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IRS Inspector General Faults 'Ineffective Management'


We have more details today on missteps by the Internal Revenue Service, specifically in the way the IRS processed applications for tax-exempt status by Tea Party groups and other conservative organizations. An Inspector General's report says the problems were not limited to low-level agency employees.

Last week the IRS apologized for targeting such groups for special scrutiny when they applied for tax-exempt status. NPR's Scott Horsley joins us now. Scott, what more have you learned from the Inspector General's report?

SCOTT HORSLEY, BYLINE: Well, Audie, remember, when this case burst in the public last week, Lois Lerner, the IRS official who oversees tax-exempt groups apologized for the extra attention that had been given to Tea Party and patriot-type organizations when they sought tax-exempt status. But she said that that misjudgment was the responsibility of low-level employees in the agency's Cincinnati office where those applications were handled.

The Inspector General's report, released tonight, sets its sights higher. It faults ineffective management for allowing that inappropriate scrutiny to go on for more than a year and a half. And the Inspector General also says that ineffective management allowed hundreds of these applicants to sit in limbo, in some cases for more than three years, waiting to see if they would be given tax-exempt status.

CORNISH: Right. This problem began back in 2010 when the IRS suddenly got a rush of applications from non-profit groups, so has the problem been corrected now?

HORSLEY: Not according to the Inspector General. The IG's report says, while some corrective action has been taken, the IRS needs to do more to ensure that groups seeking tax-exempt status have their applications processed in a way that's both timely and impartial. At the heart of this case is a rule that says groups get this special tax status should not be primarily engaged in political activity.

And it turns out, just looking for groups with Tea Party in the name is not a very good test for that. The report concludes, some of the groups that were targeted for special scrutiny should have been cleared quickly. And also some groups that should have gotten a closer look did not, so the Inspector General makes nine recommendations; one of those is that the Treasury Department should develop some better guidance on what is and is not allowed under this section of the tax code.

CORNISH: So what happens now?

HORSLEY: Well, we've had everyone from the president to top-ranking members of Congress calling this unacceptable and since the IG blames ineffective management, there will no doubt be calls for accountability in IRS upper management. We'll see how high that accountability goes. There's also going to be a push to be more transparent about how these applications are judged for tax-exempt status.

Maybe putting the criteria online so everyone knows what the rules are, and the IRS could have an audit of how it enforces the limits on the kind of politicking that tax-exempt groups can do.

CORNISH: That's NPR's Scott Horsley. Scott, thank you.

HORSLEY: My pleasure.

CORNISH: You're listening to ALL THINGS CONSIDERED from NPR News. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.
Audie Cornish
Over two decades of journalism, Audie Cornish has become a recognized and trusted voice on the airwaves as co-host of NPR's flagship news program, All Things Considered.
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