May 10, 2013 -- Conservative groups have rejected an Internal Revenue Service apology for unjustifiably scrutinizing tax-exempt conservative groups during the 2012 election cycle. The IRS apology has seemingly validated conservatives' fears of politically motivated regulation.
House Republican leaders, meanwhile, have vowed to investigate.
Lois Lerner, the director the IRS unit that oversees tax-exempt organizations, said that organizations had been given additional scrutiny if their applications included the words "Tea Party" or "patriot." The practice originated with "low-level" employees in Cincinnati, according to an Associated Press report.
In a press conference on Friday, Lerner called the actions of these employees "absolutely inappropriate."
"They didn't do it because of any political bias," Lerner said, adding that singling out groups with specific names was an ill-thought-out organizational "shortcut."
"It was an error in judgment and it wasn't appropriate but that's what they did," she said.
"We've now corrected these issues, and we don't expect that any of these will be repeated going forward."
Despite the apology, conservative groups are now seizing on the news, which they say proves their long-standing complaints of mistreatment by the IRS.
"President Obama must also apologize for his administration ignoring repeated complaints by these broad grassroots organizations of harassment by the IRS in 2012, and make concrete and transparent steps today to ensure this never happens again," said Jenny Beth Martin, national coordinator for Tea Party Patriots.
Tea Party Express founder Sal Russo told ABC News that his group, formed as a PAC, never heard from the IRS but did hear from smaller Tea Party groups that complained of government scrutiny.
"On our bus tours the local Tea Party groups were all screaming about it. It was so pronounced around the country that it was obvious that the tea party groups were being targeted. Not unlike any bureaucracy, the first reaction is to deny everything even when they don't know the facts," Russo told ABC News, saying he is "glad they finally acknowledged what was obvious to everyone else."
"We appreciate that the IRS acknowledged and apologized, but the real question is, how do we make sure that this never happens again? All Americans, regardless of their philosophical beliefs, should be treated equally under the laws of the land," said Jackie Bodnar, spokeswoman for the tax-exempt tea-party group FreedomWorks.
Republican members of Congress were also quick to register their displeasure, and House leaders have promised to investigate.
House Oversight and Government Reform Committee Chairman Darrell Issa, who has dogged the Obama administration from his position on the House's top investigative panel, promised to delve into the matter.
"The fact that Americans were targeted by the IRS because of their political beliefs is unconscionable. The committee will aggressively follow up on the IG report and hold responsible officials accountable for this political retaliation," Issa said in a statement.
House Speaker John Boehner and House Majority Leader Eric Cantor echoed his promise.
"The IRS cannot target or intimidate any individual or organization based on their political beliefs. The House will investigate this matter," Cantor said.
"Today, we are left with serious questions: Who is ultimately responsible for this travesty? What actions will the Obama administration take to hold them accountable? And have other federal agencies used government powers to attack Americans for partisan reasons?" Boehner said in a statement. "House Republicans have made oversight of federal agencies a top priority on behalf of the American people, and I applaud the work that members such as Charles Boustany, Darrell Issa and Jim Jordan have done to bring this issue to light."
Senate Minority Leader Mitch McConnell, R-Ky., publicly asked President Obama to review his entire administration for politicization.
"Today, I call on the White House to conduct a transparent, government-wide review aimed at assuring the American people that these thuggish practices are not underway at the IRS or elsewhere in the administration against anyone, regardless of their political views," McConnell said in a statement.
Michael Macleod-Ball, chief of staff at the ACLU's Washington Legislative Office, called the IRS story "constitutionally troubling" and suggested that "there must be clear checks in place to prevent this from ever happening again." Even former Obama speechwriter Jon Lovett tweeted: "IRS seems to be claiming this was stupidity, not malice. Maybe so. But we shouldn't take their word for it and neither should Congress."
At his daily press briefing on Friday, White House Press Secretary Jay Carney called the IRS's actions "inappropriate."
