner. There has been a great deal of press in terms of the likelihood of your agency structure and form and funding of 501(c)(4) in terms of welfare organizations. This media attention specifically focused on our assets, examination of what are (c)(4) groups, who also engage in political activity, should be denied a release of their taxes. Two reasons I think that your activities are of so much interest to the press, and to everyone out there, certainly to us in Congress, first because of the timing of the inquiries, which make it appear a little bit linked to other actions, and second, is the focus, since the examinations seem to be centered on groups that are considered Tea Party groups, or those that openly oppose the Administration’s policies.

Can you help put any of those concerns to rest today that these groups are specifically being targeted because of their political activities or their opposition to the Administration’s policies?

Mr. SHULMAN: It is a good question. I am glad you asked it because I think there has been lots of information flying around in the press, and I think it is important that people put it in perspective. First, is for taxpayers to operate as a 501(c)(4) organization, they need to be primarily engaged in promoting the common good or general welfare. They are allowed to be involved in political campaign activity, but it cannot be the primary activity. Second, in order to be a (c)(4) organization, you do not need to apply to the IRS. You can hold yourself out as a 501(c)(4). You then file your 990 at the end of the year, and if we see something that either has to do with political activity or something else, we have the option to do an examination, and there is not a high chance of an examination; we run samples. Third, when we decide to do an examination, we pride ourselves on being a non-political, non-partisan agency. We are given these complex rules that have things like political activity written into the tax code that does not allow you to do certain things or else you jeopardize your tax exemption. We have set up very clear safeguards, for determinate exams. Our Chief Counsel and I are the only Presidential Appointees, and I have a five-year term, so that it goes past Presidential election cycles.

There is a committee of three career employees in our tax-exempt organization, not even based in Washington, who look at any political referrals or any allegations of political activity. Those three rotate, but they make decisions about farming out examinations to the field, so there are many safeguards built in. This work has nothing to do with election cycles and politics. And so that is, generally, what happens. But the important thing about what has been in the press in the last few weeks is not all of these organizations are being examined. They voluntarily came in and said, ‘‘I would like to apply for 501(c)(4) status, so I would like to engage the IRS in what my activities are,’’ and when you apply, you send in an application. We ask sets of questions. These people had a choice to not engage the IRS, to be 501(c)(4)s, hold themselves up as such, file a 990 after a year plus of operation, and then there would have been a much less of a chance that we would have discussions with them. So this notion that we are targeting anyone, I think, is off because these people are going through an application process that they voluntarily decided to do. It is not required under the law.

Mr. GRAVES: Has the IRS recently changed its policies with respect to these organization’s applications?

Mr. SHULMAN: No. No, when you apply as a 501(c)(3) or a 501(c)(4) you send in information. If we need more information, we do a back-and-forth with you. I think there have been press reports about the questions we ask. We also send out information that say, ‘‘If you think you can provide us information in other ways, please let’s have a conversation.’’ I think we are quite reasonable around those things.

Mr. GRAVES: The questions you ask today are the same questions you asked two, three years ago?

Mr. SHULMAN: It is facts and circumstances, and up to the examiner what they think they need to ask to get the information to determine what the activities of this organization are.

Mr. GRAVES: So back to the original question. So you did not deny that are increasing in exams or looking into these organizations, in fact you said engaging in political activities is not the primary focus, but you can come good after determining that does increase the opportunity for examination, so sounds to me like you confirmed the fact that the groups identified that the primary focus here is not the common good, but it is of a political nature.

Mr. SHULMAN: No, I think you have got that wrong. I was reciting the tax law and what are the standards we use when we look at 501(c)(4) organizations. We have been clear in our exam plan that we will look at these groups. When we see 501(c)(4)s not using their status right, we will look at it. That is our job, it is written into the tax code, and when people apply, we will make sure we try to do our best to understand what is happening.

Mr. GRAVES: What is your intention when somebody is not using it correctly?

Mr. SHULMAN: People file a 990, we get referrals from organizations about what is happening, and our examiners have a variety of ways it comes to their attention. A lot of it is on the application. They say, ‘‘Here are my activities,’’ and we will go out and do examinations.

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UKIP shakes Conservatives in local vote

By Andrew Osborn

LONDON (Reuters) - The anti-European Union UK Independence Party made big gains in local elections, grabbing support from Prime Minister David Cameron's Conservatives in a vote that underlines widespread frustration with Britain's traditional parties.

Early results showed UKIP had won 42 council seats - as many as the opposition Labour party - after seven of 34 councils had been declared. Full results of the elections in England and Wales are expected later on Friday.

UKIP, which wants Britain to leave the EU and an end to "open-door immigration", also pushed Cameron's Conservatives into third place in an election for a national parliamentary seat in northern England in a humiliating blow to the premier.

