USA TODAY International Edition
Official: IRS also targeted liberals
“Tea Party” a term that could mean any political group, she says.
When front- line tax agents in Cincinnati used the term “tea party,” they didn’t just mean conservative groups. They meant any group — including liberal ones — believed to be engaging in political activity, an IRS official told congressional investigators.
“Since the first case that came up to Washington happened to have that name, it appeared to me that that’s what they were calling it that as a shorthand, because the first case had been that,” said Holly Paz, the Internal Revenue Service’s director of rulings and agreements, which was responsible for processing applications for tax- exempt groups. She said “tea party” could mean any political group, just as people refer to tissues as “Kleenex” or “Coke” for soda.
Since the IRS revealed last month that applications from Tea Party groups seeking tax- exempt status had been subjected to additional scrutiny that delayed their approval for two to three years, congressional investigators have been trying to determine whether liberal groups were also caught in the same process. An inspector general’s report failed to resolve that issue.
Paz, the highest- ranking IRS official with knowledge of the targeting to thus far cooperate with the congressional investigation, spoke to House Oversight Committee Chairman Darrell Issa, R- Calif., and bipartisan committee staffers on May 21. USA TODAY reviewed the full transcript of her interview.
Paz said liberal groups were mentioned by name, alongside the Tea Party, on an IRS “be on the lookout” list. Screeners in Cincinnati, where all applications for tax- exemptions are processed, used the list to identify sensitive or complex cases that should be sent to specialists.
“And I was aware of, you know, other cases at that time that were working their way through the D. C. office that involved proposed denials of exemption to liberal organizations that supported the Democratic Party. So I had no indication that we were not being balanced in what we were doing,” Paz said.
Elizabeth Hofacre, the agency’s emerging issues coordinator in Cincinnati when the targeting began, has told investigators that she kicked out any progressive groups that other agents tried to put in with the Tea Party cases. She said she understood the term to mean only conservative or Republican groups.
A USA TODAY analysis of IRS data shows that dozens of liberal groups received tax- exempt approval during this time period. The exemption is intended for groups primarily focused on social welfare, not political activity.
Paz’s lawyer, Roel Campos, confirmed Saturday that she has been placed on administrative leave from the agency, but said she has done nothing wrong.
“Holly Paz was the whistle- blower and was the first to point out the problem,” Campos said in an e- mail. He noted that Paz was on maternity leave when the targeting first started in early 2010, and again when the IRS sent letters with invasive questions to Tea Party groups. Both times, Paz discovered problems upon her return and brought them to the attention of her boss, Lois Lerner, Campos said.
Lerner, the director of exempt organizations, refused to testify but said she has done nothing wrong.
In July 2011, Lerner convened a meeting in Washington — with Cincinnati managers attending by phone — to discuss the cases, Paz said. It was clear that screeners were using key words like “Tea Party,” “Patriots” or “9/ 12” to identify cases for greater scrutiny.
Lerner “directed that they cease using the filters and labels that they were using before and that they would use this new phraseology about organizations with political lobbying or advocacy,” Paz said.
In January 2012, IRS managers changed the criteria again to “political action type organizations involved in limiting/ expanding government, educating on the Constitution and Bill of Rights, social economic reform/ movement.”
It’s unclear how that change occurred. “Because it was a very informal process and sort of a group decision, it wasn’t really clear who was responsible,” Paz said.
Paz said she participated in a review that found Cincinnati employees “didn’t fully have a grasp on what sort of activity was permissible” by social welfare groups.