Treasury officials told of tax probe in June 2012

WASHINGTON (AP) — The ousted head of the U.S. tax agency apologized to Congress for his agency's tougher treatment of conservative groups seeking tax-exempt status, including during last year's presidential election, saying it resulted from a misguided effort to handle a flood of applications, not political bias.

Lawmakers from both parties harshly criticized the Internal Revenue Service at a congressional hearing Friday over the tax targeting scandal, which opposition Republicans are using to raise questions about President Barack Obama's credibility and make it harder for him to press his second-term policy goals.

Targeted were conservative and small-government tea party groups that are critical of Obama. Agents did not flag similar progressive or liberal labels, a Treasury Department inspector's report said this week.

The report by J. Russell George, the Treasury Department's inspector general for tax administration, concluded that a regional IRS office improperly singled out tea party and other conservative groups for more than 18 months and took no action on many of their applications for tax-exempt status for long periods of time — hindering their fundraising for the 2010 and 2012 elections.

Senior Treasury officials were made aware in June 2012 that investigators were looking into complaints from tea party groups that they were being harassed by the IRS, George said Friday — disclosing that Obama administration officials knew there was a probe during the heat of the presidential campaign.

Trying to manage the issue, the White House said Obama met Friday with Daniel Werfel, the new IRS acting commissioner. The Treasury Department said Secretary Jacob Lew told Werfel to perform a thorough review and report back to Obama within 30 days.

Former acting IRS Commissioner Steven Miller was forced to resign this week. He conceded Friday that "foolish mistakes were made" and that the process that resulted in conservatives being targeted, "while intolerable, was a mistake and not an act of partisanship."

George, the inspector general, said Friday the yearlong investigation did not uncover illegal activity.

"It is not illegal, but it was inappropriate," George said of targeting conservative groups.

The House Ways and Means Committee chairman, Republican Dave Camp, said the tougher examinations that conservative groups encountered seemed to be part of a "culture of cover-ups and intimidation in this administration." He offered no other examples.

Obama has said he didn't know about the targeting until last Friday, when the IRS official who heads the division that makes decisions about tax-exempt groups acknowledged at a legal conference that conservative groups had been singled out.

The agency has said between 2008 and 2012, the number of groups applying for tax-exempt status as so-called social welfare groups more than doubled.

Along with that was an increase in complaints that such groups were largely engaging in electoral politics, which is not supposed to be their primary activity. The IRS determines whether that imprecise standard is met.

In recent months, Republicans on the Ways and Means panel had repeatedly asked the IRS about complaints from conservative groups that their applications were being treated unfairly.

On Friday, numerous Republicans wanted to know why Miller and others never told them the groups were being targeted, even after May 2012, when the IRS has said Miller was briefed on the practice.

The Treasury Department issued a statement Friday saying officials first became aware of the actual results of the investigation in March of this year, when they were provided a draft of George's report, a standard practice.