"We've certainly seen those reports. My understanding is this matter is under investigation by the IG [inspector general] at the IRS," Carney said, when asked if the administration would oblige McConnell's request for an administration-wide review.
"The IRS, as you know, is an independent enforcement agency, with only two political appointees. The fact of the matter is what we know about this is of concern, and we certainly find the actions taken as reported to be inappropriate, and we would fully expect the investigation to be thorough and for corrections to be made," Carney said.
Carney pointed out that the IRS commissioner in 2012, Douglas Shulman, was appointed by President George W. Bush. Asked when the White House became aware of the extra reviews, Carney referred questions to the IRS.
"I learned about it today," Carney said.
In a statement, the IRS admitted that "mistakes were made," but it said that the errors were not due to "any political or partisan rationale."
"We fixed the situation last year and have made significant progress in moving the centralized cases through our system," the IRS said. "It is important to recognize that all centralized applications received the same, even-handed treatment, and the majority of cases centralized were not based on a specific name."
The IRS said that about 75 applications for tax-exempt status that contained the words "Tea Party" or "patriot" were added to a pool of 225 other applications that were singled out for additional scrutiny. So far, none of those applications have been rejected, although some have been withdrawn.
The news came after an election cycle punctuated by claims by liberal and watchdog groups that conservative tax-exempt organizations were unduly influencing political elections, and in some cases, violating their tax-exempt status.
Groups with a 501(c)4 tax status are prohibited from using more than half of their resources for electioneering activities.
"The revelations revealed today that the IRS was targeting conservative groups during the 2012 elections is shocking," said David Bossie, president of Citizen's United, the 501(c)4 organization that touched off much of the recent controversy over these groups' role in political elections.
"The politicization of the IRS cannot be tolerated by the American people. To single out groups because they offer a point of view that is different from the Obama administration harkens back to the dark days of the Nixon administration."
Some liberal and watchdog groups believed that the IRS wasn't doing enough to review groups that they believed might be flouting their 501(c)4 tax-exempt status in the 2012 election.
"That's the most interesting thing about this: They were actually doing it," said Kenneth Gross, a campaign finance law expert and former counsel of the Federal Election Commission. "Now that they have done it, to some degree, it looks like they stepped on a pile off dog doo."
The effect of this revelation could be chilling for future regulation of politically active, tax-exempt groups.
"There are legitimate questions to be asked about political groups that are hiding behind a 501(c)4 status," said Nick Nyhart, president and CEO of Public Campaign in a statement. "It's unfortunate a few bad apples at the IRS will make it harder for those questions to be asked without claims of bias."
Particularly after the Citizens United v. Federal Election Commission Supreme Court ruling in 2010 created "super PACs," which opened the door for these political action committees to receive funds from affiliated tax-exempt groups that don't have to disclose their donors, the arrangement has been the subject of ridicule. Comedian Stephen Colbert in one instance accused American Crossroads and Crossroads GPS, two organizations affiliated with Republican operative Karl Rove, of "money laundering."
Later in the election cycle, former aides to President Obama formed their own groups, Priorities USA and Priorities USA Action, which used the same organizational principle to boost the Obama campaign.
McConnell highlighted reports of harassment by the IRS of conservative groups.
"Earlier this year, dozens of Tea Party-affiliated groups across the country learned what it was like to draw the attention of the speech police when they received a lengthy questionnaire from the IRS demanding attendance lists, meeting transcripts and donor information," McConnell said in a speech at the American Enterprise institute last year.
"One of the group's leaders described the situation this way: '[Groups like ours] either drown … in unnecessary paper work … or you survive, and give them everything they want, only to be hung.'"
The rare apology in some ways vindicates conservative groups that have been hounded by allegations that their activities were not completely legal.
It also suggests that the IRS might be attempting to get ahead of legal action or congressional scrutiny, Gross said.
"The IRS is not accustomed to apologizing for anything," Gross said. "Maybe they were trying to avert embarrassing congressional hearings or just get out in front of any criticism that might come their way. But in Washington, these things tend to fuel things rather than abate them."