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What Really Happened With the IRS’s ‘Lookout Lists’



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The IRS’s release on Monday of an 83-page report attempting to explain its targeting of tea-party groups, coupled with Ways and Means Committee ranking member Sander Levin’s release of 14 “lookout lists” issued by the agency at various points between August 2010 and April of this year, have created an enormous amount of confusion about whether tea-party groups were in fact targeted, and, if so, whether progressive and liberal groups were targeted too. 

The documents are revealing, but they have been misinterpreted by many reporters, who are using them to demonstrate that groups across the ideological spectrum were flagged by IRS screeners. That is not the case. Several outlets have reported that the terms “Occupy” and “Israel” appeared on lists. Having reviewed all the lists posted by Levin, I have yet to see those terms. (I welcome corrections.)

The treatment of progressive groups cannot be equated to that of tea-party groups. The term “progressive” was flagged in a general warning to agency screeners — one that remained on the list throughout the time in question — that the applications of progressive organizations may not merit 501(c)(3) designation, which prohibits groups from engaging in political activity. That warning, according to an IRS source familiar with the review process, did not prevent first-line screeners from recommending an application be approved.

The same lists, between August 2010 and February 2012, directed screeners by default to send tea-party applications to a special group for further review and for coordination with lawyers in Washington, D.C. “They are different,” says the agency source of the designations made for progressive and tea-party groups. 

Several of the lookout lists also indicate that the terms used to flag tea-party groups evolved. Between February 2 and February 8 of 2012, the tea-party listing was changed from “organizations involved with the Tea Party movement applying for exemption under 501(c)(3) or 501(c)(4) status” to a general listing under “Current Political Issues” that included organizations “involved in limiting/expanding government, educating on the constitution and bill of rights, social economic reform/movement.”

 

 

The Treasury Department inspector general’s report issued in mid-May took note of this change, which reportedly took place after the IRS’s former director of Exempt Organizations, Lois Lerner, had directed that any objectionable language be removed from the list, and without her approval: “The team of specialists [handling tea-party applications] subsequently changed the criteria in January 2012 without executive approval because they believed the . . . criteria were too broad.” This is puzzling, first because the BOLOs indicate that the change took place in February, and also because it appears to broaden rather than restrict the criteria.

According to the TIGTA report, another change to the list took place in May 2012. That change is reflected in the June 15, 2012, version of the list, which entirely sanitizes the way in which political issues are flagged, instructing screeners to send along for special processing applications from organizations with “indicators of significant amounts of political campaign intervention.” Nothing objectionable about that. The words “tea party” do not appear on any lookout list issued after May 2012. 

 

 

But we know their applications continued to be — and, in some cases, continue to be — caught up in the IRS bureaucracy. Could this answer the question? A month after the “political issues” listing was sanitized, in July 2012, an entirely new group of cases was added to the list: organizations formed to “pay down the national debt.” IRS screeners were told to elevate them for further scrutiny to the same group processing tea-party cases, where, the chart indicates, they were being coordinated with the same set of lawyers in Washington, D.C. Those groups remained on the IRS’s lookout list until IRS acting commissioner Werfel recently issued agency-wide orders to do away with such lists entirely. (On the most recent list released by Representative Levin, dated April 19, 2013, screeners are told to flag these organizations.)  

         

 

Whether groups devoted to paying down the debt served as a proxy for tea-party cases is unclear. What is clear is that, if anything, the lookout lists released on Monday, if anything, substantiate the claims of tea-party groups that they were subject to unequal treatment by the IRS, and that until at least May 2012 their applications for tax-exemption were treated differently from those of their political opponents.



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