Official: Cincy IRS agents used several lists to flag tax-exempt apps

WASHINGTON, June 24 (UPI) -- IRS agents in Cincinnati used several lists to flag some tax-exempt applications for further review, IRS Principle Deputy Commissioner Danny Werfel said Monday.

Werfel said an internal probe of the Internal Revenue Service found other similar lists that were in use by tax-exempt screeners when he took over as IRS chief at the end of May, USA Today reported.

The IRS previously acknowledged that the Cincinnati office, which reviews all tax-exempt applications, used a "be on the lookout" list that included words such as "tea party" or "patriot" to determine which groups' applications should be reviewed further.

"There were a series of these types of lists being used in this part of the IRS as part of their review of tax-exempt applications," Werfel said in a conference call with reporters. "We believe there continued to be inappropriate or questionable criteria on these BOLO lists."

"There was a wide-ranging set of categories and cases that spanned a broad spectrum," said Werfel, who replaced Steven Miller, who had been acting IRS commissioner until forced to resign over the controversy over IRS targeting of Tea Party and other conservative groups.

Werfel's discussions with reporters came as the IRS released an internal report on the tax agency's handling of tax-exempt applications.

The three-part report cited actions to hold management accountable and identified immediate steps to help right the process for approving tax-exempt applications, Treasury Department officials said in a release.

"It is critical that the IRS takes steps to ensure accountability, address the problems uncovered in recent weeks and improve the operations of the IRS to continue to carry out our critical mission on behalf of the public," Werfel said. "We have made a number of changes already, more are in the works and even more will develop as we move forward."

The report found significant management and judgment failures occurred, as outlined in a Treasury Inspector General for Tax Administration audit in May, that contributed to the "inappropriate treatment" of taxpayers applying for tax- exempt status.

To address this issue, new leadership was put in place across all five executive management levels involved in the chain of command tied to the Cincinnati office's activities and set up an accountability review board to provide recommendations on any additional personnel actions that should be taken.

The IRS has suspended the use of any BOLO lists in the application process for tax-exempt status, the report said.

The report also outlined a new voluntary process to help certain applicants gain fast-track approval to operate as a tax-exempt entity if they are being reviewed for advocacy questions and have been in the application backlog longer than 120 days.

The report identified several actions to ensure taxpayers that selection criteria across the agency are appropriate and that taxpayers are aware of how they can get help if they have concerns about the IRS.

"The IRS is committed to correcting its mistakes, holding people accountable, and establishing control elements that will help us mitigate the risks we face," Werfel said. "This report is a critical first step in the process of restoring trust in this critical institution. We have more work in front of us, but we believe we are on the right track to move forward."