By Richard Rubin and Kathleen Hunter
Attorney General Eric Holder ordered a criminal investigation into the Internal Revenue Service's targeting of small-government advocacy groups for extra scrutiny.
"The FBI is coordinating with the Justice Department to see if any laws were broken in connection with those matters related to the IRS," Holder said in response to a question at a news conference Tuesday.
Also Tuesday, the White House said it had no involvement in the matter and that it is awaiting an inspector general's report before deciding how to respond to the treatment of the advocacy groups as they sought tax exemptions as nonprofit organizations.
"I am certainly not aware and am confident that no one here was involved in this," White House spokesman Jay Carney said in Washington. "We have to find out exactly what happened."
A report by the inspector general that oversees the IRS is due to be released Wednesday, officials from the inspector general's office told congressional staff members at a meeting Monday, said a Democratic aide who requested anonymity to discuss the private conversation.
The IRS decision to use words such as "tea party" and "patriot" to sort through the applications has ballooned into a scandal that has led to four separate congressional inquiries.
Holder spoke about the planned investigation by his department and the FBI at a news conference in Washington.
The acting IRS commissioner said the agency's errors in targeting small-government groups stemmed from the lack of a "sufficient process" and weren't the result of partisanship.
In an opinion piece in USA Today, Steven Miller wrote that the IRS sought to centralize its handling of applications for tax-exempt status following a "sharp increase" in the number of applications, which more than doubled between 2010 and 2012.
"While centralizing cases for consistency made sense, the way we initially centralized them did not," he wrote. "The mistakes we made were due to the absence of a sufficient process for working the increase in cases and a lack of sensitivity to the implications of some of the decisions that were made."
President Barack Obama called it "outrageous" for the IRS to target groups promoting limited government for special attention.
"If, in fact, IRS personnel engaged in the kind of practices that have been reported on, and were intentionally targeting conservative groups, then that's outrageous, and there's no place for it," Obama said Monday at a news conference at the White House.
The president said he first learned of the IRS targeting through news reports May 10. On that day Lois Lerner, the IRS official in charge of overseeing tax-exempt groups, acknowledged that the agency had targeted for special review groups promoting limited government and issued an apology.
Calls for congressional probes of the matter followed. They intensified after disclosures over the weekend that the Treasury Department inspector general's report found that IRS officials knew of the targeting of the groups as early as June 2011, nine months before the agency's head told lawmakers it wasn't occurring.
"The IRS knew what was happening yet they continued to give us assurances that they were applying the tax rules in a fair and impartial way," Senate Minority Leader Mitch McConnell, R-Ky., said Tuesday on the Senate floor. "The IRS was in fact singling out conservative groups, groups who dared to speak up and express their First Amendment rights."
The IRS hasn't explained why it didn't restart the screening process in June 2011, which was more than six months before it started sending inquiries to the groups.
"Mistakes were made, but they were in no way due to any political or partisan motivation," Miller wrote.
"We fixed the situation last year, and have made significant progress in moving the centralized cases through our system," Miller continued, adding that more than half of the cases have been approved or withdrawn. "These applications, which came from all parts of the political spectrum, received the same, even-handed treatment."
The House Ways and Means Committee will hold a May 17 hearing with Miller and Inspector General J. Russell George as the only witnesses, according to a statement by panel Chairman Dave Camp and the committee's top Democrat, Sander Levin, both of Michigan.
Rep. Charles Boustany, a Louisiana Republican and chairman of the Ways and Means oversight subcommittee, sent a letter to Miller demanding by May 15 all agency communication containing the words "tea party" and "patriot" as well as the names "of all individuals involved in this discrimination."
The IRS said in a statement that Miller was first notified by agency staff on May 3, 2012, that "some specific applications were improperly identified by name" and had been forwarded for further review.
Senate Finance Committee Chairman Max Baucus also said his panel would investigate. "Targeting groups based on their political views is not only inappropriate but it is intolerable," the Montana Democrat said in a statement yesterday.
Senate Majority Leader Harry Reid, D-Nev., said the allegations, if true, "would be a terrible breach of the public's trust." He said he had "full confidence" Baucus's panel would "get to the bottom of this matter and recommend appropriate action."
House Oversight and Government Reform Committee Chairman Darrell Issa has said his panel will hold hearings on the IRS's actions, which he said represent a clear "abuse of power."
Rep. Mike Turner, an Ohio Republican on Issa's committee, introduced legislation Monday criminalizing IRS discrimination against individuals or groups based on political speech or expression. Florida Senator Marco Rubio, a Republican, said he will introduce the measure in his chamber.
The Senate Permanent Subcommittee on Investigations is expanding its inquiry of whether the IRS didn't enforce the law on tax-exempt groups to include the extra scrutiny it gave to Tea Party-affiliated groups.
Miller, the acting IRS commissioner since November, told lawmakers in July that the agency had grouped together advocacy organizations seeking nonprofit status "to ensure consistency, to ensure quality" without saying that some groups had been scrutinized for having words like "tea party" in their names.
According to a timeline from the inspector general's report, Miller became involved in the issue as early as March 8, 2012. That was 19 days before his predecessor, Douglas Shulman, testified to Congress that the IRS hadn't targeted groups based on ideology.
Anti-tax tea party groups, some of which include the word "patriot" in their names, formed after Obama took office in January 2009 and helped fuel gains by Republicans in the 2010 midterm election that gave the party control of the U.S. House.
In addition to groups with "tea party" and "patriot" in their names, other organizations selected for the additional IRS review included those in which "statements in the case file criticize how the country is being run," according to a June 29, 2011, briefing given to Lerner, the timetable says.
The IRS has been under pressure to regulate political spending by nonprofit groups, in particular those falling under Section 501(c)(4) of the U.S. tax code. Organizations qualifying for that status don't have to disclose donors even when engaging in political activity.
_ With assistance from Jonathan D. Salant, James Rowley, Andrew Zajac, Roger Runningen, Hans Nichols and Phil Mattingly in Washington.
WASHINGTON POST-BLOOMBERG--05-14-13 1530EDT