The partial results underline the threat UKIP poses to Britain's three traditional parties and the Conservatives in particular ahead of a national election in 2015.

It currently has no MPs in the British parliament and its strong showing could renew pressure on Cameron's leadership from discontents within his own party who say he is too liberal.

Labour, which has controlled South Shields since 1935, held onto the national parliamentary seat that was previously occupied by David Miliband, brother of Labour leader Ed Miliband and a former foreign minister, but UKIP won 24 percent of the vote, its second highest result in such an election.

"It shows us we're a party on a trajectory and that we're going places," Paul Nuttall, UKIP's deputy leader, told BBC TV after the South Shields vote. "People are voting for us because we've won the arguments on immigration and the EU."

(Editing by Guy Faulconbridge)

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Mitt Romney tells conservatives he's sorry he's not president

By Samuel P. Jacobs

OXON HILL, Maryland (Reuters) - At a gathering for conservatives to plot their future, there was a stark reminder of the past on Friday as failed presidential candidate Mitt Romney made his first public speech since election night.

"I am sorry that I won't be your president," Romney told the audience of the Conservative Political Action Conference, "but I will be your co-worker and I will stand shoulder to shoulder beside you."

Since he accepted defeat to President Barack Obama in the early hours of the morning on November 7 in Boston, Romney has largely vanished from view. He is occasionally spotted on the ski slopes with his family, pumping gas, or shopping at Costco.

He and his wife Ann have retired to La Jolla, California, where the Romney family keeps a home, although they did give an interview to Fox News last month.

The former Massachusetts governor was the first losing presidential candidate in nearly 25 years not to be in Washington on Inauguration Day.

Looking tanned since his time off the campaign trail, Romney delivered what sounded very like his campaign speech. He told vignettes about the Americans he met as he traveled across the country on the way to his eventual defeat.

Romney said he realized the awkwardness of his position.

"As someone who just lost the last election, I'm probably not the best person to chart the course for the next election," he said.

ROCKY RELATIONSHIP

Romney has never had a simple relationship with the conservative base, which always suspected he was too moderate on healthcare, abortion and other issues.

In past years, Romney won the conference's straw poll for preferred presidential candidate, but audiences like CPAC are often filled with the sort of Republicans who were most suspicious of his conservative credentials.

Appearing at the same event last year, Romney declared himself to be "severely conservative." That strained formulation did not warm conservatives' hearts and led to ridicule from some in the media.

For many gathered at a hotel here south of Washington, the lesson from Romney's loss is a simple one: Republicans nominated a candidate who wasn't conservative enough.

On Thursday, Texas Governor Rick Perry, once Romney's rival in the presidential primary, told the crowd: "The popular media narrative is that this country has shifted away from conservative ideas, as evidence by the last two presidential elections. That's what they think, that's what they say. That might be true if Republicans had actually nominated conservative candidates in 2008 and 2012."

"The fact is the base didn't come out for him," said Bob Vander Plaats, the president of the Family Leader and a prominent social conservative in the early-voting state of Iowa. "No matter how much we did to push our base towards him that was a hard rope to push."

Romney was received warmly by the audience and the former candidate thanked them for their "earnest support."

He did have one warning for conservatives.

"We particularly need to hear from the governors of the blue and purple states," he said, advising conservatives not to give up on the states where he lost to Obama.

Romney mentioned two governors — New Jersey's Chris Christie and Virginia's Bob McDonnell — who were not invited to participate in the influential conference.

Both governors have been criticized for taking positions that part with Republican orthodoxy. But a Reuters/Ipsos online poll on Friday showed Christie as the Republican with the best rating against possible 2016 Democratic opponents Hillary Clinton and Vice President Joe Biden. [ID:nL1N0C76P2]

LARGELY IGNORED

Since his defeat, Romney has rarely been mentioned by conservatives.

Speaking a few hours before Romney, Wisconsin Representative Paul Ryan, the Republican vice presidential nominee, centered his remarks on the federal budget and made no mention of his former running mate.

In the aftermath of the last campaign, Republicans have set about refashioning their image, moving away from Romney's campaign positions.

Romney's campaign was marked by a hawkish view on immigration and was hindered by his remarks in secretly recorded video deploring nearly half of all Americans as "victims."

Now, Republican congressmen are playing leading roles in trying to reform immigration laws and leaders are encouraging reaching out to African-American and Hispanic voters, two groups that backed Obama by wide margins.

Influential Republicans like Texas Senator Ted Cruz and Louisiana Governor Bobby Jindal have called on their party to embrace the people Romney appeared to reject in his infamous "47 percent" remarks about voters who receive government aid.

Despite his downfall, Romney was undeterred.

"It's fashionable in some circles to be pessimistic about America, about conservative solutions, about the Republican Party," Romney said. "I utterly reject that pessimism."

(Editing by Alistair Bell and Claudia Parsons)

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